Is The White House In DE Shaw's Pocket?

Larry Summers, who was not only Tim Geithner's predecessor as the 71st Secretary of the Treasury (from 1999 to 2001), but also the 27th President of Harvard University, and is currently the top White House economic advisor and serves as a director of the National Economic Council, apparently has a fond place in his heart and bank account for his most recent employer, $30 billion rocket scientist infested hedge fund D. E. Shaw (nothing like signing an NDA before conducting interviews). In a financial disclosure just released by the White House, Larry highlights that not only was he paid $2 million in 2008 from 40 speaking assignments, including speeches paid for by Goldman Sachs and Yale University, but, more notably, received $5.2 million in compensation from D.E. Shaw - one of the funds eligible and likely to participate in the PPIP and TALF.

Summers joined DE Shaw on October 19, 2006 as a managing director of the investment and technology department. Larry has recently been in hot water, for not only preaching Friedmanomics (quoted as saying Friedman's real contribution was "convincing people in the importance of allowing free markets to operate") as his administration is currently doing away with Mark To Market and covertly nationalizing the major banks, but also for accepting perks from Citigroup such as free rides on its corporate jet, for telling Chris Dodd to do away with executive pay caps at TARP recipient banks, and for sending Paul Volcker an imaginary memo entitled "stuff it."

The full financial disclosure document is attached below. One curious thing to note is that either Larry was drunk or high when he signed it, or else this document is counterfeit, based on the signature for "L.H.S" which is obviously not that of Larry Summers.

For comparison I present Larry's signature in the disclosure document:



with his omnipresent signature from his Treasury Secretary days (check out the signature in the bottom right of any 9 year old dollar bill in your back pocket).



Regardless of this particular conspiracy theory, ZH will be closely following any and all preferential treatment that DE Shaw (and the entire hedge fund industry in general) receives going forward compliments of Mr. Summers and the Obama administration.

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DE Shaw On The Basis Monster That Ate Wall Street

DE Shaw's quant Ph.D. geniuses are focusing on the topic de jour: the Basis Trade (to Boaz Weinstein's chagrin they are 6 months off). Always good to get one more perspective on the issue. Great bedtime reading for hardcores: enough new concepts here to find at least 5 brand spanking new ways to blow up the world. Particularly interesting section:

What's critical here is that the two risk factors most responsible for driving cash -synthetic basis-namely, the availability of financing and the positioning (long or short cash relative to synthetic) of levered players - inconveniently also two of the least desirable risk factors for a levered instrument vehicle like most hedge funds. Those factors' combined impact literally describes the terms of a classic common-investor liquidation crisis. By incurring heavy exposure to financing risk and the portfolio of other levered investors, a levered hedge fund is effectively selling a gigantic put option on its ability to finance its own positions. Moreover, this put option has characteristics that greatly increased the probability that the option will move in the money at the worst possible moment. If a levered investors suddenly finds itself facing heavy losses, it's not a stretch to suppose that, at the same time and for largely the same reasons, that investor's equity capital base is under pressure from redemptions, its financing position is weakening because of a credit crunch, and other similarly positioned investors are liquidating. Worse still, all of these phenomena lend to self-reinforce in pernicious ways. In such circumstances, it's imprudent to count on financing and trading counterparties to provide help because, as already noted, they're likely to be deleveraging at the same time.

Also, a great discussion on Berkshire abnormally positive basis. Hat tip purearb


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Greatwide Logistics To Be Acquired by DE Shaw, Centerbridge

In a recent press release, insolvent trucking company Greatwide Logistics, announced that it was "sold" to an investor group consisting of DE Shaw and Centerbridge. While no cash changed hands, the two Hedge Funds have agreed to a debt for equity swap: the company's total debt would be reduced by 77% from $620 million to $140 million.

Surprisingly, company advisor Miller Buckfire was unable to get Ron Burkle's Yucaipa to invest in the deal: the Clintons' favorite financial advisor had previously invested in bankrupt Allied Holdings and PTS, although after both of those promptly went back to insolvent status, it seems the supermarket magnate has had enough and is focusing on Barnes and Noble. It is to be seen if Greatwide can avoid the same fate. Centerbridge has already been burned once in the auto space when it invested in Dana Holdings in 2007, another Miller Buckfire special. Sphere: Related Content

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