Levine on Wall Street: Drugs, Hookers and Icahn
Comcast agreed to acquire Time Warner Cable in an all-stock deal valued at around $159 a share, well above Charter Communications' hostile $132.50 bid. "Charter is unlikely to match Comcast’s bid and is willing to study any assets Comcast would sell," and apparently there will be meaningful regulatory-driven divestitures, possibly to Charter. I suppose there is a story where coming in second in a merger auction is a victory, since you avoid the winner's curse and get to pick up cheap assets from forced sales. But I suspect that story doesn't really work in the cable industry, where I gather bigger is pretty much the only thing that's better.
What does the Volcker Rule say?
"The Volcker rule, which bans proprietary trading, says the largest banks have to start reporting information on risk and position limits, risk factor sensitivities, inventory turnover and other metrics this July," in order to prove that all their proprietary trading is the good, customer-facilitation kind, not the bad, risk-taking kind. "But the banks cannot yet put together the reports and are unsure of what to do because the regulators have been disagreeing for weeks over what they want, banking sources said." I feel like you could just put together a report that has all of what every regulator wants? Apparently it's not that simple.
But is it legal?
Alison Frankel weighs in on whether the Riegle Community Development and Regulatory Improvement Act of 1994 could be the basis for a challenge to the Volcker Rule. It's a cost-benefit-y rule, I gather, intended "to encourage small, community-based lending institutions," that "reformed anti money-laundering and flood insurance laws and included provisions intended to streamline the bank regulatory process." It's no surprise that the history of bank regulation is a constant see-sawing between imposing tighter regulation and then rolling back regulation in the name of encouraging community-based whatever. It's just weird that it proceeds by accretion: When it wants to tighten regulation, the government doesn't get rid of the old, anti-regulation laws. It just lays new ones on top. Sometimes that doesn't work.
Should Simon Johnson run JPMorgan?
When Sheila Bair caught some guff for joining Banco Santander's board of directors, she said that other bank reformer types should be on other bank boards, and suggested Simon Johnson for JPMorgan. Here is his campaign speech, and while it probably won't surprise you, it's a good statement of the bank-reformist line (cut compensation, get smaller, stop committing crimes, etc.). Mostly I like that he made the effort; if someone half-jokingly nominated me to a bank board I would probably half-joke about it on Twitter and leave it at that.
Should Carl Icahn be allowed to pay his directors?
A big thing in activist shareholdering is whether activists who nominate board slates should be able to pay "their" directors directly, beyond what the company pays them for board service. The idea is to better incentivize performance -- activists will pay their directors bonuses for stock price improvements, for instance -- and/or to make the directors loyal to the activist who nominated them. Presumably you'd only nominate them if you expected them to be at least a little loyal to you, but anyway. Lots of pro-management types -- led as always by Wachtell Lipton -- oppose this practice, and companies are implementing bylaws to forbid it. Carl Icahn disapproves of these bylaws, at frankly surprising length for him. I have no particularly strong opinions on this matter, honestly, but let's see if Icahn persuades you.
Should there be a National Market System?
This is from Tuesday, but it's a good overview by Steven Davidoff of how an SEC rule adopted in 2007 -- "Reg NMS," as it's called -- sort of caused high frequency trading, and how the SEC is sort of embarrassed about it and wants to take it back. Maybe. Also yesterday's installment i n the Wall Street Journal's "high speed traders are faster than low speed traders" series (related) is about lasers.
The jobs of the future.
"What will we do when robots take all our jobs?" is a surprisingly active subject of discussion on the internet these days, possibly because economics bloggers are deeply insecure. Anyway my intuitions are similar to Ryan Avent's and this post is very good.
Britain's GDP will go up by 10 billion pounds a year now that they're counting illegal drugs and prostitution in the numbers, a victory for accurate measurement over, I don't know, something.
To contact the writer of this article: Matt Levine at email@example.com.
To contact the editor responsible for this article: Tobin Harshaw at firstname.lastname@example.org.