Joke of the day

August 6, 2010

Jay Leno: Giuliani scolded his daughter after shoplifting “You go to Harvard. You don’t start stealing till you go to Wall Street”

Lights out for Merrill Lynch

It’s lights out for Merrill Lynch, literally and figuratively. The tower all lit up is the new Goldman Sachs headquarters. To the left is the dark WFC 4, the old location of Merrill Lynch. Bank of America has relocated most of the Merrill employees to Midtown. Just a few years ago, WFC 4 was jammed to capacity. Reportedly Deloitte accounting is negotiating a lease to move into WFC 4.

Why was Pfizer fined four times as much as Goldman Sachs?

Op-Ed August 2, 2010

The recent stock market collapse caused a $37 Trillion decrease in market cap valuation at its peak in 2008, according to Alan Greenspan. This triggered a global depression that persists to this day. Few disagree that the root cause of all of this was the irresponsible and fraudulent trading by Wall Street banks of complex financial instruments called CDO’s.

Most of these banks were taken down by their own stupidity. Lehman Brothers and Bear Stearns no longer exist. Merrill Lynch and others were forced into mergers. However, Goldman Sachs seemed to have actually profited on the bad mortgage-back securities that became worthless, and as such, has become a lightning rod for all of the global anger.

Congress paraded Goldman Sachs executives before hearings on multiple occasions as the politicians sensed their own demise this Fall. The BP oil spill redirected the news and the SEC investigation into Goldman was recently settled for approximately $550 Million. This amount represents only 1.2% of Goldman’s 2009 revenues or 4.1% of 2009 net income.

To address whether the Goldman Sachs SEC fine is fair and just, one needs to look at other corporate fines. Last September, drug giant Pfizer settled a DOJ investigation for $2.3 Billion over illegal marketing of the drug Bextra. That is four times the amount of the Goldman Sachs fine in absolute terms, or 4.6% of Pfizer 2009 revenue and 26.7% of 2009 net income (6.5 times the impact to Goldman Sachs). This was a much greater hit to Pfizer than was the fine to Goldman.

Pfizer’s crime against humanity was illegally marketing a drug that might have led to increased rates of death. That is indeed a serious offense. Goldman Sachs critics would say that their crime was in playing a significant role in separating $37 trillion in assets from stockholders (global GDP in 2009 was $58 Trillion according to the IMF) causing a global depression and massive unemployment.

Whether the Goldman Sachs fine was too small or the Pfizer settlement was too large is up to debate. One thing is clear: the financial industry lobbyists still rule supreme. The newly passed financial regulation bill is now in the hands of the lobbyists to iron out the details. Is there any doubt whether those details will favor the banks?

Better food on the way courtesy of Goldman Sachs

July 28, 2010 (UPDATE)

It was confirmed at the CB1 meeting that Danny Meyer is bringing his duo of Shake Shack and Blue Smoke to BPC. In addition, a third Danny Meyer restaurant will open in the location of the old Pac Rim restaurant on the West side of the Embassy suites. It will be high-end fine dining comparable to his Union Square Cafe and other restaurants in Midtown. The hotel itself will be redesigned and opened as a luxury Conrad hotel.

The 30,000 square feet of retail space currently occupied by DSW shoes and the additional 10,000 once occupied by New York Sports Club will be remade into a ballroom and banquet hall, to the anger of CB1 member Tom Goodkind.

July 10, 2010

Goldman Sachs has finally done something for the neighborhood that is not controversial, it seems. New York Magazine is reporting that the vacated Applebee’s and Chevy’s locations will be replaced by a Danny Meyer duo of Shake Shack and Blue Smoke. Inferior quality restaurants have long underserved BPC. Perhaps this will come to an end. It will be interesting to see what Goldman Sachs does with the vacant old steak house on the Southwest corner of their Embassy Suites building.

Goldman Sachs closes the neighborhood gym?

June 5, 2010

The only gym and aerobics facility in Battery Park City not within an apartment building, The New York Sports Club (NYSC) in the Embassy Suites building on Vesey Street adjacent to the new Goldman Sachs headquarters, is being closed down. Goldman Sachs owns the building and there are conflicting reports as to whether Goldman or NYSC initiated the closure.

