May 6 (Bloomberg) -- Lloyd Blankfein is sticking by Steven Cohen through thick and thin. While other banks have drifted away from the personal credit lines they’ve given Cohen since, well, you know, Goldman Sachs appears never to have wavered.
The illustration of this is itself an intriguing look at finance so removed from the reality of normal humans, so lofty, that we’ll call it cloud financing: Borrowing against the value of your priceless art collection for money that you can make work harder in your own investment shop to provide better returns.
Sounding like a modern-day Barnes Foundation, the art collection that is the collateral to Goldman’s private-banking loans is valued at $1 billion and sounds like the foundation for a foundation some day: Picasso, Van Gogh, Warhol and Pollock, Matisse and Hirst. The best art at the Opening Line bureau are watercolors painted by a grandmother.
This is where Goldman’s willing to go in search of a dollar, Miles Weiss’s story shows, and to make sure it doesn’t ever get too far from Cohen, whose former company, SAC, was paying banks $1 billion in commissions and fees annually, according to the Wall Street Journal.
It’s probably smart business for both parties. But given all flies SAC was attracting for a while there, if authorities were able to come back with the case against Cohen they never had the first time, wouldn’t this art be one of the first things to be liquidated?
Still, it’s nice to see trust is still a principle of relationships on Wall Street.
Trade balance is the standout U.S. economic indicator today, which will again feature a heavy load of earnings reports. Among the 51 companies reporting are Office Depot, DirecTV, Starwood, Discovery, Allstate, Disney, Whole Food, Activision Blizzard and Electronic Arts.
Most Asian markets were closed again today.
U.K. services grew at the fastest pace in four months in April, Markit Economics said in London earlier this morning.
There’s buzz the Alibaba IPO filing could come this morning. If it doesn’t, we’ll probably be saying the same thing tomorrow.
Seconds before publication:
*MERCK REPORTS SALE OF CONSUMER CARE TO BAYER AG FOR $14.2 BLN
Parties on both sides of an investigation said to be under way at the Justice Department into whether Credit Suisse helped Americans evade taxes have been making moves.
U.S. Attorney General Eric Holder released a video yesterday rebutting the concept of “too big to jail.” By the way, that was a concept he expressed himself about a year ago. Yesterday, it sounded as if he was giving himself wiggle room, saying that while a company’s conduct might be wrong or hard to defend, it might not violate the law, and that sometimes the evidence doesn’t support charges.
Other times it sounded as if he had the wherewithal and the plan to go ahead fully, saying that while there could be ripple effects, federal prosecutors have improved coordination with regulators to ensure any action taken would succeed without too much damage.
“Rather than wall off banks from prosecution, the potential for such severe consequences simply means that federal prosecutors conducting these investigations must go the extra mile to coordinate closely with the regulators that oversee these institutions’ day-to-day operations,” Holder said. “So long as this coordination occurs, it is fully possible to criminally sanction companies that have broken the law, no matter their size.”
Not surprisingly, Swiss officials are taking a dim view of all this, trotting out the same arguments that Holder was directly addressing. Yet Credit Suisse is only one of 14 Swiss banks under criminal investigation for aiding tax evasion and the bank’s conduct, including its behavior during the investigations, is behind the push for criminal charges, a person familiar with the probe told our reporters. So maybe some introspection and contrition would be a better approach at this hour.
Meanwhile, Credit Suisse had already moved late last year to quarantine the operations involved into a separate unit that could be set to take the fall in any prosecution agreement, which is very near.
Fiat/Chrysler Chief Sergio Marchionne will unveil his five-year plan for the automaker during an all-day event in Auburn Hills, Michigan, today that starts at 7:30 New York time (which also happens to be Auburn Hills time) and continues until the closing news conference with Marchionne at 7 p.m. If you missed our preview yesterday, find it here.
Late in the day yesterday, Tommaso Ebhardt and Mark Clothier, citing people familiar with the automaker’s plans, reported Fiat will shoulder the billions of euros it will cost to redesign models for now, holding out the possibility of raising funds with an equity-linked loan following a planned listing in New York. The reporters also learned Fiat plans to keep full ownership of Alfa Romeo, Ferrari and Maserati.
A 17-year-old girl from Hattiesburg, Mississippi, has taken on Coca-Cola and succeeded in pressuring the company into changing ingredients, which must be no small expense. Coke will stop using brominated vegetable oil, or BVO, as a stabilizing agent in its drinks that happens to contain a chemical ingredient also found in flame retardants.
The change came after social media pressure, notably Sarah Kavanagh’s, resulted in thousands of petitions against it. Kids these days.
It must be pretty frustrating being a scientist now, when half the country has convinced itself that it’s all bunk -- evolution, astrophysics, and, of course, climate change.
It’s worth framing it this way, without taking sides, because today the U.S. government will release the National Climate Assessment, a congressionally mandated report, and it’s going to receive the same reception as a wet dog.
Five years in the making, a collaboration of 13 federal science agencies and about 300 authors and advisers, and it’s DOA, at least to start.
