Missing in Action: Mary Jo White and the Toothless SEC

"I swear to recuse myself, so help me God"

I swear to recuse myself, so help me God” (photo: New York Times)

Over a long and storied career, Securities and Exchange Commission chairwoman Mary Jo White developed a reputation for being a tough prosecutor and litigator, belying her diminutive stature. But she’s not so tough anymore.

As U.S. Attorney for the Southern District of New York, when she wasn’t facing down mobsters like John Gotti, she was putting terrorists like Ramzi Yousef (the 1993 World Trade Center bombing mastermind) under the hot lamps. After her time as a prosecutor, she spent 10 years as chair of the litigation department at Devevoise & Plimpton, a white shoe New York City law firm.

As an unfortunate byproduct of this otherwise fruitful juridical pilgrimage, Ms. White came to know many characters on Wall Street, big business bosses, regulators, law makers, and prosecutors. When one runs in these rarefied circles long enough, you eventually become friendly with many of your “adversaries” and a system of favors and quid-pro-quo’s develops which helps maintain a stasis between the various powers of big business, government, and regulatory institutions.

A fine example of this is found in the story of Gary Aguirre, as well detailed in this Rolling Stone piece.

Aguirre joined the SEC in September 2004. Two days into his career as a financial investigator, he was asked to look into an insider-trading complaint against a hedge-fund megastar named Art Samberg. One day, with no advance research or discussion, Samberg had suddenly started buying up huge quantities of shares in a firm called Heller Financial. “It was as if Art Samberg woke up one morning and a voice from the heavens told him to start buying Heller,” Aguirre recalls. “And he wasn’t just buying shares — there were some days when he was trying to buy three times as many shares as were being traded that day.” A few weeks later, Heller was bought by General Electric — and Samberg pocketed $18 million.

After some digging, Aguirre found himself focusing on one suspect as the likely source who had tipped Samberg off: John Mack, a close friend of Samberg’s who had just stepped down as president of Morgan Stanley. At the time, Mack had been on Samberg’s case to cut him into a deal involving a spinoff of the tech company Lucent — an investment that stood to make Mack a lot of money. “Mack is busting my chops” to give him a piece of the action, Samberg told an employee in an e-mail.

A week later, Mack flew to Switzerland to interview for a top job at Credit Suisse First Boston. Among the investment bank’s clients, as it happened, was a firm called Heller Financial. We don’t know for sure what Mack learned on his Swiss trip; years later, Mack would claim that he had thrown away his notes about the meetings. But we do know that as soon as Mack returned from the trip, on a Friday, he called up his buddy Samberg. The very next morning, Mack was cut into the Lucent deal — a favor that netted him more than $10 million. And as soon as the market reopened after the weekend, Samberg started buying every Heller share in sight, right before it was snapped up by GE — a suspiciously timed move that earned him the equivalent of Derek Jeter’s annual salary for just a few minutes of work.

The case seemed open and shut, but as Aguirre would soon find out, it was mostly shut. In the summer of 2005 when Aguirre told his boss he planned to interview Mack, things “started to get weird”. Aguirre was “contacted” (read hounded) by folks from Morgan Stanley, then an aide to New York Attorney General Eliot Spitzer, then the SEC got a call from one of the firm’s top dog lawyers: none other than, you guessed it, Mary Jo White, herself the former U.S. Attorney for the Southern District of New York- the top cop on Wall Street. Continue reading


“Open Kimono”: Financial Expression of the Day

When you really need to know: "Open the Kimono"

When you really need to know: “Open the Kimono” (photo: barbwire.com)


“Open Kimono” or “Open the Kimono”, verb phrase, to reveal tightly held information.

Usage Note: This sultry expression is one of the few financial phrases that is not over-used to the point of absurdity. It therefore carries a slight element of surprise when the big-time operator slings this verbalism from his word kit. The business and finance lot are often searching for an angle of advantage or edge (or just trying to not get screwed over) when it comes to their business dealings and transactions. Likewise, investors diligencing a potential opportunity desire deeply to know what the seller knows about the asset for sale. When dealing with counterparties in these settings, there are approved customs and norms that have been created so as to satisfy the “need to know”.

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“Wood to Chop”: Financial Expression of the Day


Bankers turned Lumbersexuals: This man worked at Lehman Brothers in 2008.

Bankers turned Lumbersexuals: This man worked at Lehman Brothers in 2008 (photo: thefashiontag.com)

“Wood to Chop”, noun phrase, as used in high finance and big business, this idiom is an alternative way to say “work” and nearly always has the descriptor “a lot of” preceding the phrase.

