Observer » drachma

Greek Parties Still Negotiating Coalition, Wall Street Still Girding for European Crisis: Roundup

Patrick Clark — Tue, 19 Jun 2012 07:44:46 -0400

Whither Europe: Greece's leading pro-bailout party—conservative New Democracy, which won Sunday's elections, and socialist Pasok—are still negotiating to form a coalition to govern the teetering nation. Assuming a deal gets done, the first task will be to convince Europe to rewrite the Greek rescue agreement to provide more time—and financing—to meet austerity goals.

European leaders promised a more integrated banking system at the G-20 meeting in Mexico City yesterday, listing common banking oversight and depositor guarantees among future steps to be considered.

Asset managers like Legg Mason are preparing for worst case news out of Europe.

Greek savers aren't the only ones stuffing banknotes under their mattresses; Reuters reports that institutional investors are increasingly holding cash.

("If you wrapped up all the $100 bills in circulation, it would form a cube about 74 feet per side...")

Spain paid 2 percentage points more to borrow on 12-month bonds yesterday than it did one month ago.

If all that paints too rosy a picture, talk to Mark J. Grant.

For a little optimist, CNBC brings you Mark Mobius.

Jon Stewart interviews the drachma.

Your tab... Goldman Sachs advanced Rajat Gupta nearly $30 million to cover legal expenses, according to The New York Times, salt in the wounds after a) the former McKinsey & Co. chief executive and Goldman director passed Goldman secrets to hedge fund manager Raj Rajaratnam, according to the jury and b) Mr. Gupta's defense team took an adversarial approach to the parade of Goldman execs appearing at the witness stand (one attorney for Mr. Gupta called Goldman CEO Lloyd Blankfein "cold and callous," according to The Times). Anyway, Goldman has been picking up the tab because firm bylaws require the bank to pay the legal fees of executives and board directors; Mr. Gupta signed a pretrial agreement stipulating that he would pay his own legal bills if convicted.

Hide the whale: Bruno Iksil, the JPMorgan trader known as the London Whale, sometimes resisted sharing the details of his trading positions with superiors,The Wall Street Journalreports: "Mr. Iksil once confided to the colleague that when he wanted to avoid questions from supervisors about his trades, he sometimes would start discussing a mathematical term, equation or other technical jargon, to confuse and end the conversation."

Jamie Dimon is scheduled to testify before the "harsher and crazier" House of Representatives today.

BofA to divest? Swiss private bank Julius Baer is in talks to acquire Bank of America's non-U.S. wealth management unit, which manages about $90 billion, and which Reuters says could be worth about $2 billion.

Short-term fix: Nine months and $15 million later, Michael Francis is out as president of J.C. Penney.

HSBC Tests Greek ATMs for Compatibility With Drachma

Patrick Clark — Mon, 04 Jun 2012 10:42:42 -0400

And so the Grexit continues to be nigh: George Soros may handicap Greece's June 17 election in favor of the pro-bailout parties deemed more likely to keep the nation in Europe's monetary union, but better-safe-than-sorry still applies. If you're a Greek saver, that may mean stashing some euros under your mattress. If you're the British banknote printer De La Rue, it means denying rumors that you've been printing drachma just in case. And if you're HSBC, it means testing Athens ATMs for compatibility with the drachma, though that seems something of a dicey proposition, given that drachma banknotes supposedly don't exist, not to mention the fact Greek depositors may have looted their HSBC accounts long before the new drachma lands, leaving little to withdraw.

From This is Money:

HSBC has tested its cash machines in Greece to check whether they could cope with the reintroduction of the drachma if the country drops out of the euro.

...

An HSBC spokesman said: ‘Like all banks, we have been working with regulators to undertake preparatory work at multiple levels in the event of a sovereign default, an exit from the euro, or any other eventuality.’

...

The cash machine tests at branches in Athens are understood to have been extensive to ensure that the machines are able to handle banknotes of a different size and texture.

Inside JPMorgan’s War Room; How High Will Facebook Pop? Wall Street Roundup

Patrick Clark — Fri, 18 May 2012 06:33:17 -0400

JPMorgan fallout: Jamie Dimon couldn't sleep after seeing the CIO positions! He had a hard time breathing! Mr. Dimon drank vodka, others drank wine and the JPMorgan chief executive officer struggled to fire "sister" Ina Drew. Ms. Drew told executives at an April 9 operating committee meeting that early press reports of the London Whale were "blown out of proportion." On May 7, Mr. Dimon stepped away from the war room for a meet with Mark Zuckerberg. And more: the Wall Street Journal gets some great play-by-play from JPMorgan's 48th floor war room as executives grappled with trading losses that are believed to have topped $3 billion.

Crisis experts liked Mr. Dimon's forthright response to the billions in trading losses JPMorgan disclosed last week. Lucas van Praag chimed in: "From a communication perspective, the approach is smart, although I'm sure their legal team would probably rather pursue a bunker mentality."

Simon Johnson parses Tim Geithner's NewsHour interview and hears the Treasury secretary asking Mr. Dimon to resign from the board of the New York Fed.

JPMorgan's losses are "the way America works," Mitt Romney in an interview Wednesday with Ed Morrissey. “The $2 billion JPMorgan lost, someone else gained.”

How high? Your guess on Facebook's closing price is as good as ours. Reuters finds a 15 to 20 percent pop credible, which puts the price in the mid-$40s; the average estimate of analysts polled by Morningstar was $50. On twitter yesterday, it wasn't hard to find pundits pushing estimates well into the $70s (those higher marks seemed less serious, more sneering).

Meanwhile, Facebook will pay it's underwriters $176 million in fees, or 1.1 percent of the $16 billion offering, a hefty discount to the median 3.6 percent that the 10 previous biggest U.S. IPOs paid investment bankers.

Not breaking up? Greek voters are returning to pro-bailout parties, a new poll finds. The prospect that the leftist Syriza coalition, whose leader Alex Tsipras has threatened to "tear up" the existing rescue plan, increasing fears that Greece may leave the eurozone.

Still, a commercial printer is drawing up plans to produce drachma banknotes, in the contingency of a Grexit.

Spanish steps: Moody's downgraded 16 Spanish banks, and the two biggest by three grades each. A little perspective: Morgan Stanley said that a three grade cut by two ratings companies would force the firm to post an additional $9.6 billion in collateral.

Spain tapped Goldman Sachs to value nationalized lender Bankia SA.

A-list: Goldman executives Lloyd Blankfein, Gary Cohn and David Viniar, American Express CEO Kenneth Chenault and former Proctor & Gamble CEO A.G. Lafley are among the financial industry titans to receive invites to the insider trading trial of Rajat K. Gupta.

Oracle offered: Warren Buffett kicked the tires on ResCap, Ally Financial's mortgage unit, before the embattled home lender filed for bankruptcy, according to Bloomberg. Buffett sought to avoid a ResCap filing because his firm, Berkshire Hathaway, held unsecured debt in the lender.

[Photo by Mario Tama/Getty Images]