In exchange for an upfront premium, borrowers use the firms’ credit ratings instead of their own.

TO BE NOTED: From Bloomberg:

"Muni Bond Insurance Buffett Called Dangerous Delivers Comeback

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By Joe Mysak

May 8 (Bloomberg) -- Municipal bond insurance is showing signs of renewal this year as new providers respond to demand from low-rated borrowers whose costs have increased three times as fast as for issuers with top credit grades.

Leading guarantee firms, including Ambac Financial Group Inc. and MBIA Inc. forfeited top credit ratings last year after losses related to subprime mortgage-backed securities. The amount of insured new issues plunged 64 percent in 2008 as the biggest bond-insurance firms wrote down at least $21.3 billion, according to data compiled by Bloomberg.

An early contender to replace them, Warren Buffett’s Berkshire Hathaway Assurance Corp., was downgraded to Aa1 by Moody’s Investors Service in April. The billionaire investor in February called tax-exempt bond guarantees “a dangerous business.” His firm insured $3.3 billion in issues last year, ranking third in the industry.

Buffett’s warning isn’t stopping Macquarie Group Ltd., Australia’s biggest securities firm, from backing a new guarantor: Municipal and Infrastructure Assurance Corp. plans to sell its first policy by July, said Richard E. Kolman, the New York-based startup’s executive vice chairman.

“It is surprising to find that municipal bond insurance is anything but moribund in the early going in 2009,” wrote Philip J. Fischer, a Merrill Lynch & Co. municipal strategist in New York, in an April 6 report.

Carrie Gray, a spokeswoman for Merrill Lynch, declined to make Fischer available for comment.

Diversity Sought

Municipal and Infrastructure Assurance will join new subsidiaries of Ambac and MBIA, along with industry leader Assured Guaranty Corp., in trying to revive so-called credit enhancements. In all, insurers covered $72 billion, or 18 percent, of new tax-exempt bonds last year. That was down from $201 billion, or 47 percent, in 2007.

The amount of insured issues may rebound to about 35 percent over the next two years, said Guy Lebas, chief economist at Janney Montgomery Scott LLC in Philadelphia. Most of that work may go to a nonprofit firm that issuers hope to create, he said.

“I’d like some more diversity in names” to avoid having the same company backing too many issues, said John F. Flahive, who manages $22 billion in municipal debt at BNY Mellon Wealth Management in Boston.

Almost 70 percent of the firm’s tax-exempt bond holdings are insured, he said.

‘Historically Wide’

The coverage guarantees payments on bonds that defaulted about one-fifth as frequently as AAA corporate debt from 1970 to 2006, according to a Moody’s study in 2007. The policies equalize investors’ risk of lending to issuers of varying quality. In exchange for an upfront premium, borrowers use the firms’ credit ratings instead of their own.

Issuers rated BBB, Standard & Poor’s Corp.’s next-to-lowest investment grade, currently pay 4.75 percent to borrow for 10 years, according to Bloomberg data. The rate for insured general obligation bonds is 3.4 percent -- a difference of $135,000 on each $1 million of debt over the life of the loan.

The gap between yields on BBB- and AAA-rated issuers is about 152 basis points, Bloomberg data show. While down from a record 357 basis points in March, it remains “historically wide,” said Kolman, 54, who spent 25 years in municipal bonds at New York-based Goldman Sachs Group Inc., before retiring in 2007. A basis point is 0.01 percentage point.

Between January 2000 and January 2007, the mean spread was 52.9 basis points.

Premiums Higher

In 2006, when at least seven companies competed, premiums were as low as 15 basis points, according to a December report by the National League of Cities and the National Association of Counties. That meant issuers borrowing $1 million for 10 years paid as little as $2,212.50.

With competition dwindling, insuring A-rated general obligation bonds may now cost from 30 basis points to 75 basis points Kolman said -- or as much as $11,062.50 on $1 million for 10 years.

In 2005, their peak year, firms including Armonk, New York- based MBIA and Ambac of New York covered $233 billion, or 57 percent, of new tax-exempt issues, according to data from Thomson Reuters.

