the finance industry / wall street

there goes that revolving door again
http://dealbook.nytimes.com/2013/07/22/a-legal-bane-of-wall-street-switches-sides/?ref=business
and go round and round and round in the circle game

A friend posted this and it's interesting but something seems incomplete about the explanation. What are banks' incentives to evict someone and then NOT foreclose?

http://www.nationalmemo.com/how-deadbeat-banks-pushed-detroit-to-the-brink/

becoming a public interest attorney for the gov't is a pretty good way to get a nice cash payout at the end of the road. i feel like it incentivizes playing it light on the industry you're regulating when you're looking at your long-term career prospects.

when my uncle was at the state AGs office he was offered a hefty salary to join the guys he litigated against. he refused, but it was a shit load of money and my family was pretty pissed he didn't take it. he didn't because he actually believed in the work he was doing... and there aren't enough people like that out there.

http://eksith.wordpress.com/2013/07/07/bank-of-america-bot/

http://gawker.com/bank-repossesses-wrong-house-sells-off-homeowners-stu-893629920

The amazing thing about the BoA twitter one is that it's NOT a bot. It's actual people, responding identically to every mention of BoA.

With all of her stuff either sold off by the bank or thrashed, the homeowner presented the bank's president with an $18,000 estimate for restitution.

He refused to pay up.

"He got very firm with me and said, ‘We’re not paying you retail here, that’s just the way it is,’" Barnett recalled. "I did not tell them to come in my house and make me an offer. They took my stuff and I want it back."

In litigation jargon, we call a guy like that a fucking moron who really wants to get sued.

http://www.washingtonpost.com/opinions/katrina-vanden-heuvel-fed-up-with-wall-streets-revolving-door/2013/07/30/7f171f02-f893-11e2-8e84-c56731a202fb_story.html?tid=pm_opinions_pop

Will Obama still pick Summers anyway for the Fed?

SEC sues Goldman Sachs for securities fraud (and other financial schadenfreude)

a token conviction

get the ant, ignore the colony

yup

it occurs to me that investment banking is kind of like organized crime, inasmuch as it's easiest to bring charges against the lowest level people because they do the actual dirty work. Unfortunately there's no SEC equivalent of RICO.

You can charge business folks with operating a criminal conspiracy, however. You can prosecute the case similar to RICO that way.

The prosecutors had a list of up to 200 unindicted co-conspirators in the Enron case that the defense wasn't really allowed to talk to and people who knew they were potential targets wanted nothing to do with running afoul of the DOJ and go from unindicted to indicted co-conspirator.

http://www.chron.com/business/enron/article/Names-of-some-Enron-co-conspirators-released-1984531.php

Yes you can, but it's a REALLY high bar. Enron was basically a company-wide sham.

I had dinner with him last year, without knowing who he was. Huge fan of Big Bang Theory

He came across as a really nice guy, tbh. There's no doubt he acted unethically and illegally but he did so in an environment that actively encouraged it. He was completely hung out to dry by people far more culpable than himself. It goes to show that you do literally need to have written e-mails bragging about all the shady stuff you're up to to get convicted.

if you ask me the differences between enron and the parties involved in the housing crisis are negligible. both were trading in derivatives that spiraled out of control, both played fast and loose with the rules but technically still followed them once they pushed them to their logical extremes.. enron just got caught all by themselves rather than in a whole crowd of people robbing the bank at the same time.

the differences are big when it comes to actually proving some kind of criminal conspiracy -- in one case you have an entire fraudulent enterprise, in another you have organizations that do a million different things, a small subset of which are arguably fraudulent. It's not so easy to argue that the entirety of Citigroup is a criminal conspiracy for putting together bad mortgage-backed securities when they're also running a commercial bank and putting out analyst reports on stocks and doing boring bond issues and all that other stuff. And it's not so easy to get Citigroup top executives for that reason, unless you can show direct knowing involvement by them in the fraud.

enron wasn't "technically still following" any rules by the end. it was straight out cooking the books.

how you estimate the future risk of collateralized debt is one thing. just not marking down losses or buying propping up your own assets with bogus loans from shell companies is something else entirely.

so longreads linked to this old wapo article on super-smart high school students and their quidags and whatever http://www.washingtonpost.com/wp-dyn/content/article/2006/11/27/AR2006112700960_pf.html

and i was curious what happened to the subject of the article, and sure enough i google around and she ended up working in risk at goldman. http://www.nytimes.com/2009/08/23/fashion/weddings/23MANN.html

http://www.nytimes.com/2013/08/16/opinion/no-banker-left-behind.html?nl=todaysheadlines&emc=edit_th_20130816&_r=0

Banks do much better than pensioners in Detroit bankruptcy action

This much is clear:

■ The banks’ 25 percent hit is nothing compared with the 90 percent cut to pensions suggested by the city — a cut that would be disastrous in both human and political terms and that the State of Michigan must prevent from happening.

■ Municipal officials are prey for Wall Street. The Dodd-Frank financial reform law called on regulators to establish “enhanced protection” for municipalities and other clients in their dealings with Wall Street, but the Securities and Exchange Commission has not yet completed rules, while the Commodity Futures Trading Commission’s rules are so weak as to virtually invite the banks to exploit municipalities.

■ The special treatment banks receive when debtors are in or near bankruptcy is unfair and economically destabilizing. Detroit’s agreement with the two banks requires court approval, but, in general, swap deals by banks are not subject to the constraints that normally apply in bankruptcy cases; in effect, the banks are paid first, even before other secured creditors and certainly before pensioners. That privilege, dating to the heyday of derivatives deregulation in the 1990s and 2000s, is destabilizing because the assurance of repayment fosters recklessness.

enron wasn't "technically still following" any rules by the end. it was straight out cooking the books.

