Wall Street Folly

Is this really gonna save money in the long run?:  A memo that was forwarded to CNBC’s Charlie Gasparino might make you think twice about shaking hands with anyone from Bank of America.  Seems like the grinchy belt tightening bank is cutting out some of those little civilized kitchenette items that employees at many firms have grown to enjoy:  Gratis teas, crackers, soups, cocoa, and yes…..hand soap.  At least that’s what the document said.  What’s this action gonna do?  More time will be wasted with employees taking breaks to forage for snacks.  It’s not exactly a morale booster either.  And given the guffaws coming out of all ends of Wall Street, it’s a sure public relations embarrassment.  Way to go B of A!!!

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Tags: Bank of America, Compensation, Culture

•    Merrill Lynch sniffing around for even more funding
•    Taiwan Exchange selling as much as a 25% stake in itself
•    Citigroup predicts double digit gains for European stocks in ‘08
•    Tracinda is taking a 35% stake in Delta Petroleum
•    Sucky results at Macys lead to 9 store closings
•    Baidu CFO dies in a vacation accident

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•    Dismal new home sales hit a 12 year low
•    Warren Buffett looks to make lemonade out of bond insurer lemons by starting
     up his own
•    Busy Christmas: Add ING’s reinsurance unit to Buffett’s holiday buying spree
•    Citigroup and Goldman are trying to cut their LBO debt overhang with
     discounts up to 10%
•    Court rules that Finish Line must complete Genesco buy
•    Luminent Mortgage posts $520.6 million mortgage related loss
•    Dubai World ups MGM Mirage stake to 6.5%
•    Amazon makes deal to offer Warner music downloads

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•    Pakistan opposition leader Benazir Bhutto assassinated at an election rally
•    Goldman says Citigroup, JPM Chase and Merrill may have more writedowns and
     now expects Citi to slash its dividend by 40%
•    Sallie Mae plans to do public offerings of $2.5 billion of common and
     convertible preferred stock
•    More losses ahead for Wells Fargo?
•    2007 set a record for convertible bond sales
•    Avanex warns
•    MAXJet equity holders won’t get bupkus for their bankrupt shares

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•    Retail sales disappointed
•    Congress reviving plans to tax internet sales
•    Warren Buffett buying 60% stake in Pritzker’s Marmon Holdings & will buy
     the rest by 2015
•    Cerberus to pay $100M breakup fee to United Rentals
•    Goldman buys 230 Park Avenue building
•    Higher demand at Toyota and Honda caused them to increase November production
•    MAXJet filed CH11 after canceling all flights early this week
•    Harrah’s finally has all of the regulatory approvals it needs for its buyout

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• Chrysler says it has ample liquidity, disputing a negative WSJ report
• Cheyne Finance SIV receivers in agreement to sell assets to Goldman
     Sachs
• Swiss regulators looking into UBS losses according to FT, but Bloomberg
     report cites no evidence the company broke rules
• Traders hit by ‘triple whammy’
• Cisco to network whole cities
• News Corp selling 8 Fox stations to private equity firm Oak Hill Capital

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At least reclusive Cerberus CEO Steve Feinberg’s public court appearance wasn’t in vain.  Cerberus won their case against United Rentals.  A judge said that they don’t have to follow through with their buyout of the firm: 

Delaware Chancery Court Judge William B.
Chandler III ruled today that United Rentals officials should have known that
Cerberus executives believed they had a right to pull out of the deal at any
time as long as they paid a $100 million fee.

“There’s some clarity here for the private-equity firms that if you have an
agreement, you’re protected,” Steven Kaplan, a professor at the University of
Chicago Graduate School of Business, said in a phone interview. “For United
Rentals, part of this can’t be recovered because it was predicated on debt
markets that no longer exist.”

United alleged Cerberus’s RAM Holdings buyout entities agreed in July to pay
$34.50 per share for United Rentals’ stock, and reneged on the deal in November
amid weakened U.S. credit markets.

United Rentals Can’t Force $4 Billion Cerberus Buyout – Bloomberg

Tags: Cerberus, Lawsuit, LBO / MBO

It may not be the $75 million package first speculated, or even the more recent $70 million guess, but with a record $67.9 million pay package, Lloyd Blankfein still didn’t do too badly.

Blankfein, 53, will receive $26.8 million in cash, and $41.1 million in restricted stock and options, the New York- based firm said in a regulatory filing. Co-Presidents Gary Cohn, 47, and Jon
Winkelried, 48, will each receive restricted shares and options valued at about $40.5 million, up from $25.7 million last year. Cash payments weren’t disclosed for anyone other than
Blankfein, who reaped a record-setting $53.4 million last year.

