Crane Collapse Causes Building DelaysAlso, the real Mr. Big thought watching the ‘Sex and the City’ movie was “eerie,” and Wachovia chief G. Kennedy Thompson is out the door. And more, in our daily industry roundup.
JPMorgan Gearing Up to Move Into Bear’s Sweet HQFINANCE
• JPMorgan Chase will probably move its investment-banking unit to Bear Stearns’ smokin’-hot headquarters on Madison Avenue. The building is valued at $1.2 billion, which is just one-fourth of quadruple the price JPMorgan paid for the firm itself. [NYP]
• JPMorgan Chase’s valuation of Bear Stearns shows that financial institutions are significantly overvalued. Speaking of which, many employees had their life savings wiped out. [NYP, WSJ]
• Meanwhile Goldman Sachs’ earnings are down but beat analysts’ expectations. [DealBook/NYT]
white men with money
Spitzer–Mortgage Industry ConnectionAmid all the vengeful glee on Wall Street, the Ashleymania, and the coverage that has accompanied Spitzer’s fall, one aspect of the story has been underexplored, according to journalist Greg Palast: Could the Lonesome Gov’s fall have had something to do with the Fed’s $200 billion bailout of the subprime-mortgage industry, which Spitzer conspicuously opposed and which coincidentally occurred on the same day as his resignation? It was a federal investigation which uncovered Spitzer, Palast points out, and his outing could be seen as unusual.
Senator David Vitter, Republican of Louisiana, paid Washington DC prostitutes to put him in diapers (ewww!), yet the Senator was not exposed by the US prosecutors busting the pimp-ring that pampered him. Naming and shaming and ruining Spitzer — rarely done in these cases — was made at the ‘discretion’ of Bush’s Justice Department.
Palast, a cult hero in underground journalism circles (he’s the winner of six “Project Censored” awards), doesn’t really unload any evidence as much as speculate at sinister motives, but it’s interesting, and better than watching Ashley’s maddeningly chaste dance moves on some scrub’s cell-phone camera. —Josh Ozersky
Eliot’s Mess [Greg Palast]
Predatory Lenders’ Partner in Crime [WP]
white men with money
No Snow for Angelo: ‘Recent Events’ Cause Countrywide to Cancel Ski VacationCountrywide executives were supposed to be entertaining bankers this week at the Ritz-Carlton Bachelor Gulch ski resort, a fairy-tale lodge nestled in the mountains near Aspen, Colorado, where rooms start at $725 and a Spago restaurant offers $140 caviar and Kobe steaks, served with a side of wasabi mashed potatoes, for a mere $105. But alas, it is not to be.
This morning, Countrywide decided to cancel their getaway, in light of “recent events,” a spokesman told the Times. They didn’t specify which recent events. Was it poor snow conditions? Too much work? Or, oooooh, pressure from Chuck Schumer, perhaps? “This brings new meaning to ‘snow job,’” the senator said over the weekend, when he urged the company to “call off this shameful ski getaway and put all [the] company’s resources into refinancing the borrowers Countrywide took advantage of,” in a written statement. Then there was the Post story headlined, “Let Them Eat Kobe.” And lest we forget! CEO Angelo Mozilo is scheduled to testify in front of Congress next week, where he’ll be asked to justify his ginormous salary in light of the ginormous losses that Countrywide suffered in the past year ($422 mill in the fourth quarter!) and layoffs of 11,000 employees. Just those kind of events. Nothing major.
Countrywide Puts an End to Ski Junket [NYT]
Congress to grill Mozilo, O’Neal, Prince over pay [CNN]
Jane Fonda’s Vocab Malfunction Might Affect FCC’s Ruling on Janet Jackson’s NipplesLAW
• Jane Fonda’s vocabulary malfunction on NBC’s Today show last week might influence the legal battle between CBS and the FCC over Janet Jackson’s wardrobe malfunction in her 2004 Super Bowl halftime appearance. [Legal Intelligencer]
• New York City criminal-defense lawyer Jeffrey Schwartz receives support for representing the accused murderer of a 7-year-old girl. [NYT]
• Are television shows the reason lawyers get a bad rap? [Law.com]
white men with money
UBS Replaces Old Jerk With New JerkerJerker Johansson, a 22-year veteran of Morgan Stanley and a close ally of former Morgan Stanley co-president Zoe Cruz, who was fired in December, was named the head of UBS’s investment-banking operations this morning. He takes over from Huw Jenkins, who left in October after write-downs due to the subprime crisis, and CEO Marcel Rohner, who was serving as the interim head and who last month had the pleasure of announcing the largest-ever quarterly loss by a bank. Also, he is Swedish. Okay, let’s face it: Dude will be based in London, so it’s not like we care about him that much. We just wanted to say, Jerker. Jerker, Jerker, Jerker. Heh.
