Opening Bell: 03.12.10 - Dealbreaker

Opening Bell: 03.12.10

Author:: Dealbreaker
Updated:: Jan 14, 2019
Original:: Mar 12, 2010

AIG Is Said to Query Bonus Holdouts in Push for $45 Million of Concessions (Bloomberg)
The insurer mailed questionnaires this month to ex-workers at the Financial Products unit asking whether they’d earned income after leaving AIG, said the people, who declined to be identified because the negotiations are private. Under the program, compensation earned by former AIG staff in 2009 from another employer would lower payouts to be delivered next week from the New York-based company, the people said.

Big Majority Of Americans Wants Wall Street Regulation (Reuters)
Supposedly: "82 percent of Americans want the government to clamp down more strongly on Wall Street excesses, with a particular emphasis on bonus schemes that have rewarded employees at loss-making companies such as AIG."

The U.K. Origins of Lehman’s Accounting Trick (Dealbook)
Repo 105.

UBS Lobbies for Swiss-U.S. Deal (WSJ)
The IRS has uncovered as many as 20 other Swiss private banks as part of a tax amnesty aimed at declaring funds to the authority, according to a UBS document seen by Dow Jones Newswires Friday. In the document, UBS argues that a parliamentary no-vote could also harm the other Swiss banks who offered services to wealthy Americans. "Switzerland's refusal to honor its international obligations could send an escalating signal," UBS writes in the seven-page document, which was sent to Swiss parliamentarians this week.

Obama to nominate Yellen as Fed vice chairman (MarketWatch)
Yellen "is one of the more dovish policy makers among the Fed's 12 regional bank presidents and has been a strong supported of the policies of Fed Chairman Ben Bernanke."

Dennis Kneale: Obama is Ahab, Strapped to Moby Dick (CNBC)
Oh, okay.

SEC Asks Congress to Regulate Credit Default Swaps (Reuters)
"If we continue to allow these risky financial products to operate in the dark we should not be surprised at the damage we find when the lights come on," Securities and Exchange Commission Chairman Mary Schapiro said in a statement, without commenting on Greece's situation.

