Reading through fresh coverage of Bank of America’s $35 billion capitalization deficit, it seems the big dilemma/decision looming for President Obama is: does the U.S. government want to convert its preferred shares in B of A into common stock and thereby give the bank the capital cushion the stress tests have deemed it needs? The free marketeer in me says: Noooo! We don’t want the government running another bank, much less a very big one. But it’s just not clear to me that government management could be any worse than the geniuses who’ve been in charge to date. Moreover, if a preferred-to-common conversion gives Bank of America the breathing room to sort out its capital financing rather than rushing to shed assets it might actually want to keep for the long haul – an interim period of government control might not be a bad thing. And, as my colleague Mo Hadi notes, the Obama administration won’t even have to change the bank’s name. “Bank of America” has a nice ring for a nationalized financial institution.
Archive for May 5th, 2009
Bank Rescue Plan, Banks, Credit Crisis, Financial Markets, Politics, Treasury, Wall Street, Washington / Comments Off
Bank Rescue Plan, Banks, China, Credit Crisis, Politics, Treasury, Wall Street, Washington / Comments Off
News flash: Bank of America will need $35 billion (BILLION) in additional capital – which is a lot more than people expected the so-called government “stress tests” would require. The news has given the yen a boost this morning in Asia and is pushing down U.S. stock futures. With Tuesday’s U.S. stock market already showing signs investors are losing confidence, expect a lousy Wednesday. http://online.wsj.com/article/SB124158058615290821.html#mod=testMod Continue reading…
Credit Markets, Crime, Securities & Exchange Commission, Wall Street / 1 Comment
The people who ran the infamous Reserve Primary Fund, a money market fund that paid fairly handsome returns and promised your $1 you invested would always be safe, ran afoul of the Securities and Exchange Commission today. They were charged with giving investors false information about their holdings in Lehman Brothers when it went belly up and the funds ability to protect the buck – meaning that even if it lost money on Lehman, every dollar invested would be worth $1. But one of the more fascinating parts of the complaint against the fund has to do with Moody’s Investors Service questioning the fund last summer if it was adequately prepared for a credit problem in its portfolio. Moody’s met with Bruce Bent Sr., 71, and the chairman of the fund company, and his son, Bruce Bent II, vice chairman, on July 18 last year, to see how the fund would deal with an unforeseen credit event.
Credit Markets, Crime, Derivatives, Securities & Exchange Commission, Wall Street / Comments Off
The trade on Wall Street is always about money. It just may not be the money you make today, rather the money you can make tomorrow. That seems to be the alleged motivation behind the latest insider trading case the Securities and Exchange Commission has brought – and the first case that touches the murky world of credit default swaps. The SEC alleges that Jon-Paul Rorech, a bond and CDS salesman at Deutsche Bank, passed along market sensitive information to Renato Negrin, a portfolio manager employed by hedge fund Millennium Partners L.P. and that Negrin used that information to trade in credit default swaps on non-public information about VNU, a Dutch media conglomerate. The information had to do with a bond offering.
Here’s a glimpse of how one investment fund views the landscape: An official with Credit Suisse Asset Management tells DJN how he intends to reap a 20% return on global equity investments in 2009. Robert Parker, CSAM vice chairman, says the firm made “a big move” into corporate bonds and increased its exposure to equities as well. Parker is attending the Asia Development Bank meeting in Bali. Continue reading…