ValuAct’s Citi stake; SEC commissioner leaving

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Vote of confidence: Activist investor ValueAct Capital Partners said it owns a $1.2 billion stake in Citigroup. The Wall Street Journal says the holding, which amounts to about 0.7% of the bank, is “a bet that the giant bank’s strength as a service provider to corporations will enable it to thrive in the post-crisis era and make up ground its shares have lost in recent years.” The firm said it supports CEO Michael Corbat, “partially because he rose through what it views as the bank’s crown jewel, the part of the bank that works closely with large corporate clients,” the paper says.

That relatively small holding, which would make ValueAct the bank’s 25th largest shareholder, gives “the activist hedge fund an influential platform” at the bank, the Financial Times notes. The firm said it was “continuing to add to the position opportunistically.”

Meanwhile, in other stockholder news, famed investor Carl Icahn appears to have “called time on his campaign” against AIG. Icahn Enterprises, his investment vehicle, no longer lists the insurance company as one of its “significant holdings.” At the end of last year it owned $2.6 billion of stock, making it one of AIG’s five biggest shareholders.

Jumping the shark: Researchers at the Federal Reserve Bank of San Francisco have pegged what they say is the exact date the price of bitcoin peaked. The date is Dec. 17, 2017, when bitcoin hit a record high of $19,511. It has since dropped more than 50%.

What happened on that date? CME Group began listing bitcoin futures, which enabled speculators to bet that the price would fall, putting an end to “one-sided speculative demand.”

Comments by the top two executives of Berkshire Hathaway over the weekend haven’t helped. On Saturday chairman Warren Buffett told CNBC that bitcoin was "probably rat poison squared."

"I like cryptocurrencies a lot less than you do," said vice chairman Charlie Munger. "To me, it's just dementia. It's like somebody else is trading turds and you decide you can't be left out."

But that apparently isn’t deterring Intercontinental Exchange, the parent company of the New York Stock Exchange, from working on creating an online trading platform to enable large investors to buy and hold the digital currency.

AG gone: New York State Attorney General Eric Schneiderman, one of Wall Street’s leading regulators, announced Monday he will resign effective after work Tuesday, after the New Yorker magazine published an article in which four women claimed he physically abused them. Schneiderman denied the claims but said they “will effectively prevent me from leading the office’s work at this critical time.” Wall Street Journal, New York Times, Washington Post, American Banker

Wall Street Journal

Stepping down: Michael Piwowar, a Republican member of the Securities and Exchange Commission who the paper credits with “jump-starting the SEC’s deregulatory efforts” when he was acting chairman for five months after President Trump’s election, is leaving the agency after nearly five years. His departure, scheduled for July, would leave the agency with four commissioners, “meaning some votes could be deadlocked if the SEC’s two Democrats oppose measures favored by Chairman Jay Clayton,” a Republican who was appointed by Trump. “That could slow Mr. Clayton’s progress on his priorities, which include stricter rules for brokers advising retail investors and lightening the regulatory burdens on public companies.”

Andrew Harrer/Bloomberg

Financial Times

Acid test: A string of defaults by commercial borrowers even in the middle of “an unbroken streak of economic expansion that is among the longest in U.S. history” has “become an early test for the ‘shadow’ finance providers that are replacing traditional banks” in lending to companies with weak credit, the paper reports. Companies with junk-rated credit borrowed $564 billion last year, “topping the high-water mark reached on the eve of the financial crisis.”

“Even some of those responsible for crafting the deals worry that an insidious build-up of risk, abetted by policymakers and all but invisible while the economy is still growing, could again erupt in a downturn,” the paper warns.

New York Times

Moonlighting: Mick Mulvaney “has seized on his second job as the interim chief of the Consumer Financial Protection Bureau as an opportunity to dismantle an Obama-era watchdog agency vilified by Republicans since its inception as an example of government overreach,” the paper says in a profile of the White House budget director. “He is making the most of his opportunity, unapologetically attacking the signature accomplishment of one of Mr. Trump’s most nettlesome enemies, Senator Elizabeth Warren of Massachusetts, and taking on the other Democratic legislators outraged by his efforts to gut the bureau.”

American Banker notes Mulvaney has stacked the CFPB with political appointees to aid in his bidding.

Quotable

“We believe that in this era of banks, the winners and losers will be decided by strategic focus, customer centric innovation, and capital allocation, as opposed to product breadth, appetite for risk and investment in trading talent that defined competition in the pre-crisis era.” — ValueAct Capital Partners, in a letter to investors in which it announced it owns a large share of Citigroup stock.