William D. Cohan, my new hero: Make Wall Street Risk it All

I first read William Cohan when I bought The Last Tycoons: The Secret History of Lazard Frères & Co, and followed it with House of Cards: A Tale of Hubris and Wretched Excess on Wall Street.  (Don’t you love those titles?)

His work is indepth, interesting as hell, and very well written.

He also writes in the Opinionator section of  The New York Times Opinion Pages and yesterday, he blistered Wall Street and recommended the most thoughtful action possible to change the behavior of those who work there.  He suggests we curtail high risk behavior on Wall Street by assigning personal responsibility. Make them responsible.  Really responsible.

Prior to the 1970’s Wall Street Firms were partnerships.

every partner signed an agreement requiring him (and rarely her) to put his net worth on the line every day.

His cure is simple . . . do it again.

To my mind, its central feature should be that each of the top 100 executives at Wall Street’s remaining “systemically important” firms be personally liable for the risks they take. Not just their unexercised stock options or restricted stock, but every asset they have in their possession: from their cars to their fancy homes to their bulging bank accounts.

And just so you know, William D. Cohan, a former investigative reporter in Raleigh, N.C., writes on alternate Fridays about Wall Street and Main Street. He worked on Wall Street as a senior mergers and acquisitions banker for 15 years. He also worked for two years at GE Capital.


Read the full article here: Make Wall Street Risk it All


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And I do recommend that you read every word.  Very well written, highly informative, he’ll make you understand why NONE of the new controls are going to make a positive difference in your life, and won’t really make a whit of difference in the way of doing business on the street.

News from all over: Foreclosure Hell


Obama vetos “Foreclosure Bill”

The Wall Street Journal, New York Times and the Washington Post all have articles on President Obama’s plans to veto a bill that should make it harder for homeowners to stop foreclosures.  H.R. 3808, is actually the Interstate Recognition of Notarizations Act of 2010.

The WSJ went so far as to comment that this is the

most direct intervention so far into a growing debacle tied to how banks foreclose on homes.”  Regulators “have struggled to formulate a coordinated response to recent mortgage allegations, in part because they worry intervention might destabilize the fragile housing market. (Italics mine)

So we’re going to let all these people lose their homes with bad paperwork from the banks, and that will stabilize the market?  What are we working toward here, a larger homeless population?

The Post reported the bill would have made courts accept notarizations from across state lines

but as the lack of a proper paper trail in mortgage documents came to light, the idea of relying on electronic notaries triggered protests from real estate lawyers and consumer advocates.

Hammering the market

Front page of the New York Times: the fallout from the slipshod foreclosure documents across the country is

hammering the market, especially in states where distressed properties are abundant.

And The Washington Post wrote about MERS (Mortgage Electronic Registration Systems) documents being cited in thousands of court filings about questionable foreclosures and also predicts a worsening market.

If courts increasingly begin to nullify the MERS model – different judges have issued differing rulings — this could call into question the legitimacy of millions of mortgages, wreak havoc on the real estate market, spur costly litigation against Wall Street banks and ultimately harm the broader financial system. (Italics mine)

God knows we wouldn’t want to ask Wall Street to answer for anything, would we?


Full Article at the Wall Street Journal; New York Times, Washington Post

Wake Up!

I feel like we’re in the midst of the movie Vanilla Sky, where everyone is telling Tom Cruise

. . . Wake Up

Bush gave billions to the banking industry in order to salvage the economy, placing the country in a deficit of $1.2 trillion.  Trillion.  That’s dollars, buckos, Trillion.

The $247 billion Troubled Asset Relief Program (TARP) was established to stimulate the economy by making money available in the way  of credit to businesses and individuals.  There weren’t any rules with the money, no contracts, only expectations.  It was 2008, we had no clue what was coming and Bush came up with a knee-jerk reaction to throw money at the problem, expecting that the banks would follow through and offer credit to the people and the econmy would stumble back to its more pleasant recent past.

Fast forward to 2010, and Damn!  Lending fell.  According to a USA Today/American University study, Outstanding loans to business and plain old people fell 9.1% for banks with TARP funds.  (6.2% at banks who didn’t receive those funds)

Paychecks got larger at the TARP-assisted banks!  With all the hoorah about bonuses at banks and on Wall Street, those guys got more money – the average pay for TARP assisted banks went up 9.1%; non TARP-assists?  1.8% increase in salaries.

And they opened more branches!  I don’t know why, they weren’t there to make loans to the neighborhood.

. . . Wake Up!

Henry Paulson, Treasury Secretary AND the former chairman of Goldman Sachs was making decisions on who got the bucks.  And how many billions went to Goldman?

Here we are in 2010, and now we want to question what they did with the money?  And investigate Goldman and others?  Where were these brainiacs in 2008 when they were handing out money like the banker at a big-ass Monopoly game?

The people who are trying to fix the problem either don’t get it yet, or don’t care and are still taking care of their cronies at the expense of the American public.  If we, the American public sit back, forgive me, fat, dumb and happy, and this continues, we’re going to become less fat, and considerably less happy in the coming years.

