October 14, 2011

Hey Occupy Wall Street: Here’s Your Message

October 14, 2011

Hey Occupy Wall Street: Here’s Your Message

Like most, I started with a sarcastic (but hilarious) view of Occupy Wall Street: joint addled hippies decrying capitalism, lots of anger, no plan. Having spent the day at OWS base camp in New York’s Zuccotti Park Monday, I realized it’s not just hippies and the anger is real.

But there’s still no plan as evidenced by my photo summary linked below. I talked to people and shot nearly every non-repeated sign, and as you will see, there are at least 100 different messages. OWS benefits from media and celebrity activist interest, but unless they rally around a message, it’ll fade. Here’s one message I recommend, which would be especially useful around Halloween season.

Kill The Zombie Banks.

A plain example here is Bank of America, which not only announced $11m in severance pay for executives Joe Price and Sallie Krawcheck, but is also buckling under bad Countrywide debt.

Investment advisor Josh Brown touched an Occupy Wall Street nerve last weekend with his evisceration of Bank of America for it’s payouts to ousted execs.

So the OWS emotion and momentum is clearly there. Now how do you rally that around a message?

In August, Brown’s colleague Barry Ritholtz laid out a clear plan to fix the zombie banks in the Washington Post—using Bank of America as the model.

This piece is the near-term blueprint for OWS.

Don’t focus on 100 messages. Focus on “Kill The Zombie Banks” for now.

Below are brainstorming points to pen your new signs. Yes they’re from a Wall Street veteran at the top of his game, but get over it:

First, the easy stuff: Fire senior management. Not just the chief executive. Nearly the entire top floor at the bank, including the board of directors, is canned. Equity shareholders are wiped out. Whatever is left after all is said and done goes to the bondholders, typically, at 25 to 50 cents on the dollar. (In Sweden, bondholders got 100 cents on the krona, but that currency was significantly devalued. So the bondholders were not made whole; they lost 50 to 75 percent in real value.)

Temporary nationalization is the play: Uncle Sam provides debtor-in-possession financing to keep operating. All of the bad holdings, mortgages, derivatives and other liabilities are pulled out and auctioned off. This includes the bad real estate (REOs), the CDS/CDO book, defaulted mortgage obligations. Remember, there are no such thing as toxic assets, only toxic prices. At some valuation, these are worthwhile investments — just not 100 cents on the dollar. Let healthy buyers pay 15 to 30 cents. And anything that is worthless gets written down to zero.

Recapitalize the parent bank, and spin off each division: IPO Merrill Lynch for $20 billion. Spin out a clean Countrywide for maybe $8 billion. Sell off all the non-depository bank pieces.

What you have left is a well-capitalized bank, owned by taxpayers, with well-capitalized divisions as stand-alone companies. All of the above have transparent balance sheets. Eventually, everything gets IPO’d back to the public markets. Uncle Sam gets repaid, and whatever is left (if anything) goes to the bondholders.

You would have also created a transparent, unleveraged, adequately capitalized banking system that would be a contributing member of the U.S. economy, rather than zombie banks that don’t realize they are already dead.

Full OWS Photo Series:
OWS Photo Summary 1 of 5
OWS Photo Summary 2 of 5
OWS Photo Summary 3 of 5
OWS Photo Summary 4 of 5
OWS Photo Summary 5 of 5