Rajaratnam Hedge Fund Scam Case: Big Fucking Deal? No.

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Perp walk for Raj Rajaratnam

How could anybody be breathless about the Manhattan U.S. Attorney's Office measly $20 million bust of hedge-funder Raj Rajaratnam and cohorts for allegedly illegal inside trading?

Yet the Wall Street Journal's follow story this morning on Friday's bust of the pirates associated with Rajaratnam's aptly named Galleon treats this as if it were a real indication that Wall Street's goniffs are being tracked down.

If this is the crux, the main point, of the Galleon case — read the U.S. attorney's press release and complaints — it's not that big a deal.

New York Attorney General Andy Cuomo is the prosecutor who's doing the hard work of hounding the culprits of last fall's crash. U.S. Attorney Preet Bharara, Barack Obama's guy in the crucial Southern District prosecutor's office, wants us to salute him for the Galleon case?

Bloomberg News notes that this is an indication that prosecutors will use wiretaps in unraveling future Street crime. Yeah, that's comforting.

And the NYT insists that prosecutors "intended [the] case as a shot across the bow of hedge funds." What total bullshit that is. Yeah, I'll bet hedge fund moguls like John Paulson are really shaking in their boots that people made $20 million from this alleged wrongdoing and got caught.

The WSJ story notes Galleon "pushed its traders so hard to get market-moving information that those who failed were frequently berated or pushed out."

You don't say! WTF, this unpleasant behavior is SOP on the Street and in thousands of other businesses.

This morning's NYT story notes that the wiretaps leading to the charges against the Sri Lankan dude were full of "a fair number of four-letter swear words." Fucking unusual, eh?

I like how Bharara says "this case should serve as a wake-up call for Wall Street." Not likely. This may be a big insider-trading case (but it's not really, based on what we know so far), but it's nothing compared with last fall's meltdown — and it has nothing to do with last fall's meltdown. We're still waiting for some federal government action on that.

One item of political interest: Indian-born Preet Bharara's first highly publicized bust is of a Sri Lankan who supposedly contributed money to the Tamil rebels, the Liberation Tigers of Tamil Eelam. They're the dudes who assassinated Indian pol Rajiv Gandhi.

This case against Rajaratnam by an Obama appointee should help the Democrats among the steadily more influential Indian-American population, especially because of Rajaratnam's supposed support of the Tamil terrorists.

Good for a snicker is the NYT story last August about Bharara, particularly the headline: "For Manhattan's Next U.S. Attorney, Politics and Prosecution Don't Mix." Yeah, right. Except that Bharara was chief counsel for Demo kingpin senator Chuck Schumer.

This A.M.: Banks Shed Toxic Assets, Fend Off Gov't; Cuomo's Riding High; Business World Rolls Out Red Carpet for Qaddafi

Bank of America to Pay for Merrill Backstop, Faces SEC Trial (Bloomberg)

Ken Lewis trying hard to buy his way out of trouble, saying BofA will pay $425 million to cancel one piece of unused federal guarantee of Merrill Lynch's assets. Lewis frantically trying to reduce "reliance on government support and return to normal market funding." Will it help fend off the government? SEC says it will "vigorously pursue" its bonuses case against the bank, and maybe the SEC means business now that federal judge Jed Rakoff is on the agency's back.


Liquidation of CDOs aids banks (FT)

Market has loosened up for the assets underlying the complex, toxic securities that crashed Wall Street. An estimated $123 billion of these bullshit, defaulted securities that fed the Street's excessive greed have been liquidated.


Is This a Sucker's Rally? (Seeking Alpha, Jeff Miller)

A good roundup of bloviations good and bad.


Why haven't any Wall Street tycoons been sent to the slammer? (McClatchy, Kevin G. Hall)

In search of a "poster child for the Great Recession." Hank Paulson's always a candidate.


Envoy seeks to ditch 'bullying' US image (FT)

Louis Susman, Obama fundraiser and now U.S. ambassador to the U.K., announces that the Bush Era is officially over: "We are not a dumb power, we are not a bullying power." He adds: "To compare it to the previous relationship, well, some people might say that relationship wasn't healthy. Many people here in the UK didn't think it was healthy because it was without questioning and interaction."

MORE HEADLINES FOLLOW

This A.M.: Obama Enters the Liars' Den to Confront Congress. Today's Magic Number: 9

Obama to Endorse Public Plan in Speech (WSJ)

On 9-9-09, the biggest test of Barack Obama's charm, charisma, and brains. Date will be easy to remember (if not for the new Beatles box set released today that includes the White Album's "Revolution No. 9") even if the president doesn't screw up this speech of the new century. NYT's David M. Herszenhorn offers up "How to Watch the Speech." WashPost's preview.


Gas prices dip as summer travel comes to an end (Orlando Business Journal)

Gentlemen, start your SUVs.


Lehman's Legacy: Overhaul Falters As Shock Fades (WSJ)

Good piece takes a step back and sees that, a year after the Wall Street meltdown, overhaul plans are bogged down, banks have regained some of their swag and swagger. "Large compensation packages are back. And so is risky business." La misma mierda. Siempre.


