Levine on Wall Street: Surfing Hedge Funds and Iterating Regulators
Nobody wanted to borrow at the discount window.
There's a stylized fact that banks don't want to borrow from the Federal Reserve's discount window because it's like admitting to the market that you can't get money anywhere else. This also seems to be a real fact! Here's some New York Fed research finding that, from December 2007 to October 2008, the discount window stigma was about 42-47 basis points: That is, banks would borrow from a non-discount-window source at rates that were over 0.4 percent a year higher than the discount window's rate. So that's your stigma. Those other sources, by the way, were the asset-backed commercial paper market (+42 basis points) and the repo market (+47 basis points), but also the Fed's Term Auction Facility (+44 basis points). Which is itself basically a Fed bailout! But "The TAF was specifically designed as an auction to remove perceptions of stigma that had plagued the" discount window, and I guess it worked.
People want to
buy Time Warner Cable
Yesterday Charter Communications publicly proposed to buy Time Warner Cable for about $61 billion, preferably in a friendly deal, otherwise in an unfriendly deal. They've been pursuing this deal for months; "Time Warner Cable has resisted Charter's approaches to reach a friendly deal on several occasions over the past few months: in June, October and, most recently, December," according to Charter's chief executive officer. Meanwhile Liberty Media Corp., Charter's largest shareholder, may be hatching its own convoluted plan to buy Time Warner; it involves a merger with Sirius XM Holdings to increase borrowing capacity, because of course Liberty Media would prepare for an acquisition by doing another acquisition. Also Comcast is floating around somewhere. I guess when you have a deal this big people are going to talk, but still, this is a lot of rumor-mongering and telegraphing for an offer that was just announced today.
How the CFPB lost its laser focus .
Here is a story of how the Consumer Financial Protection Bureau "was designed as a Google-era regulator: a data-obsessed start-up, forever iterating, laser-focused on the safety of consumers rather than the soundness of banks," and then, you know. Became a regular regulator. Raj Date, my favorite CFPB alumnus, has a big role in the story; apparently he was a leading contender to run the CFPB but was ultimately deemed too corporate, man. An important lesson here is that if anyone tells you that anything is going to be a "Google-era [anything]: a data-obsessed start-up, forever iterating, laser-focused on [anything]," run, they are always lying.
Lots of companies get mortgages .
Here's a story about commercial mortgage backed securities and how they include things like "a loan to 127 West 25th Street, a homeless shelter whose location in the fashionable Chelsea neighbourhood of Manhattan has raised the ire of some of the area's residents," or "a loan to Kalahari Resort and Convention Center, a chain of African-themed waterparks." Really, why not? There used to be a thing where a small business, or homeless shelter, would go to its local bank and get a loan, which that bank would keep on its balance sheet with loving care. Now there are capital markets, and they provide small business loans; in kind of a weird way, sure -- collateralized with real estate and packaged into CMBS -- but, still, they're where the loans are.
Hedge fund advertisers like hedge fund advertising .
There's a hedge fund, I guess, called Topturn Capital. A while back it released, like, a YouTube video to the effect of "ooh invest in our hedge fund," and there was a surfer involved. His surfing was intended to make you think that you should give your money to a hedge fund. Does that sound good to you? Here is a press release from the public relations firm that came up with that ad, Meyler Capital, and it is full of things. Here is a thing:
Meyler uses video a great deal as it can say more about a fund in two minutes than can be said in even a 40 page pitch book. JD David, the firm's COO, points out that "video captures the essence of people - their passion, enthusiasm and charisma - it's not about track record, it's about the people behind that track record."
There are other things. Welcome to the world, hedge fund advertising business, you're gonna do great.
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Matthew S Levine at email@example.com