Is repo madness predicting a crack-up?
Rick Ackerman, 21 June 2021
[The following was written by a San Francisco friend from the hedge fund world, Shawn Brown. It buttresses the suspicion that while there seems to be plenty of credit money available for speculation, the collateral behind it is getting thinner and shakier by the week. The Fed, with $8 trillion of Treasury paper and other top-shelf collateral on its balance sheet, has monopolized the supply, leaving lending banks to scramble for collateral for their own that hasn’t already been hocked twentyfold. As a result, central bank interventions are becoming more frequent, more complex and bigger, to the point where even the experts are having trouble determining whether the banking system is headed for a crack-up far larger than the one that took down Archegos a few months ago. RA] Continue reading “Article: Is repo madness predicting a crack-up?”
Fed Admonishes Deutsche Bank for Ongoing Compliance Failures
Robert Schmidt and Jesse Hamilton, 29 May 2021
The Federal Reserve has privately told Deutsche Bank AG that its compliance programs aren’t up to snuff, signaling that the scandal-plagued bank is failing to adhere to a number of past accords with U.S. regulators, according to people familiar with the matter.
The Fed’s recent warning came in an annual regulatory assessment that said Deutsche Bank hadn’t improved its risk management practices despite being under confidential agreements with the central bank to fix the issues, the people said. The assessment letter has the German bank’s leaders bracing for potential sanctions, including the possibility of a large fine, said one person briefed on the matter. Continue reading “Article: Fed Admonishes Deutsche Bank for Ongoing Compliance Failures”
What The Boom In Fraud Says About The Current Market Environment, Part 2
TYLER DURDEN, 01 May 2021
Just about three months ago, I wrote a blog post which featured this quote, from Charles P. Kindleberger’s Manias, Panics and Crashes: “Swindles are a response to the appetite for wealth (or plain greed) stimulated by the boom.” Since then, the number of frauds, or swindles, that has been revealed has soared, a clear testament to both the breadth and degree of greed inspired by the current boom.
Most recently, we saw the collapse of Greensill Capital as the result of fraud. Like WireCard, Greensill was a relatively young finance company looking to disrupt its more mature competitors which took a few (illegal) short cuts in the process. Continue reading “Article: What The Boom In Fraud Says About The Current Market Environment, Part 2”
Deutsche Bank Avoids Archegos Meltdown, Reports Profit Surge
Patricia Kowsmann, 28 April 2021
Deutsche Bank AG reported its strongest quarter in seven years thanks to activity at its investment bank, while the lender escaped the implosion of Archegos Capital Management that badly hit some rivals.
The news sent Deutsche Bank shares up 10% on Wednesday, their highest level since May 2018. Also helping its bottom line were lower charges on bad loans, as customers seemed to be weathering the pandemic effects better than expected.
The bank benefited from frenzied investor activity in financial markets. Its business advising clients on fundraising and mergers and acquisitions also boomed, as companies repositioned growth plans during the pandemic. A cost-savings plan imposed to turn the lender around following years of bad results is also helping. The bank reported a cost-to-income ratio of 77% compared with 89% a year ago. Continue reading “Article: Deutsche Bank Avoids Archegos Meltdown, Reports Profit Surge”
Banks Raise $34 Billion to Comply with SEC Rule, Effective Today
Tim Fries, 22 April 2021
Having the collateral to cover stock trading is important to oil the market cogs. With margin trading, it is critical, a lesson learned the hard way from “Bill” Hwang last month. From today, the SEC will decide which brokerages failed to cover their securities trading, and what punishments it will dish out.
What is SEC Rule 15c3-3?
Even free market absolutists understand that rules of the playing field have to be followed to maintain the ecosystem. The U.S. Securities and Exchange Commission (SEC) is the final arbiter in this arena. Although this regulatory agency too suffers from the “revolving door” syndrome, on paper, the SEC is in charge of ensuring market participants play fairly. Continue reading “Article: Banks Raise $34 Billion to Comply with SEC Rule, Effective Today”
Gary Gensler is now head of the SEC. What comes next?