UBS Unit Said to Be Close to Guilty Plea in Rate-Rigging Scandal (NYT) Federal prosecutors are close to securing a guilty plea from a UBS subsidiary at the center of a global investigation into interest rate manipulation, the first big bank to agree to criminal charges in more than a decade. UBS is in final negotiations with American, British and Swiss authorities to settle accusations that its employees reported false rates, a deal in which the bank's Japanese unit is expected to plead guilty to a criminal charge, according to people briefed on the matter who spoke of private discussions on the condition of anonymity. Along with the rare admission of criminal wrongdoing at the subsidiary, UBS could face about $1 billion in fines and regulatory sanctions, the people said. Meet Them In St. Louis: Bankers Move (WSJ) Smaller cities around the nation have emerged as unlikely hives of financial-services hiring, thanks to lower wages, municipal-tax incentives and the misfortunes of older hubs that are home to companies ravaged by the 2008-2009 financial crisis. The beneficiaries are spread across the U.S., according to an analysis of data by The Wall Street Journal. In St. Louis, the 19th-largest U.S. metropolitan area, securities-industry employment surged 85% between January 2007 and September 2012 to a recent 12,190, according to figures compiled by Moody's Analytics. New York lost 9% of its jobs in the securities, commodities, asset-management and fiduciary-trust areas over the same period, leaving it with 195,000. Counter-Terrorism Tools Used to Spot Staff Fraud (FT) JPMorgan Chase has turned to technology used for countering terrorism to spot fraud risk among its own employees and to tackle problems such as deciding how much to charge when selling property behind troubled mortgages. The technology involves crunching vast amounts of data to identify hard-to-detect patterns in markets or individual behavior that could reveal risks or openings to make money. Other banks are also turning to "big data", the name given to using large bodies of information, to identify potential rogue traders who might land them with massive losses, according to experts in the field...Guy Chiarello, JPMorgan's chief information officer, said the bank was mining massive bodies of data in "a couple of dozen projects" that promised to have a significant affect on its business, although he refused to give further details. According to three people familiar with its activities, JPMorgan has used Palantir Technologies, a Silicon Valley company whose technology was honed while working for the US intelligence services, for part of its effort. It first used the technology to spot fraudsters trying to hack into client accounts or ATMs, but has recently started to turn it on its own 250,000-strong staff. Obama Meets Boehner at White House for Budget Talks (Bloomberg) President Barack Obama and House Speaker John Boehner met for a third time at the White House to discuss averting spending cuts and tax increases before a year- end deadline. Boehner and Obama met for almost an hour yesterday, with no public announcement of progress. In January, more than $600 billion in spending cuts and tax increases, the so-called fiscal cliff, are scheduled to begin. “The president and speaker had a frank meeting in the Oval Office,” Boehner spokesman Brendan Buck said in an e-mailed statement, adding that the “lines of communication remain open.” Britain's Queen Quizzes Central Bank on Financial Crisis (CNBC) During a visit to the Bank of England on Thursday, the Queen was overheard asking whether a "lax" attitude to financial regulation had contributed to the financial crisis. After touring the vast vaults of gold bullion that lie beneath the central bank in London, Queen Elizabeth reportedly asked the central bank officials whether the Financial Services Authority (FSA) that was meant to regulate the banking system had not been aggressive enough - "did not have the teeth" - in its response to the crisis...The Queen was then told that officials in the room were charged with ensuring the crisis did not happen again. The Queen's husband, Prince Philip, then jokingly asked "There's not another one coming, is there?" before telling the officials present "Don't do it again." John McAfee Returns to US, Admits Playing 'Crazy Card' (ABC) After three weeks ducking authorities in Belize, by hiding in attics, in the jungle and in dingy hotels, he turned up in Guatemala Dec. 3. Barely a day later he was detained for entering the country illegally. As Guatemala officials grappled with how to handle his request for asylum and the Belize government's demand for his