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Law & Order, ECU — FBI Probes Investment Banks With Its Unit

FBI Agent
Late yesterday afternoon, the FBI announced it was investigating fourteen banks for accounting fraud relating to subprime-mortgage loans. "There are some irregularities we are looking at," Neil Power, chief of the FBI's Economic Crimes Unit, told ABC News, adding that "good old-fashioned greed," likely played a part in the turmoil in the U.S. housing market, which has led to $135 billion in credit losses since last year. Power declined to say which companies were targets of the investigation but did say that they were "dealing with the people who securitize them and then the people who hold them, such as the investment banks." Coincidentally, Bear Stearns, Goldman Sachs and Morgan Stanley yesterday all separately disclosed that government investigators had asked them for information about their subprime activities. And they might as well add UBS to their list: The Swiss bank, which posted its fourth-quarter results this morning, announced it would be writing off $14 billion, all of it related to subprime mortgages. FBI Opens Subprime Inquiry [NYT] Feds Investigate Banks Over Subprime Lending [CNBC] FBI Wades Into Subprime Mess [ABC News] UBS Writes Off $14 Billion [NYT]

Kent Brownridge Still Stealing Silverware From the House of Wenner

MEDIA • Kent Brownridge picked a new fight with his old boss Jann Wenner, poaching ten-year Rolling Stone vet Joe Levy for the top spot at Blender. Brownridge already stole Men's Journal editor James Kaminsky to take over Maxim. [Mixed Media/Portfolio] • The OK! issue with the Jamie Lynn–pregnancy exclusive sold only 900,000 copies on the newsstand, well short of the roughly 1.5 million the mag had predicted. [WWD] • Steve Cohn on the Condé shake-up following so fast on Steve Florio's death: "It sort of reminds me of The Godfather. They go to the funeral and then they blow everything up." [NYP]

You Can Just Call Alan D. Schwartz ‘Mr. Smooth’

Jimmy Cayne is officially out at Bear Stearns, the company announced last night, and Alan D. Schwartz is in as the new CEO. Yesterday's Times referred to Schwartz as "a smooth, discreet investment banker," Portfolio today called him a "smooth dealmaker," and former Time Warner head Richard Parsons says he's "a smooth operator." But other than the fact that he is, apparently, silky soft and hairless, what do we really know about Alan D. Schwartz?

Bush to Economy: ‘Hey, Did You Get a Haircut? Something's Different.’

FINANCE • Bush acknowledges slower economy, but he stops short of warning about recession. Still, will he go for another round of tax cuts? [NYT, NYT] • Financial titans Warren Buffett and Maurice Greenberg came under attack in the Gen Re trial. Neither stands as a defendant, but both were accused of being intimately involved in a fraudulent transaction worth $500 million. [NYT] • Now that Jimmy Cayne's out of the picture, which hedge fund will step in to buy Bear Stearns? [Deal Journal/WSJ]

Jimmy Cayne: The End of an Era

For Bear Stearns CEO Jimmy Cayne, his 74th year was a difficult one. In August, two of Bear's hedge funds collapsed, heralding the subprime crisis and tipping off the worst losses in the firm's history. Then there were the firings, the Wall Street Journal article that painted him as a slacker pothead (and also weird), plus the investor retaliations, the regulatory investigations, the whispers that, after 39 years of service, he might need to be canned. It's enough to make anyone want to take refuge in golf and ganja. Which, the Journal and other media outlets are reporting, is what Cayne is doing. Citing "sources" who have been briefed on the situation, the papers are reporting that as early as today, Cayne will step down from his role as CEO at Bear Stearns and be replaced by Alan D. Schwartz. Cayne is "relieved," one source told the Times. As with a great movie where the hero dies in the end, we knew this was coming, and yet still, we're surprised. With his bridge addiction, his aversion to breakfast cereal, and his rumored affinity for the wacky tabacky, Cayne was a Wall Street original, an orchid in a sea of carnations, if you will. We'll miss you, old chap. Cayne to Step Down As Bear CEO [WSJ] Bear's Cayne Will Quit As Chief Executive [NYT] Earlier: Intel's coverage of Jimmy Cayne

Did Cayne Miss Yesterday's Conference Call Because He Got High?

