decline

Level three assets to rise?

Jim Kim — Fri, 07 Nov 2008 13:10:01 -0500

Once banks started writing off lots of toxic debt, some thought we'd see a significant decline in level three assets, but that may not necessarily materialize as a trend. JPMorgan said in an SEC filing, for example, that its level three assets are on the rise. The increase reflected transfer of CLOs backed by illiquid debt and issues related to the WaMu deal. the good news is that there were some big offsets in the form of $15.8 billion of sales and markdowns of residential mortgages, leveraged loans and transfers of leveraged loans to level two status. But there were some ominous signs in the release, notably indications that defaults on consumer debt (including home equity and credit card debts) are likely to increase, the Financial Times notes. The charge off rate, 5 percent now, may hit 7 percent by the end of 2009.

For more:
- here's the Financial Times item

ALSO NOTED: Goldman Sachs shuts down AQR fund; UBS rejects call to spin of wealth management unit; and much more...

Mon, 07 Apr 2008 06:59:50 -0400

Company News:
> UBS rejects call to spin of wealth management unit. Article
> Goldman Sachs shuts down AQR fund. Article
> HSBC to "stare down" hedge funds. Article
> JP Morgan Chase-Bear Stearns deal gets OK from NYSE. Article

Industry News:
> Seats on commodities exchanges tank. Article
> Hedge funds decline in March. Article
> Fitch to rate funds of hedge funds. Article
> Mood change by investors? Article
> A look at the Fed's balance sheet. Article

And Finally... Great idea: A Segway for golf courses. Article

Inside the near-fiasco at Lehman Brothers

Fri, 04 Apr 2008 07:59:58 -0400

Lehman Brothers deserves plaudits for its ability to pick its way through the recent rumor-laden minefield. It is not the next Bear Stearns, a reflection of good luck and good planning. Fortune offers an insightful look at how the bank prepared for a potential crisis. Starting a year ago, the firm worked "to reduce a technical but crucial funding measurement: its net repo liability. This is a measurement of the firm's liability in its book of overnight and short-term loans, or repurchase agreements." Lehman Brothers had a little less than $19.1 billion in net exposure, down from $24.5 billion a year earlier, the magazine notes. Bear Stearns' net rose to $74.5 billion from $31 billion.

For more:
- here's the article

Poll Question: Which company appears to be, in all likelihood, the next Bear Stearns? Vote Here

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Still unfolding: The scam that hit Lehman Brothers. Article
Lehman doubters' short-sightedness backfires. Article
Sign of times: New CFO at Lehman Brothers. Article
Similarities between Bear Stearns and Enron? Article
Bear Stearns: A timeline of decline. View timeline

10 days that shook Wall Street

Tue, 01 Apr 2008 07:59:55 -0400

The implosion of Bear Stearns was nothing if not stunning for its sheer speed. Fortune offers an interesting reconstruction of the final 10 days. It still amazes me how the bank could go from not commenting on rumors to a deal for $2 a share in so little time. The fall was aided by a Goldman Sachs move to no longer back certain Bear derivatives. That opened the floodgates, with hedge funds and other clients wanting out, fast. Alan Schwartz, in addition to calling JP Morgan Chase's Jamie Dimon, was reduced to pleading with a hedge fund manager to appear on CNBC to attest to the strength of Bear; the manager declined. By then it was too late. Hopefully, we'll hear more specifics about this soon.

For more:
- here's the Fortune article

Related Articles:
Similarities between Bear Stearns and Enron? Article
Bear Stearns: A timeline of decline. View timeline
The future of Bear Stearns. Article

JP Morgan Chase luring more Bear Stearns employees

Thu, 27 Mar 2008 07:59:55 -0400

We've noted that Jamie Dimon, CEO of JP Morgan Chase, met with top investment bankers at Bear Stearns, apparently to recruit them to the dark side, er, make that the JP Morgan side. But the new bosses apparently are bent on retaining a broader swath of talent. The Financial Times notes that it also is pitching the top private client brokers, holding out the promise of $500,000 bonuses. JP Morgan also is reaching out to the prime brokerage unit, seen as one of Bear Stearns' crown jewels. Overall, most Bear employees will be out a job, however.