Again, it is my opinion that if  you do bad business, your business fails.  It doesn’t get a gazillion bucks to stay in business with no obligation to the customers it has harmed.

I’m telling you, it is worse than sleep-walking.

Ethics in the world of working "other peoples' money"? ABOUT TIME

In the AIG debacle, where AIG has officially estimated a discount of 20% to 50% for clients who have been offered the opportunity to redeem half the fund; and while they can redeem residual income, due to mature in 2012, now, it appears that will be at 30% lower than face value. Finally, some Ethics are being exercised in the world of  working “other peoples’ money” While I don’t lately think of ethics and Wall Street banks in the same sentence, Barclays Wealth says they will “step up to the plate” to offer their clients support in recovering from AIG. An unnamed  Barclays spokeswoman confirmed the bank’s earlier comment: “We have a dedicated team working with AIG to determine the best way to achieve the return of all funds to our clients. This team is working closely with other private banks. We are focusing our efforts on representing the interests of our clients in these discussions. You may recall that Sallie Krawcheck (known as one of the most powerful women on Wall Street,  named as one of Forbes 100 Most Powerful Women)  resigned from Citigroup’s wealth division in September, “after failing to persuade her former employer that it should compensate clients for investment losses” according to the Wall Street Journal.
Sallie Krawcheck

Sallie Krawcheck

(Read the article, it wasn’t the only reason she left, but it makes her a hero in my book.) Maybe the Universe will right itself . . . maybe.

Should you take Cramer's advice and quit the Market?

“Whatever money you may need for the next five years,” Jim Cramer told the legions of Cramericans yesterday, “please take it out of the stock market right now.” From Agora Financial’s 5 minute forecast: “Mr. There’s always a bull market somewhere” officially checked out of the current market, suggesting that a the current drama could cause “as much as a 20% decrease in the stock market.” You don’t have to run screaming from the market and take losses today because Cramer said to.  You can take a loan against your portfolio to hedge against losses; non-recourse loans mean that if your stock tanks, you can walk away. I don’t recommend making any decision on the emotions we’re experiencing now.  Check out your options, take a deep breath, then sleep on it. Manage the risk of owing stock in this market by taking out a stock loan.  If you have $1 million in stock you can borrow $500,000.00 now and if the stock drops in value during the loan you can walk away from the loan without any negative impact on your credit. If the stock increases in value you can capture that appreciation. There is NO fall-back position to selling your stock. Done is done. Use a stock loan to hedge your position instead of abandoning it.

Update to Bear Stearns indictments

Dan Slater writes in the Wall Street Journal LAW BLOG: Bear Fund Managers Get Good Draw, Sizing Up Judge Block So, Justice Carries a Swift Sword?  We’ll See – Curiously, a poster named “Anonymous”, says “the sub-prime mess  . . . has plenty of people who deserve fines and jail time . . . BUT these guys are not the scapegoats we need.” Well, gee, they thought up the hedge funds, created them, bought the mortgage backed securities, and then (!) CIOFFI was charged with insider trading for moving TWO MILLION DOLLARS OF HIS MONEY out of the fund . . . leaving institutional investors in the fund with no warning . . . when they knew the fund was in danger. They may not be the scapegoats we NEED, but it certainly appears they need to be in front of a judge for the way they ran the funds!

Quick Notes from all over . . . indictments at Bear Stearns . . . a new kind of black widow

The U.S. Attorney’s Office for the Eastern District of New York handed down indictments for Ralph Cioffi and Matthew Tannin formerly with Bear Stearns.  You may or may not recognize them as the brains (if you will forgive me) behind the Bear Stearns High Grade Structured Credit Strategies Fund (begun  in 2003) and the Bear Stearns High Grade Structured Credit Strategies Enhanced Fund (begun  in 2006), both of which failed miserably earlier this year. From the US Attorney’s Office (Eastern District of New York) Press Release   “… The indictment alleges that by March 2007, the defendants believed that the Funds were in grave condition and at risk of collapse. However, rather than alerting the Funds’ investors and creditors to the bleak prospects of the Funds and facilitating an orderly wind-down, the defendants made misrepresentations to stave off withdrawal of investor funds and increased margin calls from creditors in the ultimately futile hope that the Funds’ prospects would improve and that the defendants’ incomes and reputations would remain intact. ” (italics all mine) “… The subsequent collapse of the Funds during the summer of 2007 resulted in losses to investors totaling more than $1 billion.” CIOFFI was also charged with insider trading, as I understand it, for moving TWO MILLION DOLLARS OF HIS OWN MONEY out of the fund and into another. Probably one that didn’t fail, doncha guess? Attorneys for the men maintain their innocence . . . Well, would they get paid otherwise? I understand the FBI is investigating 19 other companies who were originating and securitizing sub-prime loans for accounting fraud, insider trading, and the failure to disclose true valuations. Lovely ~~~~~~~~~~~~~~~~~~ Billed as social networking with a bite  (pun intended I suppose) the Black Widow Network is designed to send real estate investment deals direct to your in-box . . . Other websites designed to take advantage of REOs and the possibility of making money off them are BiggerPockets.Com PropertyShark.Com Krunching.Com If you’re looking for deals – try them out –