Starting in the mid-1990s, the top companies expanded into guaranteeing mortgage- and asset-backed securities. That business soured in 2007 as subprime mortgages began defaulting at record rates. As guarantors reported losses, their shares plunged.

Values Drop

The market value of four municipal-bond insurance firms -- Ambac, MBIA, Assured Guaranty and Syncora Holdings Ltd. -- declined to about $2.7 billion from a high of $45.6 billion in May 2007.

Borrowers with variable-rate debt saw interest rates rise as guarantors lost top ratings. Jefferson County, Alabama, had converted $3.2 billion in sewer debt to auction and floating- rate. Two of the county’s five commissioners suggested declaring bankruptcy in March, partly because downgrades allowed banks to demand the county buy back almost $1 billion in debt.

This year, Assured Guaranty, rated Aa2 by Moody’s and AAA by S&P, covered an industry-leading 426 municipal bonds with a par value of $9.3 billion in the first quarter, according to an April 3 statement.

Its closest rival, Financial Security Assurance Inc. of New York, wrote 122 policies, totaling $1.2 billion. Assured Guaranty, backed by billionaire Wilbur Ross, agreed in November to buy FSA for $722 million in cash and stock.

‘Next Shoe’

Municipal and Infrastructure Assurance, which is also backed by Chicago-based hedge fund manager Citadel Investment Group LLC, will be capitalized at $500 million, Kolman said. It will have the advantage of no subprime baggage, he said.

“Unlike the legacy insurers, the ones who built the business since its establishment in 1971, nobody is going to wonder about the next shoe to drop,” he said.

MIAC deserves a rating of AAA because “our strategy is not to diverge away from municipals,” said Tim Bishop, president of Macquarie Capital (USA) Inc. in New York.

Macquarie, an early proponent of privatizing public facilities, has acquired interests in four toll roads in Chicago, Indiana, California and Virginia.

The new subsidiaries of Ambac and MBIA say they also deserve top ratings.

Ambac’s rankings were cut to Ba3 -- 12 grades below the top tier -- by Moody’s on April 13. Its municipal bond subsidiary, called Everspan, will merit the “best available ratings,” said Douglas Renfield-Miller, the firm’s chief executive officer. That may be AA, he said.

Seeking Top Ratings

Ambac, whose shares have fallen 99 percent since October 2007, intends to raise $1 billion in capital, and Everspan would begin selling coverage sometime in the second quarter, Renfield- Miller said.

National Public Finance Guarantee Corp., MBIA’s subsidiary, is in talks with raters, said Thomas McLoughlin, CEO of the unit.

Third Avenue Management LLC, a New York mutual fund manager, sued the parent company last month to try to block the spinoff. The complaint in Delaware Chancery Court says the move would harm debt holders. MBIA has declined 93 percent since October 2007.

Two hedge funds, Aurelius Capital Management and Fir Tree Partners, filed a similar suit in federal court in New York in March. McLoughlin declined to comment on the litigation.

‘Quite Challenging’

Competition would inevitably force new insurers to cut prices and take on other types of risk, Moody’s said in November.

“A municipal-only guarantor’s ability to overcome these circumstances is likely to be quite challenging,” the rating company said.

Moody’s assigned a negative outlook to U.S. local governments as a whole for the first time on April 7. It cited “unprecedented fiscal challenges” to counties, cities and school districts arising from the steepest recession since World War II.

Buffett, whose Omaha, Nebraska-based Berkshire Hathaway Assurance guaranteed $241 million in the first quarter, said on May 3 that the firm is selling fewer policies lately.

“We basically don’t like the pricing,” he said during a gathering of reporters after a press conference in Omaha. “If you have the wrong pricing, you can lose a lot of money.”

Moody’s downgraded the parent company, Berkshire Hathaway Inc., last month, citing “the severe decline in equity markets over the past year as well as the protracted economic recession.” It also cut financial-strength ratings for the company’s insurance units.

