Last year, Scaramucci procured former President George W. Bush to be SALT’s keynote speaker. This year, former vice-president Al Gore scored the keynote time-slot.

The enormous and palatial Grand Ballroom at the Bellagio Hotel was packed to the brim for Gore’s appearance, but Gore’s next date with SALT attendees was more exclusive. As was the case with Bush one year earlier, Gore’s talk was followed by a dinner for twenty or so handpicked guests at the Bellagio’s private Tuscany dining room.

Seated on either side of Gore were financier and Obama bundler Orin Kramer and Los Angeles Mayor Antonio Villaraigosa, according to someone who attended the dinner. Also at the table was hedge fund supremo Leon Cooperman of Omega Advisors, a panelist at SALT who had also been a guest at the Bush dinner last year (Bush’s dining partners in 2011 included SAC Capital’s Steve Cohen, Maverick Capital’s Lee Ainslie and Millenium Partners Israel Englander).

Gore was also joined by other Wall Street veterans including Frank Meyer, founder of Glenwood Capital,  Barry Sternlicht, CEO of Starwood Capital Group, and Ted Seides, of Protege Partners, the person said, as well as other private investors.

Topics of conversation, not surprisingly, included the so-called Fiscal Cliff – billions in tax cuts set to expire at the end of the year – a topic that had peppered panel discussions all day; the so-called “Battle of the Bobs,” a 1993 showdown between then-President Bill Clinton’s labor secretary Bob Reich and his treasury secretary and former Goldman Sachs exec Bob Rubin, about how to restart the flailing economy; and Obama’s rocky relationship with Wall Street and tax hikes on America’s richest.

At one point during the  “very spirited” but friendly debate, Al Gore turned to Leon Cooperman and asked if he would mind if his taxes were raised, according to two people at the dinner.  Cooperman responded he cared less about his taxes being raised and more about President Obama dialing back anti-Wall Street rhetoric, the attendees said.

In fact, several SALT attendees have said there is a noticeable anti-Obama atmosphere at SALT this year, though not one that is necessarily pro-Mitt Romney, the presumptive Republican presidential nominee. “You can feel it,” one investment manager said of the disdain for President Obama.

When the topic of which political party could deliver a more business-friendly environment took center stage during a Wednesday panel  session, a panelist joked about a November ticket featuring Starwood Capital’s Barry Sternlicht and Third Point’s Daniel Loeb, who were both on stage at the time.

This hedge fund crowd applauded raucously at the suggestion.

From The New York Times:

From The New Yorker:

Nicholas Lemann explores new books that illustrate the ties between politics and the economy.

From BusinessWeek:

Lazard’s Michele Lamarche takes on the tough task of courting debt-strapped nations.

From Harvard Business Review:

Jody Greenstone Miller and Matt Miller outline the phenomenon of “supertemp” workers and their role in corporate society.

From The Economist:

Banks have learned the hard way to pull back on overseas lending.

European banks — especially those that rely on ECB LTRO financing — are bracing themselves for an imminent downgrade, according to an article in yesterday’s Wall Street Journal:

While Moody’s hasn’t said whether and to what degree it will cut various banks’ ratings, officials at multiple top European banks said they expect their grades to be knocked down at least one notch…

As part of its downgrade reviews, Moody’s is examining the degree to which banks are reliant on the ECB loans and “what are the banks’ abilities to wean themselves off that funding,” said a person familiar with the matter. Heavy borrowing from the ECB “prompts more intense scrutiny” from Moody’s about the banks’ financial health, this person said.

When Moody’s finally cuts these banks’ ratings, it will be costly: Royal Bank of Scotland estimated in a recent filing that a one-notch downgrade would force the bank to post an additional £12.5 billion of collateral.

It’s not clear how much longer European banks can last in their current form, according to a recent Barclays research note. More radical solutions to banks’ woes may be needed, Barclays analysts Simon Samuels, Mike Harrison, and Nimish Rajkotia wrote:

European banks are now unique in their inability to fund… With sovereign debt issuance crowding out bank debt, we think it highly unlikely that the funding model that worked pre-crisis can be re-established.

