Money Stuff: The Podcast – Episode Summary
Title: Audible Frustration: C, ME, ETF
Release Date: March 7, 2025
Hosts: Matt Levine and Katie Greifeld

Introduction

In the episode titled "Audible Frustration: C, ME, ETF," Matt Levine and Katie Greifeld delve into a trio of financial missteps and industry practices that have stirred both frustration and intrigue within the financial sector. From colossal banking errors to the turbulent journey of a genetic testing giant and the dubious sales tactics of an ETF issuer, the hosts provide a comprehensive analysis of recent events shaping Wall Street and beyond.

Citigroup’s Monumental Fat Finger Errors

One of the primary discussions centers around Citigroup's series of "fat finger" mistakes—significant erroneous transactions resulting from simple input errors.

Katie Greifeld introduces the topic by highlighting Citigroup's troubling history:
“What is going on over at Citigroup? It seems incredible.” [03:27]

Matt Levine elaborates on past and recent incidents:
“Citigroup has had a series of very public and very comical mistaken payments... For example, they mistakenly sent $81 trillion to a customer’s escrow account instead of $280.” [04:45]

Despite the staggering figure, Levine reassures listeners that the error was contained:
“It's an internal transfer. They reversed the payment the next day and reported it as a near miss to regulators.” [05:02]

The hosts dissect the implications of such errors, emphasizing the systemic issues within Citigroup's operational frameworks. Levine sarcastically remarks on the absurdity of the $81 trillion mistake:
“It's very funny to imagine these being material risks to the bank, right? Like a bank going bankrupt because it accidentally wired out $81 trillion.” [10:25]

Katie underscores the recurring nature of these errors and questions Citigroup's internal controls:
“They seem to have implemented new warnings for large transactions, but with the volume of alerts, it's easy for employees to become numb and ignore them.” [09:13]

23andMe’s Downward Spiral and Privatization Bid

Shifting gears, the hosts explore the decline of 23andMe, a once-popular genetic testing company, and its recent attempts to go private.

Katie provides context on 23andMe’s trajectory:
“Last time I thought about it, it was going public via SPAC in 2021. It was 2021 at a $3.5 billion valuation.” [16:31]

However, the company has since plummeted in value, with shares trading below a fraction of their IPO price. Matt discusses the CEO's controversial bid to take the company private:
“She’s offering $10 million for the company, which is like $0.41 per share... It’s a tough deal because she’s offering much less than the current trading price.” [18:01]

The negotiation dynamics are explored, highlighting the challenges faced by the board in balancing shareholder interests against the CEO's intentions. Matt notes the CEO's strategic maneuvers:
“After the original directors resigned over her offer, she appointed new independent directors who also rejected her bid.” [20:03]

Katie reflects on the broader implications for 23andMe:
“The company needs to raise cash or find some solution, or else it won't be around for much longer. It’s fascinating to follow.” [21:56]

First Trust's Dubious ETF Sales Tactics and FINRA Investigation

The episode then transitions to a deep dive into First Trust, an ETF issuer embroiled in questionable sales practices and under regulatory scrutiny.

Katie introduces the First Trust saga:
“A really great deep dive into First Trust, which is an ETF issuer based...” [27:44]

Matt explains the sales channels of ETFs, distinguishing between advisor-led and self-directed retail investments. The focus is on First Trust's high-fee ETFs and their aggressive sales tactics: “Their average fee is 78 basis points, which is pretty high compared to the industry average of 58.” [30:37]

The hosts highlight the company's under-the-radar strategies to entice financial advisors through perks and incentives. Katie references internal emails revealing First Trust's emphasis on entertainment:
“We've always been about entertainment. That's our one leg up on our competition.” [35:33]

Matt critiques these methods, drawing parallels to potential bribery:
“They’re paying attention to the advisors and creating good feelings, which could lead advisors to prefer their expensive ETFs over cheaper alternatives like Vanguard.” [38:18]

Furthermore, Katie discusses the FINRA investigation prompted by First Trust's practices:
“According to our reporting, First Trust is actually under investigation by FINRA for their sales tactics.” [31:16]

The conversation extends to the personal corruption of First Trust’s managing director, Jim Bowen, whose extravagant expenses came under legal scrutiny during his divorce proceedings:
“He spent $147,000 at Sea Salt and $70,000 on seafood at the Ritz Carlton, which were related to entertaining financial advisors.” [40:23]

Matt underscores the depth of mismanagement:
“He took financial advisors out to dinner at hotels and restaurants in Chicago, giving Hermes scarves to waiters to ensure high maintenance clients are well-treated.” [41:44]

Conclusion

Throughout the episode, Matt Levine and Katie Greifeld provide incisive commentary on the systemic issues plaguing major financial institutions and corporations. From Citigroup's laughable yet potentially catastrophic errors to 23andMe's faltering business model and First Trust's ethically questionable sales practices, the hosts shed light on the complexities and repercussions of financial mismanagement. Their discussion not only informs listeners about these specific cases but also prompts a broader reflection on accountability and integrity within the financial industry.

Notable Quotes:

• Matt Levine on Citigroup's $81 trillion error:
  “It's very funny to imagine these being material risks to the bank.” [10:25]

• Katie Greifeld on 23andMe’s privatization challenges:
  “The company needs to raise cash or find some solution, or else it won't be around for much longer.” [21:56]

• Matt Levine on First Trust’s sales incentives:
  “They’re paying attention to the advisors and creating good feelings at the advisors.” [37:55]

This episode of "Money Stuff" effectively combines detailed reporting with sharp analysis, offering listeners a vivid portrayal of recent financial debacles and the underlying issues that enable them. Whether you're a seasoned financial professional or simply curious about the intricacies of Wall Street, Levine and Greifeld's insightful discourse provides valuable perspectives on the ever-evolving economic landscape.