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Today's Top News1. Judge declines to quickly approve SAC settlement
Hold your horses! A federal judge has effectively told all players in the ongoing SAC Capital drama to take a breather. Judge Laura Taylor Swain of the Federal District Court in Manhattan said last week she wants to take a few months to study the case before she gives the massive $18 billion settlement a thumbs up---or down. To be sure, most people still think she will ultimately bless the deal, which called for the embattled hedge fund firm to admit guilt on five counts of fraud. But if she decides for some reasons that it is defective, the firm can withdraw its guilty pleas, pushing the negotiations back to square one. At that point, the gnashing of prosecutors' teeth will be audible. Judge Swain is hardly the first judge to throw a wrench into settlement plans. Previously, a few judges seemed to think that various deals let the defendants, such as the Bank of America and Citigroup, off with less punishment than was warranted. It will be interesting to see if Judge Swain moves down this path as well. While she studies the settlement, the world will be treated to another glimpse of the inner workings of the firm via the Michael Steinberg trial, which is scheduled for this month. It just might change some minds about what went on within the walls of the firm. But it will likely have no bearing on Judge Swain's decision, as none of Cohen's specific trades will be an issue in the upcoming trial. Given the historic nature of the SAC Capital settlement, it's not all that odd that a judge would want to spend some time studying the implications. For more: Read more about: insider trading, SAC Capital 2. Big insider trading trial to start soon
All the drama over the $1.8 billion SAC Capital settlement seemed to crowd out other news related to the troubled hedge fund firm, notably the upcoming trial of Michael Steinberg. Jury selection is expected to begin Nov. 18. He was once the right hand man of founder Steven Cohen, until he left the firm after he was criminally charged with insider trading. Steinberg was the target of an aggressive effort aimed at prodding him to testify for the government and against Cohen. But Steinberg held firm and decided to take his chances at trial. He pleaded not guilty to five counts of insider trading in Dell and NVIDIA stock. Coming so soon after the SAC Capital settlement, lawyers for both sides are concerned. CNBC reports, "In a joint court filing late yesterday, attorneys for both sides asked U.S. District Judge Richard Sullivan to take prospective jurors aside for 'detailed questioning'—outside the presence of the rest of the jury pool—if there are indications the person 'may have seen or become aware of the charges against SAC Capital, the recent plea by SAC Capital or any media coverage' of the scandal." "The government and defense attorneys disagree on how much prospective jurors should be told about Steinberg's involvement with SAC, however. The government says jurors should be told that Steinberg worked at Sigma Capital Management, a division of SAC Capital. The defense does not want the judge to say specifically where Steinberg worked." It's unclear how Steinberg's affiliation with Cohen and SAC Capital will affect a jury. In any case, the trial promises an intriguing insider's view of life at a troubled hedge fund firm. It will be fascinating. And widely covered. One has to wonder what Steinberg thinks of his friend Cohen's move to admit criminal violations of the law, something both resisted for the longest time. For more: Read more about: insider trading 3. Political controversy ensnares Goldman Sachs in India
Such is the lingering lot of Goldman Sachs: it has become a lightning rod for political criticism around the world. Not just in the United States. Not just in Europe, where the power of the gilded bank---in Greece and in regulatory positions across the Continent, for example---has been hotly debated. But now also in India. The Financial Times reports that a kerfuffle has broken out over a memo from Goldman Sachs strategists that suggested the local economy might be better off if the opposition party won an upcoming election. "Goldman is parading its ignorance about the basic facts of the Indian economy, and it also exposes its eagerness to mess around with India's domestic politics," one government official was quoted. In its defense, Goldman Sachs noted that its memo to a client "contains no political bias nor any political opinion by Goldman Sachs or its analysts. It simply notes that investor sentiment is being influenced by party politics. We stand by that assertion and by our research." Goldman added that part of its role as a securities firm was to provide impartial research and to explain the reasons for market movements. Which seems quite reasonable. As far as controversies go, this is a tempest in a teacup. But it does indicate that criticizing Goldman Sachs seems to be a safe political strategy in various countries. For more: Read more about: Goldman Sachs, Politics 4. Taxpayers to profit from GSE bailouts
Back in 2008, with the economy reeling, the news that Fannie Mae and Freddie Mac would be bailed out with $187.5 billion in taxpayers' funds inspired anguish and awe. Truly, it was a phenomenal amount, one that reflected the depths to which the real estate market had sunk. But now the two government GSEs are on the verge of paying back nearly all of the bailout funds. Bloomberg notes that the entities will make $39 billion (most of it from Freddie Mac) to the U.S Treasury after reporting strong third-quarter profits, bringing their total re-payments to "within about $2 billion of the bailout sum." As part of their conservatorship deals, they have essentially been turning over all profits in excess of $3 billion to the Treasury. "The money counts as a return on the U.S. investment and not as a repayment of the aid, leaving Fannie Mae and Freddie Mac (FMCC) without an avenue for exiting conservatorship." At some point very soon, Uncle Sam will be realizing a profit on its investment in the two, just as it did on its bailout of big banks in the crisis via TARP. All this adds color to the on-going debate over the future of the big GSEs. The conventional wisdom holds that both should be wound down, allowing for the rise of private entities to replicate their function as mortgage guarantors. That said, several hedge funds are betting that the junior preferred shares (and in some cases the common shares) will rise in value if only the government will bring them back via some sort of privatization scheme. Some funds have sued, arguing that the government has improperly expropriated the profits to the detriment of shareholders. For more: Read more about: Fannie Mae, Freddie Mac 5. Will Steve Cohen ever own a MLB team?
In the wake of the book-worthy, decade-long battle between Steven Cohen and federal prosecutors, the debate will rage about which side actually won. The prosecutors ended up with a record-breaking $1.8 billion settlement, the satisfaction of ending Cohen's career as a money manager and the possibility that additional charges could be handed up against him. The founder of SAC Capital, however, was never personally charged, and he will remain a very rich man. Perhaps in his dreams, Cohen envisioned himself accepting his banishment from managing other people's money and waltzing off to follow another ambition, as yet unfulfilled. It's no secret that he has long yearned to own a MLB team. He's a minority owner in the New York Mets, but he has previously aimed much higher. He was among the final bidders for the Los Angeles Dodgers and he was interested in the San Diego Padres. Unfortunately, his firm's guilty plea, according to Bloomberg Businessweek, may have dashed his dream of owning a team outright. Faye Vincent was quoted: "I would hazard a guess that it would be very difficult for him to get a team. People like (Chicago White Sox owner) Jerry Reinsdorf, who is very important and a strong keeper of that tradition of vetting owners, would be a very major obstacle." Another expert: "The potential ownership market is too strong for baseball to keep Cohen on the short list. The potential relationship comes with too much baggage." But it may not be wise to count Cohen out permanently. There are definitely second acts in American life. If Cohen really wants to own a team, he will have to recreate himself as a man who has learned from his mistakes and sought to do good afterwards. If he can somehow change the public perception of him, all will be possible. But it will likely take time. For more: Read more about: SAC Capital, Steven Cohen Also Noted
SPOTLIGHT ON... Prosecutors seek penalties against Bank of America In a legal filing, prosecutors sought to impose a $863.6 million penalty on Bank of America after a federal jury found it liable for defective mortgages sold to the big GSEs. The amount, which was based on losses suffered on the securities, was slightly more than expected. The government is also seeking penalties against Rebecca Mairone, the former midlevel executive at the bank's Countrywide unit. She was found personally liable. The bank will respond to the penalties request within a few weeks. Article Company News:
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Monday, November 11, 2013
| 11.11.13 | Judge declines to quickly approve SAC settlement
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