Buffett’s Warning

Buffett told investors in February that governments with guaranteed debt might choose to default rather than raise taxes. “Insuring tax-exempts, therefore, has the look today of a dangerous business -- one with similarities to the insuring of natural catastrophes,” he wrote.

“What mayor or city council is going to choose pain to local citizens in the form of major tax increases over pain to a faraway bond insurer?” he asked in his annual letter to shareholders.

“With all due respect to Mr. Buffett, I’m sure a lot of issuers are pretty insulted by that,” Kolman said.

New municipal bond guarantors are needed -- though perhaps not as for-profit businesses, said Lebas of Janney Montgomery Scott.

Public Insurer Planned

“I would actually anticipate some form of nonprofit solution to come down the pike in the long run -- something akin to a municipal bond bank or issuers’ association,” Lebas said in an e-mail.

Such an entity could cover as much as 25 percent of new issues over time, while traditional companies handled about 5 to 10 percent, he said.

In December, the National League of Cities and National Association of Counties endorsed creating a “voluntary, national mutual credit-enhancement company owned and operated by local governments.”

They’re putting together a business plan for the nonprofit entity and plan to ask the U.S. Treasury for $1 billion in capital, said Cathy Spain, director of the league’s Center for Member Programs in Washington. Andrew Williams, a Treasury spokesman, said the agency had no comment.

Representative Barney Frank of Massachusetts, the Democratic chairman of the House Financial Services Committee, said in February that the federal government should get into the business.

Issuers Slam Ratings

Demand for bond insurance would disappear if states, cities and counties received fair credit grades, according to a third group of public-finance officials, led by California Treasurer Bill Lockyer.

Tax-exempt issuers should be rated as corporate borrowers are, on their chance of default, the officials say. Doing so would result in upgrades for many municipalities.

The issuers sought federal legislation to speed rating changes. Local leaders have asked that the Municipal Bond Fairness Act be reintroduced in Congress after failing to pass in 2008.

Meanwhile, some issuers are going without credit enhancement and paying more to borrow. On April 13, the Butler Health System, a nonprofit hospital and physician group about 35 miles north of Pittsburgh, sold about $76 million in revenue bonds to help pay for an expansion.

‘Lot of Demand’

“We looked at Assured Guaranty, and talked to them, but didn’t pursue it because we didn’t think the pricing would be in our best interest, given the turmoil in the market,” said Andy Majka of Skokie, Illinois-based Kaufman Hall & Associates, the Butler, Pennsylvania medical group’s financial adviser.

Assured doesn’t comment on issues it hasn’t backed, said Ashweeta Durani, a spokesman for the firm.

Butler Health sold its bonds with a Baa1 rating from Moody’s and A- from Fitch, and paid yields that included 7.4 percent on $47.5 million due in 2039 -- about 217 basis points over the Municipal Market Advisors Consensus scale.

“We’d welcome the formation of new insurers -- there’s a lot of demand for credit enhancement,” Majka said.

To contact the reporter on this story: Joe Mysak in New York at jmysakjr@bloomberg.net."

"He recommends using interest rate spreads instead of credit ratings as a proxy for losses. "

From the WSJ:

"By ROBERT ROSENKRANZ

The rating agencies have been widely criticized for their role in the financial crisis. It is said that they wrongly assessed the risks on trillions of dollars worth of bonds backed by residential mortgages. And indeed they did. But this is hardly surprising.

Rating agencies employ quite ordinary mortals to analyze the credit risk of bonds, just as firms like Goldman Sachs and Merrill Lynch employ quite ordinary mortals to analyze the outlook for stocks. No one is shocked when equity analysts' recommendations don't pan out. Why should we expect any more of the rating agencies? ( IT DEPENDS. UNDER A VERY STRICT SET OF AGREED UPON GUIDELINES, ALL THE CREDIT RATINGS AGENCIES ARE SUPPOSED TO DO IS PROVIDE A THIRD PARTY CONFIRMATION OF THE COMPANY'S FINANCES. STOCK PICKING INVOLVES A LOT MORE THAN THAT. )

