If the SEC is going to be all holier-than-thou re: matters insider-trading, two Congressmen want to know why it doesn’t bar its employees from trading any stocks at all. You know, to be sure. Read more »
The (outgoing) CFTC chairman is a conscientious public servant who’s somewhat technologically challenged. And since he missed the introductory meeting on accessing his work e-mail from home (also one on the Federal Records Act), he simply had to trudge over to his 12-year-old Dell desktop and handle Commission business via his dial-up AOL account—not because he was trying to hide anything from Darrell Issa. Read more »
SEC Not Going To Let Bankers And Research Analysts Nod Hello To Each Other In The Hallway Just Because Congress Told It ToBy Matt Levine
The SEC had a feisty week last week, telling off Congress with cheery abandon. Darrell Issa sent them a pretty crazy letter a few months back demanding that all IPOs be Dutch auctions for some reason, and last week Mary Schapiro sent him a deeply researched 32-page letter telling him, with appropriate condescension, that that wasn’t happening. Also a few months back Congress passed a JOBS Act demanding that the SEC allow much more fraud in connection with sub-$1bn-company IPOs, in particular by occasionally allowing bankers and analysts to be in the same room with each other, and last Wednesday the SEC released a Q&A saying that that wasn’t happening either.*
There is much to ponder but let’s talk about the overall tone, which is:
- the SEC wants to make sure you don’t get bad information, but
- it’s not so concerned with you getting good information, or at least, not all the information you might want, or at least, not all the information that somebody richer and better-looking than you might get.
So there is a lot of protection against research analysts shading their analysis to win IPO business, and a lot of discussion in the letter to Issa about the danger to investors of getting incomplete information if they are given anything other than the 200-page chock-full-o-risk-factors prospectus for an IPO. But there is not much discussion of the fact that some people get more information – in particular, the fact that in the Facebook IPO the company seems to have told the banks’ analysts to revise their estimates downwards, and the analysts seem to have done so and then told their biggest customers (and nobody else), and then those big customers seem to have piled out of the deal leaving it to retail investors who didn’t know any better. Read more »
I recommend reading this letter from Darrell Issa and friends to the SEC about reforming IPO practices, it is a nice mix of boring and thought-provoking and subtly crazy.
The basic intuition here is (1) it is weird and un-American that IPO prices are set by the judgment and good graces of investment banks rather than “the market,” and (2) it is weird and suspicious that on average those prices are mostly “too low” compared to the post-IPO market price. This creates a bit of cognitive dissonance in the letter, which was of course sparked by the Facebook IPO: Facebook’s offering price was it is safe to say “too high,” and so the lawmakers express some pious concern about whether investors were ripped off, but then spend most of their letter lamenting how “[i]mposing non-market-based charges, by under-pricing IPOs, places a direct drag on economic growth – it is a tax on the issuer of capital akin to hurting the goose that lays the golden eggs.”
Painful though that metaphor is, the thought is maybe not too dissonant: non-market prices mean that someone gets ripped off; that’s usually issuers but every so often it’s investors. Also the compositions of the ripper and rippee investor groups are different; the lawmakers cite evidence that institutions get allocated more hot IPOs while individuals get allocated more dogshit IPOs so I guess “non-market-based” pricing does in fact help the smart and hurt the dumb. I submit to you that so does, y’know, market-based pricing but whatever. Read more »
In these volatile times it helps to have role models to steer you through economic uncertainty, wise investors who you can look to when your faith in markets is shattered. And that sort of wisdom is hard to find right now, what with John Paulson continuing to trip over his own feet and George Soros closing up shop / apparently not having the resources to house all of his girlfriends in the manner to which they are accustomed. Fortunately, Roll Call today brings us a new list of investors for you to emulate: the 50 richest members of Congress.
Would you believe that millionaires who are able to direct stimulus funds to their own companies and unconstrained by insider trading laws had a pretty good year in 2010? Then you would be correct. Our 50 richest members of Congress had an average net worth of $32mm, and saw a weighted average growth in their net worth of 17.7% (unweighted 26%).* The S&P was up 12.8%. Read more »
In 2007, John Paulson’s hedge fund donated $15 million to the Center for Responsible Lending. The money was used “exclusively to provide legal assistance to people facing foreclosure to help them stay in their homes.” Charity, helping those less fortunate, etc is something rich people sometimes do, either to help their image or because they’re not total dicks and would like to give back. Representative Darrell Issa, the greatest mind Washington and Wall Street has ever seen, however, knows better. Oh, he’s got this Paulson guy’s number. Issa knows that this was not an act of kindness but rather yet another Machiavellian trick by Paulson to inflate the housing bubble as big as he could before popping that shit like he did to the 40 virgins you just know he’s got out back, and maniacally laughing his way to the bank.
You know what the American people also have a right to know? Starts with a ‘What a’ ends with a ‘smug, intellectually dishonest little punk you are.’ Since we all know this is a baseless attempt to vilify hedge funds in general and Paulon & Co in particular, why don’t you back the shit off and devote the time saved to a more admirable pet cause, like personally going under cover to nail those patronizing prostitutes? Oh, you don’t know what I’m talking about? That’s funny, because I’ve got the tapes right here. Read more »
Timmy G’s tormentor-in-chief Rep. Darrell Issa will get to the bottom of that whole AIG saga, believe you me. Issa sent yet another letter to Bernanke yesterday, asking him to turn over all Fed documents related to the AIG bailout and its credit-default counterparties. Apparently those 250,000 pages they already turned in don’t reveal anything and the document production is “incomplete and not in full compliance with the Committee’s subpoena.”