Levine on Wall Street: Some People Love Money So Much They Can't Live Without It

Matt Levine is a Bloomberg View columnist. He was an editor of Dealbreaker, an investment banker at Goldman Sachs, a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz and a clerk for the U.S. Court of Appeals for the Third Circuit.
Read More.
a | A

Addiction memoirs are mostly boasting.

Some people get paid millions of dollars a year trading credit for banks and hedge funds, and some of those people discover that they want to tell everyone about it, because getting paid millions of dollars a year is awesome. The New York Times Sunday Review is a great place to tell everyone how rich you are, but you need a hook; I don't think they've ever published a column titled "I Make a Lot of Money Hahaha I'm So Rich," though I have not checked. But "I was addicted to money and it was a terrible affliction" is apparently a successful hook. Or was; now that it's been done you'll need another one. Sorry.

The Wolf of Wall Street is pretty pleased with himself.

Speaking of self-aggrandizing self-flagellation, here's another rundown of what the Wolf of Wall Street is up to now. Not paying back his victims all that they're owed, for one thing. Motivational speaking, for another: "He works as a motivational speaker, sells a $2,000 home study course in how to get rich quick 'without sacrificing integrity' and hires himself out to companies including Virgin Airlines and Deutsche Bank." I just. One, a $2,000 home study course in how to get rich quick, I'm sure that's great. But, two, the motivational speaking to banks. I mean, okay, fine, hire the guy to give your motivational speeches if you're an airline or whatever, but Deutsche Bank? Do you really need to be associated with the Wolf of Wall Street? Do you really think people are coming away from his speeches resolving to cut back on the cocaine and the fraud? This is not a good look for you, Deutsche Bank.

Banking is about relationships.

Here is a story about how big investment banks are taking startups more seriously. It starts with an anecdote about SurveyMonkey, a smallish firm that didn't want to go public and talked to JPMorgan about doing a syndicated loan. And Jimmy Lee, the vice chairman of JPMorgan, flew out to Palo Alto. To discuss a $350 million syndicated loan. "Considering what a small company we are, SurveyMonkey isn't something Jimmy would usually spend time on," says SurveyMonkey chief executive Dave Goldberg, and that is quite an understatement, until you read that Goldberg "is married to Facebook Inc. Chief Operating Officer Sheryl Sandberg," and then you start to understand how Jimmy Lee chooses where to spend his time. I guess other startups are getting attention from banks too though.

Morgan Stanley isn't so into FICC.

In 2011, James Gorman beefed up Morgan Stanley's fixed-income trading business. "On Friday, after three years of spotty results, Gorman flipped the script, announcing a new strategy for fixing the operation: shrinking and taking less risk. It is at least the fourth time the bank has tried to retool the business since the financial crisis." So that's great I guess? What if it's the right answer: Do you praise them for being empirical and iterating until they got the right answer? Or is it like, really, you should have gotten that in your first three tries? Anyway the story is consistently interesting; a lot of people -- some of them at Morgan Stanley -- have their doubts that a smaller and warier Morgan Stanley fixed-income trading business can actually succeed, and would prefer that Morgan Stanley either commit to a bigger bond trading business or get out of it altogether.

Sometimes your bets go the wrong way.

Berliner Verkehrsbetriebe (BVG), the Berlin public transport system, is involved in a lawsuit with JPMorgan over a $200 million loss that it suffered on credit default swaps in 2007. BVG thinks it was ripped off and isn't paying. JPMorgan's response is basically, you had some pretty bad luck, but that's not our fault: Sure BVG signed up for a derivative in which the "chance of any defaults in the underlying portfolio for the swap were 0.19 percent when it was signed," but all that means is that one time out of every 500 or so, things will go wrong. Things went wrong. "Taking on a small risk, even vanishingly small, isn't the same thing as taking on no risk at all," says JPMorgan's lawyer, and those are words to live by. Things that I do not understand include (1) why "Berliner Verkehrsbetriebe" is abbreviated "BVG" and (2) why a public transport provider needed to invest hundreds of millions of dollars in credit derivatives.

The SPDR Trust is a trust.

The $172 billion SPDR S&P 500 ETF is a giant exchange-traded fund but it is also a Massachusetts trust, and like all trusts it is subject to the rule against perpetuities, a ghoulish rule that is too complicated to describe here. The point, though, is that the ETF will be dissolved 20 years after all of 11 random young people named in the trust documents are dead. Not clear how those young people were chosen -- maybe they were the lawyers' relatives? maybe they were picked from a phone book? -- but the oldest is now 23 years old, and they're all still alive. It would be weird to have a $172 billion dollar investment vehicle depend on your staying alive.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Matthew S Levine at mlevine51@bloomberg.net