We should not, but the regulators have, and that is the problem. Regulators of banks, insurance companies and broker dealers have all incorporated the work of the ratings agencies into their regulations in myriad ways. Most importantly, bond ratings determine -- as a matter of law -- how much capital regulated institutions need in order to own the bonds.( A BAD IDEA )

For every dollar of equity that insurance companies are required to hold for bonds rated AAA, $3 is needed for bonds rated BBB, and $11 is needed for bonds rated just below investment grade (BB). For banks, the sensitivity of capital requirements to ratings is generally even more extreme. ( OK )

The Bank for International Settlements also uses ratings to drive capital requirements, so the rating agencies have the same role in global capital markets that they have in the U.S.

For money market funds, ratings are equally critical: They are typically barred altogether from investments rated lower than AAA. In short, the ratings agencies are like a Consumer Reports for financial instruments -- but with the force of law behind their ratings( TRUE ). It is as if you were forbidden by law from buying an iron or a toaster unless it is rated "Excellent."

Since the ratings determine required capital, they have a profound influence on how financial institutions invest their assets -- in effect, the regulatory reliance on ratings makes the rating agencies the de facto allocators of capital in our system( TRUE ). And every actor in the financial system has every incentive to group and slice assets in ways that maximize not their fundamental soundness but their rating( THEY DID ).

Indeed, that is the entire raison d'être of the $6 trillion structured-finance business, which serves little economic function other than as a rating-agency arbitrage( TO INCREASE LEVERAGE. YES. ). Subprime mortgages (and all manner of other risky loans) held directly by financial institutions are questionable assets( I AGREE ) with high associated capital charges( YES ). Each one alone would deserve a "junk" rating. Structured finance simply piles such risky assets into bundles and slices the bundles into tranches. The rating agencies deemed some 85% of the tranches by value as AAA, and nearly 99% as investment grade -- thus turning dross into gold by a sort of ratings alchemy( NOT QUITE. THE TRANCHES CAN REPLICATE BOND RATINGS BY WHO GETS PAID FIRST. ).

This ratings alchemy( IT WAS MORE LIKE COLLUSION. THE TRANCHES, IN AND OF THEMSELVES, ARE NOT THE PROBLEM. IT WAS THE ASSESSMENT OF RISK AND UNDERLYING ASSETS THAT CAUSED THE PROBLEM. ) created enormous demand for dross -- in this case, dodgy mortgages( POOR LENDING PRACTICES ). Credit was extended to countless dubiously qualified purchasers of homes, which in turn drove dramatic increases in house prices. The housing bubble has now burst, with average house prices in America down some 20% to 25% from the peak. This led( STARTED ) to the current crisis.

The problem was not the erroneous ratings per se; everyone misgauges risk and ratings agencies are no different. The problem is that these erroneous ratings were incorporated into law. Regulators should not have relied on ratings agencies to asses the risk of bond holdings. Instead, they should have relied on markets( HOW? ).

When they come to design new regulations to govern capital requirements and investment parameters for financial institutions, Barack Obama and Congress should write ratings agencies out of the regulation of financial institutions. The market is a far better judge of risk and value than any individual analyst, team or firm( HOW? ).

The amount of capital required to hold a fixed-income security should be determined not by a rating but by its yield, expressed as a spread over Treasurys( WAIT A SECOND. HE BELIEVES THAT CURRENT SPREADS MAKE SENSE BECAUSE THE MARKET SAYS SO? THAT'S SILLY. ). The higher the spread, the riskier the market has determined the asset to be, and more capital should be required to hold it.( THIS IS A TERRIBLE IDEA. IT WOULD MAKE CRISES FAR WORSE BY GUARANTEEING A CALLING RUN IF THE MARKET GETS SPOOKED AND SPREADS GET LARGER. COME ON. )

Similarly, financial institutions should be required to set aside a percentage of their interest income every year as reserves for credit losses; the higher the spread, the higher the reserve percentage. Should spreads widen, the share of the return set aside for reserves should increase, thus gradually increasing reserves commensurate with the market's perception of increased risk.