deportation, McAfee fell ill. The mysterious illness, described by his attorney alternately as a heart ailment or a nervous breakdown, led to a scene with reporters chasing his ambulance down the narrow streets of Guatemala City and right into the emergency room, where McAfee appeared unresponsive. He now says it was all a ruse: "It was a deception but who did it hurt? I look pretty healthy, don't I?" He says he faked the illness in order to buy some time for a judge to hear his case and stay his deportation to Belize, a government he believes wants him dead. When asked whether he believes Belize officials where inept, he didn't mince words. "I was on the run with a 20-year-old girl for three and a half weeks inside their borders and everyone was looking for me, and they did not catch me," he said. "I escaped, was captured and they tried to send me back. Now I'm sitting in Miami. There had to be some ineptness." [...] He denies any involvement in his neighbor's death but adds that he is not particularly concerned about clearing his name. He is focused on getting his 20-year-old and 17-year-old girlfriends out of Belize and says he has no idea what he'll do next, where he'll live or how he'll support himself. CNBC v. Buffett (NYP) The “Oracle of Omaha” sent a terse e-mail to editors at CNBC yesterday after a reporter for the cable news network railed against his recent repurchase of Berkshire Hathaway shares. Gary Kaminsky, CNBC’s capital markets editor, took Buffett to task for the $1.2 billion stock buyback, calling it “hypocritical to the maximum level.” Kaminsky claimed that Buffett’s purchase allowed the seller — described by Berkshire as the “estate of a long-time shareholder” — to avoid potentially higher capital gains taxes next year...In his rebuttal e-mail, Buffett said capital gains taxes don’t apply to estates. “Mr. Kaminsky also made the statement that the estate that was a seller was better off by selling in 2012 than 2013,” he wrote. “This, too, was incorrect.” He said capital gains are wiped out by stepped-up basis rules, with assets marked at their current fair-market value at the time of death. Buffett also blasted Kaminsky for saying his buyback was hypocritical on principal as Buffett is known to eschew buybacks. Buffett attached a copy of Berkshire’s 1984 annual report showing he has outlined conditions under which he would favor buybacks. CNBC anchor Melissa Lee read a correction late Tuesday that thanked the famed investor for “watching and setting us straight.” Fisher: Fed Risks 'Hotel California' Monetary Policy (CNBC) Dallas Fed President Richard Fisher told CNBC that he's worried the U.S. central bank is in a "Hotel California" type of monetary policy because of its "engorged balance sheet." Evoking lyrics from the famous song by The Eagles, he said he feared the Fed would be able to "check out anytime you like, but never leave." Fisher said on "Squawk Box" that he argued against revealing the new inflation and unemployment targets set by the Fed this week, saying he's worried that the markets will become "overly concerned" with the thresholds. Euro-Zone Downturn Eases (WSJ) Data company Markit said on Friday its preliminary purchasing managers' index, a gauge of activity among euro-zone factories and services companies, rose to 47.3 in December from 46.5 in November. A reading above 50.0 would signal an expansion. The national measure for Germany picked up to 50.5 from 49.2 in November, indicating that activity rose in the euro zone's largest member. "The euro-zone downturn showed further signs of easing in December, adding to hopes that the outlook for next year is brightening," said Chris Williamson, chief economist at Markit. Residents find neighbor at their door with machete (KS) A 38-year-old Bremerton man was arrested by police Monday night for allegedly confronting his neighbors with a machete in response to alleged vandalism at his residence, according to documents filed in Kitsap County District Court. Officers were called to a Nollwood Lane address shortly after 8 p.m. Monday. Two residents said when they answered a knock at their door, a man was standing in the doorway holding a machete. The man, a neighbor, reportedly said he was tired of vandalism to his home and blamed it on a family member of his neighbors, police said. The neighbors attempted to slam the door on the man, but he reportedly put his foot into the door holding it open, police said. The neighbors were ultimately able to close it, though the suspect denies he put his foot in the door. Police interviewed the man, 38, who admitted he'd retrieved the machete out of anger after another incident of vandalism.

