Thursday, August 16, 2007

Tantrums At Credit Suisse

I was going to give the blogging game a bit of a rest today, maybe catch up on my work, work on buying an apartment, improve the intern, that kind of thing.

And then along comes an outburst of such monumental stupidity and chutzpah I feel obliged to reply with a umbrage-laden, humourless and insulting outburst in return. Yes, I've finally taken a banker's comment personally.

Via the inordinately informative Alphaville, the free-bones FT with lower levels of ponderousness, comes the following ludicrous outburst from one Jonathan Blau, the co-head of the leveraged finance strategy and portfolio products group at Credit Suisse. Mr Blau is discussing the fact that current credit markets are experiencing huge levels of volatility, that mediocre credits (those with average levels of risk) cannot raise debt, and that really good ones are paying historically high levels of interest on new debt issues:

I would argue that this remains an idiosyncratic event. And it’s being amplified by the financial press because the financial press talks to a banker, talk to a trader. The trader says to himself, ‘I’ve lost all the money I made this year; I’m having…a bad day; my bonus is impaired’ and he tells the financial reporter it’s the end of the world.

The financial reporter of course prints that because he wants to make a big splash with his editors so that he can move on to some other job that he’d much rather have, say working on the political desk.

There are a few possible explanations for this outburst. The most obvious is that during previous encounters with the press, the hacks in question were unable to conceal their contempt for him. Blau may have confused a personalised dislike with a more generalised dislike for covering the world of finance. It could be, on the other hand, that the reporters relegated to writing about "leveraged finance strategy" are truly bored and dispirited with their work.

What's most amusing about this is that it was only today that I realised that Credit Suisse HAD a leveraged finance strategy (yes, I'm misconstruing his title for comedic effect). I'd always sort of assumed that CS' leveraged strategy was finding the stupidest, greediest, or most desperate clients and pitching them leveraged loans and high-yield bonds at eye-watering rates of interest.

In fact, I've never encountered an investment bank with such an unconcealed lack of respect for their clients. In fact it was almost impressive how often they were willing to say "hey what else were they going to do?" to reporters. I'd love, you'd know I'd love, to give you some juicy examples, some of which you might be able to follow up on by joining the dots from bankruptcy filings. But they'd be much too close to the day job.

Still, I'm sure some of you can remember the "Burning Bed", when the attempts of First Boston (which Credit Suisse subsequently acquired) to gouge the Ohio Mattress company ended with it owning the unfortunate maker of Sealy Posturpedic.

Then of course we have the swashbuckling tale of Credit Suisse Financial Products, its derivatives arm, which has since been disbanded. While one financial title was indeed fulsome in its praise for the operation, the UK's Financial Services Authority and Japanese regulators were less so.

And who could forget the time Credit Suisse lent a struggling Houston utility money at 12.5% and upwards? (Actually, in its defence, saintly heartland investor Warren Buffett wanted in on that deal, too).

What we have here is a picture of a smart guy apparently wigging out at the behaviour of the small number of people that believe him any more. Now it's true that Credit Suisse, like Deutsche Bank, is a legacy Wall Street investment bank that succumbed to the charms of a graceless European owner through its own fecklessness, but such churlishness should be beneath such a group of very rich men.

It is true that there is a huge degree of financial illiteracy amongst some business journalists. Indeed, I've poked them with my pedant stick on a couple of occasions. But by and large the financial media is slightly better compensated, slightly smarter, and a lot weirder than their counterparts covering politics or what have you. Bloomberg's big contribution to the media has been to recognise this, for good or ill.

I suspect the good folks at Alphaville know all this already (except maybe the gouging Texan utilities bit) and are just too kind to rub it in his face. But really, if there was a canon or poor excuses for a debt capital markets business going up the tube, this is definitely top five. Because, seriously, none of us have enough money to buy his toxic leveraged loans, even if we were qualified investors.

On a lighter note, happy birthday Elvis, the Republic of India, and the compact disc. Actually all three are on consecutive days, but I could not come up with a better way of plugging
Alex Von Tunzelmann's mighty Indian Summer, which, unlike Credit Suisse, IS actually Big In Houston.


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