A requirement that financial institutions set aside reserves for ultimate credit losses sounds obvious, but does not currently apply to holdings of bonds. Using market data to drive reserves, as well as to drive capital requirements, ensures that market perceptions of risk are continuously, but gradually, taken into account. In contrast, rating-agency downgrades are discreet events that often lag the data reflected in market prices.

Rating agencies would continue to have a useful role. Their assessment of credit risk, and their marshalling of pertinent data, would help investors make their decisions. And whether issuers or bond buyers pay for their services, rating agencies will want their ratings to be as predictive as possible. They will still be the "Consumer Reports" of the bond markets, simply without the force of law behind their recommendations. Buyers of toasters can decide for themselves, and so can buyers of bonds. Our economy would be stronger for it.

Mr. Rosenkranz is chairman and CEO of Delphi Financial Group."

Now, Arnold Kling:

"Robert Rosenkranz writes,

in effect, the regulatory reliance on ratings makes the rating agencies the de facto allocators of capital in our system. And every actor in the financial system has every incentive to group and slice assets in ways that maximize not their fundamental soundness but their rating.

Indeed, that is the entire raison d'être of the $6 trillion structured-finance business, which serves little economic function other than as a rating-agency arbitrage. Subprime mortgages (and all manner of other risky loans) held directly by financial institutions are questionable assets with high associated capital charges. Each one alone would deserve a "junk" rating. Structured finance simply piles such risky assets into bundles and slices the bundles into tranches. The rating agencies deemed some 85% of the tranches by value as AAA, and nearly 99% as investment grade -- thus turning dross into gold by a sort of ratings alchemy.

Read the whole thing. He recommends using interest rate spreads instead of credit ratings as a proxy for losses. The logic is that the market is likely to be better at assessing risk than the rating agencies.

I think his view has merit. Still, I believe that any attempt to regulate financial institutions using rules and formulas will be gamed. I think that letter-of-law regulation has to be supplemented by spirit-of-law rules( I AGREE ). If the CEO's of government-backed institution act in ways that are imprudent even though their actions are within boundaries of regulatory requirements, those CEO's ought to face the risk of imprisonment( I AGREE COMPLETELY )."

At least Mark-to-Market is intended to prevent a Calling run. This idea would encourage them.

"Yields on speculative-grade bonds imply a U.S. default rate of 21 percent, higher than the record set during the Great Depression in 1933"

For the second day in a row, I've been sidetracked by a post. I should be working on my first novel, which is a philosophical horror roman. What do I mean by Philosophical Horror? Imagine taking the neurons of Stephen King and Albert Camus, tossing them in a bag, adding a few synapses, and shaking them. There. That's the start of a philosophical horror book.

Now, here's the story on Bloomberg:

"By Bryan Keogh

Dec. 3 (Bloomberg) -- Yields on speculative-grade bonds imply a U.S. default rate of 21 percent, higher than the record set during the Great Depression in 1933, according to John Lonski, chief economist at Moody’s Investors Service.

The extra yield investors demand to own U.S. high-yield bonds was 19.19 percentage points on Dec. 1, according to Moody’s. Assuming a 20 percent recovery rate, the spread implies a default rate of 20.9 percent, Lonski said yesterday in a market commentary. That compares with a rate of 11 percent in January 2001, 12.1 percent in June 1991 and 15.4 percent in 1933.

Defaults and bankruptcies are accelerating as financing options for high-yield companies dwindle amid the longest U.S. economic recession in at least 26 years. The U.S. default rate rose to 3.3 percent in October, according to Moody’s, which forecasts the rate to increase to 4.9 percent in December and 11.2 percent by November 2009.

“The default rate is going to start rising quickly, soon enough it’s going to be breaking above 10 percent,” Lonski said in an interview. “Lack of access to financial capital is a very big problem for high-yield bonds.”

Now, to me this is preposterous. It's driven by an irrational aversion and fear of risk, which can cause these kind's of scenario's to come true. Of course, I could be wrong about this, but it doesn't pass my smell test.

What's the smell test? I use my nose as a kind of Bayesian filter and take a good whiff of the probabilities that might arise. I don't believe that we'll have more defaults than the Depression. Next, you'll be telling me that the Sun is more likely to Supernova than Junk bonds not default.

Would I buy these bonds? Um, um, um, sure, why not? I'll take a hundred. Put it on my tab.

"The National Bureau of Economic Research, the panel that dates American business expansion, on Dec. 1 confirmed that the U.S. economy has been in a recession for 12 months, making it the longest since 1982. The economy shrank at a 0.5 percent pace in the third quarter after expanding 2.8 percent in the previous three months. Economists expect a 2.2 percent contraction in gross domestic product for the fourth quarter, the average estimate from a Bloomberg survey.

Three companies have sold $2.7 billion of high-yield bonds this quarter, compared with $30 billion in the same period a year ago, according to data compiled by Bloomberg. Leveraged loans arranged this year total $301 billion, down more than a third from last year, Bloomberg data show.

“There’s a lot of forced selling of high-yield bonds by hedge funds owing to the need to de-lever as well as by mutual funds in response to redemptions,” Lonski said. “You’re looking at a market where the sellers well outnumber the buyers and the reluctance on the part of buyers makes sense if only because a bottom for economic activity is not yet in sight.”

High-yield, high-risk bonds are rated below Baa3 by Moody’s and BBB- by Standard & Poor’s."

Okay. Deleveraging is a problem. But I still think this is overdone.

Now I'll probably have to talk about that Bayesian post that Hsu wrote.

"a sense that unhealthy things were going on in the U.S. housing market": And It's Not Mold

Michael Lewis with a post that got a lot of attention on Portfolio:

"At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income."

Poor loans. Spigot Theory, useless.

"By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market.

"Unhealthy things". "Screwed up". Don't blind me with science.

"But the scarcity of truly crappy subprime-mortgage bonds no longer mattered. The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets. Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. It cost money to make this side bet, but nothing like what it cost to short the stocks, and the upside was far greater.

The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’ ”

I've already used the football and betting analysis in my losing debate with Derivative Dribble.

"More generally, the subprime market tapped a tranche of the American public that did not typically have anything to do with Wall Street. Lenders were making loans to people who, based on their credit ratings, were less creditworthy than 71 percent of the population."

Poor loans. Over and over.

"In retrospect, pretty much all of the riskiest subprime-backed bonds were worth betting against; they would all one day be worth zero. But at the time Eisman began to do it, in the fall of 2006, that wasn’t clear."

This is called regret. It doesn't occur only in finance.

"The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. "

Highly comical. If someone predicts something but not for the right reasons, it's called a lucky guess. It certainly doesn't qualify as prescience.

"But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says."

It's called alchemy. Even Newton believed in it.

"Eisman, Daniel, and Moses then flew out to Las Vegas for an even bigger subprime conference."

Next time fly to Bakersfield. You'll get more done.

“Would you say that 5 percent is a probability or a possibility?” Eisman asked.

A probability, said the C.E.O., and he continued his speech. "

Pardon me? This is just a confusion of words.

"That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them."

Poor loans.

"The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs."

Sorry, if done right, these can be useful for determining the likelihood of default. It's not the product. I wouldn't do it, but I'll use the info.

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.”

Is this a priori or what?

"There was only one thing that bothered Eisman, and it continued to trouble him as late as May 2007."

He's a hell of a lucky guy. I'm troubled but hundreds of things daily.

“The thing we couldn’t figure out is: It’s so obvious. Why hasn’t everyone else figured out that the machine is done?”

Strangely, he's Heideggarian.

“When I read it, I thought, Oh my God. This is like owning a gold mine. When I read that, I was the only guy in the equity world who almost had an orgasm.”

I wouldn't brag about almost. It's not terribly satisfying.

"Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. "

This sounds like my Fuld parody.

Let's end it here. Too much pathos, not enough satire.