Busy Bernanke, Bank Bribes, Bitcoin Bonds

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.
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Busy Ben Bernanke.

How many investment managers can one former Fed chair consult for? I mean, a lot, right? If I were Ben Bernanke I'd sell my phone number, and a half-hour weekly window in which you could reach me, for ... I don't really know the going rate but surely seven figures? I'd be comfortable blocking off, what, forty half-hour weekly availabilities for forty different firms? That's a twenty-hour-a-week job, and still probably worth it for all of them? 

The actually existing Ben Bernanke is up to two, signing on with Pimco this week after recently agreeing to consult for Citadel. The Pimco job seems to be mostly helping with investment decisions, though there might be a certain amount of being trotted out in front of clients. Those are his only two jobs, though, says his other full-time employer:

Bernanke is working with only these two firms, according to DJ Nordquist, a communications director at the Brookings Institution in Washington, where the former chairman is a distinguished fellow in residence. Bernanke remains a full-time employee at Brookings, she said.

Seems busy. Also he's publishing a book and blogging.

I guess you can get mad that Pimco exists in the shadow of the Fed and Bernanke going there will move that shadow over a bit, but I don't know, Bernanke was not primarily a regulator and I just don't see this as a regulatory move. On the other hand it surely has something to do with his insight into how the Fed thinks about interest rates -- "Obviously his experience within central banking is important at the moment, given where we may be in terms of the U.S. economic cycle," says Pimco Group Chief Investment Officer Daniel Ivascyn -- and if you think that's a revolving-door problem (do you?) then Pimco is like the worst place for him to go. Also, are Bernanke's two gigs in conflict with each other? Will Citadel use him to get insight into Pimco's moves?

What even is bribery?

Banks are sick of being investigated for hiring well-connected people in foreign markets:

U.S. government officials have told the banks that hiring someone with the intent of winning business is, in itself, a legal violation even if there isn’t an explicit quid pro quo, the people said.

Several banks dispute this interpretation, saying the law bars only hires done solely to win specific deals, the people said. The SEC’s approach would redefine bribery law by punishing firms for hiring qualified but well-connected people who are later linked to certain deals, people close to the banks said.

Banks also maintain that hires of well-connected people are only one part of large, complex relationships with clients, who didn’t award deals purely as a result of any such hires, people close to the banks said.

I have said before that investment banking is about relationships, and that "Relationships are like quid pro quos but fuzzier," and I pretty much stand by that. So I guess I'm sort of with the banks here; I find it plausible to say that a quid pro quo is a bribe and a relationship is not. 

Argentina should issue bitcoin bonds.

"Digital Gold," Nathaniel Popper's new bitcoin book, is out next month, and here is an excerpt in the New York Times Magazine about the rise of bitcoin in Argentina. Argentines like bitcoin "thanks in large part to their country's history of financial instability," and hey that gives me an idea. Remember how Argentina wants to issue new bonds, but is somewhat (not entirely!) stymied by a U.S. court that will block any sales or payment process that touches in any way on New York? And how basically any dollar transaction touches in some way on New York? Well bitcoins are just, like, on the Internet, man. Issue a bond denominated in bitcoins. You don't need a trustee or custodian or clearinghouse or anyone else subject to New York jurisdiction to make it work. It all lives in the blockchain. It's so crazy that it just might etc.

Elsewhere, Goldman Sachs is investing in Circle Internet Financial, "a start-up that aims to use the technology underlying Bitcoin to improve consumer payments." And here is Izabella Kaminska on the "world's first bitcoin traded note on Nasdaq Stockholm," which ... sounds ... just ... super.

Twitter, hacking, insider trading.

I wrote about this yesterday, but this Ars Technica article does a much better job of getting at the real issue in Selerity's early access to Twitter's earnings release:

Selerity's actions remind us of the exploits of Andrew "weev" Auernheimer, who was criminally prosecuted on hacking charges for obtaining and disclosing the personal data of about 140,000 iPad owners from a publicly available AT&T website.

In that case, the Justice Department took the position that AT&T did not intend for the public to see the data and that the links Auernheimer accessed were located in a place that an everyday computer user would never stumble upon. In short, the data he accessed wasn't intended for public consumption despite it being public.

It's not clear if that position is the law -- Auernheimer's case was decided on other grounds -- but if it is, then doing things like guessing the URL of an upcoming earnings release might be "hacking." (Selerity says it didn't need to guess the URL, just refresh an existing page a lot, though arguably that doesn't change the analysis.) If it's hacking, trading on the information is also insider trading under probably all of the new proposed insider-trading bills; it's also probably insider trading under currently existing law. So I mean: I don't really think this is "hacking," or insider trading, nor do I think it should be. But be careful out there.