UBS Names Johansson Chief for Investments [WSJ]
it just happened
Warren Buffett Will Save Us All
Just now in a phone call to CNBC, warmhearted gagillionaire Warren Buffett said his Berkshire Hathaway would help out troubled bond insurers by offering a second level of insurance on up to $800 billion in municipal bonds.
The holding company already made the offer of reinsurance, he said, to insurers Ambac, MBIA and FGIC, all of whom have had problems with subprime mortgages and other loans and are in danger of losing their AAA credit ratings. One firm rejected the offer, and he is still waiting to hear from the other two. The offer is designed to make Berkshire Hathaway money, he added; it’s not just “a good deed.”
Warren Buffett Offers to Reinsure $800B in Municipal Bonds [CNBC]
Have You Heard? There’s a New Economic Freak-out Happening!FINANCE
• William A. Ackman of Pershing Hedge Funds got everyone freaking out about bond insurers by issuing a report yesterday afternoon predicting that MBIA and the Ambac Financial Group might just lose $24 billion on mortgage investments. “Here comes Ackman at the 11th hour upsetting the apple cart,” Douglas M. Peta, chief market strategist at J.& W. Seligman & Company, told the Times. “I don’t think anybody has really thought it all through, but we all understand the implications of real trouble in the bond insurers could be far reaching.” [NYT] Related! MBIA announced a $3.5 billion write-down this morning. [CNN]
• Wharton is still the number-one place in the universe to pick up an MBA.
• Following in the steps of other CEOs with giant mortgage-related losses, Merrill won’t give its top brass any bonuses. But they will give them stock options “to promote the continuity of the management team as they continue to navigate through challenging market conditions in 2008.” That’s one way to hang on to staff. [Reuters]
white men with money
Law & Order, ECU — FBI Probes Investment Banks With Its UnitLate 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]
white men with money
Can John Thain’s Hotness Save Merrill Lynch?Merrill Lynch lost $9.8 billion in the fourth quarter, the brokerage announced this morning. As with many of the other lenders reeling from mortgage mess, this is the firm’s biggest quarterly loss since it was founded, which, in Merrill’s case, was 94 years ago. In a scary bit of synchronicity, new Merrill Lynch CEO John Thain used the exact same words Citigroup CEO Vikram Pandit used the other day when his firm lost nearly $10 billion. The results are “clearly unacceptable,” they said. Yeah. Remember in It’s a Wonderful Life when Uncle Billy lost $8,000 and the Bailey Brothers Savings and Loan nearly went under? That was unacceptable. This is way worse. But on the bright side, Thain, who replaced recently deposed Stan O’Neal, has lately brought in some liquidity by selling a commercial-finance unit and almost $13 billion worth of capital investments overseas. “We’re very confident that we have the capital base now that we need to go forward in 2008,” he said in the conference call this morning. Well, he should be confident. After all, he is hotter than his predecessor, which, according to a recent study, bodes well for his success.
Live-Blogging The Merrill Earnings Conference Call [WSJ]
Merrill Posts Steep 4Q Loss [AP]
white men with money
Cayne & Co. Will Not Bogart the BonusesChristmas is a time for giving, and lest we forget, it is also a time for sacrifice. This year, James Cayne and the other top executives at Bear Stearns are making the ultimate sacrifice: They’ve decided to forgo their year-end bonuses. Because they have enough money? Because they decided to donate it to the children of Darfur? Because J.C. hit it big at bridge? Eh, no. Ostensibly this decision has come about because they’re gearing up to announce some pretty shameful fourth-quarter results tomorrow, and after losing $1.6 billion in investor money this year, pocketing what little is left would look kind of bad. So instead they’re divvying up the small pool left over from what they didn’t blow on subprime mortgages and giving it to players in the firm in hopes that they don’t jump over to, say, Goldman Sachs.
Bear Stearns Chiefs to Skip Bonuses [WSJ]
Update: It’s a trend! After announcing a $9.4 billion writedown, Morgan Stanley CEO John Mack is foregoing his bonus, too. Somewhere, Zoe Cruz is snickering.
Gucci Would Prefer a More Flattering CutFASHION
• The Gucci family is up in arms over Ridley Scott’s biopic. They fear he’ll focus on the family scandals. You know, instead of making a movie about all the boring stuff. [British Vogue]
• Helmut Lang is opening a pop-up shop in the meatpacking district. Just what we need, another fabulous place to spend our money while we are drunk. [Fashion Informer]
• Kaiser Karl rocked the U.K. with a Chanel fashion show. [WWD]