Credit Suisse Puts On a Brave Face

Do repost and rate:

Also First Republic, US vs. European regulatory responses, well-timed trades in competitors’ stocks, a Raiffeisen/Sberbank trade and some Signature musical parodies.

Credit Suisse

I don’t think I’ve ever seen a debt tender offer announced at 2 a.m.? You just fell asleep reading the words “debt tender offer,” didn’t you? Nobody stays up until the wee hours of the morning due to the excitement or urgency of a debt tender offer. But seems to have hit the wire at 1:45 a.m. Zurich time:

Credit Suisse Group takes decisive action to pre-emptively strengthen liquidity and announces public tender offers for debt securities ...

Credit Suisse is taking decisive action to pre-emptively strengthen its liquidity by intending to exercise its option to borrow from the Swiss National Bank (SNB) up to CHF 50 billion under a Covered Loan Facility as well as a short-term liquidity facility, which are fully collateralized by high quality assets. Credit Suisse also announces offers by Credit Suisse International to repurchase certain OpCo senior debt securities for cash of up to approximately CHF 3 billion.

Credit Suisse announces its intention to access the SNB’s Covered Loan Facility as well as a short-term liquidity facility of up to approximately CHF 50 billion in aggregate. This additional liquidity would support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs.

Credit Suisse also announces today that it is making a cash tender offer in relation to ten US dollar denominated senior debt securities for an aggregate consideration of up to USD 2.5 billion. Concurrently, Credit Suisse is also announcing a separate cash tender offer in relation to four Euro denominated senior debt securities for an aggregate consideration of up to EUR 500 million.

Obviously the main point here is that the Swiss National Bank is giving Credit Suisse a 50 billion-Swiss-franc ($54 billion) line of credit. One thing that this means is that, if depositors run on Credit Suisse asking for their money back, Credit Suisse will have a lot of money to give them. (As of its 2022 annual report it had CHF 234 billion of customer deposits, so the 50 billion from the SNB is a meaningful chunk.)

Another, more important thing that it means is that the SNB is willing to give Credit Suisse the money, that it has talked to Credit Suisse management and looked at its books and generally done its bank-regulatory work and said “ehh, Credit Suisse, still fine.” The SNB and the Swiss Financial Market Supervisory Authority put out a statement yesterday saying that in so many words:

Regulation in Switzerland requires all banks to maintain capital and liquidity buffers that meet or exceed the minimum requirements of the Basel standards. Furthermore, systemically important banks have to meet higher capital and liquidity requirements. This allows negative effects of major crises and shocks to be absorbed.

Credit Suisse’s stock exchange value and the value of its debt securities have been particularly affected by market reactions in recent days. FINMA is in very close contact with the bank and has access to all information relevant to supervisory law. Against this background, FINMA confirms that Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks. In addition, the SNB will provide liquidity to the globally active bank if necessary.

A rough way to think about the dynamic of a giant bank failure is that the bank keeps going until its national regulator and central bank decide to pull the plug. Sometimes “pulling the plug” means that the bank still has cash but the regulator says “you’re done” anyway, 1  while other times it means that the bank runs out of cash and calls its lender of last resort for more cash, and the lender of last resort says no. 2  The SNB/Finma statement, and Credit Suisse actually drawing CHF 50 billion, is a way to reassure the market that the plug won’t get pulled anytime soon. The stock rallied hard today, though then it pared gains when the European Central Bank raised rates

Meanwhile, Credit Suisse’s instruments — its credit default swaps, but continue to look horrifying. There about counterparties — big banks, hedge funds, etc. — cutting their exposure to Credit Suisse in recent months, and avoiding new exposures. When we talked on Tuesday about the failure of Silicon Valley Bank, I said that SVB’s problem was “having a concentrated set of depositors” — tech startups and venture capital firms — “who were uninsured, quick-moving, well-informed, herd-like and very rates-sensitive in their own businesses.” My point was that this was unusual among US regional banks: Most banks have more diverse depositors, and particularly more retail depositors who are covered by insurance and do not pay a ton of attention to financial news.

But the global megabanks look, in this respect, more like SVB, not in the sense that their actual depositors look like that (though Credit Suisse has had deposit outflows in recent months), but in the sense that they get more of their money from short-term capital-markets lenders and derivatives counterparties, and investors — banks, hedge funds, etc. — uninsured, quick-moving, well-informed, herd-like and rates-sensitive, and when they flee then that’s a crisis. Banks and hedge funds follow financial news closely and tend to be jumpy in times of stress, and they seem nervous about lending to Credit Suisse.

But the SNB is not. And so there is a trade. Here is the tender offer announcement. Credit Suisse has about $1.9 billion of 1% U.S. dollar notes due in about six weeks. In six weeks, it will have to pay those bonds off at 100 cents on the dollar. Yesterday they traded at 92.6 cents on the dollar, a yield of about 60%. Today Credit Suisse is offering to buy them at 98 cents on the dollar, a yield of about 19%. 3  In general if you are a global megabank and you can invest safely in a short-term investment that yields 19%, you should. It also has $923 million of 0.495% notes due next February. Those traded yesterday at 83.8 cents on the dollar. Credit Suisse is offering to buy them at 90, a yield of about 13%. 

Bloomberg News

Credit Suisse Group AG is poised to save about $70 million with its plan to buy back debt, as it looks to counter a collapse in market confidence.

The bank proposed buying back 3 billion francs ($3.2 billion) of bonds at a discount, which would enable it to save on the cost of redeeming those notes later.

It’s offering to buy back 14 dollar- and euro-denominated senior debt securities, according to a statement on Thursday in which it also said it would tap a Swiss National Bank liquidity facility for as much as 50 billion francs. The transactions “allow us to take advantage of current trading levels to repurchase debt at attractive prices” as well as manage interest expense, it said in a statement.

But surely Credit Suisse would be thrilled to have the tender offer fail — to have no one show up to sell bonds at these prices — and miss out on saving the $70 million. Seventy million dollars is pocket change; Credit Suisse posted a net loss of CHF 7.3 billion last year. If its short-term debt rallies enough that it is no longer able to buy back its one-month bonds at a 19% yield, that means that its one-month debt is no longer trading at a 19% yield. That’s way better than saving $70 million! Global banks live or die by their access to credit markets, and they don’t live all that long if their debt trades at distressed levels. 

Credit Suisse’s main goal right now is to convince funding markets that everything is fine. If you want to convince traders of something, the best evidence is a trade. The market is telling Credit Suisse that its debt is distressed. Credit Suisse wants to tell the market that it isn’t, that everything is fine. The way to do that is with price: The market says “Credit Suisse’s debt is distressed and only worth 84 cents on the dollar,” and Credit Suisse says “oh yeah? I’ll pay you 90.” It is a show of confidence from Credit Suisse, backed up by a show of confidence from the SNB. Perhaps it will help.

First Republic

Here are two Wall Street Journal stories. One is about First Republic Bank

JPMorgan Chase & Co., Morgan Stanley and several other big banks are discussing a potential deal with First Republic Bank that could include a sizable capital infusion to shore up the beleaguered lender, people familiar with the matter said.

First Republic is working on various potential options including a capital raise that could take various forms, the people said. A full takeover is also a possibility, though some of the people cautioned that looks unlikely at this point.

The situation is fluid and whether a deal comes together and what it might look like is still highly uncertain. Any deal would need the blessing of regulators and will be driven at least in part by the bank’s highly volatile stock. First Republic’s stock has been pummeled for days and fell another 31% Thursday morning over concerns about the bank’s health in the wake of the collapse of Silicon Valley Bank.

The other is about Silicon Valley Bank

SVB executives came to Goldman with the rough outlines of a plan to raise capital. Two private-equity firms, General Atlantic and Warburg Pincus LLC, were on the bank’s list of possible investors. ...

Goldman pitched a hybrid public-private share sale: The firm would find enough investors to fully fund a $2.25 billion deal but would also offer the public an opportunity to buy shares at the same price. … [Warburg backed out, and] Goldman decided the only option was a public share offering anchored by General Atlantic. SVB executives signed off on the plan. ...

SVB’s stock at first fell around 8% in aftermarket hours [on March 8, when the capital raise was launched], not as steep a drop as feared, and Goldman’s bankers received many orders to buy shares. … 

SVB shares tanked when the market opened on March 9, prompting customers to pull their deposits. It was the beginning of a downward spiral: As news of the deposit run spread, the shares fell further, prompting more customers to yank their money. The stock closed down more than 60%.

Still, the deal wasn’t dead yet. Goldman had lined up a slate of investors at $95 a share, about $11 less than the day’s closing price. 

At around 5 p.m., Goldman bankers got a report on SVB’s deposit outflows. 

SVB’s lawyers at Sullivan & Cromwell LLP said the deal couldn’t go forward without a disclosure about the deposit losses. Goldman abandoned the deal. The Federal Deposit Insurance Corp. seized SVB before it could open the next morning. 

SVB’s current share price is a mystery — the stock hasn’t traded since Thursday — but it is probably zero. The deal was launched with a stock price of $267.83, it was about to price at $95, but then the lawyers decided it couldn’t price without revealing more details about the bank run, which would presumably lead to a much lower price. The next day, the value of the stock was zero.

How does the troubled regional bank capital raise go? First Republic’s stock closed at $123.22 two weeks ago and $31.16 yesterday. It lost about $17 billion of market capitalization in two weeks. If JPMorgan calls you up and says “we are trying to get a couple billion dollars of capital into First Republic, are you in,” at what are you in? The bid-ask seems wide:

  1. If they get a deal done at $20, or $25, or some other reasonable-ish price, then the buyers will probably do well? I mean, not investing advice, and what do I know, but basically this stock is trading at pretty depressed prices because of worries about the bank going under. If they raise two yards of capital, those fears will be allayed, and the stock might rip back up. You could multiply your investment in a week.
  2. If they don’t get a deal done, I am sorry, but the very highly publicized recent precedent is that the stock goes to zero in a day.

So First Republic’s pitch to investors is “if you buy the stock at $25 it will go to $50 in short order, so buy it at $25,” and the investors’ response might reasonably be “if we buy the stock at $25 it will go to zero in short order, so we’ll buy it for $1,” and that’s not very helpful.

Meanwhile Bloomberg reports

The nation’s biggest banks are close to agreeing upon a plan to deposit about $30 billion with First Republic Bank in an effort orchestrated by the US government to stabilize the battered California lender, according to people with knowledge of the matter.

Banks including JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., Wells Fargo & Co., Morgan Stanley, U.S. Bancorp, Truist Financial Corp. and PNC Financial Services Group Inc. are part of the discussions, said the people, asking not to be identified because the talks are private. 

The biggest banks, including JPMorgan, Bank of America and Citigroup, would contribute $5 billion of deposits each, with smaller banks kicking in smaller amounts, the people said. Details of the rescue, which are still being worked out, may be announced as soon as Thursday afternoon, the people said. Drafts of an announcement are being shared at banks and across federal agencies, the people said.

The traditional approach — SVB’s apparent approach — is that you solve your capital problems, and that calms depositors and prevents the bank run. A reasonable thing to think! But it didn’t work for SVB, so First Republic might as well reverse the order. Fix the — by getting a ton of deposits from other banks — and go out and raise capital. With less of a threat of imminent disaster, maybe stock investors will be more willing to pay up.

Europe vs. US

Above, I quoted yesterday’s joint SNB/Finma statement about Credit Suisse being fine. I should say that the statement does not with Credit Suisse being fine. It leads with making fun of America:

The Swiss National Bank SNB and the Swiss Financial Market Supervisory Authority FINMA assert that the problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets. The strict capital and liquidity requirements applicable to Swiss financial institutions ensure their stability. Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will provide CS with liquidity.

The SNB and FINMA are pointing out in this joint statement that there are no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market.

Credit Suisse has spent the last decade finding astonishing new ways to lose money and embarrass itself, so this is a little rich, but it is accurate. “Credit Suisse’s failings have included a criminal conviction for allowing drug dealers to launder money in Bulgaria, entanglement in a Mozambique corruption case, a spying scandal involving a former employee and an executive and a massive leak of client data to the media,” notes Bloomberg QuickTake, not to mention its losses on the Greensill scandals. Credit Suisse’s current troubles are obviously related to those errors. But they were immediately precipitated by a run on Silicon Valley Bank, which had nervous concentrated tech-industry depositors and was mark-to-market insolvent due to losses on its portfolio of long-dated US Treasury bonds. For all its problems, Credit Suisse does not have problems. “Credit Suisse has plenty of capital, no looming losses from bad assets and more than enough liquidity to meet withdrawals,” notes my Bloomberg Opinion colleague Paul Davies. Any panic about Credit Suisse does seem to be contagion from the US rather than something fundamental to the bank itself.

Meanwhile, Laura Noonan at the Financial Times reports that European regulators are not happy with the Silicon Valley Bank bailout

One senior eurozone official described their shock at the “total and utter incompetence” of US authorities, particularly after a decade and a half of “long and boring meetings” with Americans advocating an end to bailouts.

Europe’s supervisors are particularly irate at the US decision to break with its own standard of guaranteeing only the first $250,000 of deposits by invoking a “systemic risk exception” — despite claiming the California-based lender was too small to face rules aimed at preventing a rerun of the 2008 global financial crisis.

“This is the US version of the small Venetian banks,” said one French policy expert, referring to the US’s criticism of Europe’s handling of the Monte dei Paschi debacle. “You are always systemic for somebody.”

“From a financial stability perspective, they really killed a fly with a sledgehammer,” said Nicolas Veron, a regulation expert at the Washington think-tank the Peterson Institute. Designating SVB as systemic was, Veron added, a “very questionable” decision that set a dangerous precedent for further bailouts of uninsured deposits.

A former senior UK policymaker who helped negotiate global standards for bank resolution described the SVB handling as a “disaster”.

The 2008 crisis triggered a sea change in how to handle the collapse of banks, with policymakers meeting often at the Basel-based headquarters of the Bank for International Settlements to create regimes designed to minimise the wider fallout from failures.

I can find nothing to object to in this criticism. Yes, absolutely, after 2008 global regulators tried to create regimes to minimize the systemic risks of big banks, and US regulators supervised regional banks like SVB with a light touch specifically because our political system concluded that those banks were systemically important, and then at the first sign of trouble at SVB the US conclude it was systemically important and rushed to implement a giant bailout. “Killed a fly with a sledgehammer” seems right, as does “long and boring meetings” for that matter.

That said, my gut instinct is that something like “talk constantly about how you’ll never ever ever ever do bailouts, but then occasionally do a bailout” is basically the right approach to bank regulation? As a matter of moral hazard and discouraging bad risk-taking, you have to tell banks “we would never bail you out,” because then they will try to behave themselves. But then if they take bad risks, as a matter of not burning the house down, you bail them out anyway. 

Outsider trading

If you are a senior executive at a public company, your trades in your own company’s stock will be heavily scrutinized. Your trades in your company’s competitors’ stocks, though, will probably be less scrutinized. But ProPublica got a bunch of tax returns for a bunch of public-company executives and scrutinized their stock trades, and they found a number that were pretty well timed

A Gulf of Mexico oil executive invested in one partner company the day before it announced good news about some of its wells. A paper-industry executive made a 37% return in less than a week by buying shares of a competitor just before it was acquired by another company. And a toy magnate traded hundreds of millions of dollars in stock and options of his main rival, conducting transactions on at least 295 days. He made an 11% return over a recent five-year period, even as the rival’s shares fell by 57%.

There are some obvious reasons public company executives might make well-timed trades in their competitors’ stocks. 4  One is: They are experts in an industry, they use their training and skills to analyze public data, and they use that general knowledge to pick stocks that will go up. This one is fine? It shades into some nuance: What if you meet the chief executive officer of a competitor at a conference, find her personally impressive, and buy her stock as a bet on her? That does not feel like “material nonpublic information” exactly, but it is not something that every investor has access to. But overall there is a wide range of stuff that is like “expert in an industry is good at picking winning and losing stocks in that industry” that seems fine. 

Another explanation is: They are in an industry, they hear nonpublic rumors about that industry, they compete on deals, they gossip with bankers and consultants, they know things, and they can often come upon material nonpublic information about their competitors. This one is interesting. “Insider trading,” I like to say, “is not about fairness, but about theft.” If you are an executive of a company (or its banker or lawyer or CEO’s therapist or whatever) and you learn things about your company and you trade the stock before the news is public, you are in some sense stealing information that belongs to the company and using it for yourself; you had a duty to the company not to do that. But if you learn information about your competitor, do you have the same duty? I think the answer is “maybe,” and it depends on things like how you learned the information and what your company’s trading policy says. “The owner of a private firm may argue that they can use nonpublic information from their own company to trade the stock of competitors because they have no duty not to use the information for personal benefit,” notes ProPublica, but “some companies have policies that forbid trading while in possession of nonpublic information about competitors, clients or partners.”

A third explanation is what we sometimesshadow trading”: The executive doesn’t have any inside information about her competitors, and she doesn’t make trades based on deep industry expertise, but she have inside information about her company. If you know that your company is going to miss earnings because no one is buying widgets, you probably don’t want to sell all your stock (because regulators will notice), but you might short your competitors’ stocks because (1) regulators might not notice and (2) those stocks will probably go down too when you announce bad earnings. This is not legal or investing advice, and the US Securities and Exchange Commission definitely thinks this one is illegal. ProPublica doesn’t have any examples that exactly sound like this, but it is, in general, a live possibility.

A fourth explanation, one that I really like, is hedging. From the ProPublica story:

For Barry Wish, on one occasion, losing a contract to a competitor came with a significant benefit. In the 1980s, Wish co-founded Ocwen, a mortgage-servicing company, then helped steer the West Palm Beach, Florida-based firm for decades on its board. Mortgage servicers essentially act as brokers between lenders and homeowners, handling billing, modifying loans for borrowers and carrying out foreclosures.

In the years after the housing crash, Ocwen and its competitors grew rapidly, as big banks auctioned off the loans they were administering amid costly new regulations.

One of the prize tranches — $215 billion in home mortgages from Bank of America — was won by Wish’s rival, Nationstar, in January 2013. The day the company’s deal with Bank of America was announced, its stock shot up almost 17%, its biggest one-day gain since the company had gone public almost a year earlier. According to reporting at the time, Wish’s firm had been jockeying with Nationstar for the deal.

But losing wasn’t a total loss for Wish.

Less than three weeks earlier, he had bought $600,000 of Nationstar shares. The day the deal became public, Wish sold his shares, earning himself a $157,000 profit.

In a phone call with ProPublica, Wish said he didn’t recall buying Nationstar shares. 

One possibility here is that he was deeply informed about the auction, he had nonpublic information that made him think that Nationstar would win, and he bought Nationstar stock to bet on it going up. Another possibility is, look, there was an auction, somebody was going to win, and it would be good for him if his company won and bad for him if another company won. He did his best to win, but he bought shares in the company to cushion the blow in case he lost. If Ocwen had won this auction, presumably he’d have a loss on his Nationstar shares, but he’d have a gain on his Ocwen shares and his career generally; this $157,000 gain was the consolation prize.

It feels vaguely like bad corporate governance for an executive of one company to diversify by owning his competitors? You want him to be fully motivated to win. 5 And yet I do not think it is insider trading exactly, and I sympathize. If I were a CEO, I’d be tempted by this. If some other company is better at your job than you are, why not own their stock?

Financial prisoner exchange

Broadly speaking, due to war and sanctions and geopolitical tensions, Russian banks with euros in Europe often can’t send those euros back to Russia, and European banks with rubles in Russia often can’t send those rubles back to Europe. But these are not real things. A “euro” or a “ruble” is not a bank note that needs to get on a plane and cross a border. They are just entries in ledgers.

If you are a European bank with Russian operations, and you know a Russian bank with European operations, you might propose a trade: “You give us your euros in Europe, which you can’t get use but we can, and we’ll give you our rubles in Russia, which we can’t use but you can.”

Matt Levine's Money Stuff is what's missing from your inbox.Matt Levine's Money Stuff is what's missing from your inbox.Matt Levine's Money Stuff is what's missing from your inbox.We know you're busy. Let Bloomberg Opinion's Matt Levine unpack all the Wall Street drama for you.We know you're busy. Let Bloomberg Opinion's Matt Levine unpack all the Wall Street drama for you.We know you're busy. Let Bloomberg Opinion's Matt Levine unpack all the Wall Street drama for you.
By submitting my information, I agree to the Privacy PolicyTerms of Service

The advantage of this is that it allows everyone to get access to their money without moving the money from Europe to Russia or Russia to Europe. The disadvantage of it is … wait, no it doesn’t? This is the only thing that “moving the money” could mean? It means exchanging euros in Europe for rubles in Russia on the books of banks? If you’re not allowed to move euros from Europe to Russia, you really shouldn’t be allowed to do this, which is the same thing.

Raiffeisen Bank is seeking to exchange €400mn worth of profits trapped in Russia against Sberbank’s frozen cash in Europe, in a plan underlining the Austrian lender’s efforts to reduce its exposure to the Russian market.

The swap deal, presented at a Raiffeisen board meeting last week, involves Sberbank receiving roubles from Raiffeisen’s Russian subsidiary, which are barred from exiting the country because of capital controls imposed by the Kremlin, according to three people directly involved in the discussions.

As part of the so-called “project Red Bird”, Raiffeisen would in turn take over a sanctioned legacy cash pile held by Sberbank’s European arm.

“Consider this the financial equivalent of cold war prisoner exchange,” one of the people involved in structuring the deal said.

The creative solution is likely to raise eyebrows among western politicians and policymakers because it would mean allowing Kremlin-owned Sberbank, Russia’s largest lender, to effectively get some of its frozen European cash back. Any deal would require the approval of regulators in Washington, Brussels and Moscow.

Well it raised my eyebrows. I do love a creative banking deal, but still.

Every [clap emoji] thing [clap emoji] is [clap emoji] securities [clap emoji] fraud

Credit Suisse Group AG was hit with its first US investor lawsuit over the bank’s recent difficulties, alleging that it overstated its financial prospects to shareholders.

The proposed class-action complaint, filed in federal court in Camden, New Jersey, alleges that the bank made “materially false and misleading statements” in the past year that impacted investors.

To be fair, surprising financial losses at a bank are a lot closer to traditional securities fraud than most of the stuff I write about under the heading “everything is securities fraud,” but still the timing here feels a bit cruel.

Isn’t it ironic

Should you be involved in a corporate musical parody video in which you lock arms with your coworkers in a kickline? Buddy, if anyone even suggests that, you should quit your job, short your company’s stock and call the police; this is not legal or investing advice but it would have worked out for Signature Bank

On Sunday, the third-biggest failure in US banking history marked the downfall of a group of outer-borough, blue-collar bankers who leaped into the crypto business in recent years and saw depositors flee. But long before then, Signature had been unlike any other in New York’s finance industry. The 2016 video, which shows employees doing a synchronized dance inside cubicles, is just one of several. …

Another clip, made for the bank’s 10th anniversary a decade ago, begins with the cash-register sound effects from Pink Floyd’s “Money.” Then a man in a Viking outfit buys a hotdog. Women in red bowties ride an elevator that opens onto a bank office. A child uses a sword to strike a printer that spits out, letter by letter, the bank’s name. 

“Now you’ve come to Signature,” a voice sings to the tune of Katy Perry’s “Firework.” “Show your clients what you’re worth.”

The Vikings rejoice and throw their helmets. “Our profits will go up, up, up,” the song goes as people dance on a bar chart. “Watch them grow, they’ll never stop.” …

Alyson Stone, who was senior vice president of strategy and marketing until she left in 2018 to start Attion Consulting LLC, said the videos weren’t her work. “Marketing did not do this,” she said. “This was Scott’s baby.” The videos were used not as advertisements, she said, but to boost employee morale.

“They were not universally popular within the bank, even when the bank was successful,” she said. “If I had had a vote, I would have voted no.”

Oh me too, me too. To be fair, these videos are from long ago and if you had shorted the stock based on them you’d have had a rough decade. But it’s the principle of the thing.

Things happen

“The Schedules and SOFAs filed describe $3.2 billion in payments and loans to founders, chiefly from Alameda Research, including $2.2 billion to Sam Bankman-FriedGoldman looked to buy SVB in 2020 but talks fizzled. Government Will Likely Only Sell Silicon Valley Bank to Another Bank, Sources Say. Nears Deal for Capital Injection and Debt Conversion, Sources Say. U.S. Threatens Ban if TikTok’s Chinese Owners Don’t Sell Stakes. In New York City, a $100,000 Salary Feels Like $36,000. Barney Frank defends role at Signature Bank: ‘I need to make money

If you'd like to get Money Stuff in handy email form, right in your inbox, please subscribe at this link. Or you can subscribe to Money Stuff and other great Bloomberg newsletters . Thanks!

  1. This more or less describes what seems to have happened to Signature Bank last weekend: “The decision to take possession of the bank and hand it over to the FDIC was based on the current status of the bank and its ability to do business in a safe and sound manner on Monday.”

  2. This more or less describes what seems to have happened to Silicon Valley Bank last weekend: “As of the close of business on March 9, the bank had a negative cash balance of approximately $958 million. Despite attempts from the Bank, with the assistance of regulators, to transfer collateral from various sources, the Bank did not meet its cash letter with the Federal Reserve.”

  3. That’s from Bloomberg’s calculator — CS 1 05/05/23 YAS — using a price of 98 and a settlement date of March 24, which is when the tender is expected to settle.

  4. Actually there is another obvious important explanation that is not addressed by the ProPublica report, which is random luck. ProPublica reports a few anecdotes of executives with suspiciously well-timed trades, picked from their corpus of tax returns, but there is no overall analysis of the data. If 10,000 executives make 1 million trades in their competitors’ stocks over several years, then some of those trades will be very successful just by random luck. If you write an article about the five most successful trades, they will look suspicious. I think there are good intuitive reasons to think that pure luck is not the main thing going on here, but it’s worth mentioning.

  5. Consider also all of the stuff about “should index funds be illegal”: If shareholders are all diversified, does that create anticompetitive incentives? What if executives are too?

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:

Matt Levine[email protected]

To contact the editor responsible for this story:

Brooke Sample[email protected]

Regulation and Society adoption

Ждем новостей

Нет новых страниц

Следующая новость