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Showing posts from March, 2009

Banks Repay Government Aid

According to the Washington Post, "Four regional banks have become the first financial firms to repay emergency aid from the federal government: Signature Bank of New York, Old National Bancorp of Indiana, Iberiabank of Louisiana and Bank of Marin Bancorp of California."

A good sign.

Active proxy season forecast

According to the NY Times, "This proxy season is already proving to be more contentious and active than last year.So far, 283 shareholder proposals have been disclosed, compared with 252 for the same period last proxy season. The rise is largely attributable to proposals on corporate governance issues."

Free tool that completely removes the Conficker/Downadup worm from home and business networks

"BitDefender has launched a free tool that removes all versions of the Conficker (or Downadup) worm on both home workstations and business networks."

Treasury Outlines Framework For Regulatory Reform

The U.S Department of the Treasury today proposed a new set of rules and regulations governing activities and firms in the financial marketplace. We applaud and fully support this effort. It follow a regulatory structure we first outlined in 1998, and expanded in 2007. As such we are hopeful.

The proposal consists of four broad outlines:

1. "Addressing Systemic Risk: large, interconnected firms and markets need to be under a more consistent and more conservative regulatory regime.

2. Protecting Consumers and Investors: clear rules of the road that prevent manipulation and abuse.

3. Eliminating Gaps in Our Regulatory Structure: clear authority, resources, and accountability for key functions. A substantive system of regulation that meets the needs of the American people.

4. Fostering International Coordination: ensure that international rules for financial regulation are consistent with the high standards in the United States. Launch (of) a new initiative to address prudential super…

Who will profit from PPIP?

According to CBS MarketWatch,

"Representatives of Pimco, BlackRock Inc. and Colony Capital all told MarketWatch that their companies intend to offer their services to work on the effort." Other firms lining up at the trough:

Goldman Sachs
Wellington Management Co.
Och-Ziff Capital Management
Fortress Investment Group
Avenue Capital Group
Marathon Asset Management
King Street Capital
Blackstone Group

What is needed is new perspective, new ideas, new ethics. Sadly, these are all in short supply at the firms listed above.

One thing is certain. You will not profit. You will, however, be left with the bill.

Public Private Investment Program (PPIP)

Treasury released details concerning the Public Private Investment Program (PPIP), the Administration's approach to dealing with "legacy assets", or the real estate loans and securities that caused the current financial crisis.

The approach relies, in large part, on the market. Unfortunately, these are the same institutions that created the problem. The issue is this: as the Fact Sheet Treasury released describing the PPIP Program notes,

"the financial system is still working against economic recovery." (No kidding.) As we noted in April, 2008:

"With the development of toxic (derivative and subprime lending) financial products, the relationship between investment banks and the economy has turned parasitic."

Further, the solution outlined by the Administration relies heavily on the assumption that "these assets create uncertainty around the balance sheets of.. financial institutions." This is a false assumption: the behaviour of financial manag…

Big bonus plans at A.I.G., despite White House outrage

According to the International Herald Tribune,

"American International Group, the insurer that has received more than $170 billion in taxpayer bailout money from the U.S. Treasury and Federal Reserve, plans to pay about $165 million in bonuses to executives in the same business unit that brought the company to the brink of collapse last year.

The payments to A.I.G.'s financial products unit are in addition to $121 million in previously scheduled bonuses for the company's senior executives and 6,400 employees across the company. Mr. Geithner last week put pressure on A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance.

The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government's efforts to prop up Wall Street."

Yeah. Right. Good luck with that backlash. Let me mention that we outlined…

Why the market failed

For those of you wanting more of an explanation, read this.

"There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used (financial bets) to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when (hedge funds) bought a credit-default swap, (they) enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets (hedge funds) and others made with firms like Goldman Sachs and AIG. (Hedge Funds), in effect, were paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all."

“They weren’t satisfied getting lots of unqualified borrowers to borrow money …

Socially Responsible WalMart II

In an article originally posted on the Street Insight section of thestreet.com on 5/2/2006 at 12:15 AM EST, we made the case that Wal-Mart was becoming socially responsible. We said, "The firm's poor reputation no longer matches the new corporate reality."

