Wall Street Fodder: The Self-Immolation of the 1%

Things we're reading about the vanities and victories of Wall Street.

We've all heard the story of how the FBI and prosecutors upped their game to catch insider traders. But it's still fun to see it phrased this way.

The two men, head of securities and commodities fraud units at the New York office, faced a dilemma. Informants had told them the hedge fund industry was similar to organized crime: insular and distrusting of outsiders. Without people on the inside, the government would have a tough time gathering enough evidence to prosecute. They needed more tools to gather more information on traders who move faster, and more secretly, than your typical Mafia soldier.

London bankers rack up bar bill of $111,000, primarily because something they were doing required 38 gallons of vodka. 1) Is it 1998 already? 2) What kinds of activities would, in your opinion, require 38 gallons of vodka? Pickling a pygmy hippo? Obscure trade wars with Russian vodka producers? Still, they have nothing on Jimmy Fallon: the late-night host created the world's largest Bloody Mary (garnished a la Fallon) using 10 times that much vodka. Step up your game, bankers.

It's unclear if Max Abelson actually saw some of these bankers and other sources burning cigars wrapped in $100 bills, but that is the general gist of this story filled with eye-popping quotes from the wealthy not showing sympathy for a nation in recession, but defending their own cupidity. One CEO, driven to distraction by attacks on his integrity as a member of the 1%- the productive class, as he says it - rails that he doesn't care"what some imbecile thinks." What this tells us is that many people are still in the "anger" phase of the five stages of grief following a financial crisis, and they have a lot of healing to do.

Compare and contrast Abelson's slice of the 1% with Katie Benner's at Fortune; she found a billionaire who pays attention to the people around him and -- without question-  gets better PR advice.

Steve Schwarzman really, really wants to know what you think. He craves information, and he'll seek it from anybody, anywhere, anytime. Over Easter weekend this past spring Schwarzman started hearing from people he bumped into that $4-a-gallon gasoline was crimping their lives, forcing them to carpool and cancel vacations. "They were scared," Schwarzman recalls. He began asking everyone he encountered -- waiters, gas station attendants, his dentist's assistant -- what they thought.

Morgan Stanley bankers are especially known for their dapper threads, so that makes the aesthetic wound particularly painful. Who says Wall Street doesn't sacrifice?

Back in 2009, Thomas Montag was the golden-boy trading mastermind of Bank of America Merrill Lynch. Fresh from a long, successful run at Goldman Sachs, Montag's mastery of the markets helped him survive at the bank when two CEOs and two other high-level executives lost their standing. (That's John Thain, Ken Lewis, Sallie Krawcheck and Joe Price). Montag doesn't technically "need" his paycheck, in the way that mortals "need" to pay pressing bills, but he still can't be happy with what time has done to his earnings. Back in 2010, he was promised $12 million as part of his bonus for a solid year's work. Now, with BofA stock at around $5 a share, that bonus is only $4 million. Here's Easy Street's refresher on why bonuses are so important to Wall Streeters: because "you don't go to work on Wall Street to cure cancer or for the good of the common man; you work on Wall Street to make money."

 

Remember Dexia? It was the struggling French bank whose imminent collapse kicked off phase II of the European sovereign crisis back in August. Now, as part of a government-orchestrated breakup, it’s been sold – 90% to Qataris, 10% to the government of Luxembourg. The price tag was less than $1 billion, which is a real steal and a signal of the incredible fire sale prices going right now. Banks cannot show their faces around the souk.

Dexia may be the Bear Stearns of the European crisis: the first to experience a lack of confidence from the market, and the first to get a government-brokered sale. Note the cameo played here by Qataris – back in 2008, banks angled to court sovereign wealth funds from Kuwait, Qatar, Saudi Arabia, Singapore, Japan and elsewhere who were thought to be the most likely investors - sitting on billions - who could save them.  The acquirer of Dexia is NOT Qatar’s sovereign wealth fund – but it is a private firm controlled by the Qatari royal family, and they've been investing in financial assets. The question is: how many more can they save? A Bear Stearns of the Euro crisis means we probably haven’t even gotten to the Lehman part. Early days.

Had an analyst (hello, Sean Egan) impugn your commitment to a svelte balance sheet? Richard Handler, the CEO of Jefferies, is not playing around after the bank's near-death experience in October. He says he will not expand the bank's debt until he sees "light in the world." Your move, Jesus.

 

 

 

 

About the author

Heidi N. Moore is The Guardian's U.S. finance and economics editor. She was formerly the New York bureau chief and Wall Street correspondent for Marketplace.

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