A manager at the gym explained to BatteryPark.TV that the lease included the option for Goldman Sachs to take over the spot and that Goldman is the party that initiated the closure. The NYSC manager said, “We are not supposed to discuss this with the media…a lot of members are getting on Goldman about this”.

Goldman Sachs did not reply to BatteryPark.TV, but according to a local paper, Goldman Sachs claims that it was the NYSC that chose to close. Journalist Matthew Fenton wrote on June 4^th, “Three employees at the club said that they understood this move to have been initiated by Goldman Sachs, the owner of the hotel, whose new headquarters building is located next door. But a Goldman spokesman, Andrea Raphael, said the closure is “a result of negotiations that began in May 2009 when NYSC approached us to terminate their lease.” A corporate spokesman for NYSC declined to comment.”

The Wall Street Journal wrote in April that Goldman employees were not pleased with the gym and sauna of the luxurious new headquarters 30 feet across from the Embassy Suites building and New York Sports Club. Many Goldman Sachs employees have joined the NYSC. It is not clear what Goldman Sachs will do with the Applebees and NYSC spaces.

Next door to the NYSC on the ground level was also an Applebees. That too has been closed, but whether Goldman Sachs caused this is unknown. Goldman Sachs is trying to recruit top restaurants like Danny Meyers’s Shake Shack to the area, according to Mr. Fenton. The hotel itself and the movie theater will remain open.

Local residents in Battery Park City are furious. In a local paper, one person wrote “(The shutdown of NYSC gym) is extremely and utterly disappointing. There is no gym in Battery Park City and the only one that we have is being booted out by Goldman Sachs…I feel bullied by them – after all of their disruptive construction plus the falling debris that has made me feel like I’ve lived in a “war zone” for the last several years. Now they are taking away something that is incredibly important for our community, and makes life inconvenient, which is a big selling point of having a gym close by.  We all have busy, professional hectic lives and having a gym nearby is one of the many reasons we chose to live here. I would like to make sure that Goldman knows that we come first as residents and, as far as I’m concerned, they are a new visitor. I feel they should not be calling all of the shots.  To live in this area, we all need to work together as opposed to being taken over and pushing people out.”

For more stories on how Goldman Sachs has angered the neighborhood since relocating to Battery Park City, please see our December story, “Goldman Sachs angering its new neighbors”

Did the Daily Show copy BatteryPark.TV?

The May 10^th Daily Show on Comedy Central featured a video segment poking fun at the way the TV news covered the false “fat finger” trader rumor. Their choice of segments, including obscure Fox Business footage that BatteryPark.TV first selected, indicates they might have been influence by our May 9^th video. Skip to the 10:00 mark of the Daily Show video and decide for yourself.

Exclusive: Citigroup is considering legal action over false rumors

May 10

BatteryPark.TV has learned that Citigroup has assigned their legal department to collect all of the video and text stories from last week that erroneously linked Citigroup to the “fat finger trader” rumor. Citi is trying to find the source for the rumor, and is also considering suing news outlets.

How network TV spread a false rumor about the collapse of the Dow

May 9^th, 2010

On May 6^th, 2010, the Dow crashed 1000 points within 20 minutes. As with all unexplained market movements, unsubstantiated rumors popped up to explain the movement. The most sensational one was that a single human was to blame. A “fat fingered” trader supposedly punched in a B for billion instead of an M for million, and ordered 16 Billion shares of stock PG to be sold, triggering electronic selling of the entire market.

For a few experienced investors, this was an obvious erroneous rumor for a variety of reasons. First of all, PG stock has less than 3B shares in total, so a 16B order would never have been accepted. Moreover, traders have been well aware of the problem of programmed trading that can drive massive volatility and short selling.

Nevertheless, the TV news ran with the unsubstantiated rumor that a “fat finger” trader was the cause. They cited no sources other than, “We are hearing”.

