Insiderman

Bankruptcy: Chrysler/Treasury's Strategic Nuclear Weapon

I'm trying to figure out how banks have managed NOT to write down their non-performing loan portfolios to this point. I thought that was the kerfluffle that resulted in the capital calls on banks.

Open Letter to SEC: Wall Street's REIT Bait-and-Switch

You are correct. They should not have allowed it to be issued.


On Apr 22 10:12 AM wobatus wrote:

> A picayune point, but the compliance department doesn't issue a report.
> They may bless it. Perhaps they were side-stepped, duped or brow-beaten
> (the last 2 hardly good defenses). But yes, the firm is to blame.
>

Open Letter to SEC: Wall Street's REIT Bait-and-Switch

There is simply NO WAY a firm's compliance department should issue a market moving research report within 48 hours of an issue.


On Apr 22 09:31 AM oddsneds wrote:

> Weingarten is one of the better REIT's, I have followed it for more
> than 15 years. Their ability to sell sizeable stock so as to replace
> debt is a good sign and that alone is worthy of an analyst reconsidering
> their viewpoint as to the company's prospects. I don't know the analyst
> or her age, experience, reputation etc. so I wouldn't necessarily
> consider her opinion too highly on my reasons to buy or sell. I also
> think occasional conflicts of interest are inevitable and don't mean
> collusion or some secret plan to defraud us poor unsuspecting investors.

Open Letter to SEC: Wall Street's REIT Bait-and-Switch

Sounds to me like Jeffrey Donnelly, CFA needs to review the CFA Institute Research Objectivity Standards:

4.0 (a) ii. Ensure that investment banking objectives or employees do not have the ability to influence or affect research or recommendations;

Did the FDIC Sabotage WaMu's Management and Erode Investor Confidence?

Steve Liesman of CNBC has interesting commentary on Treasury possibly forming "The Club" of banks that are 'helping' by taking over the troubled banks. He included Bank of America, Citigroup (now that they are taking over Wachovia), JPMorgan, Goldman Sachs, and Morgan Stanley. If you're in the group, you're safe.

That effectively means that no company outside the group can raise capital. Only the big five will be able to raise capital to fund their purchases (at bargain basement prices).

If these are the smartest guys in the room, I'm in the wrong room.

WaMu Shows, Again, Smart Money Can Be Wrong

The whole WaMu takeover is so bizarre.

First, FDIC seized WM on a Thursday and immediately gave it to JPM. This implies that FDIC had agreement from JPM to do the deal. WM was in the process of finding a suitor, and JPM was one of the suitor candidates earlier in the process. JPM must have been contacted shortly after they did their due diligence because they had an offer ready. This means that FDIC KILLED any prospect of JPM purchasing the company before seizure. There ought to be a lawsuit against somebody in there somewhere.

Second, FDIC was out of money. They get $1.9 billion in the deal to help bail out other troubled banks. That's not how the FDIC system was supposed to work. FDIC's funds were supposed to come from insurance premiums, NOT from equity shareholders and subordinated debt. Low premiums created a moral hazard for this situation within the FDIC, who desperately needed more money to cover potential upcoming closures.

Third, Warren Buffet and Jamie Dimon are totally dependent on the $700 billion Washington financial system bailout for their deals to bear real fruit. This means that there is ... once again... tremendous pressure on Barney Frank and Chuckie Schumer to come through for their buddies on Wall Street. Every Democrat in Washington (well almost every Dem) gets contributions from these guys.

Fourth, letting the beneficiaries of Wall Street contributions (Frank, Schumer) manage the bailout deal is so incredibly remarkable! No wonder that the part of the country 20 miles away from Wall Street is ready to cut off their own noses to spite their own faces and let Wall Street fall into the Atlantic.

Fifth, all the major offenders in this situation got up in Switzerland and spoke about how THEY controlled risk. Frank and Schumer have done nothing as heads of their committees to ensure that this was actually taking place. Paulson and Bernanke have known about the Level III asset risk forever and have done nothing.

So government was the problem when they said we have to subsidize home ownership for low income and minority buyers who couldn't come up with enough down payment/ monthly payment/ funds to fix up their property. Government was the problem with a system where contributions bought concession on regulation of risk. Government was the problem when contributions bought concession on oversight to ensure markets stay free. Now the recipients of these contributions think we should bail out the companies that took advantage of this system.

The original deal doesn't even pass the smell test.

Credit Default Swaps: The Show Isn't Over

Maybe part of the answer would be to require derivatives trades to match up, much like short sales are supposed to (within 13 days, anyway), with the underlying. Let's say there is one share left after all the puts and shorts are taken into consideration. Why does it somehow make sense to let someone buy/sell a put for 100 shares, 99 of which are already "net" gone?
I guess one of the big reason options models don't work all that well is that they fail to address demand/supply constraints.