On the surface, the downfall of SAC Capital appears to be a “them” problem: A group of audaciously rich hedge managers, led by Wall Street titan Steven A. Cohen, left with just their own money to play with. Looking closer though, it may be a “we” problem. A healthy SAC leaves billions of dollars in crumbs for brokerage firms and others that do business with the hedge fund giant. That money is likely to dry up, too.
The Wall Street Journal estimates that SAC generates as much as $1 billion a year for its partners – brokers and bankers that process trades, set up client meetings and lend it money. With clients reportedly pulling most of the $4 billion that they hadn’t already marked for redemptions due to the government’s ongoing insider trading investigation, “fear and anxiety” have hit Wall Street trading desks.
“This is going to have a significant impact to the Street, full stop,” one exec told the New York Times.
One key benefit SAC has delivered to Wall Street is its aggressive borrowing strategy. The Connecticut hedge fund reportedly borrows roughly $3 for every $1 in the fund. That activity will likely stop, as will the veracity of its trading strategy, lowering fees collected by brokers. While it’s unlikely SAC will sack any analysts and traders who are capable of making the firm money, other cuts to the 950-person staff are possible.
Cohen will be just fine, as long as he continues to evade the government’s grasp. It’s his foot soldiers and external partners that will be left dangling.
In today’s challenging economy, it is difficult to know if you should stay put or jump ship. Here are eight tell-tale signs it’s time to start looking.
Missing from the IRS scandal were specifics on how conservative groups seeking non-profit status were targeted by staffers. Now we have some detail from the groups themselves, who testified before Congress on Tuesday. Claims of free speech impairment, leaking of confidential donor information and unnecessary red tape have been made.
Kathleen Brown, chairman of investment banking at Goldman Sachs’ Midwest region, is retiring from the firm after 12 years. No word yet on any potential successors.
Fabrice Tourre, the former Goldman Sachs trader facing civil charges for his role in the complex debt security scandal known as Abacus, lost his bid to narrow the case on Tuesday. He’ll face trial in six weeks. The most interesting part of the ruling involved the judge’s drawn-out Little Red Riding Hood metaphor.
A group of bipartisan lawmakers plans to propose a bill that that would liquidate Fannie Mae and Freddie Mac.
Royal Bank of Scotland is set to cut as many as 60 jobs across its credit business in London and Asia.
Banks have been struggling to find digital professionals despite offering bigger salaries, but this is also a problem in the supposedly cooler start-ups.
Buzz Around the Office
Apple pie, the NFL and this middle schooler’s hilarious response to dropping his cymbal during a rendition of the Star Spangled Banner. That’s what makes America great.
List of the Day: Bad Bosses
Think your boss is terrible? If they do these things, they probably are.
- Use fear tactics to motivate.
- Expects you to read their mind.
- Can’t provide constructive criticism.