This is the story of just how bad some aspects of national TV network journalism can be at times. Watch the video sequence of events as the “fat finger” rumor went from a NYSE floor rumor, to a speculative comment on the business shows, to becoming fact on the regular news that evening. Finally, the next day, ABC’s George Stephanopoulos began to correct the mistakes, and Fox Business confirmed that human error was not the cause.

Who were the suckers buying the Goldman Sachs junk and why?

Op-Ed  BatteryPark.TV, April 22, 2010

One of the key defenses used by Goldman Sachs in the SEC fraud case is that sophisticated institutional investors purchased the mortgage derivative product it sold, known as Abacus, and should have known better. “Mom and pop” investors were not scammed. Goldman Sachs is correct (although they may still be guilty of not disclosing the little tidbit about the hedge fund Paulson & Co. choosing the composition of Abacus as it simultaneously shorted the product).

How were these “sophisticated investors” duped so badly? For that matter, how did Merrill Lynch, Lehman Brothers, Bear Stearns, Citigroup, etc. all get stuck owning so much toxic debt?

Herd mentality creating a false sense of security is the fundamental reason most of Wall Street, the Fed Chairman, the Treasury Secretary, the President of the United States, and the rest of the world, were all caught off guard. Goldman Sachs was unquestionably the smartest firm with the best reputation at the time and was leading the way in creating various types of derivatives related to mortgages. The lesser firms followed Goldman’s lead.

In 2007, BatteryPark.TV attended a Citigroup conference at the Waldorf Hotel. One of the speakers was from a prominent private equity firm. He commented how surprised he was at the demand for CDO products and how little the “sophisticated investors” cared about the quality of the mortgages. They just wanted instruments to help them make hedges in their portfolios, he said.

This conference took place more than a year before the collapse of the markets but not many prop-traders at the Wall Street banks seemed to heed the warnings. Ironically, Citigroup, host of the conference, would later become decimated and nearly liquidated by the bad CDO debt on its books. Only a $45 Billion government bailout saved them (of which, $20 B is still owed).

Like all bubbles, many people actually trading the CDO’s knew better, but were lured into the risk because everyone else seemed to be doing it. Their highest supervisors condoned the behavior. How could such incompetent traders within Wall Street banks be allowed to “prop trade” such risky derivatives? Warren Buffet called derivatives, “weapons of mass financial destruction”.

In a previous commentary (A Case to ban Prop Trading), the perverse incentives of Wall Street that reward cronyism more than competence are described. As a result, people with little to no experience with derivative trading in real hedge funds were put in charge of the purchasing and trading of these complex financial instruments. The same people are under immense short-term pressure to make profit regardless of future risk. As a result, Wall Street broker dealers practicing proprietary trading were the biggest suckers in the game purchasing the junk that Goldman Sachs was selling. Meanwhile, Goldman was going short on the mortgage market taking an opposite bet to the banks buying its products (e.g. the Abacus tranche of CDO’s).

One of the main components of the “Volcker Rule” that may become part of the final financial regulatory bill supported by President Obama will be a ban on “prop trading” by banks. It seems prudent to separate the trading of equities and derivatives from the unqualified executives working at the hybrid Wall Street/bank firms. They have proven their incompetence many times over the years.

Harry’s of Hanover Square and the wine cellar

Harry Poulakakos is a legend of the Financial District in Manhattan. His first restaurant, Harry’s of Hanover Square was featured in the Academy Award winning film “Wall Street”. Harry and his son, Peter, helped developed Stone Street into a popular café district and have opened up several successful pubs and restaurants in the area.

Harry took us one an extensive tour of his flagship restaurant and its extensive wine cellar.

http://www.harrysnyc.com/

212 785-9200

Good news for the NYC economy soon?

October 14

It is being reported that Wall Street is expected to pay out the largest total in salaries ever: more than $140 Billion. This will, of course, directly impact the struggling NYC economy.

The commercial real estate bubble

October 6

The other shoe to drop for New York City will be the massive rate of defaults on commercial real estate loans. Up to a trillion dollars in loans could go unpaid within the next year or two. Will lenders renegotiate or will they evict all of the businesses in those buildings causing an even great unemployment problem and tax revenue shortage?