Wall Street Folly

Key senators are expected to scrap President Barack Obama’s proposal to prohibit commercial banks from certain risky trading activities, people familiar with the matter said, a setback for the administration’s bid to limit the size and scope of the largest U.S. banks.

The proposal, dubbed the “Volcker rule” after former Federal Reserve Chairman Paul Volcker, would have essentially prevented any commercial bank with federally insured deposits from owning a division that makes speculative bets with its own capital.

But after resistance from lawmakers from both parties, Senate Banking Committee Chairman Christopher Dodd (D., Conn.) and other legislators are expected to introduce a plan next week that would give regulators more discretion to limit and potentially ban risky trading at banks, especially if it poses a risk to the broader economy. The measure would stop short of banning such trading outright……

Citigroup Inc. is in talks to sell a hedge-fund business with about $4 billion in assets as the bank company continues to whittle down a $547 billion pool of assets marked for sale, according to people familiar with the sale talks.

SkyBridge Capital, a New York alternative-asset manager led by two alumni of Goldman Sachs Group Inc., is in advanced talks to buy Citi’s fund-of-funds business, the same people said. No pact has yet been signed, and the proposed sale price couldn’t be determined…..

The assets Citi is selling include about $1 billion in investments farmed out to hedge funds, some $2.5 billion in hedge-fund assets on which Citi advises, and $500 million in seeding capital tied to stakes in small hedge funds, says a person familiar with the matter……

U.K. hedge funds, facing a regulatory onslaught from lawmakers worldwide, received a boost from a report by Britain’s financial regulator that said they posed no “destabilizing risk.”

The 50 largest hedge fund firms operating in the U.K. had borrowings of about double their $300 billion of assets under management, according to an October 2009 survey released by the Financial Services Authority today. The study showed that no hedge fund borrowed more than $500 million from a single bank without collateral. The biggest hedge fund questioned had about $1 billion of credit spread across a number of banks.

“Major hedge funds did not pose a potentially destabilizing credit counterparty risk,” the FSA said. “Data shows a relative low level of ‘leverage’ under our various measures.”….

Hedge-fund assets fell for the first time in eight months in January as stock and commodity prices declined last month, Eurekahedge Pte said.

Following its best annual performance in six years, the industry lost $2.85 billion last month. Performance-based losses totaled $3 billion, even as net inflows for in January totaled $140 million, the Singapore-based industry researcher said in a report posted on its Web site……

Donald Trump’s lawyers argued in a court hearing that the celebrity developer can pull his name off three bankrupt New Jersey casinos if rival billionaire Carl Icahn wins control of them.

At stake in a two-week hearing in U.S. Bankruptcy Court in Camden that began today is ownership of the Atlantic City resorts — and who gets the right to use the Trump brand.

“Icahn can’t get the benefits” of the name if he wins control of Trump Entertainment Resorts Inc., Trump attorney David Friedman told U.S. Bankruptcy Judge Judith Wizmur. He argued that bankruptcy law doesn’t allow Icahn to take over the personal-services contract that governs the Trump brand…..

Tags: Activists, Atlant City, Barack Obama, Carl Icahn, Casinos, Citigroup, Donald Trump, Hedge funds, Paul Volcker, Politics