Levine on Wall Street: The FBI Is Monitoring Your Ringtones
The FBI is looking into illegal ringtones.
The FBI has "medium confidence" in a theory that a couple of big banks front-ran Fannie Mae and Freddie Mac interest rate swap orders, though I feel like there's a nonzero chance that they're just reading too much into normal trader behavior. I guess that's what "medium confidence" means though. I'm just not quite sure about what the FBI calls the banks' "unsophisticated tradecraft," which included "hand signals" and programming "their phones with different ring tones to identify when certain customers were calling, alerting traders that a large order was about to be placed." It'd be cool if they programmed their phones to ring differently depending on whether the upcoming order was a buy or a sell.
Charles Ergen knows how much people like being around him.
A bankruptcy court is deciding a complicated thing about LightSquared and Dish Network and Dish chairman Charles Ergen; the gist is that Ergen bought a lot of LightSquared debt and it's good for him if he bought it for himself but bad for him if he bought it for Dish. So he testified on Monday and it was amazing:
Ergen claims he broke no rules — but cloaked his purchases in secrecy for more than a year, not even telling his wife, because he’s a private person.
“I just don’t really like people knowing my personal investments,” Ergen said.
An awkward fact is that Dish's treasurer worked on Ergen's debt purchases, which makes it sound like maybe they were for Dish. But oh no:
“He likes being in the action,” Ergen said. He referred to the younger executive, someone he has known for 27 years, as a “mentee.”
“When he’s doing stuff for me personally, he gets to spend time with me and I think he likes that.”
Charlie, not gonna lie, when you do stuff like this, I get to spend time reading and writing about you, and I like that.
BofA did good.
Bank of America earnings beat expectations, at $0.29 per share versus $0.26 estimates; the stock is up pre-open. Its $3.44 billion net income for the quarter was held back a bit by a $2.3 billion litigation expense, which is actually bigger than JPMorgan's number -- something like $847 million of legal expenses -- even though JPMorgan had $2 billion and $13 billion settlements last quarter. The power of reserving: JPMorgan booked most of its expenses in previous quarters.
If you can't follow the law, there's always business school.
One of the mysteries of Mathew Martoma's career is how he got a job at SAC Capital after being expelled from Harvard Law School for transcript forgery. Another is how he got into Stanford Business School after same. This DealBook story does not do much to clear up the mystery, though "A person familiar with Stanford’s admission process but not authorized to discuss it publicly said the expulsion of an applicant from another university, if it was disclosed on an application or otherwise known, would create a 'serious impediment' to a candidate’s admission." You would ... hope so? No word on whether SAC had similar policies.
Credit trading is getting harder.
Here is a story about how "many firms are moving away from the all-singing, all-dancing credit offering," specializing in what credit trading services they are offering. "If you have no presence in a region, just developing secondary market-making won’t make economic sense," says the head of credit at BNP Paribas, and gosh that sounds like the end of an era or something. Used to be that the dream of every bank was to trade bonds and credit default swaps, because that's where the money was. Now bond trading "won't make economic sense," so sad.
Owning TruPS CDOs is getting easier.
The Volcker Rule briefly made banks disclose the actual value of collateralized debt obligations backed by trust preferred securities, instead of their inflated historical value. (Also it was going to make them sell those TruPS CDOs, but the real pain was the marking to market.) A lot of little banks complained. The federal agencies responsible for the Volcker Rule changed the rule. Now they can keep the TruPS CDOs and, I guess, continue not to mark them to market. The weird irony is that the marks on those CDOs were pretty good: The fact that all the little banks would have to sell them revived the market and actually pushed prices up.