So, yesterday Bear Stearns CEO Jimmy Cayne announced the investment-banking firm's first quarterly loss in its history, on the tail of announcing a $9.1 billion write-down. He was apologetic, sort of: He said the results were unacceptable and declared that neither he nor his management team would be taking bonuses this year. Then he then proceeded to entirely skip the conference call with investors. “You’d think the circumstances might have merited a show of contrition,” noted The Wall Street Journal today. Yeah. Especially since, the other day, Charlie Gasparino reported "sources" were saying the Bear Stearns board has been talking about a successor for him. We can't, er, bear this idea: We've grown fond of the Jimster, he's like our pot-smoking, bridge-playing, possibly pervy uncle. Which is why we have to assume that Cayne skipped the conference call not because he didn't feel bad, but because he couldn't deal with all that bad energy. Bad News for Bear Stearns [WSJ]

Imus Sucker Punches Brokaw

MEDIA • Don Imus on Tom Brokaw: "He is not the most courageous person I've ever met in my life. He's not the guy I'd want to be in a foxhole with." You see, Brokaw didn't defend Imus when he was down-and-out because of the whole "nappy-headed-hos" incident. Resentment, now that takes courage! [NYP] • Shocker: CNBC is actually scared shitless of Fox Business News. They're now asking guests to choose sides, threatening to drop them if they dare to appear on Murdoch's new down-home network. [Silicon Alley Insider] • Veteran literary agent Lynn Nesbit wants a new publishing madman: "Even [former Simon & Schuster CEO] Dick Synder is a lot more colorful than [newly departed Simon & Schuster CEO] Jack Romanos, who is now gone. I mean, they had passion, they cared about literature. Even Dick, who's not an intellectual. He cared. He was a madman . . . . Who is a madman now in publishing? . . . It was just different then." Hi, Lynn, allow us to introduce you to our favorite publishing madwoman, Judith Regan. [Media Mob/NYO]

Let the Bear Blame Game Begin

FINANCE • Bear Stearns followed up yesterday's Morgan Stanley announcement with its own $850 million loss, again the first quarterly deficit in the bank's history. [DealBook/NYT] • Is former Bear Stearns exec Ralph Cioffi, the guy behind the two Bear funds that imploded this summer, the main culprit in the subprime crisis? New reporting suggests his team set off the plague of dirty debt that cost Citi and other top banks billions. Oh, and Cioffi's under investigation for pulling out a couple mil before anyone else got the chance. [Business Week] • What a mensch: David Rubenstein, the former lawyer turned Citadel private-equity master, decided to keep his new copy of the Magna Carta on display at the National Archives. Rubenstein paid $21.3 million — chump change for a guy worth around $2.5 billion. [Law Blog/WSJ]

Morgy Says, ‘I'm Too Old to Retire!’

LAW • Robert Morgenthau called a press conference in response to a "Page Six" item about him stepping down after 33 years: "I'm too old to retire." The man is 88! [NYT] • Big-time Mayer Brown partner Joseph Collins, who maintains offices in both New York and Chicago, has been indicted for fraud in the Refco case. [Above the Law] • Which court is the worst "judicial hellhole" in the country? [Law Blog/WSJ]

Hedi and LVMH: Together at Last!

