Unstructured Finance

In the complaint against former MF Global CEO Jon Corzine filed in federal court on Thursday, the U.S. Commodity Futures Trading Commission depicted the former New Jersey Governor as a negligent leader who should never be allowed back into the financial industry because he did not try hard enough to stop his employees from raiding the brokerage’s customer accounts to cover its own trading losses.

The suit stops short of an important accusation, however: intent. Though Corzine and MF Global’s former assistant treasurer Edith O’Brien should have known better, according to the CFTC, they did not mean to make the inappropriate money transfers or to lie about them or try to cover them up.

“Mr. Corzine did nothing wrong, and we look forward to vindicating him in court,” said Corzine’s lawyer, Andrew Levander, in a statement emailed to reporters shortly after the CFTC unveiled the suit.

Even though a section of the complaint details the false statements MF Global made to the CFTC, its regulator, about how much money was in the segregated customer accounts (the firm reported an excess on nights when there was really a deficit of hundreds of millions of dollars), the CFTC is not accusing anyone of deliberately lying.

This lack of intent is one of the main reasons, experts say, why no criminal charges were ever filed against Corzine or any other MF Global employees despite the misappropriation of nearly $1 billion in customer money.

There are storm clouds on the horizon at Ray Dalio’s $150 billion Bridgewater Associates.

Yeah, excuse the weather imagery but it’s hard to resist given the sudden sharp reversal of fortunes with Bridgewater’s $70 billon All Weather portfolio. As Jenn Ablan and Katya Wachtel first reported, the portfolio that Dalio has long marketed to pension funds as an innovative investment strategy for navigating storm markets, isn’t doing so well in this stormy market.

The fund, as of last Friday, was down 6% for the month and down 8% for the year.

One of the biggest economic stories this year has been the recovery in U.S. home prices. But for the more than 11 million homeowners stuck with a mortgage that’s worth more than the value of their home, it has felt more like being Bill Murray in the movie Groundhog Day.

The housing crisis may be over for Blackstone, Colony, American Homes 4 Rent and other deep-pocketed investment firms snapping up foreclosed homes with cheap money courtesy of the Federal Reserve, but for many Americans they are still living with it some five years later.

So maybe that’s why  a controversial idea of using the government’s power of condemnation to seize and restructure distressed mortgages in order to provide debt relief to struggling homeowners  just won’t go away, even though many think it’s unconstitutional and bond investors have rallied to savage the proposal.

A Goldman fund’s REIT charges investors 10 cents per page for financial statements.

Of all the accusations made by an aggrieved group of REIT investors against Goldman Sachs, perhaps the most surprising is how stingy the bank can be.

A Goldman fund that manages the REIT, formerly known as Equity Inns Inc, requires investors to pay 10 cents per page for print copies of its financial reports. Those reports are not available online, nor are they released publicly — a fact that has led this long-running feud to spill into public view in comment letters to the SEC.

Wall Street will have a simulated cyber war called Quantum Dawn 2 this month.

Quantum Dawn 2 is coming to Wall Street.

No, it’s not a video game or a bad zombie movie; it’s a simulated cyber attack to prepare banks, brokerages and exchanges for what has become an ever-bigger risk to their earnings and operations.

Organized by the trade group SIFMA, Quantum Dawn 2  will take place on June 28 – a summer Friday that, with any luck, will be a relatively quiet day in the real markets.The drill involves not just big Wall Street firms like Citigroup and Bank of America, but the Department of Homeland Security, the Treasury Department, the Federal Reserve, the Securities and Exchange Commission, according to SIFMA officials.

“We go through a pretty rigorous scenario where we look at multiple threats being thrown out at the U.S. equity markets,” said Karl Schimmeck, vice president of financial services operations at SIFMA.

Hard to believe, there was a time when Steven A. Cohen was not all that well-known on Wall Street outside of the hedge fund industry. Some even used to confuse the then-paunchy hedge fund trader with a popular magician with the same name.