TYLER DURDEN, 19 April 2021
Apparently, firing half a dozen executives including its head of risk management (Lara Warner, also one of the most high-ranking women in the global financial services industry) hasn’t done enough to quiet shareholders’ demands for change atop Credit Suisse, the Swiss banking giant that reported a $4.7 billion loss from the collapse of Archegos Capital Management, with billions of losses likely to follow from the collapse for Greensill.
As CEO Thomas Gottstein clings to his position, the Wall Street Journal reported Monday that John Dabbs and Ryan Nelson will immediately step down as co-heads of prime services, the prime-brokerage unit responsible for extending all that credit to Archegos (as a reminder, for an explainer on how Archegos built its $100 billion massively leveraged position. Continue reading “Article: Credit Suisse Prime Brokerage Heads Fired Over Archegos Blowup”
Archegos Exposes SEC Blind Spots, Dithering on Market Oversight
Robert Schmidt and Benjamin Bainx, 10 April 2021
The U.S. Securities and Exchange Commission was supposed to be able to spot a whale like Bill Hwang by now. As the financial world knows, it didn’t. Will the agency be able to catch the next one?
The collapse of Hwang’s Archegos Capital Management represents one of the most spectacular failures of risk-management and oversight in recent memory. For the SEC, it caps a decade of foot-dragging on protections that were meant to avert, or at least minimize, just such a blowup. Continue reading “Article: Archegos Exposes SEC Blind Spots, Dithering on Market Oversight”
Senate Banking Chair Probes Banks Over Archegos Collapse
Dean Seal, 08 April 2021
The chairman of the Senate Banking Committee is asking Credit Suisse, Goldman Sachs and other Wall Street giants that brokered for Bill Hwang’s Archegos Capital Management to explain their involvement in the fund’s high-profile collapse.
In letters released Thursday, Sen. Sherrod Brown, D-Ohio, told higher-ups at the Swiss bank, Goldman, Morgan Stanley and Nomura that he was “troubled, but not surprised” that risky derivatives transactions between the banks and Hwang’s generally unregulated family office were connected to a shocking multibillion-dollar firesale on stocks in late March. Continue reading “Article: Senate Banking Chair Probes Banks Over Archegos Collapse”
“A Gigantic Clusterf**k”: How Morgan Stanley Avoided $10BN In Archegos Losses By Selling First
TYLER DURDEN, 07 April 2021
One week ago, in our initial take on the biggest hedge fund collapse since LTCM, we explained that – in our view – the catalyst for the failure of the Archegos hedge fund, which had as much as 10x leverage allowing it to hold some $100BN in positions, was Morgan Stanley and Goldman breaking ranks with their fellow prime brokers, and sparking the biggest margin call since Lehman and AIG.
Turns out we were right. Continue reading “Article: “A Gigantic Clusterf**k”: How Morgan Stanley Avoided $10BN In Archegos Losses By Selling First”
In Archegos fire sale, Credit Suisse, Nomura burned by slow exit
Matt Scuffham, Elizabeth Dilts Marshall, Brenna Hughes Neghaiwi, 31 March 2021
NEW YORK/ZURICH (Reuters) -While banks including Goldman Sachs, Morgan Stanley and Deutsche Bank were able to exit their trades with Archegos Capital relatively unscathed, Credit Suisse and Nomura have been burned in the fire sale.
The blowup of the Archegos fund, a family office run by former Tiger Asia manager Bill Hwang, is still reverberating across the financial system, with global banks so far standing to lose more than $6 billion.
Switzerland’s Credit Suisse and Japan’s Nomura are expected to bear the brunt of that. Continue reading “Article: In Archegos fire sale, Credit Suisse, Nomura burned by slow exit”
SEC Opens Probe Into Archegos Chaos, Deutsche Bank Confirms ‘Quick Sale’ To Avoid All Losses
TYLER DURDEN, 31 March 2021
As more details from the now infamous debacle surrounding Tiger cub Archegos, whose massive derivative-based exposures spilled out into the open and transformed into the biggest and most painful rolling margin call to hit Wall Street since Lehman, we now know that at least six Prime Brokers scrambled to unwind the biggest hedge fund blowup since LTCM without hammering the overall market.