For more:
- here's the Financial Times article

Related Articles:
Did Bear Stearns executives lie? Article
Bear Stearns: A timeline of decline. View timeline
Many opinions on Jamie Dimon. Article
JP Morgan works to retain Bear hedge fund clients. Article

ALSO NOTED: Goldman Sachs files for SPAC offering; Analyst cuts Lehman profit forecast; and much more...

Wed, 26 Mar 2008 07:59:50 -0400

Company News:
> Analyst cuts Lehman profit forecast. Article
> Fortress profits decline. Article
> Commentary: Historic perspective on PE bust.
> Goldman Sachs files for SPAC offering. Article
> UBS slashes estimates for Merrill Lynch. Article
> Advisers laugh at structured products these days. Article

Industry News:
> Repo loans losing favor? Article
> Bank rebound not like the 1990s. Article
> Subprime exposure hits two China banks. Article

Regulatory News:
> Supreme Court nixes part of CalPERS suit against NYSE. Article
> FDIC plans to boost staff. Article

And Finally... More than a quarter of employees snooze on job. Article

Bear Stearns board getting a pass?

Tue, 25 Mar 2008 07:59:58 -0400

There was a great deal of anger before JP Morgan offered to redo its deal for Bear Stearns. The outrage over the $2 a share initial deal was powerful. The anger was spread over lots of players--CEO Alan Schwartz, Jamie Dimon, and faceless rumor-mongers--but we didn't hear a lot about the board. Portfolio suggests that maybe that should change. It publishes a list of all directors, noting: "It's ultimately the responsibility of its board of directors to determine the best price its shareholders can get, and, as evidenced by the events of the past 10 days, they don't have much of a clue." You have to wonder exactly what their thought process has been through all this. It seems they let things get way beyond their control.

For more:
- here's the Portfolio item
- here's the new deal announcement

Related Articles:
Bear Stearns' weird stock trip. Article
Bear Stearns: A timeline of decline. View timeline

Did Bear Stearns executives lie?

Thu, 20 Mar 2008 07:59:57 -0400

Bear Stearns just can't win. The humiliation of the Fed-backed, JP Morgan Chase bailout was rank enough. Now comes word from Financial News Online that the SEC is taking a look at statements by executive committee chairman Ace Greenberg and CEO Alan Schwartz before the deal that said, outright, that the bank had no liquidity problems. No one really believed them, obviously, but did they lie? People have speculated. It will be interesting to see what comes of this. The irony is that JP Morgan Chase will be liable for all the damage.

For more:
- here's the Financial News Online article
- Schwartz likened to Skilling. Article

Related Articles:
Bear Stearns: A timeline of decline. Timeline
Can Bear Stearns be salvaged? Article
The future of Bear Stearns. Editor's Corner
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The costs of alpha

Mon, 10 Mar 2008 07:59:58 -0400

Kenneth French, of Fama-French fame, has drawn attention for a working paper that calculated the cost of trying to generate alpha. The New York Times relates how the Dartmouth finance professor simply added up all the costs of investing--fees, transaction costs and other things--and then deducted the amount they would have paid if they were in indexes. The results show that the costs of investing have been on the rise, even at a time when trading costs collectively were thought to be in decline. In 2007, costs may have hit $100 billion for the first time. The point, according to the Times, is that most people are better off indexing.

For more:
- here's the column

Related Article:
Really, a 130/130 index? Article

John Mack fared well in 2007

Fri, 29 Feb 2008 06:59:58 -0500

Morgan Stanley CEO John Mack received some decent press recently when he made clear that he would not accept a bonus for what was a dismal 2007. But that doesn't mean he didn't make a whole lot of dough. CNNmoney.com notes that he made $41.3 million in 2007, $800,000 in salary, $336,000 from deferred compensation, $400,000 in perks (mainly the use of the company jet), and the remaining $40 million from stock and options grants (most of which are yet to vest in all likelihood). All in all, he didn't suffer. If the stock continues to tank, the value of those grants decline, of course. For most guys at that level, reputation matters as much as fortune. You can bet the top guys are plenty motivated to change their legacy.

For more:
- here's the article

Related Articles:
Morgan Stanley walking the plank? China deal announced. Article
Forcing the succession issues at Morgan Stanley. Article
Mack's bonus turns heads. Article