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"When You Say 'Bad Case Of Rectal Prolapse,' What Exactly Do You Mean By That?"

You know. I have to say that sometimes we worry that our venerable Wall Street institutions have no sense of humor. Turns out there's nothing to fear, per this handy guide Citi put together for its Smith Barney employees who may be faced with "tough questions" from clients, such as "Your CEO said only six weeks ago that 'I love that business' and that it's not for sale. What happened?" and :

9. Is the Federal government directing you to liquidate businesses to raise
additional capital?

As you know, we do not comment on our discussions with the U.S. Government
or regulators.
[If pressed: Negotiations were not driven by regulators. But regulators are being

Morgan Stanley Smith Barney Tough Questions and Answers [PDF]


You Say "Voldemort" Like That's A Bad Thing

Do you think that Bruno Iksil, when he woke up in Paris on Friday looking forward to trading from home in his black jeans, expected to become an international celebrity? The evidence suggests not. You may remember Iksil - possibly under other names like "Voldemort" or "the London Whaleâ„¢" as the JPMorgan chief investment office trader who has sold protection on $100bn of notional of a CDX investment grade index to ... hedge ... JPMorgan's massive short position in credit ... or ... something?* Anyway a lot of people are mad at him because that's just too much protection to sell on that index and so they are complaining to Bloomberg and the Journal about how he is manipulating the market and also taking huge proprietary risks with JPMorgan capital that should obvs be regulated out of existence. This is weird in a lot of ways but one of them is that you can distill a lot of the Volcker-Rule complaints into "my God, you're telling me that JPMorgan is exposed to $100bn of credit risk on investment-grade debt issued by a diverse mix of 121 U.S. companies!?" No! JPMorgan is exposed to something like $750bn of credit risk on debt issued by a diverse mix of companies. Some of it's non-US. Some of it's not even investment grade. And that's just in its loan book.** Is writing $100bn of protection on the CDX.IG.NA.9 a terrible risk to take with investor and depositor and government-backstop money? Well, define "terrible risk." It's certainly less risky than operating the rest of JPMorgan.***