To “make a living in this business… be first, be smarter, or cheat…”
We previously noted that Morgan Stanley and Goldman Sachs were the “first” to break ranks and rejected the efforts of Credit Suisse’s emissaries who tried to create consensus to unwind the positions without sparking a panic.
As we now also know, Nomura and Credit Suisse which dithered and were unsure what to do, seeing their stock crushed and their counterparty risk hedge premia explode higher.. Continue reading “Article:SEC Opens Probe Into Archegos Chaos, Deutsche Bank Confirms ‘Quick Sale’ To Avoid All Losses”
Nomura CEO’s Honeymoon Ends With $2 Billion Archegos Debacle
Takashi Nakamichi and Takako Taniguchi, 31 March 2021
Nomura Holdings Inc.’s chief executive officer was having a bumper inaugural year in charge — until a U.S. family office spoiled the party.
Just days before Kentaro Okuda’s first anniversary as head of Japan’s biggest brokerage, the company warned of a “significant” loss from an unnamed U.S. client. That’s tied to the massive unwinding of leveraged bets by Bill Hwang’s Archegos Capital Management, according to people familiar with the matter. Continue reading “Article: Nomura CEO’s Honeymoon Ends With $2 Billion Archegos Debacle”
Report: SEC Opens Preliminary Investigation Into Archegos’ Bill Hwang After $30 Billion Stock Liquidation
Sarah Hansen, 31 March 2021
TOPLINE The Securities and Exchange Commission has opened a preliminary investigation into Sung Kook “Bill Hwang,” whose Archegos Capital Management roiled markets by defaulting on risky margin calls last week and prompted $30 billion in losses, Bloomberg reported Wednesday.
Archegos defaulted on highly leveraged margin calls last Friday, triggering a fire sale of some $30 billion in stocks including ViacomCBS, Baidu, Tencent Music Entertainment and Discovery Communications as banks rushed to unwind their positions. Credit Suisse and Nomura—two of the firm’s brokers—warned this week of “significant losses.” Goldman Sachs and Morgan Stanley were also forced to liquidate the positions they held for Archegos, but did so more quickly than other banks and as a result saw smaller losses, the Wall Street Journal reported Tuesday. Continue reading “Article: Report: SEC Opens Preliminary Investigation Into Archegos’ Bill Hwang After $30 Billion Stock Liquidation”
Comeback quashed for faith-driven investor Bill Hwang
Lawrence Delevingne, 30 March 2021
(Reuters) – Bill Hwang’s comeback was nearly complete. Once punished by U.S. and Asian regulators for stock trading rule violations at his former hedge fund, the New York investor rebuilt his fortune to about $10 billion. Major Wall Street banks once again competed for his business. And his charitable foundation’s coffers swelled by hundreds of millions of dollars.
Hwang was making big money again, inspired by a renewed Christian faith.
“When we create good companies through the capitalism that God has allowed, it enhances people’s lives….God delights in those things,” Hwang said in a video posted online in 2019 here. Continue reading “Article: Comeback quashed for faith-driven investor Bill Hwang”
One of World’s Greatest Hidden Fortunes Is Wiped Out in Days
Katherine Burton and Tom Maloney, 30 March 2021
From his perch high above Midtown Manhattan, just across from Carnegie Hall, Bill Hwang was quietly building one of the world’s greatest fortunes.
Even on Wall Street, few ever noticed him — until suddenly, everyone did.
Hwang and his private investment firm, Archegos Capital Management, are now at the center of one of the biggest margin calls of all time — a multibillion-dollar fiasco involving secretive market bets that were dangerously leveraged and unwound in a blink. Continue reading “Article: One of World’s Greatest Hidden Fortunes Is Wiped Out in Days”