But it’s true. In fact, a decade ago,  BusinessWeek (pre-Bloomberg takeover) did a cover story about Cohen and his then-$4 billion SAC Capital Advisors, calling  the once super secretive investor, “The most powerful trader on Wall Street you’ve never heard of.”

Today, however, it’s almost a rarity when a major business publication or website (that’s you Dealbreaker) doesn’t have a story about Cohen and his currently $15 billion hedge fund (subject to change depending on how much in outside investor money gets returned at the end of this month). Whether it be the long-running inside trading investigation, his failed attempt to buy the Los Angeles Dodgers, his impressive growing art collection or his sizeable charitable donations, Cohen and his firm are always making news. A few years back, we even did a story on SAC Capital’s resident golf pro and how he would line up golf outings for SAC traders with corporate executives.

New Jersey Governor Chris Christie shakes hands with Lloyd Blankfein lookalike outside Goldman Sachs on Wednesday

Editor’s note: Updated with reason for Christie’s visit.

These days it seems New Jersey Governor Chris Christie is everywhere, from TV talk shows and radio appearances to accompanying Prince Harry on a well-publicized tour of the devastated Jersey Shore. So maybe it’s not too surprising he was spotted outside of Goldman Sachs’s Lower Manhattan office Wednesday morning. An Unstructured Finance reporter happened to see the sharp-tongued Republican governor walking into 200 West Street just before 11:30. Spokespeople for Goldman and the governor’s office said he was there for the bank’s Global Macro conference, which invites politicians, regulators, diplomats, CEOs and other power players to talk about big-picture trends.

Christie, who filed papers last year to run for re-election in 2014, recently announced that he had gastric bypass surgery to deal with his weight problem and he was looking in good spirits on Wednesday. He had a thick security detail and shook hands with a guy who, from behind, looked like Lloyd Blankfein but turned out not to be. He buttoned his jacket and waved to onlookers on his way into 200 West Street.

It’s generally been thought the main exit strategy for Wall Street-backed firms that are buying distressed homes to rent them out, is to convert to a REIT and file for an IPO. That attempt to cash-out on the single-family home trade has obvious benefits for the big institutional buyers but risks for retail investors as the math behind the buy-to-rent model becomes increasingly suspect.

But there’s another potential exit strategy for the institutional buyers beyond converting to a REIT or flipping homes earlier than anticipated and that’s becoming a home lender.

In Las Vegas, where the institutional buyers have been quite active the past six months, there’s talk about firms like Blackstone Group eventually providing financing to prospective buyers looking to acquire one of their single family homes. Buyers like Blackstone won’t comment on speculation about their single-family home management subsidiaries becoming defacto mortgage lenders. But it makes sense, especially in the case of Blackstone, which now owns more than 25,000 homes nationwide and says it intends to hold onto the homes and rent them out for several years.

Darwin theorized that peacocks’ colorful plumage was a sign of        their evolutionary strength.

Wall Street has always been known as a cutthroat kind of place, but lately it seems big investment banks are just mulling around, hoping their competitors die first.

A report on Friday by Goldman Sachs bank analysts said that the industry has entered what they called a state of “reverse Darwinism,” in which banks are betting their long-suffering trading operations can increase revenue not by stealing business from rivals on a competitive basis, but by waiting for rivals to call it quits – leaving their clients with no choice but to move business elsewhere.

Although most investors have been pleased with the steadily rising U.S stock market over the past six months, funds that profit when markets are convulsing are licking their wounds.

With market stress at multi-year lows, volatility hedge funds returned just 1.16 percent in the first quarter, compared with 3.7 percent for the broader hedge fund group.

Some of the volatility specialists are doing better than others by capitalizing on major market moves in Japan, for example. And some are doing better simply because they are ‘short’ volatility funds – they tend to perform better when markets are calmer. But those funds are now few and far between.