Wall Street Folly

More layoffs are on the way at UBS.  1,900 people will be axed from investment banking, equities and fixed income with the announcement said to be made at the upcoming October 2 annual meeting.  Support staff will also be among those getting pink slipped.  According to Bloomberg:

UBS is scaling back its investment banking unit, which it plans to separate from wealth and asset management after mounting writedowns prompted rich clients to withdraw funds for the first time in almost eight years. The job cuts would be on top of 7,000 already announced by UBS, which has taken writedowns and credit losses of $44.2 billion since the credit crisis began last year.

“It is unquestionably the worst hiring climate I’ve seen in 30 years in the City for the European markets,” said Shaun Springer, chief executive officer of Napier Scott Executive Search Ltd. in London.

UBS to Cut 1,900 Investment Bank, Equities, Fixed Income Jobs – Bloomberg

Tags: Credit Crunch, Revolving Door

GuestOfAGuest shows us that investing in $1000 worth of beer would have
been a way better investment than blowing the same amount in either (or all three) of AIG,
Wachovia or Lehman Brothers shares.  (We note that hey seem to have left off common stock dividends in their calculations, but even when those are factored in, the beer drinkers still would have won.)

Tags: AIG, Lehman Brothers

This picture of the Lehman Brothers sign removed from its midtown headquarters was in this morning’s NY Post.

Tags: Barclays, Lehman Brothers

Tough times in NY: How much pain will Wall Street losses mean to New York?  As much as $3.5 billion in tax revenue and 40,000 financial industry jobs according to state comptroller Thomas DiNapoli. Historically, around 20% of the state’s tax revenues were derived from financial industry companies and employees…

The job loss estimates, released in a
statement today, are up from earlier projections that 25,000 jobs would be
eliminated. Each securities job lost may result in as many as three jobs that
disappear elsewhere, the comptroller’s office said. DiNapoli’s statement came
after the U.S. House of Representatives voted against a financial-rescue plan
intended to restore confidence in the banking system.

“The volatility in the markets is creating difficulty in predicting budget
revenues and today’s vote in Washington will only increase that volatility,”
DiNapoli said.

“Given the fact that 20 percent of
New York State revenues come from Wall Street, the impact of recent events on
our finances will certainly be significant,” Paterson said in a prepared
statement.

Wall Street Woes May Cost New York $3.5 Billion – Bloomberg

Tags: Credit Crunch, Economy, New York

• Libor Surges Most on Record After U.S. Congress Rejects Bailout
• Senate May Try to Revive Bank-Rescue Bill by Tomorrow
• Japan, Australia Central Banks Add $20.8 Billion to Ease Crunch
• Belgium, France Lead EU6.4 Billion Dexia Rescue; Shares Rebound
• Probe Into Fannie Mae, Freddie Mac Widens
• Citigroup avoids missteps of other bail-outs
• Japan’s stake in M Stanley ‘an alliance’
• Bain, Hellman Acquire Lehman Investment Unit for $2.15 Billion
• Pandit makes his mark with Wachovia purchase
• Icap looks forward to derivative changes
• Apple shares plunge on consumer spending fears
• Short of cash, N.Y. Sun is shutting down
• Circuit City Said to Have Hired Restructuring Firm as Sales Dip

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We heard Nancy Pelosi’s speech just prior to the vote and couldn’t believe how she was sticking it to the Republicans.  It’s no wonder the vote failed. And that’s what Republican Minority Leader John Boehner and Eric Cantor are both saying.  Next up: the Democrats will naturally call bullshit on that.

You can judge for yourself:

Part 2 is below

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Tags: Credit Crunch, Economy, Politics

1:47 The market is tanking

Apparently the roll call can remain open, hoping that some votes will change

1:53:  The vote is now 227 Nay, 206 yay.  Some strong arming must be going on

1:54:  One more vote has switched:  226 nay, 207 yay

the drama, the drama…

Some are saying that Nancy Pelosi’s partisan remarks just before the vote may have pissed off some Republicans…

Sounds like it’s back to the drawing board. The bill has officially failed. 

