Wall Street Folly

Out from under Uncle Sam's increasingly restrictive thumb: IBERIABANK becomes the first to redeem its TARP

Take your TARP and shove it!: CNBC just reported that IBERIABANK is the first bank to have filed notice with the U.S. Treasury that it's redeeming its $90.6 million TARP preferred.  They said in their press release:

When we decided to accept funds under this program, we believe we were the type of healthy bank that could employ the funds in the manner consistent with the goals initially set out by Congress and the Treasury in supporting the expansion of credit to the markets we serve. We believe recent actions, interpretations, and commentary regarding various aspects of the program places our Company at an unacceptable competitive disadvantage. Our Board of Directors has determined that continued participation in this program is no longer in the best interest of our Company and its shareholders."

Here's the press release, issued yesterday:

Charlie Rose conversation with Amazon.com's Jeff Bezos

Amazon.com's Jeff Bezos talks to Charlie Rose, mostly about the new Kindle.

Jim Chanos' Kynikos Associates suffered 2008 asset redemptions of 20% even though his fund "had a good year"

With the huge market dislocations in 2008, hedge funds didn't have to lose money to still have substantial redemptions:  Short seller Jim Chanos' Kynikos Associates, which "had a good year" in 2008, apparently suffered an outflow of 20% of assets.  Such was the lot of being one of the seemingly small number of firms that hadn't blocked investor redemptions.  "We were like an ATM machine" he joked according to Reuters.

Common equity dilution: Citigroup is exchanging Preferred for common to increase tangible common equity

 Here's the press release.  There's an 8:30 am EST conference call:  Dial-in numbers for the conference call are as follows: US & Canada: (877) 700-4194 / International: (706) 679-8401; Conference code: 88132598

WSF Headline Roundup - 2/27/09 - Hedge Funds / Private equity / VCs paying through the nose; JPM sees more consumer ills; FNM taking down $15B more; GM bankruptcy fears; DELL downer; New YHOO shakeup; SKS for sale sign

• Buyout, Hedge-Fund Managers Could Pay $24 Billion More in Taxes
• JPMorgan warns of more consumer woe
• In President's Budget Plan, Broad Agenda and a Few Gaps
• Fannie to draw further $15bn
• As GM losses deepen, bankruptcy fears grow
• GM’s Wagoner Meets With Auto Panel for Six Hours
• General Motors Cuts NCAA Promotional Spending by 60%
• Merrill Expands Japan Equity Research; Rivals Retreat
• Dell 4Q Net Down 48% On Sales Woes, Margin Drop
• New Yahoo CEO ushers out CFO in executive shake-up
• Sears wants Congress to ease pension rules
• Saks Open to Offers, Won’t Go Bankrupt, Chief Says
• Rocky Mountain News to Publish Final Edition Tomorrow

Citigroup may have to raise private capital alongside the government

The Obama administration may require Citigroup Inc. to raise private capital and make changes to its board of directors as part of an effort to strengthen the bank, according to people familiar with the matter.

The plan could be announced as soon as tomorrow according to Bloomberg.

So say someone actually throws in with Uncle Sam and buys common stock.  What if the bottomless pit known as Citigroup needs even more capital?  Does the government dilute the their new private equity capital partner along with the rest of the common holders?  We suspect that there would be big dilution.  Personally in this one, we wouldn't want common stock, only something higher up in the capital structure. No way. No how.  But would Uncle Sam go along with new money coming in senior to them?   Probably not.

Citigroup May Be Required to Get Private Capital Alongside U.S. - Bloomberg

Ken Lewis flies in for his meeting with the Cuomo people -- on a corporate jet

Ken Lewis made his pilgrimage today to speak to the Cuomo people about those $3.6 billion in Merrill bonuses.   The subpoenaed CEO flew in from Charlotte on a $50 million G-5 luxury corporate jet, one of the nine (with three for sale) in the Bank of America fleet.  An ABC video showed the plane arrive and Lewis emerge.  They note in the video that the cost of gas and pilots runs $5K an hour for gas and pilots, while a scheduled US Air flight costs $440. The company was quick to justify the use of the jet.:

Video: Fox Business interviews Muriel Siebert

Muriel Siebert discusses President Obama's budget and the new bank stress tests with Liz Clayman on Fox Business.

As if Citigroup has just been sooooo successful at investing in hedge funds: it's providing seed money (along with Blackstone) to some former employees for their $200M startup

Given their disastrous forays into investing in hedge funds not to mention their shaky finances, we wonder what Vikram and Co can possibly be thinking with their apparent decision to still help fund a $200 million hedge fund start-up, along with Blackstone, run by a couple of former Citigroup prop trading guys.  Blackstone is sitting on piles of cash, and isn't on government life support, so we have no problem with them ponying up.   But Citi?  We wonder what Barney Frank et al. will have to say about that.   We kind of think it's ridiculous.  They need to get their financial house in order before staking others. 

By the same token, if we were the hedge fund guys, we'd be more than a little nervous that Citi might have to pull their investment (of an undisclosed size) on short notice.   It's not exactly stable money given their own instability.

Former Fed chief Volcker pushing for “strong restrictions on risk-prone capital market activities -- hedge funds, equity funds, proprietary trading and the like”

According to Bloomberg:

“We must not again leave the markets so vulnerable that a breakdown will again threaten the national and world economies,” Volcker, who heads President Barack Obama’s Economic Recovery Advisory Board, said today in a hearing of the congressional Joint Economic Committee in Washington.

He urged “strong restrictions on risk-prone capital market activities -- hedge funds, equity funds, proprietary trading and the like” to help ensure the stability of banking institutions and limit potential conflicts of interest.

“We are living in a difficult time for the economy, with unprecedented complexities, complications and risks for financial markets and financial institutions,” Volcker said.

Volcker Urges ‘Strong’ Restrictions on Hedge Funds - Bloomberg