Skyler—I finally got through it. The financial reform law was a slog—390,000 words and 5,000 pages, not exactly an S-1 or other light reading. But I’m pleased to report that you were correct about the loopholes: It’s holier than a piece of Swiss cheese. The firm (and other investment banks on Wall Street, probably) has a multitude of options.
And even though the new law really won’t prevent a second collapse, I think we can all agree that we don’t want to repeat the past few years. The firm has cut back on travel per diems, on watering the greens at the country club—and let’s not talk about downgrading from The Glenrothes to Johnnie Walker. (I even had to sell off the 55-foot Ferretti!)
Here are the loopholes I found, with my thoughts on how best to exploit them.
1. The part about limiting our investment in hedge funds and private equity to 3 percent of capital is tricky, but I think we can work around it. I know of a few funds that are refocusing on luxury condos and rebranding as “REIT-platinum.” We can also continue to bet on web 2.0, 3.0, cloud and other vaporware firms as long as an equivalent value of the companies’ offices and other real estate holdings are used as collateral. With today’s prices and depressed valuations, we can get really good terms for the equivalent of an Aeron chair. Ironically, real estate looks like a pretty solid bet going forward.
2. The new Consumer Financial Protection Bureau initially looked like a substantial obstacle, but a close reading suggests that its protections can apply to the words “Consumer Financial” as much as actual consumers. Since the name isn’t taken yet, marketing grabbed the website and legal is creating a shell “Consumer Financial Bancorp of America” for most of our assets. Should keep the rabble in their place—behind us. LOL!
3. We’re going to have to scrap our “Preferred Broker” reward system for the subprime team. Can’t tie the rewards to the higher cost of the loans, apparently. But—I love this—we can take a cue from the cell carriers and pad out the bottom line with extra line items: Closing Fees, Late Fees, Escrow Transfer Fees (coming and going), Late Fee Payment Processing Fees, Public Portfolio Acknowledgement Fees, Attorney Toleration Fees, etc. The possibilities (and revenues) are endless.
4. I know what you’re thinking about No. 3, and yes, we have to spell them all out. All I can say is, when was the last time you read your itemized cell phone bill through? Tree, meet forest.
5. Another thought: You know how the government makes everything available in two or three languages? We do the same, in the name of hippy-drippy multiculturalism. Did you know there are more than 500 languages represented in New York? We slip English in at No. 63, between Edo and Falam Chin.
6. Still trying to figure how to exploit the exception for auto dealers. All those zero percent financing deals didn’t help our case before the crash. Maybe we could buy back Hummer from the Chinese? We wouldn’t even have to open a lot. Just divvy up the inventory. Say, two H2s each? :-)
7. The community banking exception is easier: What is Wall Street but a cozy community of the rich and rapacious?
8. There’s nothing in the law that says we can’t initiate Project Costa del Fresno and set off our nuclear “asset” underneath the San Andreas Fault. I’m just saying our holdings in the Central Valley would be more valuable with beaches and ocean views. We’ll check with legal about any relevant statutes.
9. Finally (I skimmed the 10th for myself :P), there’s the fact that the law does nothing about Fannie Mae or Freddie Mac, even though they were partly responsible for this mess. There just might be something to that whole government-backed enterprise thing. I suspect our neighbors on the top floor got the same idea when they changed their name to Goldy Sac. We should really look into it.
As I said, we have options. Let’s talk about them over a glass of 18-year-old Glen ... if I can still afford it.