An excellent Wall Street Journal front page article explores the far reaching ramifications and pains of letting Lehman Brothers fail.  We think that it was a terrible decision by the Fed and U.S. Treasury, which helped to put us where we are now, resulting in what we consider to be a rescue plan that amounts to nothing more than a $700 billion band-aid….

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Tags: Barclays, Ben Bernanke, Credit Crunch, Fed, Henry Paulson, Lehman Brothers

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Tags: Credit Crunch, Economy, Fed

Unfortunately, we’re bound to hear more stories like this one of a successful 47 year old banker with private equity firm Olivant Advisers who couldn’t cope with the credit crisis.  According to the Daily Mail

Kirk Stephenson, who was married
  with an eight-year-old son, died in the path of a 100mph express train at
  Taplow railway station, Berkshire. 

Mr Stephenson is believed to have
  taken his own life after succumbing to mounting personal pressures as the
  world’s financial markets went into meltdown. 

New Zealand-born Mr Stephenson, who
  owned a £3.6million, five-storey house in Chelsea and a retreat in the West
  Country, was chief operating officer of Olivant Advisers.
 

Last year, the private equity firm
  tried to buy a 15 per cent stake worth almost £1billion in Northern Rock
  before the bank was nationalised, bidding against Virgin boss Sir Richard
  Branson.

Credit crunch banker leaps to his death in front of express train – Daily Mail

 

Tags: Credit Crunch, Obits

Tags: Charts, Credit Crunch

Financing has dried up for the beleaguered 1 1/2 year old newspaper according to the NY Post.  It’s been said to have been losing around $1 million a month.

Tags: NY Sun

That’s according to the Financial Times:

Goldman is moving to shift $150bn of assets to the balance sheet of the Utah bank. These would include loans to private clients and other assets that would be found more typically at a traditional commercial bank.

Goldman also plans to talk to US regulators to identify up to $50bn in assets it could buy from troubled lenders. These, too, would be put under the Utah bank.

Goldman seeks to buy up to $50bn in assets – Financial Times

Tags: Credit Crunch, Distressed, Goldman Sachs

Shades of WaMu, although in Wachovia’s case, Citigroup is assuming the senior and subordinated debt.

Citigroup Inc. will acquire the bulk
of Wachovia’s assets and liabilities, including five depository institutions and
assume senior and subordinated debt of Wachovia Corp. Wachovia Corporation will
continue to own AG Edwards and Evergreen. The FDIC has entered into a loss
sharing arrangement on a pre-identified pool of loans. Under the agreement,
Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of
loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC
$12 billion in preferred stock and warrants to compensate the FDIC for bearing
this risk.

Here’s the press release from the FDIC

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Tags: Citigroup, Credit Crunch

• Paulson Must Make $700 Billion Rescue for Banks Work
• The question now: Will bailout plan work?
• Treasury Gets Broad Power in Bailout Bill to Hire Contractors
• Wachovia takeover rests on bail-out
• Bradford & Bingley: the Treasury statement
• Fortis Receives EU11.2 Billion Rescue From Benelux Governments
• Flowers Raising $2.5 Billion to Buy Financial Assets (Update1)

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Tags: Charts, Credit Crunch, Henry Paulson, Politics

Here are links to the plan…

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Tags: Credit Crunch, Economy, Henry Paulson, Politics

Now they all want a Jamie Dimon’s type deal: Why buy the entire bank, including the toxic debt and other liabilities as well as having to pony up for the equity, when if you just wait a few days, the Feds may swoop in and let you just cherry pick the good assets, limiting your liabilities?  Those thoughts may chill exploratory merger talks between Wachovia and possible suitors Citigroup, Banco Santander, and Wells Fargo .  According to Bloomberg:

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Tags: Banks, Citigroup, Jamie Dimon, JPM Chase, M&A

Wachovia says they don’t have "liquidity issues" (at least as of today) but they’re nonetheless reportedly testing the merger waters. The toxic debt laden bank is reportedly in preliminary merger discussions with Banco Santander, Wells Fargo and Citigroup.   The stock got nailed today, closing at $10, down  $3.70.
achovia reportedly in talks with three suitors – MarketWatch

Tags: Banks, Citigroup, Credit Crunch, M&A

Has Wall Street already found a way around Chris Cox’s silly and misplaced short selling ban?  Bankers, including those said to work at Citigroup, have apparently been hard at work on a derivative based end run tactic. They’re supposedly making their pitches to hedge funds:

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Tags: Citigroup

TPG’s investment in Washingtual didn’t work out so well.  What do they have to show for their $1.35 billion investment made last April  in the now seized bank whose assets (sans liabilities) and deposits were picked off by Jamie Dimon & Co for $1.9 billion?  Bupkus. Zilch. Zero.  It’s a stale donut for breakfast.

TPG
invested, along with others, when Washington Mutual Inc raised $7 billion in
April. At the same time, TPG’s founding partner David Bonderman was appointed to
the board.

In a statement on Thursday, a TPG spokesman said: "Obviously, we are
dissatisfied with the loss to our partners from our investment in Washington
Mutual."

He continued: "While this loss is extremely disappointing, we are well
diversified across platforms, geographies and sectors, and this investment
represented a very small portion of our assets."

TPG stake wiped out, buyout firm says loss disappointing – Reuters

Tags: Jamie Dimon, JPM Chase

Attorney General Andew Cuomo is expanding his probe of short sellers to also include the credit default swap market. According to the WSJ: Mr. Cuomo’s office Thursday morning subpoenaed data from three providers of pricing and trading information that operate in the swaps market: Markit Group Ltd., Depository Trust & Clearing Corp. and Bloomberg LP. His office has already subpoenaed multiple hedge funds from New York, Texas and London, among others, seeking information on their activities in short-selling and CDS contracts. Broker dealers have cooperated with the office in providing data about these markets.

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Tags: Andrew Cuomo, Credit default swaps, Politics

He’s baaaaaaack:  Former Merrill Lynch CEO Stan O’Neal, one of the credit crunch’s biggest CEO casualties (although he left MER with a package estimated at $160M), is considering a number of options. Among them: he might join Vision Advisors, a small hedge fund / private equity group.  According to the Financial Times:

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Tags: Credit Crunch, Hedge funds, Merrill Lynch

• Wrangling holds up US bail-out
• Money-Market Rates Rise Globally as U.S. Talks on Bailout Stall
• Lehman Won’t Return Prime Broker Assets for `Weeks’
• Labor unions protest in New York against bailout
• Away from Wall Street, Economists Question Basis of Paulson’s Plan
• Fortis Says Solvency Is `Solid’ as Shares Fall for Fifth Day
• Greenberg Decreases AIG Holdings by 40 Million Shares
• Bank of East Asia Chairman Says `Returning to Normal’
• Research In Motion’s Profit, Forecast Miss Estimates
• Bankrupt Delphi Wins Court Approval to Change GM Agreements

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Misplaced blame: Ambac is down over 50% in just a few days and not a new short seller in sight;  It’s one of the stocks that’s on Chris Cox’s verboten list of financials…Could it be that this (and other financials) might actually have been falling of their own weight instead of from short selling pressure?

“Taking
the short sellers out of the market doesn’t change the fundamentals,” said Dean
Gulis, part of a group that manages about $3 billion for Loomis Sayles & Co.
in Bloomfield Hills, Michigan. “It’s wrong to say that short selling of shares
was the biggest contributor to the financial crisis.”

Short-Sale Ban Fails to Save Ambac From 50% Plunge – Bloomberg

Tags: Charts