Obama Said Close to Choosing Lew for Treasury Secretary (Bloomberg) President Barack Obama may choose White House Chief of Staff Jack Lew to replace Treasury Secretary Timothy F. Geithner as soon as this week, according to two people familiar with the matter. The selection of Lew would trigger a White House shuffle for Obama’s second term as he replaces his chief of staff and moves senior aides into new roles, said the people, who requested anonymity to discuss personnel matters. While Obama hasn’t made a final decision to pick Lew, the president’s staff has been instructed to prepare for his nomination, said one of the people. Rescued by a Bailout, AIG May Sue Its Savior (NYT) The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal's high interest rates and the funneling of billions to the insurer's Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for "public use, without just compensation." Greenberg: 'Cadre' Hurt AIG (NYP) Maurice “Hank” Greenberg, former chief executive officer of American International Group, says in a soon-to-be-published book that the company was almost destroyed by overzealous overseers. The insurer was “ultimately taken over and run aground by a cadre of auditors, lawyers, outside directors, and government officials,” according to an excerpt of “The AIG Story” on Amazon.com’s website. JPMorgan’s Staley Quits to Join BlueMountain Hedge Fund (Bloomberg) ames E. Staley, the JPMorgan Chase executive who was once seen as a possible candidate to become chief executive officer, quit to join BlueMountain Capital Management LLC, a $12 billion hedge fund with close ties to the New York bank. Staley, who was at JPMorgan for more than 34 years, most recently as chairman of the corporate and investment bank, will become a managing partner and purchase a stake in BlueMountain, the New York-based firm said today in a statement. Proceeds from the stake sale will be invested in new infrastructure, technology and people, the firm said. “I’m very excited to be joining BlueMountain at a time when sea changes in the financial industry combined with the firm’s unique strengths open up enormous possibilities to deliver value to clients,” Staley, 56, said in the statement. HSBC N.J. Client Admits Conspiracy in Offshore Tax Case (Bloomberg) A New Jersey client of HSBC Holdings pleaded guilty to charges that he hid as much as $4.7 million through Swiss and Indian accounts not declared to the U.S. Internal Revenue Service. Sanjay Sethi, 52, who owns SanVision Technology Inc., conspired with HSBC bankers in New York, London and Geneva to hide assets from the IRS, he admitted yesterday in federal court in Newark, New Jersey. Sethi will pay a $2.37 million penalty for failing to file reports required for foreign accounts. “Sethi and his co-conspirators used nominee and shell companies formed in tax-haven jurisdictions and elsewhere to conceal the defendant’s ownership and control of assets and income from the IRS,” according to his charging document. Bill Ackman Says Just Getting Started Exposing Herbalife (Bloomberg) “We’re prepared to spend whatever it costs and do whatever is required to make sure that the world understands the facts about this company,” he said in a telephone interview. “We can’t imagine how the SEC or the Federal Trade Commission or any other relevant regulator will ignore what we have said.” Ackman said he would make all his information available to U.S. regulators. Chinese Tech Titans Eye Brazil (WSJ) The Chinese like emerging markets because, for a change, they don't have to start way behind established American companies. By moving into Brazil aggressively, Chinese PC maker Lenovo Group and Internet-search company Baidu hope to gain an edge over companies like Hewlett-Packard and Google In addition, some U.S. companies that are leaders at home and in Europe have a smaller footprint here because of Brazil's long history of protectionism and red tape and its high cost of labor, particularly compared with Asia. Oregon brewer Daniel Keeton creates nutritional, non-alcoholic brew for his dog (NYDN) Oregon man Daniel Keeton enjoys serving beer to customers at the brewery he works