The news last week that New York Attorney General Andrew Cuomo launched an investigation of eight of the largest banks to determine if they had mislead the credit rating agencies is one of those wonderful Wall Street melodramas that typically start with a bang and end with a blur
Actually, it started with a guy named Mikey. After college, he found a job at a second-tier firm in the late ’90s analyzing dotcoms and working for peanuts. In his second year, Mikey was making nearly six figures and in his third he was waiting tables.
Two years later at Tavern The Green, a former co-worker recognized him, told him of an analyst job at Bitch & Company, which did corporate credit ratings.
He smoked the interview and was back in the game.
After proving himself in pet foods for 18 months, he was moved up to mortgage-backed securities.
But in his new field, the banks and their law firms were always after him with wine, women, and Yankee tickets. They “just wanted a little help,” to raise their rating, but Mikey never bent. He loved his work.
Then the headhunter called.
Global Bank, a frequent client, made Mikey an offer he couldn’t refuse. A million to start and a big bonus at year’s end. That was for starters. Global’s securities’ business was soaring and they needed a No. 2 to “manage” the ratings analysts. Of course, he accepted.
Mikey was a natural. He herded the analysts like they were cattle and fed them so much bull that Global’s securities soon had the highest rating in the industry. Mikey was made a Senior Managing Partner. Clients and money poured in. He dined with the CEO every Thursday. Then subprime collapsed. He still had a job, but a much smaller office.
Besides, he was burned out. An idea morphed into a plan. He called his $1,000-an-hour lawyer. The lawyer was against it, but came around. Then Mikey called his pal, the CEO.
The met for drinks the next afternoon. The talk of Cuomo hung in the air. Mikey quickly summarized the deal. The CEO smiled, said he liked it and a day later, Mikey handed over some 20 predated calls—options to buy stocks—to his boss. The calls were dated six to nine months earlier, and with the CEO’s signature, were now valid and worth some $22 million. They had a deal. Mikey would take the fall.
The next day, Global announced that a single employee was responsible for misleading all the credit rating agencies, and was being placed on leave. Further, they had contacted Cuomo’s office to start to repair the damage even though they were not sure any laws had been broken.
Since then, Mikey’s lawyers have turned down a five-year country-club sentence; he’s holding out for three, less 12 months off for good behavior. Mikey has already signed with Simon & Shuster for “The Three Years In The Yard,” with a guaranteed 50,000 first printing when he gets out.
Bill Regardie is the founder of Regardies magazine.