Usage Note: Smart finance and business types often put on a lot of show to exude confidence and display their intellectual horsepower. Using fancy and pithy phrases is one way they attempt to bedazzle their colleagues and customers; to cast a spell on them in an effort to maintain power in their relationships and interactions. But inside, they are often ill at ease with themselves and their lack of physical stature, having been chained to a desk and stuffed inside a cubicle for many years doing their time while hoping for an eventual payday. They have atrophied into hunch-backed, monitor-tanned zombies who couldn’t survive a week in the wild if the power went out. For the male homo sapien whose evolutionary DNA has wired him to be hunting for food, fighting and killing enemies, and moving giant boulders around to create some kind of calendar, this is rather emasculating.  To compensate, these big shots hurl verbal abuse at their underlings, talk like jocks in the locker room, and use phrases like “wood to chop” in place of “work” because it sounds like actually doing work, as opposed to typing numbers in a spreadsheet which, well, isn’t very manly from an evolutionary perspective.

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No Regard for History: NYC to Bulldoze Grand Central Station

Will Grand Central Station go the way of the old Penn Station?

Will Grand Central Station go the way of old Penn Station? (photo: Slate.com)

The vaulted ceiling with stunning astronomical art work. The open, airy space. The giant windows with wrought iron works that create the iconic sun-streaming-in photographs of by-gone eras. The beautiful marbled halls and concourses. And of course, the beloved old-timey clock in the middle of the great hall that millions have designated as their meeting place.  All must go. In a shameful acquiescence to greedy developers and aided by most New Yorker’s architectural and cultural ignorance, the city council has voted to tear down the historic landmark to make way for, you guessed it, a retail shopping complex anchored by Wal-Mart and a 70 story high-rise with great river views. In a city of dwindling architectural gems (The Empire State Building, The Chrysler Building, and the New York Public Library- now desecrated with the name of Steven A. Schwarzman emblazoned on the facade, are among the few remaining) Grand Central Terminal is just one more casualty in the ever-morphing city scape.

“Frankly, New Yorkers just don’t like old-fashioned architectural grandeur” said mayor Bill De Blasio when reached for comment. “Most New Yorkers prefer dingy, foul-smelling, poorly-lit, and cramped public spaces, particularly when it comes to our transit system. I mean, have you ridden the subway lately?  I sure haven’t- it’s a dank and disgusting place. And have you ever used an elevator from street to platform on the A line? Pick one of the few stations that even has an elevator, and I guarantee a real treat. It’s like sticking your head in a public toilet with a horrific smell of vomit and urine, the doors can’t open soon enough and you’ll feel like you need a shower when you get out. I’d like to clean it up, but the people of the city just won’t have it. They like the way it is and some even say it builds character, oddly.” Continue reading

Republicans Coalescing Around Netanyahu US Presidential Bid

Netanyahu: Practicing for future State of the Union addresses

Netanyahu: Preparing for future State of the Union addresses

In a shocking, if not terribly surprising development, Bud Fox News has learned that Republican party leaders and key heavyweight donors are coming to a consensus that Benjamin Netanyahu, the current Israeli prime minister, will be the party’s “establishment” candidate for the 2016 US presidential election. The news comes in the wake of the unprecedented access Messr. Netanyahu has been granted to the US legislative bodies, highlighted by the invitation from Republicans to give a prime-time address to a joint session of Congress on March 3, 2015. It’s unclear how this late-breaking news will affect his chances of re-election as Israeli’s hit the polls today to elect a new prime minister.

Many political observers question the move and some are alarmed by this bold extension of Israeli meddling in US affairs. “You thought the tail was wagging the dog before- you ain’t seen nothing yet”, one senior Obama administration official observed.

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“Story”: Financial Expression of the Day


Financial storytellers captivate their audience with tall tales of success. (Photo: Library of Congress)

“Story”, noun, a narrative of incidents or events.

Usage Note: More than simply a tale of history, in High Finance a story can be either backward- or forward- looking and is often used to justify an action taken or that should be taken; an investment, a trade, or a sales pitch looking for a buyer.  It becomes a construct used to convince one’s self and others that a decision being made will not result in the loss of money.

Every corner of finance has it’s own story it likes to hear.  The amazing thing is, the desired story for any given subculture is so predictably similar, that after a while it doesn’t take much intelligent or creative thought to deliver the story people want to hear.  The same six or eight bullet points (surrounded by flatulent big-talk and fancy words) will usually satisfy the requirements of the supposedly discerning audience.   Continue reading

“Hair Cut”: Financial Expression of the Day


In Finance land, there's no such thing as a good haircut unless you're doing it to someone else

In Finance land, there’s no such thing as a good haircut unless you’re the barber (Photo: galleryhip.com)

“Hair Cut”: verb phrase, in business and finance, to receive less than the amount due or expected on a financial obligation or investment (i.e. application of a discount to an amount owed or return anticipated).

Usage Note: Sharing some similarities with the gem of a phrase “Take a Hit”, this well-worn financial idiom is more versatile, and more widely used.  When you think about it, the haircut is a strange behavior unique to the human animal. Humans share 97% (or whatever) of our DNA with chimpanzees and although you’ll see a lot of people acting like monkeys, particularly in finance, you’ll never see monkeys getting a haircut.  But we humans just love getting our haircut. Something very relaxing and rejuvenating about someone tugging on your mane and snipping at it in tiny increments with a sharp pair of scissors.

