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Billions Season 5 Episode 3 Recap: Wall Street Journal – May 17, 2020

Why Would Bobby Axelrod Want to Buy a Bank?

by Paul Vigna | Wall Street Journal | May 17, 2020

So, Bobby Axelrod wants to buy a bank. Let’s talk about that.

On “Beg, Bribe, Bully,” tonight’s episode of “Billions,” (written by Ben Mezrich, directed by John Dahl), Axe is down in the dumps. He keeps losing things to Mike Prince. Shamans. Artwork. Vanity Fair covers.

The hedge fund world sure is a slog for a poor kid from Yonkers. What could possibly make it bearable? How about owning a bank? That’s right, the founder of one of the most successful hedge funds in the (fictional) world wants to buy a bank.

Is that, like, even possible? We were intrigued so much by this question that we started Googling and calling sources. We wanted to find out for sure. As usual, our recap focuses on what’s real in “Billions,” and what’s TV.

Now, there are different kinds of banks. But the answer is, it’s very, very rare for a hedge fund and bank to mix. Which is pretty much what “Hard Bob” (Chelcie Ross) told Bobby, but the reasons why go way beyond Axe’s bad reputation.

It’s not unusual for a rich hedgie to want to buy a bank, said Abbott Cooper, founder of Driver Management, a bank-focused investment-management firm. They think that by owning the bank, they can cut out the middleman—or, more properly, buy the middleman—and have an endless supply of cheap funding for whatever else it is they want to make money on.

For most of them, Mr. Cooper said, the thinking is, “Why am I putting money in Jamie Dimon’s pocket when I could give myself the loans?” But one conversation with a lawyer usually squashes the dream. “About 10 minutes after they get that idea, they realize it won’t work,” he said. “The regulators won’t let you do that.”

Banks are regulated with one bedrock foundation in mind: protect deposits. Safety is paramount. Hedge funds are by their very nature high-risk operations. You could not run them both together; the rules won’t allow it.

Maybe Bobby plans to own the bank separately from Axe Capital. That’s slightly more plausible, Mr. Cooper said, but there would still be serious restrictions. For one thing, Bobby would now have banking regulators constantly looking at his books. Any hint that he’s using “Axe Bank” as a vehicle for Axe Cap will draw their wrath. It’s not like he doesn’t already have a vengeful prosecutor on his back. You think he wants more people sniffing around his operations?

So if this were the real world, we’d agree with Hard Bob: Axe isn’t getting his bank.

And, really, there is only one clear example of a person who owns both a bank and hedge fund: Andy Beal. Mr. Beal is a math whiz (he created something called the Beal Conjecture) who made a fortune in real estate. He then started a bank, Beal Bank, and later started a hedge fund, CLG Hedge Fund.

But Beal Bank is the extremely rare example of this working. “It’s only allowed to exist as a cruel joke on everybody else who has this idea,” Mr. Cooper quipped.

And, really, why does Bobby Axelrod even want to do this? Axe is a “deca,” remember? He’s worth $10 billion. He’s not just in the 1%, he’s in the 0.00000001% (we did the math). You can count the number of bankers worth more than Bobby on one hand.

By absolutely any market measure, he has won the game.

Then there’s the more immediate matter of Bobby’s son, Gordie, and his expulsion from dear old Skinner Prep for setting up an illegal crypto-mining operation inside his dorm.

Now, let’s talk about Gordie Axelrod and his brief foray into crypto mining. We counted eight rigs, and while it was hard to pick out the exact make, they look pretty standard. So, figure roughly each one runs on anywhere from 1,600 to 3,000 watts, which is pretty average (your desktop computer needs only about 170 watts). For the sake of argument, go high end. That’s 24,000 watts in total, or 24 kilowatts; leave them running for an hour, and you’re talking about 24 kilowatts per hour.

A standard Nissan Leaf battery uses about 40 kilowatts per hour and you can plug that into your wall.

So, is it more likely that Gordie’s mining rigs created a surge that knocked out the power, or is it more likely that the moldy old prep school’s wiring is faulty? Gordie himself says this, and he’s right.

Axe goes up to Skinner and tries Plan A, bribe the headmaster (J.C. MacKenzie). When that doesn’t work, he moves on to Plan B, which is to destroy the headmaster. He also reprimands Gordie. Not for trying to get rich from mining, mind you, but because the “risk reward” of his scheme didn’t add up.

Yo, Bobby, that’s what we told you two weeks ago.

Of course Bobby finds something incriminating on the otherwise sterling headmaster. He bribes the poor guy into letting Gordie stay on—and into giving Bobby himself the lectern to address the entire school. Axe gives a rousing speech about capitalism that is equal parts Gordon Gekko and School of Rock’s Dewey Finn.

Back at the office, Taylor Mason (Asia Kate Dillon), who uses the gender-neutral pronoun they, is trying to take advantage of a problem at fictitious Lawrenceburg University, under pressure from its students to pull its endowment out of investments in fossil fuels. They is trying to figure out a profitable way for the school to do it, and bring the endowment’s assets to Mase Cap, a fund within Axe Capital. Taylor’s lieutenant, Sara Hammon (Samantha Mathis), cooks up a scheme to…

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