― stefon taylor swiftboat (s.clover), Friday, 2 August 2013 22:43 (2 weeks ago) Permalink

how you estimate the future risk of collateralized debt is one thing. just not marking down losses or buying propping up your own assets with bogus loans from shell companies is something else entirely.

― stefon taylor swiftboat (s.clover), Friday, 2 August 2013 22:47 (2 weeks ago) Permalink

right this, exactly, thank you

http://www.dailymail.co.uk/news/article-2397527/Bank-America-Merrill-Lynch-intern-Moritz-Erhardt-dead-working-long-hours.html

There was one intern who was so terrified of being seen to be leaving the office that if he didn't have work to do he would do 'practice' work until late into the night and come in at the weekends just to show his dedication.

http://www.standard.co.uk/business/inside-the-world-of-londons-247-interns-6430507.html

http://www.upworthy.com/there-is-something-so-satisfying-about-watching-the-daily-show-nail-this-outrageous-hypocrisy-6

Suppose stop and frisk was used in NYC on certain streets to stop other types of crime

OK someone explain a thing to me that I have never understood. Today's MSFT/NOK deal is a perfect example. Microsoft is paying $7B for the handset unit of Nokia. Nokia's market cap goes up by about 5.6 billion, and Microsoft's market cap goes down by about 12.7 billion.

How can this be? Let's say I own a house outright. It's worth $300,000 and I sell it to you for $300,000. Isn't the net change to my net worth "0" and the net change to your net worth "0"? Yet by giving $7B in cash for a business, Microsoft's net worth goes down by $12 billion. Even if that business were WORTHLESS, hasn't Microsoft only lost $7B? Or is it the fact that the business is expected to incur future losses that will cost Microsoft the equivalent of a present value of an extra $5 billion on top of the $7 billion they paid?

market cap is based on share price x number of outstanding shares, no? did msft's stock go down?

right, market cap = share price x # of shares outstanding. Microsoft's stock went down, Nokia's went up.

investor's be investin'

maybe it would be better to think that your mortgagee has downvalued the house because someone has just dumped three hundred tons of turd in the garden and the house has a history of having turds dumped on it in the last decade

But do I understand correctly that *the market* believes Microsoft has just paid $7B for something that is actually worth negative $12B?

That's the way i would look at it. who knows how the market values stocks!

But the weird thing, then, is that Nokia has just received $7B cash AND gotten rid of a thing worth negative $12B, but its market cap is only up $5B. Shouldn't it be up $19B? Market be CRAY!

well the thing isn't necessarily worth negative 12B in nokia's hands, synergies etc.

i mean if you could accurately predict market cap that would mean you could accurately predict stock prices which is like, the holy grail of holy grails

they don't need to think about it in direct monetary terms. it could just be a feeling that this signals microsoft is making bad decisions in general, and they don't trust its 'mobile strategy' or the like

xp shouldn't it be worth more in Microsoft's hands than in Nokia's? Anyway, it's not really a matter of "predicting" market cap so much as valuing companies at present.

if msft bought the twinkie line for $1 m i would expect their market cap to decrease by much more than 1 million, what does msft know about running a bakery

valuing a company and translating that into a stock price is one of the fundamentals of secondary capital markets and nobody has a good read on it, i thought

Well Nokia phones run windows so there are *some* synergies. I mean that's the point of the deal, to attempt to create another competitor in the smartphone market -- Microsoft's full muscle and cash behind the phone line instead of just providing the OS while Nokia struggles.

sure, but investors could look at the performance of other msft portables (i.e. their tablet line) and think, this is just putting lipstick on a pig

investors could think msft is throwing good money after bad. idk

Markets are brainless. This fact is obscured because that participants in a market all have brains. However, those brains are not wired together in a way that can emulate a real brain. Instead, the connections between participants are contingent, minimal and often ephemeral. This greatly limits the amount of common information a market can assemble and act upon, so that market behavior is less coordinated and sophisticated than, for example, a cockroach's behavior. Because a cockroach at least has a brain.

i think its almost always the case that when companies purchase other companies the stock of the purchaser goes down and the stock of the purchasee goes up

ive always assumed that its because the purchasing company is overpaying for stock of the purchased company, taking on a big risk, threatening profits, etc

http://www.slate.com/articles/news_and_politics/explainer/2005/06/when_one_company_buys_another_.html

i think its almost always the case that when companies purchase other companies the stock of the purchaser goes down and the stock of the purchasee goes up

― max, Tuesday, September 3, 2013 9:07 PM Bookmark Flag Post Permalink

I don't know what the majority of cases are like, but I have certainly seen deals where this is not true. But I think you're correct that there's a sense of certainty (company A just got a bunch of cash, the most certain thing of all) versus uncertainty (company B just bought a business that it may or may not be able to run well, that may or may not have a good future for various unknown reasons, etc.).

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/14/what-we-get-wrong-when-we-talk-about-the-financial-crisis/

Even if Lehman Brothers had collapsed without anyone knowing, we still would have had mass foreclosures devastating neighborhoods and underwater mortgages driving the Great Recession. There still was an entire Wall Street pipeline designed to deceive both borrowers and investors. There still was a derivatives market designed to distort the price of risk while also creating instruments designed to fail.

http://dealbook.nytimes.com/2013/09/19/jpmorgan-chase-agrees-to-pay-920-million-in-fines-over-trading-loss/?hp

http://dealbook.nytimes.com/2013/09/17/s-p-bond-deals-are-on-the-rise-since-it-relaxed-rating-criteria/

upshot: S&P overrates bonds --> overrated bonds fuck up the economy --> S&P pulls back on overrating bonds --> S&P realizes it isn't making as much money as it did when it overrated bonds --> S&P starts overrating bonds again