Salesforce might be for sale. 

"Salesforce.com Inc. is working with financial advisers to help it field takeover offers after being approached by a potential acquirer," and I guess if it sells it could get rid of that very '90s-style name. It's not clear who the potential acquirer is: "Oracle is the most 'realistic buyer,' Daniel Ives, an analyst at FBR & Co. wrote in a research note Wednesday," but Dan Primack and Adam Lashinsky at Fortune say that "speculation is already running rampant that this could be the first game-changing move for Satya Nadella since taking over last year as CEO of Microsoft." At about $50 billion Salesforce would be the biggest tech acquisition ever, and at more than 80x Ebitda it would also be one of the priciest big tech deals.

Some SEC news.

Yesterday the Securities and Exchange Commission "voted to propose rules to require companies to disclose the relationship between executive compensation and the financial performance of a company," requiring disclosure of executive pay and total shareholder return for the company and its "peer group" over each of the last five years. This is a Dodd-Frank requirement and it seems a little half-baked? I mean, it's fine, whatever, but keying annual compensation to annual shareholder returns really sounds like the sort of short-term stock-price-focused thinking that a lot of people now object to. "Oops, my salary is bigger than our total shareholder return, better declare a buyback," the cynical executive will say. Also total shareholder return is often as much luck (oil prices, Fed easing) as skill; why not try to isolate the executive's value-add? (Because it's hard and subjective and controversial, is why.) Also everyone knows the "peer group" thing is dumb. The SEC should just make a scatterplot of comp versus returns for every public company, and then each company could just print the scatterplot with its own dot in a different color.

Elsewhere in SEC news, here is a pretty boring enforcement action (expense mis-allocation) against a hedge fund firm called "Alpha Titans LLC," which really just puts it all out there as far as hedge-fund names go. And here is a story about SEC insider-trading charges "against two Beijing residents" for buying out-of-the-money call options ahead of a merger of two Chinese companies; my advice to you has long been "don't buy short-dated out-of-the-money call options in the target just before a merger is announced," but I guess if you do, do it from outside of the U.S. On the other hand, these guys got their U.S. brokerage accounts frozen, so maybe just don't do it at all.

Sheldon Adelson says things.

I advise you to read them! A sample:

The billionaire complained that his expatriate executives, deployed to postings such as Macao or Singapore, were sending their children to school on the company shilling at $30,000 a year in fees for each child. Then some of them were getting Adelson’s Las Vegas Sands company to pay $50,000 a year for college education. Adelson called that “offensive”.

On top of that there’s the housing allowance – $25,000 a month in Singapore, he stressed – and a car.

“Not a Toyota like they would drive here,” he thundered.

The judge listened in what looked like bemused silence as Adelson shifted to the high cost of flying executives’ families around the world.

What should Deutsche Bank be?

Dan Davies has some advice:

It does have one big advantage  --  it’s not subject to the Volcker Rule. As well as proprietary trading, the Volcker Rule bans US firms from investing directly in venture capital. And this could be a big deal going forward. The investment banking industry, broadly speaking, is always in either a tech industry cycle, a resources industry cycle or a FIG (Financial Institutions Groups) cycle. At present, it seems to be ending a resources cycle and beginning in tech. And from previous tech cycles, we know that being able to co-invest with VCs is an important way of getting into deals. In my view, Deutsche ought to be  --  in as quiet and unshowy a way as possible -- beginning to devote some of the capital and expertise of its Corporate Investments division in the direction of Silicon Valley.

There's also some stuff about "shared ledger" technology, a/k/a "Bitcoin for Banking."

Things happen.

People are worried about bond market liquidity. "Greece and its euro-area partners are stepping up talks in a bid to break an impasse over bailout aid," okay. The Fed's phones work. Neil Barofsky seems to be enjoying himself monitoring Credit Suisse for tax compliance. The Aleynikov jury has moved on from its food poisoning problem. Business school varsity wine-tasting teams. Undergraduate venture capitalists. Living With Being Dead. Borscht inflation. Electronic Bidet Toilet Seat Is the Luxury You Won’t Want to Live Without. Folksiness on fleek. "Great quarter, guys!" and Earnings Call Bingo

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

To contact the editor on this story:
Zara Kessler at zkessler@bloomberg.net