for, so why shouldn't he serve up some healthy brew for the dog he cares about? The dog brew is non-alcoholic of course, but it is a big hit with Keeton's canine Lola Jane. And now Keeton's special brew is available to anyone who wants it. After years of planning, Keeton launched his company Dawg Grog over the summer. Keeton, who works at Boneyard Brewery in Bend, says Dawg Grog is good for the dogs, and they can't seem to get enough of it. "Bend is a dog-loving community and a beer-loving community," Keeton told the Daily News on Monday. "I wanted to marry those two together in some way." Keeton spent years refining the ingredients to his special brew, which includes low-sodium vegetable broth, water and spent grain from Boneyard Brewery. "After a couple of years of trying recipes I came up with one that I am really happy with, and one that my dog is really happy with," he said. Secret Goldman Team Sidesteps Volcker After Blankfein Vow (Bloomberg) MSI wagers about $1 billion of the New York-based firm’s own funds on the stocks and bonds of companies, including a mortgage servicer and a cement producer, according to interviews with more than 20 people who worked for and with the group, some as recently as last year. The unit, headed by two 1999 Princeton University classmates, has no clients, the people said...The team of about a dozen people, based at the firm’s Manhattan headquarters, is headed by Daniel Oneglia and Geoff Adamson. Oneglia was treasurer of the Princeton eating club Tiger Inn, where his nicknames included “the Don” and “the Weasel,” according to the university’s website. Adamson was coxswain for men’s heavyweight varsity crew. A Boston Globe photo shows teammates flinging him into a Massachusetts lake after a victory. Carlyle Bags $4 Billion Profit From China Insurance Exit (Reuters) Private equity firm Carlyle Group sold its remaining stake in China's No.3 insurer CPIC in a deal valued at $793 million, exiting the business with its largest dollar profit on an investment. After several stake sales in the past two years, Carlyle will finish with a total profit of more than $4 billion, five times the $800 million it invested in CPIC between 2005 and 2007 for a 17 percent stake, Thomson Reuters calculations show. By private equity standards, where making two times cash paid and a few hundred million is considered a success, the CPIC exit is an historic deal for Carlyle. London Quantitative Hedge Funds Report Second Year of Losses (Bloomberg) The performance of the funds belies their popularity with investors, who’ve poured $108.2 billion into the pools since the end of 2008, according to Fairfield, Iowa-based BarclayHedge Ltd. While quants made money during the financial crisis when other hedge funds didn’t, they’ve since stumbled as market sentiment swung from optimism to pessimism following political announcements in Washington and Brussels, breaking up the trends they try to follow. That may force investors to withdraw money. Japan Executives Warn Yen May Get Too Weak (WSJ) The executives, who gathered at an annual New Year's reception held by Japan's three biggest corporate lobbies, praised Prime Minister Shinzo Abe's new government for its proposals to boost the economy and tame the strong yen, which erodes exporters' profits and makes it harder to sell Japan-made goods overseas. But they also cautioned that if the economy stays weak, or if the government doesn't take steps to get its bloated finances under control, investors could lose confidence in Japan and flee, sending the yen into free fall. KFC diner stumbles upon strange brain-like organ in his meal (TS) Disgusted Ibrahim Langoo was tucking into a Gladiator box meal when he spotted what he thought was a “wrinkled brain” inside a piece of chicken. KFC have apologised and, after having the photographs analysed, reckon the unsightly organ may in fact be a kidney. The 19-year-old took a photograph of the three-inch stomach-churning discovery on his mobile phone and complained to staff. Apologetic bosses at the fast-food chain – known for its Finger Lickin’ Good slogan – have now offered him vouchers for even more KFC meals.