CIC Looks to Pile Cash Into U.S. Real Estate (WSJ)

Attracted by the U.S. government's PPIP bailout program propping up toxic assets, the Chinese government is poised to swoop down on distressed U.S. real estate, particularly mortgage securities regurgitated by shaky commercial property. "Last year, CIC [China's flush sovereign-wealth fund] deployed just $4.8 billion in global financial markets. This year it invested that much in a single month." Upshot? The U.S. government will be guaranteeing that China (and its U.S. private-equity partners) won't lose their asses, and China will end up owning buildings all over the U.S. Congress will freak out about all this huge jump in foreign investment in our real estate.


New York Nears Charges on Merrill Deal (WSJ)

NY AG Andy Cuomo leans hard on Bank of America to divulge info on conversations. Someone's going to take the fall for BofA's failure to tell its shareholders about how fucked-up Merrill was when BofA bought it.


Record Drop Hits Borrowing: Consumers Cut Debt by Choice and by Force, Draining Fuel for Economic Rebound (WSJ)

If you were a real American, you'd save our country by plunging yourself further into debt. Implicit message from Wall Street: We got you into this. Now it's up to you to get us out of it. And Wall Street's glad to help you — see "Overspending on Debit Cards Is a Boon for Banks."

MORE HEADLINES FOLLOW

NY pension-fund scandal goes national

Spreading faster (so far) than swine flu, the New York pension-fund kickback scandal "has exposed a national network of actors whose schemes are ongoing," Reuters says today.

In N.Y. Attorney General Andy Cuomo's words, "We've uncovered corruption in New York, our government and our retirement accounts — and now we see the scheme reaching companies, individuals and pension funds nationwide."

He's not just blowing smoke: Today, Cuomo announced the arrest of Saul Meyer, from down Texas way. Meyer, a founding partner of Aldus Equity in Dallas, is charged with securities fraud for allegedly paying illegal kickbacks to Hank Morris, the longtime aide to former NY State Comptroller Alan Hevesi.

And he's just talking about scams/schemes/scandals revolving around the state pension fund. The NYC pension fund is a separate deal, and trouble's belching out of that fund, too.

In Charlotte, BofA's Ken Lewis lives on to be investigated another day

Bank of America's half-assed leader, Chairman and CEO Ken Lewis, could be literally half-assed after today's stormy annual meeting in Charlotte, North Carolina.

A vote on whether to strip Lewis of his chairman's job is too close to call, says the Wall Street Journal.

No matter what the result of that tally, Lewis is on the way out of both jobs. But it looks unlikely that he will be given the actual bum's rush today. He'll wind up leaving under his own power — but quick. (That's no surprise, especially since it became known a short time back that he was dropping dimes on Ben Bernanke.)

During today's meeting (not a confab that is open to the general public), the bank's directors were elected "by a comfortable margin," the Charlotte Observer reports.

Meanwhile, the WSJ's Peter Eavis ruminates about Lewis's monumental fuck-ups of, first, acquiring subprime bottom-feeder Countrywide and, second, swallowing up Merrill Lynch last year despite knowing the bad shape Merrill was in. Eavis steps far enough back from the current mess to note:

Mr. Lewis could have been a hero of the credit crisis, since he largely steered BofA clear of subprime. But the acquisition of Countrywide was a monumentally mistimed bet [on] the housing market and the originate-and-sell model would recover sooner rather than later. And agreeing to pay 1.8 times tangible book for a teetering Merrill Lynch in September was foolhardy, given that relatively unscathed Goldman Sachs Group had the same multiple.

Mr. Lewis's defenders may argue that, facing Fed and Treasury pressure, he could hardly walk from the Merrill deal. But in reality, the Merrill merger agreement was too restrictive to allow the bank to easily ditch it or to substantially renegotiate the deal on the basis of worse-than-expected marks. It is a contract Mr. Lewis bears ultimate responsibility for.

Coulda, woulda, shoulda — Lewis was not cut out to be "a hero of the credit crisis."

See the WSJ story about Lewis's testimony to N.Y AG Andy Cuomo's this past February about the Merrill deal. That story notes:

The transcripts show that Mr. Lewis was in a similar position in December that he is in now -- fighting for his job and needing to raise more capital. It shows he agreed to do a deal he knew was bad for certain shareholders, believing he was helping the government save the financial system. But he admits in the testimony that he believed the U.S. wouldn't have let Merrill Lynch fail given the lessons learned from the collapse of Lehman Brothers Holdings Inc.

Thus, why not swallow toxic Merrill? Hell, the government was going to provide an antidote, Lewis reasoned.

Cuomo's embarrassment of riches

Just about the only New York bigwig who has reason to treat himself to one of those great Yankee seats that cost up to $2,600 a game is Andy Cuomo.

These are great times for the state's attorney general.

He doesn't have to do any politicking, because he's too busy shooting fish in the rotten barrel that is Wall Street.

There's the pension-fund thing. There's the Bank of America/Merrill thing. Last month there was the AIG thing. So many things. So many straightforward and obvious investigations with lots of squealers.

Usually pols — especially AGs and other investigators — have to be careful when they step onto Wall Street lest they get too much shit on their shoes and stain the haughty execs' carpets. Not now.