Stress Test

Said the Fed to the banks in its purview:
"Sorry chaps, we don't mean to unnerve you,
But if panic should surge,
Our views would diverge
On the capital that would best serve you."

On the Down Low at the Roadshow

An analyst had a quick word
With investors his bankers preferred:
"We've cut our projections
For those with connections,
But won't tell the rest of the herd."

The fallout from the Facebook IPO continues. On Tuesday a spotlight was shown on the practice of IPO underwriters' not disclosing their analysts' estimates of companies' earnings, except to a small group of large institutional clients. Already a troubling practice, these quiet revelations appeared to skirt the letter of the law in the Facebook case. Analysts for Morgan Stanley and the other underwriters all made substantial cuts in their Facebook earnings forecasts during the pre-IPO roadshow, evidently based on information quietly provided by the still-private company. Joining Goldman Sachs in contempt for the retail "muppets" clamoring for $FB shares, the Morgans - J.P. and Stanley - have still not disclosed their estimates, as indeed they may not until 40 days after the IPO date. Reuters finance blogger Felix Salmon gives a full explanation of the issues and facts of the case, in a post that is worth the time of those who would like to gain insight into the world of stock underwriting.

Mr. Blankfein's Politics

"There's belief among Washington's polity
That Wall Street's Republican - solidly,
As we bankers assent
To the GOP bent
To fight against income equality."

"But on social concerns, it appears,
We set such belief on its ears,
In our scorn for the fringe
That would tend to impinge
On the rights of our gay Muppeteers."

According to Bloomberg.com, Goldman Sachs CEO Lloyd Blankfein's gay-rights stance "shows Wall Street's dilemma": whereas the financial titans might like Republicans to regulate banking and labor unions, they'd prefer the Democrats on contraception and marital unions. Mr. Blankfein took part in the "Out on the Street" LGBT Leadership Conference on Tuesday at Bank of America's New York office. As he noted in his earlier, robust endorsement of marriage equality in New York (see the video below), Mr. Blankfein believes that such policies are "just good business," facilitating the recruitment and retention of talent around the world. On the other side, the North Carolina legislature is considering a constitutional ban on same-sex marriage, which Bank of America expects will make it yet harder to attract employees to its Charlotte headquarters.