FASHION • Hedi Slimane is back in talks with LVMH to launch his own fashion house. Everyone, commence jumping up and down. [WWD] • IMG is behind Bravo’s new model show but won’t be giving the winner a contract. [Fashionista] • Not even Cavalli can rev up H&M’s sales. [NYP]

For Viacom Freelancers, Neither Happiness Nor Health for Christmas

MEDIA • Viacom screws over its army of freelancers by rolling back benefit programs drastically. Merry Christmas! [MixedMedia/Portfolio] • The Washington Post is sending veteran reporter and inveterate partier Keith Richburg to town to take over the paper's New York bureau. He's well known for throwing parties with, get this, as many as 30 people! Will Manhattan will be able to handle it? [NYO] • No holiday party at Time Inc. or the New York Times. Suckas! [Radar]

Jon Stewart Suddenly Not Looking Like the Nice Guy

MEDIA • Is Jon Stewart really the only late-night host not currently covering the salaries of his laid-off, non-striking employees? [Mixed Media/Portfolio] • The key lines from the n+1 essay that helped convinced Choire Sicha and Emily Gould to quit: "The purpose of Gawker Media was always to improve on the print publishing business model. It was never, as the content of Gawker sometimes seemed to suggest, to produce critiques of the waste that model created. The content at Gawker, like most Condé Nast titles, is a service to the advertisers. … You could say that as Gawker Media grew, from Gawker's success, Gawker outlived the conditions for its existence." Joshua David Stein announced his own departure, due mostly to personal loyalty, on Saturday. [n+1, Media Mob/NYO] • Meanwhile, Portfolio's Jeff Bercovici proves that Condé and Gawker really are at the same level: "By the way, those who feel wronged by Gawker over the years can take some satisfaction in the uniquely terrible timing of the walkout for Denton, who is pumped full of painkillers after a recent back injury. Last week, the pain became so intense he needed an ambulance to get to the hospital. As he was being loaded into the ambulance, he says, his greatest fear was that he would be spotted by someone from Gawker, which is headquartered just down the block from his home." [Mixed Media/Portfolio]

Did ‘The New Yorker’ Rip One of Its Cartoons Off ‘The Far Side’?

MEDIA • OMG, plagiarism in The New Yorker's cartoon issue? [Gelf] • Washington Post chief Don Graham has 300 Facebook friends. Poke away! [Washingtonian] • Fox 9's license is up for renewal, and a bunch of incensed New Jerseyans are fighting the station for failing to live up to its Jersey-side obligations. After all, the channel is based out of Secaucus but bills itself as "My9 New York." [NYT]

Hillary Tries to Have It Both Ways With Rupert

MEDIA • Today's negotiations between the Hollywood writers and producers, who some say have already struck a deal, reportedly will be held in an "undisclosed location." We always knew Cheney would come to the rescue! [HR] • German Vanity Fair is being sued for an interview with an infamous neo-Nazi who denied the Holocaust. [Jerusalem Post via HuffPo] • Rift in the house of Murdoch? Rupe complains that his son James can't dumb down the news to his father's tough standards. Meanwhile, a savvy voter in Iowa pressed Clinton on her Murdoch connections, and the senator, no surprise, tried to have it both ways. [FT via Mixed Media/Portfolio, The Caucus/NYT]

Bloomberg's Baby Problems: They Just Keep Popping Out

FINANCE • Another woman joined the federal discrimination lawsuit against Bloomberg LP. After her first child in 2005, her pay fell and her colleagues turned into sharks. One supervisor even asked, "What is this, your third baby?" [NYT] • More of the same on the Street: Bank of America wrote down $3 billion, Bear Stearns $1.2 billion, and British bank HSBC took the cake with $3.4 billion, largely due to U.S. mortgage weaknesses. Meanwhile, Goldman CEO Lloyd Blankfein laughed in everyone's face, predicting no more write-downs (not that they lost much in the first place) at the Teflon bank. [NYP, NYT, NYT, DealBreaker] • Is the credit crunch just like Enron all over again? So says Bethany McLean, the reporter who first broke Ken Lay's fraud wide open. [Fortune]

The Bancroft Family High Jinks: Ongoing!