Goldman shattered Wall Street profit records for the fourth-consecutive year even as banks and securities firms including Citigroup Inc. and Merrill Lynch & Co. were forced to take at least $96 billion of
writedowns. Goldman set aside $20.2 billion to pay employee salaries, benefits and bonuses, 23 percent more than last year.

“There are successful people and then there’s extraordinary success, and they’re trying to show as a firm that they’re really extraordinary,” said Jeanne
Branthover, managing director of Boyden World Corp., an executive recruiter in New York. “They’re rewarding him for leading such a fabulously successful ship.”

 
Goldman Awards Blankfein a Record $67.9 Million Bonus – Bloomberg

Tags: Bonuses, Compensation, Goldman Sachs, Lloyd Blankfein

•    Pimco’s Bill Gross says we’re in a recession
•    Justice department probing chocolate industry practices for possible price
    fixing
•    Cisco’s #2 guy seen as John Chambers’ heir apparent leaves for private
    equity world
•    Blackberry maker earnings soar
•    Micron reports more sucky earnings
•    Philips buying Respironics
•    NetSuite surges in IPO debut
•    Financial squeeze at Chrysler may force asset sales

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Going the way of some of its competitors like Morgan Stanley, UBS and Citigroup, Mother Merrill may be the next to get an injection of the Asian green stuff: 

Temasek Holdings Pte. Ltd., a Singapore
state-owned investment company, is in advanced talks to inject as much as $5
billion into Merrill, a person familiar with the situation said.

The news comes amid analyst predictions that mortgage write-downs at Merrill may
double with another $8 billion or more in the fourth quarter — the latest sign
that Wall Street isn’t out of the subprime woods yet. Temasek’s board has given
preliminary approval to the investment in Merrill, although pricing, timing and
regulatory issues remain to be negotiated, the person familiar with the
situation said. As such, a deal may still not materialize.

 

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Tags: Credit Crunch, John Thain, Merrill Lynch

So much for the NY Post’s report this morning that they were looking at buying Bank of America’s prime broker business.  Sources close to Citadel say it’s not true:

"There have been no conversations about it and Citadel has not looked at the books," said the source, who is close to the situation but not authorized to speak about it.

Citadel spokeswoman Katie Spring declined to comment. 

Citadel not eyeing BoA unit: source – Reuters

Tags: Bank of America, Citadel

Thanks to recent litigation between Cerberus and United Rentals, famously reclusive Cerberus CEO was caught on tape.  So naturally, with our admitted fascination with the  OfficeMax elves, we present to you Stephen Feinberg, the dancing elf.

Prior elfings: Dancing Private Equity Elves, Dancing Hedge Fund Elves, and Dancing Wall Street Elves

Tags: Cerberus, Humor

Citigroup showed around 30 employees in its structured credit group the door….

The cuts reduced the division by almost a
third, a week after newly appointed Chief Executive Officer Vikram Pandit
pledged a “front-to-back” cost review, said the people who declined to be
identified because the decision hasn’t been made public. The department helps
put together collateralized debt obligations, or mortgage-related securities
that have led to at least $9 billion of writedowns at Citigroup alone.

Citigroup Fires CDO Bankers After Mortgage Losses – Bloomberg

Tags: Citigroup, Credit Crunch, Revolving Door

How would you like all sorts of private information that you share with your prime broker to fall into the hands of your hedge fund competitors at Citadel?  Ya, we know…Goldman has hedge funds and they’re prime brokers too.  But there’s something unsettling about Citadel doing a deal like this……

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Tags: Bank of America, Citadel

•    AMT relief passed
•    Oracle posts great results
•    Sallie Mae Posts Record Drop as Lord Lacks Details
•    NetSuite prices at $26
•    Calpine Bankruptcy plan gets approval
•    Navistar to Buy GM Truck Unit
•    EU gives MasterCard six months to cut fee

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Just as news emerged that the senior execs at Bear Stearns, including CEO Jimmy Cayne, would forgo their bonuses this year, Morgan Stanley’s John Mack will do likewise.  Morgan reported a whopper of a loss this morning, including a larger than expected write down of $9.4 billion.  But not to worry.  The Chinese are riding to the rescue, plugging half the value of that hole with a $5 billion infusion….

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Tags: Bonuses, Compensation, Credit Crunch, John Mack, Morgan Stanley

•    Reclusive Steve Feinberg takes the stand in the United Rentals trial
•    EU rules Mastercard fees illegal
•    Barclays gets Pakistani license
•    Palm earnings and forecasts fall short
•    Larry Ellison’s NetSuite IPO price range jumps to $19-22
•    Best Buy posts strong earnings
•    Tribune Chairman expected to step down
•    Hovnanian loss rises on cancelled orders
•    GM set to offer 5200 employee buyouts

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Taking one with the team (with the news emerging notably just before their earnings announcement): Although technically entitled to a small bonus, senior Bear Stearns execs led by CEO Jimmy Cayne are said to be sharing this year’s holiday pain. While they’re passing out bags of coal to their staffers along with their slashed bonuses, they’ll be nobly accepting donuts for their own….