Which is why the president of the United States will have to stoop to an appearance with Al Roker on the Today show this morning to try to get the science -- yes, it’s science -- some attention.
We don’t know if the scientists are right. We just know that the far side of the country catches fire every summer, the middle part gets destroyed by violent tornadoes, and this end of the lower 48 is gaining new waterfront property every year. Slowly but surely.
Remember last year, around summer and fall, when U.S. businesses complained about cybersecurity legislation intended to help them protect themselves and consumers, which eventually went nowhere? Yeah, about that.
Polio is making a comeback. The World Health Organization declared its resurgence a global health emergency yesterday. Vaccination efforts have been disrupted by armed conflict in several countries, allowing the viral disease to spread from Syria, Afghanistan and Nigeria to Pakistan, Iraq, Cameroon, Equatorial Guinea, Ethiopia, Somalia and Israel.
In Pakistan, though, the hunt for Osama Bin Laden disguised as a vaccination campaign destroyed trust, Simeon Bennett reported. Perhaps no price was too big to pay for finding Bin Laden, but this sounds pretty close.
Returning to the theme of the U.S. being drained of its wealth, today’s story from Richard Rubin and Margaret Collins paints a bleak picture of Americans plundering their future -- and, writ large, the country’s -- by dipping into 401(k) plans and individual retirement accounts.
Told through the anecdote of a middle-aged Pennsylvania woman, the scenario is pretty much Opening Line’s nightmare: On the downslope toward 60 years old, out of work and out of money.
Moreover, there’s a circular damage that compounds the pain of early withdrawals, because just when you need most to borrow from your future, the cost of borrowing reduces your pile even further.
There’s an element of fatalism that can creep in, too. Screw it, you think, I’ll just take out all the money now. Worry about my future later. Then later arrives, and you can’t feed or house yourself, and you become society’s expense. The cost of capitalism.
Remedies have been hard to come by and those that emerged have gone nowhere, Rubin and Collins find.
How vast is the condition? In 2011, about 4 percent of U.S. household tax filings included reported penalties on early withdrawals, the story says, a number that’s sure to rise unless things turn around and stay turned around.
Just another deeply entrenched culture of tax-and-spend conservatives who are, in the words of Joel McHale, relying on the government to feed and house their families.
It was tempting to shy away from the developments in Nigeria, where 276 girls were kidnapped from their boarding school beds and turned into breeding stock for Boko Haram. Some stories in the news defy one’s attempts at finding insight or humor.
But -- grim reality of the situation notwithstanding -- the idea of the FBI being sent to help find and rescue them has its thrilling aspects. That’s what Eric Holder’s offering, according to reporting by the Huffington Post yesterday, citing an unidentified Justice Department official.
While nothing and no one is likely to stand out more than a pack of FBI agents in Nigeria, anything would be an improvement over the current situation. The Boko Haram leader who claimed responsibility/took credit for the kidnappings said yesterday he would begin selling the girls. Meanwhile, the wife of President Goodluck Jonathan, Patience Jonathan (which sounds more like an imperative than a name), is reported to have ordered the arrest of two leaders of protests attempting to bring pressure on the government and questioned whether there even was a kidnapping. There were no such arrests.
There’s no indication Jonathan (whichever one’s in charge) will accept Holder’s offer, but if we know this government, the FBI or CIA -- or someone -- is there already.
Is Twitter secretly an initiative to identify and separate those among us who, while seemingly sane in most daily dealings, have, in fact, fatally flawed judgment? Think of it as 140 characters of Jagermeister.
Without digging into the history of Twitter traffic -- you’ve seen it all in real time anyway -- we’ll just stipulate that people write some really. dumb. things. People who surprise you with their stupidity.
The phenomenon recalls the Stanford marshmallow experiment. A child of 7 to 9 years is given the choice of eating his marshmallow now or getting two marshmallows if he waits a little while. Some kids just don’t have what it takes to wait. They’re not bad kids, they just lack the right chromosome.
This might explain Rakesh Agrawal.
Doesn’t matter what you’ve got up front -- if you run into a hot goaltender in the NHL playoffs, you’re in trouble. Right now Pittsburgh’s Marc-Andre Fleury is hot, which is why the New York Rangers are now down two games to one in their second-round best-of-seven series. Pittsburgh won 2-0 last night, Fleury’s second shutout in two games, despite being outshot 35-15. Game 4 is tomorrow night in New York.
In the night’s other NHL playoff game, Los Angeles took a 2-0 lead in its second-round series with Anaheim with a 3-1 win, also with the aid of great goaltending, by Jonathan Quick. Game 3 is Thursday in Los Angeles.
In the NBA playoffs, Washington took the opener of its second-round series against Indiana by a score of 102-96. It’s Washington’s first time in the second round of the playoffs in 32 years.
The Los Angeles Clippers took the first game of their second-round series, beating Oklahoma City 122-105. Maybe it’s a little early to be thinking this, but if this is the year the Clippers finally win it all, the irony of Donald Sterling’s downfall that same season will be too much.
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