The trio outlines a number of alternative funding models, from the politically problematic (“the ECB will simply have to fund the balance sheets of European banks for many years to come”) to the fanciful (“another potential solution… would be the creation of a European Freddie/Fannie”). The alternative that has the greatest chance of coming to pass seems to be a “meaningful deepening of the corporate bond market” and a shift away from large-scale corporate lending for European banks. There’s a lot of scope for the European corporate bond market to expand — only 10-15 percent of European corporate financing comes from the bond market vs. 50-70 percent for the U.S.

In fact, European corporations are starting to plan for a landscape where bank lending is no longer the dominant source of funding. According to JP Morgan, after falling by €32 billion in December, bank loans to nonfinancial corporates in the eurozone were effectively zero in the first two months of 2012:

Moreover, the first quarter of 2012 marked only the second quarter in recent years in which corporations borrowed more from capital markets than they did from banks:

Companies ranging from Dutch chemical maker LyondellBasell Industrials NV to German auto-parts maker Schaeffler AG borrowed $179.5 billion by selling bonds in the first quarter, a 38% year-to-year jump, according to Dealogic. By contrast, the amount borrowed from banks fell 45% to $112.9 billion.

Of course, in addition the dire straits of its banks, Europe is also undergoing a sovereign debt crisis. European sovereigns face much weaker demand for their debt than corporations, and there are signs that increased corporate bond issuance could crowd out sovereign debt purchases:

[B]ond-market investors increasingly are avoiding government bonds of fiscally weaker European countries, and instead seeking to park their money with relatively healthy companies, whose bonds can offer similar yields.

From The New York Times: 

Jennifer Medina reports that California’s economy is either booming and busting, depending on which city you’re in.

From The Nation: 

William Greider has some suggestions on how the Federal Reserve can work with politicians to improve the housing crisis.

From Foreign Affairs:

Blake Clayton argues speculators in the oil market should be thanked and not criticized for keeping the industry in balance.

From Institutional Investor:

Julie Segal writes about an Iowan retirement money manager’s foray into emerging markets.

Wanna buy a foreclosed home on a the cheap?  Well, Bank of America has got one for you. Or to be precise, the big U.S. lender has got 556 formerly owner-occupied homes it is trying to unload right now in a bulk deal.

As my colleague Jennifer Ablan and I reported yesterday, BofA, for the second-time in five months, is seeking bids for a bulk sale of foreclosed homes. This second round is much bigger than the first and could be a sign the bank is moving aggressively to sell foreclosed homes with institutional investors eyeing the market.

After our story ran, a source provided a nice overview of the bulk deal that  BofA has  sought bids on–apparently the deadline for putting in a bid was April 4. According to the bulk sale fact sheet, BofA is trying to find buyers for pools of foreclosed homes in 7 states: Arizona, California, Florida, Georgia, Illinois, Nevada and Texas.

The opening bid for a buyer looking to scoop up all the homes was $68.8 million. But it appears, BofA also was willing to accept bids for the pool of homes in sale in each state.

The average beginning bid price for each home was $123,000.

The fact sheet provided by this source says nothing about the condition of the homes or street locations. Presumably a really motivated buyer got that information from the bank before entering a bid.

The bank continues to say it won’t comment on this and other bulk sales. But it appears, BofA is clearly determined to find a way to take advantage of the great gold rush in foreclosed homes that is taking shape all across the country.

As Swensen explained in a lecture he gave to Yale MBAs in 2008 , the Yale model rests on two core tenets: 1) “an equity bias for portfolios with a long time horizon,” because equities and equity-like alternative investments tend to rise in value in the long run; and 2) diversification, because by spreading investments among several asset classes with varying degrees of liquidity, ”for any given level of risk, you can increase the return.”

These days, though, it seems both of Swensen’s credos have become passé in the community of corporate pension fund managers, as Reuters’ Sam Forgione reported late last week:

For the first time in over a decade, more of the $1.246 trillion assets represented by the 100 largest U.S. corporate pension funds is now in bonds instead of equities, according to pension consulting firm Milliman…

“There will definitely be less demand for equities from corporate pensions if you look out the next several years,” said Aaron Meder, head of U.S. pension solutions for Legal and General Investment Management America. Corporations are “tired of the volatility in the stock market, so they want to de-risk their pensions,” he added.