Bear’s current executive compensation plan,
adopted in 1986, mandates that the firm hit a minimum return-on-equity level
before senior brass can receive bonuses. Bear just barely met that ROE standard
this year, one of the people familiar with the matter says, and executives could
draw on a small bonus pool.

In a nod to the firm’s dispiriting
end-of-year results, the executives decided not to take the pay, this person
says, a move that should be finalized today, during a scheduled, late-afternoon
gathering of Bear’s board of directors.

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Tags: Bear Stearns, Bonuses, Compensation, Credit Crunch, Jim Cayne

Ralph Cioffi, the man who was at the helm of the two imploded Bear Stearns hedge funds and who’s now being investigated over whether he improperly withdrew funds, is gone from the firm:

Cioffi, 51, ceased to be an employee last
week, Bear Stearns spokeswoman Elizabeth Ventura said in an interview today. She
declined to say why he left or to comment on the federal probe. He had stayed on
as an adviser to the New York- based securities firm after being relieved of his
duties as a fund manager in June, when his funds’ subprime mortgage investments
began to unravel.

Cioffi declined to comment on his departure. He left Bear Stearns, the
second-biggest U.S. underwriter of bonds backed by mortgages, because his role
in unwinding the funds was completed, a person close to the firm said.

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Tags: Bear Stearns, Credit Crunch, Hedge funds, Revolving Door

John Thain is looking to old timers to move Merrill Lynch forward.  Not only has he been seen lunching with former Merrill CEO David Komansky recently at San Pietro, but now Jeffrey Kronthal is being brought back as a consultant in the mortgage mess:

Mr. Kronthal and a group of other senior
fixed-income executives were ousted in mid-2006, and the absence of their risk
oversight has been cited as a factor in the buildup of mortgage assets that cost
the firm $7.9 billion in the third quarter. Those losses triggered the ouster of
Merrill Lynch Chief Executive Stan O’Neal, who retired Oct. 30.

Mr. Kronthal, 53 years old, received a
standing ovation when he appeared on a Merrill trading floor yesterday, people
at the firm said. After Mr. Kronthal and three other executives departed in
2006, Merrill kept ever-greater amounts of mortgage assets on its books after
debt underwritings, believing their high credit rating meant they were unlikely
to generate losses.

Kronthal to Return As Merrill Adviser – Wall Street Journal

Tags: Merrill Lynch, Revolving Door

And there may even be something left over for investors:

Yield Alpha, which started the year with
about $700m, has returned to solvency and can afford to repay banks which seized
the fund’s assets when it missed margin calls earlier this year.

The stronger than expec-ted financial position resulted from continued payouts
by structured credits in which Basis invested, and appears to remove one of the
few situations in which lenders to a hedge fund lost money.

 

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Tags: Credit Crunch, Hedge funds

That’s what the Feds are looking into….

Weeks before the two funds began imploding
in April, fund manager Ralph Cioffi moved about $2 million of his own money from
the riskier of the two hedge funds into another internal fund with a separate
investment strategy, these people say.

Mr. Cioffi’s move effectively lowered his
exposure to the riskier of the two failed funds when it was on the brink of
significant declines, these people say. No other senior Bear executive invested
in the funds, according to people familiar with the matter.

A spokeswoman for Bear declined to comment.

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Tags: Bear Stearns, Credit Crunch, Hedge funds

•    Housing starts at 14 year low in November?
•    Japan fears weakening corporate profitability given rising oil prices and the
     subprime mess
•    Blackstone’s $7.8 billion Alliance Data Systems acquisition may not happen
     this year
•    Adobe beats estimates with strong earnings
•    EU lawmakers pressing more scrutiny of Google / Doubleclick deal
•    New FCC rules set to piss people off
•    MGM Grand Macau opens
•    Starbucks sinks to three year low after downgrade
•    Hollywood writers strike hits the Golden Globes and Academy Awards

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Loads of people we know are getting the above message after every search.  What’s the deal Google?  Keep it up and we’ll use another search engine…..

Tags: Google

Following up on CNBC’s report on Friday, where Charlie Gasparino reported that Merrill Lynch would cut fixed income bonues an average of 40% with some in that division down 70-80, there’s a bit more color:

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Tags: Bonuses, CNBC, Compensation, Credit Crunch, John Thain, Merrill Lynch, Revolving Door