Lucas van Praag, World’s Greatest Corporate Spokesman, writes a rebuttal to the New York Times’ assertions in the Huffington Post. The most intruiging dispute is:
NYT assertion: “In addition, according to two people with knowledge of the positions a portion of the $11 billion in taxpayer money that went to Societe Generale, a French bank that traded with A.I.G, was subsequently transferred to Goldman under a deal the two banks had struck.”
The facts: The assertion is false and misleading. Goldman Sachs provided financing to many counterparties, but in that role we would not have known whether a counterparty had obtained credit default protection, let alone from whom or in what amount.
I have heard of things like this taking place. For instance, say Goldman wanted to do a deal with AIG but could not do so directly because of their risk management procedures. What they would do is call up their good friends at another bank – let’s call it the Clearly Idiotic Bunch of Clowns, or “Clowns” for short – and tell them the story. Goldman would do its deal with the Clowns and the Clowns would then lay off their exposure to AIG. The Clowns would take a spread of 15-25 bp on the transaction, record their profit, pad their bonus, shake hands and move on.
What the clowns didn’t consider important when doing the deal, however, was the fact that their deal with Goldman was collaterallized but their deal with AIG wasn’t. So as the value of the underlying instruments declined, they were getting margin calls from Goldman without being able to offset them with collateral from AIG … and, of course, as AIG itself went south, their exposure to AIG started looking more and more like a loss.
Fortunately for the Clowns, the Fed Fairy waved its magic wand and their contract with AIG was honoured. They honoured their contract with Goldman – but they would have done so anyway. The Fed Fairy’s action simply meant they could do so without taking the loss themselves.
Goldman did nothing wrong or even underhanded in this story, which is probably the explanation of the SocGen story that van Praag discusses. SocGen, of course, is renowned for it’s meticulous risk management procedures, as discussed by Jerome Kerviel.
Shed no tears for the Clowns, however! Nobody ever gets fired, or anything Dickensian like that. Only evil banks, such as Goldman, would ever dream of firing somebody for incompetence. They’ll get some extra coaching on risk management, between the “Respect in the Workplace” seminar and the workshop on throwing cream pies, and live happily ever after.
John Varley of Barclay’s testified to the UK’s Treasury Select Committee today. One of his startling revelations was that nice things cost money:
Barack Obama’s plans to stop banks engaging in risky trading activities will not stop another banking crisis, John Varley, chief executive of Barclays, said today.
Speaking before the Treasury select committee, Varley also tried to calm concerns that the crack down on proprietary trading, known as the Volcker rule, would knock Barclays’ profits.
“This initiative [Volcker] on its own will not lead to a safer system,” Varley said. “It is inconsequential. It is completely irrelevant [to Barclays].”
…
As he made a staunch defence of big banks like Barclays not being broken up by regulators, Varley warned MPs on the committee that the implication of demands that banks hold more capital and more liquid assets such as government bonds was that they would increase interest rates charged to customers.“The cost of credit is going in one direction only – it’s going higher,” said Varley.
Bombardier is considering a new medium term note, but the terms are not yet final:
DBRS has today assigned a BB rating, with a Stable trend, to the proposed issuance of up to $1 billion in Senior Unsecured Notes (Notes) by Bombardier Inc. (BBD or the Company). The Notes are expected to be due before 2020. Proceeds from the issuance are likely to be used largely toward debt repayment, with no material change in the Company’s financial profile. Bombardier announced today that it has commenced a cash tender offer to purchase up to $550 million aggregate principal amount of its 6.75% Notes due 2012, 6.30% Notes due 2014 and Floating Rate Senior Notes due 2013. DBRS notes that the Company has the option to increase the tender offer to $1.25 billion.
Notes:
All figures are in U.S. dollars unless otherwise noted
The tender offer was announced yesterday. Regulators insist that this be kept secret from Italians so remember: if you’re Italian, you didn’t learn about the tender from me, OK?
Trading volumes picked up substantially today, but PerpetualDiscounts continued their slow descent, losing 8bp, while FixedResets were able to pick up 3bp.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 3.06 % | 3.72 % | 28,274 | 20.15 | 1 | -0.2158 % | 1,805.9 |
| FixedFloater | 5.70 % | 3.77 % | 34,177 | 19.26 | 1 | 0.4737 % | 2,775.3 |
| Floater | 2.07 % | 1.77 % | 39,542 | 23.11 | 4 | 0.6481 % | 2,221.3 |
| OpRet | 4.84 % | -3.71 % | 103,573 | 0.09 | 13 | 0.0472 % | 2,322.6 |
| SplitShare | 6.31 % | 1.53 % | 141,644 | 0.08 | 2 | -0.0870 % | 2,128.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0472 % | 2,123.8 |
| Perpetual-Premium | 5.77 % | 5.58 % | 86,005 | 2.00 | 7 | 0.0510 % | 1,892.2 |
| Perpetual-Discount | 5.84 % | 5.87 % | 170,829 | 14.05 | 69 | -0.0750 % | 1,807.2 |
| FixedReset | 5.42 % | 3.61 % | 321,937 | 3.79 | 42 | 0.0341 % | 2,180.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| POW.PR.D | Perpetual-Discount | -2.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-09 Maturity Price : 20.81 Evaluated at bid price : 20.81 Bid-YTW : 6.08 % |
| PWF.PR.F | Perpetual-Discount | -1.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-09 Maturity Price : 21.54 Evaluated at bid price : 21.84 Bid-YTW : 6.05 % |
| PWF.PR.L | Perpetual-Discount | -1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-09 Maturity Price : 21.27 Evaluated at bid price : 21.27 Bid-YTW : 6.05 % |
| BNS.PR.J | Perpetual-Discount | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-09 Maturity Price : 22.52 Evaluated at bid price : 23.28 Bid-YTW : 5.65 % |
| PWF.PR.A | Floater | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-09 Maturity Price : 22.06 Evaluated at bid price : 22.35 Bid-YTW : 1.72 % |
| W.PR.H | Perpetual-Discount | 1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-09 Maturity Price : 22.15 Evaluated at bid price : 22.56 Bid-YTW : 6.15 % |
| W.PR.J | Perpetual-Discount | 1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-09 Maturity Price : 22.67 Evaluated at bid price : 22.91 Bid-YTW : 6.18 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CIU.PR.B | FixedReset | 50,915 | RBC crossed 49,900 at 28.30. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-01 Maturity Price : 25.00 Evaluated at bid price : 28.27 Bid-YTW : 3.42 % |
| TD.PR.G | FixedReset | 49,452 | National crossed 30,000 at 27.95. A swap against TD.PR.I? YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.92 Bid-YTW : 3.40 % |
| CM.PR.L | FixedReset | 44,497 | RBC crossed 21,500 at 27.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.75 Bid-YTW : 3.80 % |
| TD.PR.I | FixedReset | 43,747 | National crossed 30,000 at 27.85. Did somebody swap against TD.PR.G? YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 27.85 Bid-YTW : 3.59 % |
| ACO.PR.A | OpRet | 35,517 | Desjardins crossed 35,000 at 26.23. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-03-11 Maturity Price : 25.50 Evaluated at bid price : 26.21 Bid-YTW : -29.19 % |
| GWO.PR.J | FixedReset | 34,150 | RBC crossed 26,300 at 27.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 27.50 Bid-YTW : 3.45 % |
| There were 46 other index-included issues trading in excess of 10,000 shares. | |||