Unstructured Finance

“I’m from the Treasury, and I’m here to help”

April 4, 2013

Ronald Reagan famously said that the “nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’” But according to a report from SNL, the government may actually help banks when it forces them to add directors to their boards. Every bank CEO’s worst nightmare is having the government name directors to his or her board. Usually, banks pack their boards with clients or prominent people that offer prestige and potential business leads, but little substantive oversight. At the smaller banks that SNL is focusing on, that often amounts to people like the owner of the local car dealership, or the owner of the local golf equipment seller. (For a stereotypical example of a community bank’s directors, consider the board of Smithtown Bancorp, which was sagging under the weight of failed loans before being taken over by People’s United Bank in 2010.)
The Treasury, on the other hand, tends to appoint people with actual banking experience, who can do what board members are supposed to do: keep an eye on management for the benefit of shareholders. The government only does so for banks that have lost their way: the Treasury has the right to name directors to boards of banks that received bailout money under the Troubled Asset Relief Program, and that missed six quarters of dividend payments. Typically, these appointees are bankers with more than 20 years of experience.
By SNL’s reckoning, the banks with Treasury-appointed directors have racked up median stock gains of 50.38 percent since taking on the new board members, compared with a median gain of 28.22 percent in an index of bank stocks.
Of course there may be other reasons for this outperformance – for example, it may be that small bank stocks in general have outperformed larger bank stocks over the relevant time frame, or that relatively weak banks have been in greater demand from value investors betting on an improving economy. But it may also be that the government has found a fix for the principal-agent problem at banks that have stumbled into trouble.

The burden of being SAC Capital’s “Portfolio Manager B”

April 3, 2013

Michael Steinberg, the SAC Capital Advisers portfolio manager who was arrested at the crack of dawn last Friday morning probably envies former Goldman Sachs trader Matthew Taylor’s rush-hour surrender to the Federal Bureau of Investigation on Wednesday.

Steinberg indictment sheds some light on SAC’s computer program that once annoyed some top traders

April 1, 2013

By Matthew Goldstein

SAC Select may not have been one of SAC Capital Advisors’ best-known portfolios during its brief trading history. But the computer-driven trading program may have been one of the more controversial at Steven A. Cohen’s hedge fund.

Calendar

March 28, 2013

Some important tax and accounting events in the week ahead:

Tuesday, April 2

Internal Revenue Service hearing on the 3.8 percent investment income tax associated with the Health Care and Education Reconciliation Act of 2010, sometimes called “Obamacare.” 10 a.m. ET. IRS building. Washington.

Essential reading: Sports betting raises state coffers, and more

March 28, 2013

Welcome to the top tax and accounting headlines from Reuters and other sources.

* Cash-hungry states eye sports betting, to leagues dismay. Joe Drape – The New York Times. Nevada took in more than $3.4 billion in bets on sports last year, generating $15 million to $20 million in tax revenue. Link     

Morgan Stanley decides not to tell shareholders what “priorities” are, SEC agrees to play along

March 28, 2013

Reuters reported on Friday that the Federal Reserve is taking a closer look at precisely how Wall Street CEOs get paid. This week, the SEC released correspondence between itself and Morgan Stanley that sheds some more light on the topic, and suggests that the Fed isn’t the only one questioning how bonuses are calculated. The SEC gets good marks for effort here, but the final result may leave Morgan Stanley shareholders unsatisfied.

Essential reading: TurboTax’s lobbying fight, and more

March 27, 2013

Welcome to the top tax and accounting headlines from Reuters and other sources.

 * How the maker of TurboTax fought free, simple filing. Liz Day – ProPublica. Intuit has spent about $11.5 million on federal lobbying in the past five years. Although the lobbying spans a range of issues, Intuit’s disclosures pointedly note that the company “opposes IRS government tax preparation.” Link 

Daniel Loeb surfing to the top of the hedge fund charts again

March 27, 2013

Something must be in the water over at 399 Park Avenue, where Daniel Loeb’s hedge fund Third Point is headquartered. His Third Point Ultra fund has already gained 12.42 percent this year through the 13th of March, according to data from HSBC’s Private Bank.

Essential reading: Intangible assets under audit, and more

March 26, 2013

Welcome to the top tax and accounting headlines from Reuters and other sources.

* Intangibles targeted in tax audits. Emily Chasan – The Wall Street Journal. Intangible assets such as intellectual property, technology processes and copyrights have grown over the past decade to account for a greater portion of corporate profits, and tax regulators are taking notice. Link    

Cash is king in housing

March 26, 2013

By Matthew Goldstein

It’s no secret that housing in the U.S. has become an investors market, especially if it’s an investor with cash to burn.