Levine on Wall Street: Hooray Nice Team Work
Happy FX settlement day.
Exciting! A confession: I have not yet read the big currency manipulation settlements. There are ... some omissions? Where is the Office of the Comptroller of the Currency? I was promised foreign-exchange-manipulation settlements with the OCC! Instead, all we got was the U.K. Financial Conduct Authority, the U.S. Commodity Futures Trading Commission, and the Swiss Finma. Also, I was promised Barclays? These settlements feature Citigroup, JPMorgan, HSBC, Royal Bank of Scotland, and UBS, but Barclays "wasn't ready for a deal." The total is about $3.3 billion, quite evenly split (each bank has a six handle, with Citi the winner at $668 million and HSBC bringing up the rear at $618 million). UBS also had some precious metals trading troubles. The Bank of England had some troubles of its own: It knew about the FX misconduct and didn't do anything, and it fired its chief currency dealer yesterday in penance.
The CFTC, ever user-friendly in these matters, includes a seven-page highlights reel of "Examples of Misconduct in Private Chat Rooms." The very first one consists of traders at Citi, JPMorgan and UBS debating whether to invite a fourth trader into a chat room, with the argument against being "dont want other numpty's in mkt to know." The second one features a trader suggesting to another on the same side of his trade, "hopefulyl a fe wmore get same way and we can team whack it." (All of this is sic obviously.) They team whack it, and celebrate by saying "well done gents," "hooray nice team work," and "nice one mate." Like I said, I haven't read these in any detail. My basic bias is that some trading ahead of client orders in FX is manipulative but much isn't; some is legitimate hedging. Many of these chats don't even look that bad on first impression, more "traders offering to trade with each other" than "traders conspiring to manipulate markets." But when you plan to "team whack it," and do, and then say "hooray nice team work," that is how you end up in the CFTC's highlight reel.
The SEC isn't so sure about fair funds.
Here is an op-ed from Daniel Gallagher and Michael Piwowar, two of the five commissioners of the Securities and Exchange Commission, arguing that the SEC should not distribute the $600 million in insider-trading disgorgement it got from SAC Capital to investors who were allegedly harmed by SAC's insider trading. One reason is that "in this case it will be incredibly difficult and expensive to identify and compensate the victims," which is a bit troubling; if you don't really believe that anyone is noticeably harmed by insider trading then why send people to prison for it? But the other argument is basically that lawyers would take all the money:
It was all part of a coordinated campaign by the plaintiffs bar to gain access to the pot of gold at the end of the government investigations rainbow. These lawyers played no part in the commission’s successful enforcement action, yet they may now receive tens of millions of dollars as a result of the majority’s vote.
That ... seems right? I mean, Gallagher and Piwowar's worry that "harmed investors are now at greater risk of suffering the additional loss of a significant amount of their potential recovery at the hands of opportunistic trial attorneys" is a bit silly, since they're proposing to give those investors, you know, nothing. But you'd think that the SEC could find some way to distribute money to investors without interposing tens of millions of dollars of attorneys' fees. But again, doing that would require identifying the victims. And when there aren't real victims I suppose the lawyers need to supply them.
Mexico ICMA CACs.
The people who get excited about this sort of thing will get excited about this thing: Mexico is offering New York law bonds with the new-style collective action clauses proposed by the International Capital Market Association (which we discussed here). The goal of these clauses is to address the Argentina problem in which a few holdouts can prevent a sovereign debt restructuring, and generally to make sovereign restructuring more organized and tractable. Anna Gelpern points out that Mexico tends to be a market leader in sovereign bond documentation. So expect that, over the next 40 years or so, the problem of holdout creditors will slowly disappear. Slowly.
First drafts of history.
