Wall Street Folly

Take your TARP and shove it!: CNBC just reported that IBERIABANK is the first bank to have filed notice with the U.S. Treasury that it's redeeming its $90.6 million TARP preferred.  They said in their press release:

When we decided to accept funds under this program, we believe we were
the type of healthy bank that could employ the funds in the manner
consistent with the goals initially set out by Congress and the
Treasury in supporting the expansion of credit to the markets we serve.
We believe recent actions, interpretations, and commentary regarding
various aspects of the program places our Company at an unacceptable
competitive disadvantage. Our Board of Directors has determined that
continued participation in this program is no longer in the best
interest of our Company and its shareholders."

Here's the press release, issued yesterday:

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Amazon.com's Jeff Bezos talks to Charlie Rose, mostly about the new Kindle.

Tags: Amazon

With the huge market dislocations in 2008, hedge funds didn't have to lose money to still have substantial redemptions:  Short seller Jim Chanos' Kynikos Associates, which "had a good year" in 2008, apparently suffered an outflow of 20% of assets.  Such was the lot of being one of the seemingly small number of firms that hadn't blocked investor redemptions.  "We were like an ATM machine" he joked according to Reuters.

Tags: Hedge funds, Jim Chanos

 Here's the press release.  There's an 8:30 am EST conference call:  Dial-in numbers for the conference call are as follows: US &
Canada: (877) 700-4194 / International: (706) 679-8401; Conference
code: 88132598

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• Buyout, Hedge-Fund Managers Could Pay $24 Billion More in Taxes
• JPMorgan warns of more consumer woe
• In President's Budget Plan, Broad Agenda and a Few Gaps
• Fannie to draw further $15bn
• As GM losses deepen, bankruptcy fears grow
• GM’s Wagoner Meets With Auto Panel for Six Hours
• General Motors Cuts NCAA Promotional Spending by 60%
• Merrill Expands Japan Equity Research; Rivals Retreat
• Dell 4Q Net Down 48% On Sales Woes, Margin Drop
• New Yahoo CEO ushers out CFO in executive shake-up
• Sears wants Congress to ease pension rules
• Saks Open to Offers, Won’t Go Bankrupt, Chief Says
• Rocky Mountain News to Publish Final Edition Tomorrow

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The plan could be announced as soon as tomorrow according to Bloomberg.

So say someone actually throws in with Uncle Sam and buys common stock.  What if the bottomless pit known as Citigroup needs even more capital?  Does the government dilute the their new private equity capital partner along with the rest of the common holders?  We suspect that there would be big dilution.  Personally in this one, we wouldn't want common stock, only something higher up in the capital structure. No way. No how.  But would Uncle Sam go along with new money coming in senior to them?   Probably not.

Citigroup May Be Required to Get Private Capital Alongside U.S. – Bloomberg

Tags: Citigroup, Politics, Private equity

Ken Lewis made his pilgrimage today to speak to the Cuomo people about those $3.6 billion in Merrill bonuses.   The subpoenaed CEO flew in from Charlotte on a $50 million G-5 luxury corporate jet, one of the nine (with three for sale) in the Bank of America fleet.  An ABC video showed the plane arrive and Lewis emerge.  They note in the video that the cost of gas and pilots runs $5K an hour for gas and pilots, while a scheduled US Air flight costs $440. The company was quick to justify the use of the jet.:

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Tags: Bank of America, John Thain, Ken Lewis, Merrill Lynch, Politics, Private jets

Muriel Siebert discusses President Obama's budget and the new bank stress tests with Liz Clayman on Fox Business.

Tags: Barack Obama, Fox Business Network, Muriel Siebert

Given their disastrous forays into investing in hedge funds not to mention their shaky finances, we wonder what Vikram and Co can possibly be thinking with their apparent decision to still help fund a $200 million hedge fund start-up, along with Blackstone, run by a couple of former Citigroup prop trading guys.  Blackstone is sitting on piles of cash, and isn't on government life support, so we have no problem with them ponying up.   But Citi?  We wonder what Barney Frank et al. will have to say about that.   We kind of think it's ridiculous.  They need to get their financial house in order before staking others. 

By the same token, if we were the hedge fund guys, we'd be more than a little nervous that Citi might have to pull their investment (of an undisclosed size) on short notice.   It's not exactly stable money given their own instability.

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Tags: Blackstone, Citigroup, Hedge funds

According to Bloomberg:

Volcker Urges ‘Strong’ Restrictions on Hedge Funds – Bloomberg

Tags: Barack Obama, Hedge funds, Paul Volcker, Private equity

The axman cometh again to JP Morgan, this time as it integrates its Washington Mutual purchase into its operations.  According to AP:

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Tags: JPM Chase, Revolving Door

Here's the link to the pdf document, 146 pages

Tags: Barack Obama, Economy, Politics

• Goldman Sachs Cuts 2009 S&P 500 Forecast, Sees ‘Near Term’ Drop
• Swaps Need Regulation After Bank Losses, Gensler Says
• Wall Street Banks Vacate Towers Pushing Empty Space to Record
• Apollo May Invest $150 Million in Realogy After Loss

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Tags: Apollo, CDS, Distressed, Politics, Real Estate

One area on Wall Street will reap benefits from the stimulus plan:  Sellers of muni bonds….

