Monday, August 30, 2010

"Citigroup Goes After Mike Mayo Over Accounting Accusations" and "Bove: Nothing Amiss" (C)

Three takes on the story, first up Gasparino at the Huffington Post:
The people who run the big Wall Street firms and banks have notoriously short memories, which is why, for all the mea culpas that came after the 2008 financial collapse and taxpayer bailouts, you know these guys are going to screw up again and screw the country again in the process.

Recently, I was reminded of just how short their memories on Wall Street are by two new stories. In the first one, Morgan Stanley thinks it's a grand idea to throw a lavish party for its past and present partners in mid-September at a place called the "Temple of Dendur," a swanky room in the Metropolitan Museum of Art that gets rented out to the mega-rich and big profitable corporations that want to hold special events around artifacts of ancient Egypt. The event is supposed to commemorate Morgan's 75th anniversary as a firm even if it will be held on another important anniversary in its history: Nearly two years to the day, Morgan, along with the rest of Wall Street, received billions of dollars in bailout money from the American

OK, so throwing an expensive party on the anniversary of the bailouts may look bad, and may also require a police presence (so many former Morgan Stanley people viscerally hate the guys now in charge, and vice versa), but it isn't potentially illegal. But the second story underscoring Wall Street's memory loss involves something that could be.

As I reported early in the week on Fox Business Network, Citigroup, one of the most bailed-out banks in the history of bank bailouts, has the nerve to wage an increasingly vindictive war against a securities analyst named Mike Mayo for doing nothing more than telling the truth about the bank's questionable -- some would say illegal -- accounting practices.

First a little primer on Mayo: For the past 10 years, he has been criticizing Citigroup and its piss-poor management, right up to the time the bank cost taxpayers hundreds of billions of dollars to survive the 2008 market implosion. For that, he's been denied access to top managers (including CEO Vikram Pandit and CFO John Gerspach), ridiculed on analyst conferences calls and belittled by Citigroup personnel behind his back.

One Citigroup executive recently said because Mayo has no clients at his most recent firm, CLSA, he picks fights to get his name in the press. Despite the absurdity of that argument -- Mayo (a) has clients and (b) he will have even fewer of them if he did nothing more than pick fights for the sake of fighting -- officials at Citi continue to insist that Mayo is attacking the firm for no other reason than to see stuff written about him, even if they refuse to address in a straightforward manner the validity of his recent and maybe most damning critique of the bank....MORE
From Barron's Stocks to Watch Today (Aug. 27):
Citi: Nothing Amiss in Deferred Assets, Says Bove
Rochedale Securities analyst Dick Bove weighs in this afternoon on the purported spat between Citigroup (C) and CLSA analyst Mike Mayo regarding Citi’s accounting for its deferred tax assets.
Mayo has criticized the bank for not writing down the value of those so-called DTAs, Citi has maintained it is comfortable with its accounting and that there has been no material inquiry on the matter by the Securities & Exchange Commission.

Bove writes in a note today that he thinks there’s nothing amiss in Citi’s accounting.
Citi has a net tax asset of $46.1 billion, writes Bove. Citi has to justify maintaining that balance on the books by showing regulators it can earn $99 billion over a period of years that has variable components of between 7 and 19 years.

Bove argues no one’s actually shown that Citi can’t make that kind of money over 19 years, merely implied such.

Bove notes Mayo’s own profit estimates don’t contain any hint of a write-down to come, suggesting he thinks Mayo himself is disingenuous....MORE
From Fierce Finance:
Citigroup takes aim at star analyst
Mike Mayo, a well-known name in the bank stock analyst world, has long been an bête noire at Citigroup (NYSE: C).
The latest: The CLSA analyst has angered executives because of his view, which he's hardly shy about, that Citigroup should take a writedown of $50 billion on "deferred-tax assets," or DTAs, which he thinks have inflated profits at the bank by up to $10 billion, according to FOX Business. Mayo also thinks the bank may be violating some securities laws by not doing so. Citi denies the accusation.
In retaliation, "Mayo has been denied one-on-one meetings with top players of the firm, including CEO Vikram Pandit, Chief Financial Officer John Gerspach, and any other member of management, while other analysts enjoy full access to the bank's top executives....MORE