Tim Geithner's book is interesting, but it seems reasonably clear that he did not write it the way I write this linkwrap (in a panic at a standing desk). It was more like, he talked to a guy, then the guy cleaned up the narrative and removed all the curse words and generally made it more book-like. The Financial Times found "100 pages of transcripts ... of interviews Geithner gave to assistants preparing his book" and published some highlights, which are interesting both as an inside look into how political memoirs are made and as a rather more vivid account of Geithner's feelings about the eurozone crisis than appeared in the book. For instance: Mario Draghi's famous "whatever it takes" speech? An accident:
I remember him telling me [about] this afterwards, he was just, he was alarmed by that and decided to add to his remarks, and off-the-cuff basically made a bunch of statements like ‘we’ll do whatever it takes’. Ridiculous.
So I guess don't parse central bank statements too carefully is the lesson here. There are also some not entirely surprising resentments:
I said at that dinner, that meeting, you know, because the Europeans came into that meeting basically saying: “We’re going to teach the Greeks a lesson. They are really terrible. They lied to us. They suck and they were profligate and took advantage of the whole basic thing and we’re going to crush them,” was their basic attitude, all of them.
[T]o be sympathetic to them, the Germans’ experience has been every time they buy a little bit of calm [on the] markets and the Italian spreads start to come down, Berlusconi reneges on anything he committed to do. So they were just paranoid that every act of generosity was met by sort of a
... well, something salty. Elsewhere in book news, Thomas Piketty's "Capital in the 21st Century" is the Business Book of the Year.
The wife in that Jefferies scandal was just kidding.
"A substantial portion of what has been written in the press and other media over the past few weeks is inaccurate, untrue or hyperbolic," says Christina Kelly, who had previously alleged in court that Jefferies health-care banker Sage Kelly's "eldest daughter once had to clean up her father’s excrement after a doorman at their posh Fifth Ave. home carried the blasted banker to his bed" and that Sage had pressured her into an orgy to secure client business. I suppose that her court papers technically count as "other media." Anyway it's all better now and they've reached a divorce and custody settlement. Next I hope that Jefferies will retract its bizarre memo about the time the whole health-care group took a drug test.
Happy Goldman partner day.
Exciting! A confession: I worked at Goldman Sachs. (I did not come particularly close to being a partner.) Here's yesterday's Bloomberg News story about how partners get offered cool no-fee private equity investments. I didn't get offered those either. Basically I've wasted my life. The list comes out around noon, and my congratulations and condolences to everyone on and not on it.
Here is Bloomberg Businessweek's 2014 ranking of full-time MBA programs. Duke's Fuqua School of Business is the best in America, "part of a shakeup that dethroned University of Chicago’s Booth School of Business and also knocked elite rival Harvard Business School out of the top five for the first time in the history of the ranking." Sure. Wharton is second, Booth is third, Yale is sixth, Harvard is eighth. Sure. OK. There's also an international ranking, in which Ivey Business School at Western University in Ontario comes out on top. One Columbia student got a $1 million signing bonus, and one MIT Sloan student got a $1.8 million total comp package, which I suppose are plausible arguments for going to business school.
Where to find bad brokers.
"A Wall Street Journal investigation, analyzing the records of about 550,000 stockbrokers, identified 16 U.S. hot spots like this one where troubled brokers tend to concentrate." Unsurprisingly, the top two are Boca Raton and Long Island, with the rest of the top five all in Florida. Lower Manhattan is sixth. Way to live up to expectations, everyone.
Elsewhere in investor protection.
Alex Blumberg's Startup podcast is a podcast about making a company to make podcasts, and in further self-referentiality he decided to solicit investors in the company via the podcast. Which (1) you could not do before the JOBS Act, but (2) now you can. So here is a podcast about general solicitation and accredited investor rules, which is a nice little success story for the JOBS Act.
Arnold Kling on principles-based regulation. Alison Frankel on the terror-financing lawsuit against banks. Steven Davidoff Solomon on Sears Holdings' financial engineering. Bill Ackman has another acquisition target for Valeant. IEX is now 1 percent of the stock market. You can buy 20-minute binary options. The House of Lords makes Congress look public-spirited. A spaceship is landing on a comet. Greek police say fraudster lived as monk for years. A Brooklyn treehouse is coming to Airbnb. Russell Brand Has Written a Populist Manifesto. Teen: Facebook isn't cool but we still use it. Bond yields predict the outcomes of civil wars. There's a bourbon shortage.
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