Dozens Likely Implicated In UBS Libor Deal (FT) bout three dozen bankers and senior managers will be implicated in the alleged rigging of Libor interest rates when UBS settles with global regulators later this week, according to people familiar with the matter. UBS is close to finalizing a deal with UK, US and Swiss authorities in which the bank will pay close to $1.5 billion and its Japanese securities subsidiary will plead guilty to a US criminal offence. Terms of the guilty plea were still being negotiated, one person familiar with the matter said on Monday, adding that the bank will not lose its ability to conduct business in Japan...Not all of the three dozen individuals will face criminal or civil charges and the level of alleged misconduct varies among them. While it also is not clear how many bankers will be criminally charged, people familiar with the investigation said the settlement documents will document an intercontinental scheme to manipulate the Yen-Libor interest rate over several years involving desks from Tokyo to London. Cerberus Seeks Sale of Gun Maker Freedom Group (WSJ) Private-equity firm Cerberus Capital Management LP said it is seeking to sell the company that manufactures a gun used in last week's shooting at Sandy Hook Elementary School in Newtown, Conn. "We have determined to immediately engage in a formal process to sell our investment in Freedom Group…We believe that this decision allows us to meet our obligations to the investors whose interests we are entrusted to protect without being drawn into the national debate that is more properly pursued by those with the formal charter and public responsibility to do so," Cerberus said in a statement Tuesday. Cliff Talks Narrow (WSJ) President Barack Obama backed away from his long-standing call for raising tax rates on households making more than $250,000 a year, a development that inches the White House and congressional Republicans closer to a budget deal. Mr. Obama's move, a counter to Republicans' recent proposal to raise tax rates on income over $1 million, further narrows the differences between the two sides. During a meeting with House Speaker John Boehner (R., Ohio) Monday the president proposed allowing Bush-era tax rates to expire for households making more than $400,000 in annual income, people familiar with the meeting said. Poland Finds It's Not Immune To Euro Crisis (NYT) During much of the region’s debt crisis so far, Poland has counted itself fortunate that the troubles began before the country had joined the euro currency union. By being part of the E.U.’s common market, but not bound by euro strictures, Poland has been one of the Continent’s rare economic good-news stories. But the deceleration in Polish growth, which has prompted the central bank to begin a series of interest rate cuts to stimulate the economy, has underscored the country’s exposure to slumping euro zone consumer markets. Hedge Fund Managers Convicted of Insider-Trading Scheme (Bloomberg) Level Global Investors LP co-founder Anthony Chiasson and former Diamondback Capital Management LLC portfolio manager Todd Newman were convicted of securities fraud and conspiracy for an insider-trading scheme that reaped more than $72 million. After deliberating a little more than two days, a federal jury in New York found both men guilty of conspiracy to commit securities fraud for a scheme to trade on Dell Inc. (DELL) and Nvidia Corp. (NVDA) using illicit tips. The panel found Chiasson, 39, guilty of five counts of securities fraud, earning Level Global $68.5 million on inside tips trading on the two technology company stocks. Newman, 48, was convicted of four counts of securities fraud related to trades on inside information that earned his fund about $3.8 million. “We had all the evidence we needed,” said Felicia Rivera, a juror from Westchester County near New York City, said after court. Credit unions sue JPM for $3.6B (NYP) The nation’s credit-union watchdog sued JPMorgan for a second time yesterday over $3.6 billion of Bear Stearns mortgage bonds that imploded in the wake of the financial crisis. The suit brought by the National Credit Union Administration accuses Bear Stearns, the failed bank acquired by JPMorgan in 2008, of peddling toxic securities to four credit unions that later collapsed. The same government agency sued JPMorgan last year over $1.4 billion in mortgage-backed securities that led to losses for credit unions. That suit is still pending. In the latest complaint, the credit union regulator said Bear Stearns conspired with at least 16 outfits that cranked out toxic mortgages and securities sold to unsuspecting buyers. Those included notorious subprime mortgage outfits such as Countrywide Financial, New Century and People’s Choice Home Loans. Man wears 70 items of clothing at airport to avoid baggage charge (DS) A man took to putting on 70 items of clothing to avoid an extra baggage charge at an airport. The unidentified passenger turned up at Guangzhou Baiyun International Airport in China, described as looking like a 'sumo wrestler'. According to Guangzhou Daily, the man's luggage exceeded the weight limit. He did not want to pay the extra baggage costs, and thus took out and wore more than 60 shirts and nine pairs of jeans. Wanting to board a flight to Nairobi, Kenya, he was stopped by the metal detector and had to undergo a full body search. AIG Raises $6.45 Billion as AIA Priced in Top Half of Range (Bloomberg) AIG sold 1.65 billion shares at HK$30.30 each, AIA said in a statement today. The shares were offered at HK$29.65 to HK$30.65 each. AIA fell 3.3 percent to close at HK$30.60 in Hong Kong, the most since July 23. It was the biggest decliner and most actively traded stock by both volume and value in the city’s benchmark Hang Seng Index (HSI) with HK$56.6 billion ($7.3 billion) worth of shares changing hands today. Probe Sparks Split On Trades (WSJ) A regulatory investigation into whether stock exchanges have given unfair advantages to high-speed traders has sparked complaints against the exchanges, fueling a broader debate about how the market operates and is regulated. The Investment Company Institute, trade group for mutual funds, complained in a recent letter to the Securities and Exchange Commission that U.S. stock exchanges "facilitate strategies" for rapid-fire trading firms "that can lead to disorderly markets or that can benefit market participants at the expense of long-term investors." Buybacks Rule The Day (WSJ) American companies bought back $274 billion more shares than they issued in the year through September, according to Ed Yardeni, president of investment advisory firm Yardeni Research. And the spending spree looks set to continue, a sign that companies have the cash to put to work but don't yet see an economic case for using it to expand their businesses or create jobs. Dog swallows a foot of Christmas lights (Mirror) Charlie, a seven-year-old crossbreed dog from Southampton, was saved by surgeons from veterinary charity PDSA after wolfing down his family's Christmas lights recently. And the dog has a track record for getting his paws, and teeth, on household objects, having once eaten his owner Sharon Fay's scarf. Ms Fay, who aptly refers to her dog as the "light of her life", became concerned when she noticed bits of wire sticking out of Charlie's faeces in the garden. The 45-year-old said: "I hadn't even noticed that the lights had been chewed at this stage but it quickly became clear what had happened. "Back in March he ate one of my scarves and needed an operation to remove it, but I thought it was just a one-off incident as he hadn't shown any signs that he was going to be a repeat offender. I've had dogs all my life and have never known a dog act like this before." An X-ray immediately cast a light on Charlie's problem - the tangled remains of the decorations clearly showed up in his stomach and would have proved fatal if they were not removed. Vets rushed Charlie to the operating table and removed the Christmas decorations, also finding a shoelace.