Obama Showers Wall Street Fees With Muni Stimulus – Bloomberg

Tags: Barack Obama, Fees, Municipal Bonds, Politics

Today is D-day for Bank of America's Ken Lewis — he's testifying in NY Attorney General Andrew Cuomo's probe into the accelerated $3.6 billion in bonuses paid to Merrill Lynch employees just before it merger.

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Tags: Andrew Cuomo, Bank of America, Bonuses, John Thain, Ken Lewis, Merrill Lynch, Politics

• Obama budget includes $634 bln health fund-official
• Treasuries Fall as Obama Proposes $750 Billion in Financial Aid
• ‘Stress Test’ for U.S. Bank Industry May Not Live Up to Name
• Citi Confronts Global Fallout as U.S. Nears Deal on Stake
• AIG considers break-up in bid to stay afloat
• Liddy Pleads for Forgiveness as AIG Rescue Unravels
• GM Posts $9.6 Billion 4th-Quarter Loss as Wagoner Seeks New Aid
• RBS Posts Biggest Loss in U.K. History
• UBS Names Former Credit Suisse Chief Gruebel as CEO
• Apple Shareholders Reelect Board Amid Concerns About Jobs
• Bleaker outlook for chip sales in 2009
• Yahoo Official Says Company Isn’t Against Search Deal
• NXP to overhaul $6bn secured debt
• US Interior scraps Bush research oil shale leases
• Ex-Qwest CEO Loses Bid To Overturn Conviction
• Gannett Cuts Dividend, Joining Others Seeking Savings
• Sears Fourth-Quarter Profit Plunges 55% After Sales Decline

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Tags: Credit Crunch, Politics

Bail was set for $5 million for Arthur Nadel, the alleged hedge fund scammer who disappeared for a short time last month before he was arrested.  Nadel has to put up $1 million in cash for his bond, and four financially responsible signers with "substantial" assets have to provide their John Hancock. He also had to put up his home and any business property, which would be seized if he were to flee. He'd also have to wear the usual ankle monitor and wouldn't be able to have the internet in his home. 

 But it appears that Nadel is having some trouble digging up warm bodies to sign for him and it's unclear if he'll make bail:

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That's what RBS credit strategist Bob Janjuah thinks.

Corporate Bonds Are Next ‘Bubble,’ RBS’s Janjuah Says – Bloomberg

Tags: bonds, Credit Crunch

The Wall Street Journal highlights Renaissance Technologies' Jim Simons' connection to mega-Ponzi schemer Bernie Madoff.  Seems that he was involved in getting Stony Brook University's foundation to invest $500K in 1991, and two of his family foundation invested "a small part of their portfolios" with him in 1995.  But Simons got suspicious as to how Bernie made money, and pulled out in 2003.  And Stony Brook pulled $3.5 million of its then $8 million position in 2004 — Simons wanted them to pull it all — but others on the board disagreed. When the shit hit the fan and Bernie fessed up to his fraud, Stony Brook disclosed that it lost $5.5 million, although it had apparently pulled out $8.7 million over the years on a $2.7 million investment.

Sounds like both Simons' family foundation and Stony Brook Foundation are some of those at risk who might have to pony up those phantom profits that they got out…..

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Tags: Bernie Madoff, Jim Simons, Lawsuit, Renaissance Technologies

• Obama Mulls Plan to Withdraw Most Troops From Iraq in 19 Months
• U.S. to Get Bank Ownership Stakes Only as Losses Rise
• Citigroup Chafes Under U.S. Overseers 
• UBS Sues Highland Capital Over $745 Million in CDO Losses
• Merrill's Losses Rise By $500 Million
• RBS May Not Avoid Full Nationalization With Insurance
• Google Seeks to Join in EU’s Microsoft Antitrust Case
• AIG’s Liddy May Shift Strategy as Asset Sales Stall
• AIG in talks for third bail-out as insurer is braced for huge losses
• Home Prices Continue to Post Record Declines
• Japan exports nearly halve in deepening recession
• Ambac Posts $2.34 Billion Net Loss on Mortgage Debt
• Target Is Planning To Take Greater Aim At Wal-Mart's Success
• San Francisco Chronicle to cut jobs, might close

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Last night Charlie Rose interviewed his college buddy, Morgan Stanley CEO John Mack. Rose introduced Mack to his wife Christy (who’s the sister of his first wife).
The interview is well worth watching.

Tags: Charlie Rose, John Mack, Morgan Stanley

As if the banks don't already have enough problems…

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Tags: Ben Bernanke, Economy, Fed, Politics

If you live in NY City and are the proud owner of a condo or co-op, you should probably brace yourself for far higher maintenance fees and common charges:

Residents of a 54-unit Upper East Side co-op got the bad news last
month—despite the board's intense efforts to trim expenses, maintenance
fees are rising 15%, nearly double last year's hike. “People are
furious,” says Steven Sladkus, president of the co-op board and a
partner at law firm Wolf Haldenstein Adler Freeman & Herz. “Some of
them have lost their jobs.”

It's an increasingly common
problem. Even as the city's economy sinks, maintenance fees and common
charges for co-ops and condos, respectively, are rising at the highest
rates in years. Co-op managers blame soaring expenses, primarily
property taxes.

Soaring charges hit condo, co-op owners – Crain's
NY