Levine on Wall Street: SAC Still Popular at Goldman
Banks will still trade with SAC
This article quotes Goldman Sachs chief executive officer Lloyd Blankfein saying in September that SAC had "been indicted. They haven't been convicted." So Goldman was willing to keep trading with them. Of course now "Goldman Sachs Group, JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) are among Wall Street firms still catering to SAC Capital Advisors LP after the hedge fund agreed to plead guilty to insider trading charges." So! What have we learned? Various people talk various flavors of guff here about how the banks have to balance reputational concerns -- you're trading with a criminal organization! -- against, you know, what do banks balance things against, right, money, but this seems misguided. The time not to trade with SAC was when SAC was insider trading a lot. Now, with SAC's insider traders gone, some to prison, and its compliance programs subject to strict monitoring, how much trouble can they get in?
Every Thanksgiving, the town of Stamford, Connecticut, has a parade, and every Saturday before Thanksgiving, it has a Giant Balloon Inflation Party, and every year SAC Capital, which is headquartered in Stamford, sponsors the party. For all the turmoil that 2013 has brought to SAC, some things remain constant. “SAC Capital continues to be an extraordinary member of this community and is happily aboard as the presenting sponsor of the balloon inflation party,” Stamford Downtown president Sandy Goldstein told Dealbreaker for some reason. It's almost as if no one is ashamed to be seen in the company of a criminal hedge fund.
Italian banks like Italian bonds
A thing people in Europe sometimes talk about is breaking the bank/sovereign link: One thing you don't want, if you're building a robust financial system, is one in which the banks are the only sources of financing for the government and the government is the only source of financing for the banks. Anyway, here is a story about how Italian banks borrowed some 255 billion euros from the European Central Bank in the ECB's long-term refinancing operations, and plowed almost all of it into Italian government bonds, now holding a record 397 billion euros worth. The problems here include that the LTROs need to be repaid in 2015, making it harder for the banks to hold on to the bonds, and also that the ECB plans to stress-test the banks and may "consider exposure to sovereign debt when it conducts tests of banks' ability to withstand future crises," though hilariously it also may not.
Eric Holder, good cop
Here's a strange story about the Justice Department's lawsuit to block the proposed US Airways-American Airlines merger on antitrust grounds. BIll Baer, the head of the DoJ's antitrust division, has been running around rattling sabers about how his "best idea" was to stop the merger entirely. The airlines would prefer to negotiate a deal where they divest a few routes and get on with their merger. This week Eric Holder, the attorney general, seemed to put his support behind that option, saying that he hoped to resolve the DoJ's objections "short of trial." Holder was also personally involved in the negotiations that will supposedly lead any day now to a settlement of various JPMorgan charges. I like it! The underlings take a hard line; Holder swoops in at the last minute to save the day and work out a deal. It's the classic cop routine, though I guess it looks a little underminey to the underlings.
How we get our merger news now
Last Friday Nick Denton, who owns Gawker Media, and Henry Blodget, who founded Business Insider, had breakfast at Balthazar to discuss among other things a merger or other business combination between their sites. Then Blodget went to the bathroom. Then he wrote a post for Business Insider titled "Now Let's Discuss The Awful Restaurant Practice Of Having Bathroom Attendants Who Watch You Pee …" Then this was brought to the attention of Balthazar's owner Keith McNally, who said he agreed and would fire the restaurant's bathroom attendants. Then the Internet exploded. Then McNally said the bathroom attendants would keep their jobs, or some jobs anyway. Peace returned to the land. Then Capital New York reported the thing about the merger talks. Anyway in the future all M&A news will be broken when the target company's CEO blogs from the bathroom during preliminary negotiations.