Felix Salmon

The legal jujitsu of Goldman Sachs

August 2, 2013

Vanity Fair has timed the publication of its latest 11,000-word Michael Lewis opus perfectly to coincide with Fabrice Tourre being found liable on six counts of misleading investors while he worked at Goldman Sachs. Lewis also profiles a former Goldman employee charged with serious misdeeds; in his case, it’s Sergei Aleynikov. And in both cases — Aleynikov and Tourre — the government ended up in a position of overstretch.

When should we aid Detroit?

July 29, 2013

John Cassidy and Steve Rattner agree that the destruction which has been visited upon Detroit, in recent decades, is at least as devastating, and as worthy of federal support, as the chaos which was wreaked by Hurricane Sandy in richer parts of the country.

How not to compete with payday lenders

July 26, 2013

I’m in the UK at the moment, where it’s quite amusing to see the amount of attention paid to national institutions for which there is no American equivalent. Obviously, there’s the way in which a woman having a baby became front-page news for days on end, generating astonishing quantities of coverage despite the fact that all the facts could be summed up in a single tweet. And then, on the financial side of things, you have the Archbishop of Canterbury, Justin Welby.

Don’t send Summers to the Fed

July 24, 2013

Quickly: can you name the only person to have served as both Fed chair and Treasury secretary? The answer is William Miller: he was Fed chair for 17 months in 1978-79, and Treasury secretary for another 17 months, in 1979-81. He was an unmitigated disaster as Fed chair, and his tenure at Treasury was undoubtedly more helpful to Ronald Reagan than it was to his boss, Jimmy Carter, in the 1980 election.

The SEC’s important case against Stevie Cohen

July 21, 2013

Stevie Cohen is one of the greatest stock-market traders of all time. Indeed, there’s a strong case to be made that he’s the greatest. Cohen is not the greatest investor — he doesn’t really go in for buy-and-hold positions which steadily accumulate enormous value over decades. He’s not even the greatest hedge-fund manager: he doesn’t go in for the big macro bets (Soros vs. the pound, Paulson vs. mortgage-backed securities) which are the stuff of legend. Instead, he’s a trader, and while normal people pretty much understand what someone like Warren Buffett does, or what someone like John Paulson does, it’s much harder to understand what a trader does, or what differentiates a good trader from a bad trader.

from Shane Ferro:

HSAs: When your health insurance becomes a retirement account

July 18, 2013

A few weeks ago, we received an email from a reader who had some questions about his health savings account. The email raised two interesting questions: Are these tax-favored insurance products becoming retirement accounts, and, to quote the email, “does anybody regulate these clowns”?

Why Paulson’s talking

July 17, 2013

The ostensible job of a hedge fund manager is to deliver alpha, in the words of today’s conference, just like the ostensible job of a legislator is to govern. But just as the real job of a legislator it to get re-elected, the real job of a hedge fund manager is to raise money — to maximize the amount of funds under management.

The silly trial of Fabrice Tourre

July 17, 2013

There’s a huge amount of legal firepower on display in lower Manhattan right now, all centered on a University of Chicago grad student named Fabrice Tourre. Arrayed against him, in this civil case, is the might of the SEC, which has tapped the head of its trial unit, Matthew Martens, to take a lead role. Tourre’s own lawyers, who have been representing him for the past three years, include none other than Sean Coffey.

Art, venture capital, and down-round phobia

July 16, 2013

Ben Horowitz has a great guide to the dreaded “down round” today — that unloved point in the evolution of a venture-backed technology company when it’s forced to raise money at a lower valuation than it received in previous rounds. Certainly, such things shouldn’t be unexpected. As he explains: