Levine on Wall Street: Yucky vs. Yummy
The lawsuits are coming from inside JPMorgan
Here's a story about how the criminal case against JPMorgan for securitizing bad mortgages is based largely on information from a whistleblower inside the bank, including an email from her "warning her superiors that they were vastly overstating the quality of the mortgages being bundled into securities." There is interesting game theory to be mapped out about whether you should send that sort of email. On the one hand it is traditionally considered a bad idea: If you disagree with your boss, you should discuss it live, rather than create a paper trail of your initial negative impressions that can later be used against you. ("You said these mortgages were terrible, but you sold them anyway, and now you are in jail.") On the other hand, sending the email sets you up for a future whistleblower reward. ("Jane here said these mortgages were terrible, but you sold them anyway, and now she's on our side of the table.") Recently senders of these emails have tended to be more rewarded than punished, shifting the calculus a bit, which I suppose is the idea.
The Container Store IPO looks yummy
If you want to build a business based on selling people boxes to put things in, you might as well be passionate about it, and if you're doing an initial public offering of a bricks-and-mortar retailer the same week that Twitter's IPO filings are being made public, you might as well make it quirky to stand out. So the Container Store's IPO filing contains a letter from CEO Kip Tindell that goes a little something like this:
How to define The Container Store culture? I would have to say that first and foremost we’re an employee-first, yummy company. “What does it mean to be yummy?” might be your next question. Well, it’s the opposite of yucky. We know our employee-first mantra defies conventional business wisdom, most famously expressed by the late American economist Milton Friedman. Milton said the only reason a corporation exists is to maximize the return of the shareholder. Well, with all due respect to Milton, at The Container Store we have found that if you take better care of the employees than anybody else, they really will take better care of the customers than anybody else.
The use of proceeds of the IPO is to pay a cash dividend to the holders of the Container Store's preferred stock, including Tindell, his wife, and their private equity sponsors at Leonard Green & Partners.
The CFTC enforcement director is leaving
I have a soft spot in my heart for David Meister, the head of enforcement at the Commodity Futures Trading Commission, because the frequency and comedic value of the agency's enforcement actions have really increased during his tenure. Here's a good review of his three years on the job, which did include increased activity though, of course, "skeptics remain, by turns attacking the agency as too tough or too lenient." Skeptics will also enjoy the fact that Meister "is expected to land in the private sector," which "would reignite concerns about the metaphorical revolving door that shuttles government employees to the private sector and back again."
Vatican financial regulators are conducting their own investigation of the Vatican Bank
Did you know that the Vatican had financial regulators? Reuters describes them as "the Financial Information Authority (AIF), the Holy See's financial watchdog." What a cool job. Especially because the Vatican Bank seems to have been used for a lot of money laundering, with the embassies of Iran, Iraq, and Indonesia frequently making large cash transactions that the AIF finds suspicious. Talk about too big to fail, though; it is hard to imagine the Vatican's financial regulators shutting down the Vatican's only bank for its sins.
U.S. financial regulators are still going to work
The government may be shut down, but since the SEC, the FDIC, the OCC, the FHFA, and the Fed are all more or less profit-making enterprises, they'll keep coming to work and paying their employees. The CFTC not so much: It's paid out of general appropriations and will be furloughing hundreds of employees. So if you're planning a financial fraud this week maybe stick to the commodities markets.