MEDIA • The Bancrofts are so dysfunctional that they missed the deadline for choosing their representative to the new Dow Jones board. Murdoch then vetoed two family nominations before agreeing to Natalie Bancroft, a 27-year-old opera singer and journalism neophyte. Family member Crawford Hill concluded: "This entire, sad and pathetic final episode is a fiasco. No wonder we lost Dow Jones!!" [WSJ] • With the Times hiring former sex writer Susan Dominus as the newest "Metro" columnist, will the section be heading toward the look of "Sunday Styles"? [NYO] • Nora Ephron: Blogging makes us better writers. Hey Nora, can you call our boss? [Mixed Media/Portfolio]

Stephen Colbert Doesn't Make the Ballot

MEDIA • Hollywood and television writers have decided to strike and will announce a walk-out deadline by noon today. Late night will be most immediately effected — guess we'll find out just how funny Jon Stewart and David Letterman really are. [NYT] • The South Carolina Democratic executive committee rejected self-proclaimed "favorite son" Stephen Colbert's attempt to get on the ballot. Colbert now has to accumulate 10,000 signatures to make the ballot as an independent or pay the Republicans $35,000. Tough decision. [HuffPo] • Don Imus signed a deal with Citadel to return to radio, broadcasting on WABC in New York and syndicated nationally on ABC Radio. The I-Man had to settle for $5 million a year, half of what he made with CBS. [WSJ]

Jimmy Cayne Just Wishes Everyone Would Chill Out

Bear Stearns CEO Jimmy Cayne has sent out a company-wide e-mail, defending his conduct personally and professionally against yesterday's Wall Street Journal profile that portrayed him as a stoner and kind of a dick (But in an awesome way.) DealBook got ahold of the e-mail: "I remain, as I have been for many years, intensely focused on our business," Cayne wrote. "Don't be distracted by the noise. I am certainly not." Soon after the memo was sent, Bear Stearns employees heard strains of Pink Floyd's "Hey You" emanating from the corner office.

Jimmy Cayne Suddenly the Coolest Guy in School

It turns out that we weren't the only one who found Bear Stearns CEO Jimmy Cayne strangely charming in the Wall Street Journal's supposed "takedown piece" on him this morning. "He's a pothead who likes to enjoy a fat spleef as a way of relaxing from tournament level bridge. You don't get much cooler than that," said Salon. "It's unbelievable. The phones are ringing off the hook, and everyone wants to play golf with me now," Cayne told CNBC's Charlie Gasparino. Yeah, dude. We'd like to play golf with you, too. Especially if by "play golf" you mean, get ahold of some chemdawg and do bong hits while watching Planet Earth. Jimmy Cayne Is Suddenly a Very Popular Guy [Dealbreaker] Earlier: The 'Journal' Knows What Jimmy Cayne Did Last Summer (and It May Have Involved the Wacky Tabacky!)

The ‘Journal’ Knows What Jimmy Cayne Did Last Summer (and It May Have Involved the Wacky Tabacky!)

Since sub-prime losses forced Merrill's Lynch's Stan O'Neal to step down earlier this week, Street watchers have been sharpening their knives and turning a leery eye toward those other CEOs whose tenure has become questionable. Generally, we're all for it. Bring the pain! But this morning's rehashing of Bear Stearns CEO Jimmy Cayne's dubious behavior during last summer in the Wall Street Journal left us confused. Sure, Cayne spent much of worst crisis in the firm's 84-year-history on the links, and he's a dick for firing his second-in-command for not being in the office during said crisis, even though the dude was with Cayne at the time, at a bridge tournament in Nashville. But he seems generally well liked, and dare we say awesome? To wit:
Investment-firm chief Alexandra Lebenthal brought her 11-year-old son to visit Bear a few years back. She says she introduced him to Mr. Cayne, who pulled her aside and said, "That kid's got a rotten handshake. He's going nowhere in life."
Attendees say Mr. Cayne has sometimes smoked marijuana at the end of the day during bridge tournaments. He also has used pot in more private settings, according to people who say they witnessed him doing so or participated with him.
At a time when the culture of finance is such that young associates are too uptight to grow facial hair for cancer, a 73-year-old pothead seems like something the Street can't afford to lose. To paraphrase Geri Halliwell, our head says Jimmy Cayne must go, but our heart wants him to stay! Bear CEO's Handling of Crisis Raises Issues [WSJ]