Taking down the banks: Moody’s announced long-anticipated ratings cuts after regular New York trading yesterday, downgrading 15 banks, including Credit Suisse, which was cut three notches, and JPMorgan dinged two levels in part because of the recent trading losses in its chief investment office. Morgan Stanley, which had been put on watch for a potential three-level cut, was downgraded two notches. (Moody’s statement came more than an hour after it was widely expected, and Zero Hedge surmises word was delayed by last-minute negotiations between Morgan Stanley and the ratings company.) Citigroup said the downgrades were “backward-looking,” and failed to consider moves to make the bank less risky. Bank stocks rallied in extended trading despite the ratings cuts, and investors said the downgrades came years to late.
Reconsidering Spanish bailout: The International Monetary Fund criticized the eurozone’s bailout plan for Spain, suggesting that the region needs a mechanism for injecting capital directly into failing banks. The IMF faulted the rescue package currently on the table, which would provide as much as 100 billion euros, because it adds to Spain’s existing sovereign debt load. According toThe Wall Street Journal:
The euro zone needs to quickly set up a mechanism that allows it to directly recapitalize weak banks, “in order to break the negative feedback loop that we have between banks and sovereigns,” IMF Managing Director Christine Lagarde said after a meeting with the bloc’s finance ministers in Luxembourg.
Nasdaq probe: The Securities and Exchange Commission is investigating Nasdaq’s performance during the Facebook initial public offering, The New York Times reports, seeking to determine whether the exchange tested systems properly prior to the open, and whether Nasdaq violated rules by rewriting code to jump-start trading when its platform seized up.
805-1355888867: New rules forced hedge funds to register with the SEC. Some hedge fund managers responded by masking the names of their funds in regulatory files. The Journal has some examples. Cliff Asness’s AQR Capital Management prefers seemingly random numbers, like those bolded to the left. John Paulson aliases such as Paulson Fund 1.
Break glass: Investors questioned “end of the world” hedge strategies designed to hedge against rare but catastrophic events, Reuters reports: “You guys better figure out how, while hedging tail risk, you’re not letting liquidity risk sneak in the back door,” an investor said at a conference in Monaco.
I-banker up: Barclays named Jerry del Missler to the newly created role of chief operating officer. Mr. del Missler had been co-chief executive of corporate and investment banking.
Einhorn antes up: Greenlight Capital founder David Einhorn entered the $1 million buy-in tournament at this year’s World Series of Poker. He’ll donate any profits to City Year, according to Bloomberg.