Unfortunately, as is often the case with financial lingo, “haircut” has become an overused substitute for “discount” and as such has made its way into all forms of conversation where it really has no business being.  Finance geeks throw the term around for anything from a sale at Barney’s to short-changing a friend when repaying for last weekend’s bender. Continue reading

“Project Falcon”: Financial Expression of the Day

Like Maxwell Smart's concealed phone, a shrewd deal-man will conceal his "project"

Like Maxwell Smart’s concealed phone, the spying deal-man will conceal his “project”

“Project Falcon”, noun phrase, a characteristic code name for any confidential proceeding, such as a potential merger, take-over, leveraged buy-out, or other financial transaction. Usage Note: When bankers are working on their latest deal, rather than talk about the companies involved directly, they like to make up a code name to use in lieu of the actual situation. So on their computer hard drive when they’re working on a deal for say,  Sears acquiring Target, they’ll name that engagement and file, for example, “Project Falcon”. In the rarefied world of private equity, investment banking and even asset management, the protagonists like to think of themselves as tough, street smart, military-like combatants.  They fancy themselves generals on a field of battle with troops arrayed and lives at stake. One manifestation of this pathology comes in the form of project code names.  Not unlike Military Operation code names, project code names have a sophisticated, covert ring to them.  The primary difference is, there’s nothing so serious at stake as the financiers would like to believe.  Continue reading

Steer Clear of CNBC’s Scatological Investment Advice

Wall Street's version of this...

Wall Street’s version of this…

...is this

…is this CNBC program

At the nexus of entertainment, big-money television, and the average person’s desire to have more money, there was born a 24/7 buisness news cable channel called CNBC.  Although there is the occasional interesting interview with a captain of industry, financial fat cat, or respected economist, the vast majority of what this blow-show propagates is not fit for consumption.

Take, for one example, “Fast Money”, a daily program featuring a panel of “expert” Wall Street “traders” talking about the day’s news and their on-the-spot clever trade ideas.  Even the name stinks.  Either it invites viewers to indulge in their baser desires to make a quick buck without working too hard or it seeks to sensationalize and theatricalize the archetypal Wall Street culture of fast-thinking and fast-talking money makers.

 Stock Picking Entertainment for the Common Man

The program features polished, high-production-value graphics and rapid-fire pithy repartee between five or six regular and one or two guest panelists who all speak with consummate confidence and swagger using a deluge of slick financial yak.  Not unlike professional wrestlers, they each have a ridiculous nick-name like “The Liquidator” or “The Pit Boss”- whether to be funny or cool or tough, it’s not clear. The bobblehead experts blather on about how to “play” (that is, trade in light of) this or that company’s earnings or other “catalyst”, what direction gold or oil are headed in and at what price one should buy or sell a hot-topic stock.  There isn’t much analysis involved.  There is little thoughtful discussion of investment pro’s and con’s or risk. No mention of any financial number from anything other than an income statement.  And you won’t hear Benjamin Graham quoted on this program. This gig is mere investor-tainment.  Like WWE professional wrestling billed as “sports entertainment”, but at least those BS artists admit it’s “entertainment” right up front.  Or is it financial porn? All form and no substance.  A glitzy show designed to increase your heart rate with the quick-witted banter and sham arguments interspersed with lottery-ticket stock advice. Continue reading

Private Equity Gambling with Old People? Guy Hands on Verge of Another Fiasco

Can he repeat?  Big Hands I know you're the one.

Can he repeat? Big Hands I know you’re the one.

Guy Hands, founder of UK private equity outfit Terra Firma, is about to do it again. The odds must be slim to none, but Messr. Hands just might catch lightning in a bottle. Another Terra Firma investment is inching towards an inglorious end and if the big man accomplishes this feat, he’ll be the investing world’s version of Bad Luck Brian. Already in the running for The City’s most shambolic investment firm, this would place them squarely in first place.

Every private equity shop has laid an egg here or there. Most of the time they manage to sweep it under the rug without so much fanfare and attention as whooped up when they’ve closed their latest fund. But this “Guy” appears to have a knack for both losing money and creating a PR disaster at the same time.

To refresh BFN readers, Guy Hands’ Terra Firma had the dubious honor of presiding over perhaps the worst private equity investment in history: the acquisition of UK music publishing concern EMI. Terra Firma paid £4.2 billion ($8.3 billion at the time) in August 2007 to acquire EMI. Subsequently a number of artists left the label, a financial crisis hit, and EMI had too much debt to get through it all. By 2011, the owners had run out of options and were forced to relinquish control to the primary lender, Citigroup, wiping out all of the equity (and most of the debt). Terra Firma was reported to have lost a whopping £1.75 ($2.5) billion in the transaction (roughly one-third of investor capital) as well as more than 60% of Hands’ personal wealth (who chipped in along the way to try to keep it afloat). Continue reading