What’s striking here isn’t that pension funds no longer share Swensen’s fondness for allocating money to hedge funds or private equity — after all, Swensen himself believes that the majority of institutional investors who can’t match the resources or qualifications of Yale’s Investment Office “should be 100 percent passive.” Rather, it’s that Swensen’s golden rules of asset management — stocks for the long run and diversification — seem to be out of fashion. Pension-fund managers that have years to ride out losses on their stock portfolios until they turn into gains are increasingly throwing in the towel in favor of less volatile, lower-returning bonds. The advantage of endowments and pension funds that Swensen has touted for years — a near-infinite time horizon — is being ignored.

This risk aversion among institutional investors is trickling down to the retail level, too. Mom-and-pop investors withdrew $4.43 billion from equity funds last week, the largest amount since the start of the year, data from the Investment Company Institute showed today. These investors are also showing a preference for fixed income: bond funds saw with $6.12 billion in inflows that same week, for a total of over $26 billion in the previous three weeks.

The question institutional investors are now asking is whether the events of the past few years require a re-appraisal of principles underpinning the Yale model. Hedge funds, one of Swensen’s darling asset classes, had a particularly bad 2011, with the average fund down nearly 5 percent and some stock-picking funds down 19 percent. The New York Times published a story earlier this week that claimed that over the past five years, a set of public workers’ pension funds that had more of their assets in hedge funds, private equity, and real estate posted lower returns and paid higher fees than those with stodgier portfolios.

For what it’s worth, Yale’s target allocation for fiscal year 2012 includes having over 70 percent of its portfolio in private equity, real estate, and hedge funds and only around 10 percent in U.S. stocks, bonds, and cash; for fiscal year 2011, Yale’s endowment returned 21.9%.

From Fortune:

Hedge fund manager Paul Singer’s hardball approach has benefited Republican candidates as his fund battles in court with nation’s that have defaulted on their debt.

From The Guardian:

Zoe Williams writes about how Stephanie Flanders, the BBC economics editor and a former speechwriter for Tim Geithner, relishes bad news.

From Columbia Journalism Review:

Paul Starobin questions whether financial journalists should accept fees to speak at Wall Street-sponsored events and gets some interesting responses from journos on the receiving end of that largess.

From Institutional Investor:

Loch Adamson asks when will it be the right time for electronic trading platform BATS to get back on the horse after botching its IPO.

From AR magazine:

The magazine looks into a new European rule, which takes effect later this year, that will require some hedge fund managers to disclose some short positions.

The shooting death of Trayvon Martin, an unarmed black teen in Florida, has evoked a lot of debate about race in America and the nation’s attitudes to what it means to be a minority.

There’s been a good deal written that major media organizations were slow to react to this tragic story, in part because there simply aren’t enough minority voices on staff. This point was highlighted recently in a  story in The New York Times

That said, minorities also are underrepresented in the industry I spend most of my time writing about—Wall Street. And while it’s no secret that there are few minorities in the executives suites on Wall Street—there are not that many women, either—it’s worth taking look at some disturbing statistics.

A May 2010 by the General Accountability Office, which looked at the issue of diversity in the financial services industry, found that “overall diversity at the management level in the financial services industry did not change substantially from 1993 through 2008. Relying on data compiled by the Equal Employment Opportunity Commission, the GAO reported that minorities held just 10 percent of “senior-level” management positions at financial services firms.

In 2008, the EEOC data revealed that white males held 64 percent of all senior jobs, with African Americans holding 2.8 percent, Hispanics some 3 percent of all senior jobs and Asians holding 3.5 percent of top level jobs.

The GAO concluded  that “without a sustained commitment” from the firms, “diversity at the management level may continue to remain generally unchanged over time.

And it’s not just on Wall Street where diversity is lagging. In October, a GAO report that took look at the operation of the Federal Reserve gave it low marks as well. The report found that diversity on Federal Reserve bank board “was limited from 2006 to 2010.” The GAO said in 2006, minorities accounted for 13 of the 108 director positions on the various Federal Reserve bank boards. In 2010, the number of minority directors had risen by just 2 people to 15.

So what does of this mean? Well simply that it’s good to talk about diversity but to make it happen takes a lot of work and commitment as the GAO aptly concluded.

From Barron’s: