Levine on Wall Street: Obama's $10 Billion Bet Gone Bad
No more Government Motors
The U.S. Treasury sold its last shares in General Motors yesterday, netting a $10 billion loss on its $49.5 billion bailout of GM. President Obama released a statement congratulating GM and saying "“When things looked darkest for our most iconic industry, we bet on what was true: the ingenuity and resilience of the proud, hardworking men and women who make this country strong." The statement did not conclude "and we lost $10 billion on that bet." Unlike with the auto industry, the government made a profit on its crisis-era bailouts of the financial industry. It is fun to imagine the president saying "When things looked darkest for what is after all a pretty iconic American industry these days, we bet on what was true: the ingenuity and resilience of Jamie Dimon and Lloyd Blankfein." That would've been a good bet!
John Paulson is having a good year
Paulson's Advantage Fund, which was up five trillion percent in 2007 and down 150 percent in 2011 -- those numbers are approximate -- is up 30 percent this year, and his Recovery fund is up 55 percent. We still don't talk about his gold fund. If this were any other hedge fund manager I guess this is where I'd tell you that hedge funds don't seek only to outperform the market, and place an even greater emphasis on uncorrelated returns, low beta, and reduced risk of drawdowns. I don't know. "He’s still a legendary investor on Wall Street and the fact that he’s gone back to basics is positive," someone says.
Municipal bond investors are totally price insensitive
The five percent rule is a sort-of rule that says you can't sell bonds to a customer at more than a five percent markup. David Sirianni, the head municipal bond trader at Oppenheimer & Co., thought he'd found a way around the rule: He'd buy bonds one day, hold them overnight, and then sell them to customers the next day at a "5.01 percent to 15.57 percent" markup. Oppenheimer had computer systems to catch and review all markups above three percent, but those systems only caught matched buys and sells on the same day, so they missed Sirianni's trades. Once the bonds were on his books overnight, he presumably thought, they're just inventory, and then who can say what the markup was? Finra can say, apparently; yesterday it made Oppenheimer pay some $921,000 in fines and restitution, fined Sirianni $100,000, and suspended him for 60 days.
Some JPMorgan shareholders still want an independent chairman
When I worked as a capital markets banker I'd sometimes see alphabetized lists of investors where Lotsoff Capital Management appeared right before Moore Capital Management and I'd giggle like an idiot. "We've got Lotsoff Capital! And now we have Moore Capital!" I'd say, mostly to myself. So I cannot resist the Needmore Fund. The story is that Needmore, a family charitable fund, wants JPMorgan to split the chairman and chief executive officer roles, and has submitted a shareholder proposal to do that. Don't expect anything to come of this: A similar, though stricter, proposal failed at the last annual meeting, and Needmore is the sort of small-stake governance gadfly activist -- it owns 2,100 shares of JPMorgan and has submitted similar resolutions elsewhere -- that tends not to get its way. If they want to force JPMorgan to separate the CEO and chairman jobs, THEY'RE GOING TO NEEDMORE FUNDS AH HA HA HA HA HA HA HA HA.
Bonuses are just holiday tips right?
A good way to enrage an investment bank employee is to compare his year-end bonus to oh say his doorman's Christmas tip. Here the New York Times obliges, and gives the knife an extra twist by finding an Upper East Side doorman who used to work at Deutsche Bank. He says, "If you think of it, you just have to look at the human psyche; we all have jealousy of each other. It’s no different with doormen than it is with hedge fund managers."