Recent events confirm this perception:

According to the Chicago Sun Times, "As the Obama administration begins investing billions in health information technology, Wal-Mart plans to use its unrivaled size to bring high-tech medical records to U.S. physicians.

In recent years Wal-Mart, the world's largest retailer, has used its buying power to move into health care markets, negotiating steep discounts for prescription drugs and eye care products."

Having completed an in depth analysis of the massive $787 billion dollar Stimulus Bill, we believe this is a stunning and strategic move that bodes well for the company's stock. Our analysis reveals that, of all the publicly traded companies in the US, Wal-Mart s…

Congresswoman With Ties to Bank Helped Seek Funds

According to the New York Times,

"WASHINGTON — Top banking regulators were taken aback late last year when a California congresswoman helped set up a meeting in which the chief executive of a bank with financial ties to her family asked them for up to $50 million in special bailout funds, Treasury officials said.

Representative Maxine Waters, Democrat of California, requested the September meeting on behalf of executives at OneUnited, one of the nation’s largest black-owned banks. Ms. Water’s husband, Sidney Williams, had served on the bank’s board of directors until early last year and has owned at least $250,000 in stock in the institution. Treasury officials said the session with nearly a dozen senior banking regulators had been intended to allow minority-owned banks and their trade association to discuss the losses they had incurred from the federal takeover of Fannie Mae and Freddie Mac. But Kevin Cohee, OneUnited’s chief executive, instead seized the opportunity to plead for …

Shareholder Approval of Executive Compensation

Congress passed, on Feb. 13, 2009, HR 1, the ‘‘American Recovery and Reinvestment Act of 2009’’. Section 7001 of the legislation states that:

“(e) SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION.—

(1) ANNUAL SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION.—

Any proxy or consent or authorization for an annual or other meeting of the shareholders of any TARP recipient during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding shall permit a separate shareholder vote to approve the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the Commission (which disclosure shall include the compensation discussion and analysis, the compensation tables, and any related material).

(2) NONBINDING VOTE.—A shareholder vote described in paragraph (1) shall not be binding on the board of directors of a TARP recipient, and may not be construed as overruling a decision by such board, nor to create or imply any ad…

Wall Street firms systematically cheated customers

As noted in the New York Times, "More than a dozen Wall Street trading firms systematically cheated their customers of millions of dollars by improperly slicing bits of profit from countless trades, federal regulators said on Wednesday. The Securities and Exchange Commission disclosed the allegations after negotiating settlements. The firms did not admit or deny the charges but agreed to pay a total of more than $69 million in forfeited profits and penalties.

The 14 firms named in the complaints are all “specialists,” trading firms that have a specific duty to maintain orderly markets by matching buyers and sellers and standing ready to conduct trades when buyers or sellers are scarce. They include units or subsidiaries of well-known Wall Street names, including E*Trade Capital Markets, Goldman Sachs Execution and Clearing, Knight Financial Products and TD Options."

SEC to Discuss Rules Governing Credit-Rating Agencies

According to the Washington Post, "The Securities and Exchange Commission is planning to announce Thursday it will hold a roundtable to discuss how to revamp the rules governing credit-rating agencies, according to people familiar with the matter.

This would be the first step toward addressing problems in the industry and the first public policy initiative taken by new SEC Chairman Mary L. Schapiro since she started at the commission.

Schapiro has raised concerns about credit-rating agencies, which are private firms that have been blessed by the SEC to judge the credit-worthiness of securities. Credit-rating firms gave high grades to many of the mortgage-related securities that turned out to be toxic and have wreaked havoc in the financial crisis.

The roundtable is scheduled for April 15. The three major credit- raters, including -- Standard & Poor's, Fitch Ratings and Moody's, -- and others have been invited to speak.

Schapiro has criticized the way credit-rating firms a…

Ex-Leaders of Countrywide Profit From Bad Loans

"CALABASAS, Calif. — Fairly or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nation’s economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering."

See: http://www.nytimes.com/2009/03/04/business/04penny.html