Bank Bailout Hit By Pay Dispute

There's a certain vicious irony in the Wall Street Journal's lead story that outlines how the Treasury's $700 billion bailout bill—designed to save banks and head off massive economic collapse and knock-on unemployment—is being stymied by a pay dispute with the private sector asset managers needed to implement the plan and a "lack of manpower at Treasury." As the WSJ explains, the fees the government intends to pay financial firms to implement the plan "are not expected to be as high as a firm could get managing private assets. Treasury has been trying to figure out how best to structure the fees so it can attract managers—without overpaying." Perhaps the financial community should take a look over the horizon rather than counting the pennies. After all, U.S. regional banks accepted more than $30 billion of fresh capital yesterday, as the Financial Times notes, while over in the United Kingdom, the Bank of England has issued a stark warning that the "financial system faces the possibility of further instability," with the solvency of major insurers and hedge funds topping the list of concerns. Meanwhile on the back of Monday's monstrous share sell-off in Asia and the demoralizing 2.4 percent slump for the Dow Jones industrial average (CNN Money reports), global policymakers "are scrambling to support their economies," writes the New York Times, with South Korea and Australia's central banks all intervening to shore up investor confidence. Even as Asian markets showed signs of recovery (Hong Kong's Hang Seng rose 4.8 percent) this morning, there seems little doubt that the European Central Bank will cut its benchmark base interest rate next week.

Both the both the New York Times and WSJ report this morning that two of Detroit's Big Three seem certain to benefit from a U.S goverment bailout, even if the details of the rescue deal haven't yet been worked out. Spurring the government into action is increased anxiety over the need to push through the GM-Chrysler merger and, to that end, GM is in line to receive $5 billion "from the $25 billion in low-interest loans [to the auto industry] approved by Congress and being administered by the Energy Department." Those loans were passed to help the industry speed up the introduction of energy efficiency technology but could be used to help GM complete the merger, writes the WSJ. The news comes the same day that Porsche moved to "cement its control of Europe’s biggest carmaker" VW. Its shares rose 147 per cent after "Porsche unexpectedly disclosed that through the use of derivatives it had increased its stake in VW from 35 to 74.1 per cent," the FT reports. The move sent short sellers of VW into a panic and prompted this graphic headline from Forbes: "Porsche Squeezes Volkswagen Shorts." And you thought the credit crunch sounded nasty.

Boeing and the machinists union have struck a tentative compromise deal that looks set to "end a costly strike that has stretched 53 days," reports the Seattle Times. The major sticking point for both sides had been the outsourcing of some union work. Under the terms of the new agreement (set to last four years) the union "agreed to let vendors deliver parts to receiving areas inside the factory but won a commitment that only Machinists will take it from there."

Staying in Seattle ... Microsoft has joined forces with Yahoo and Google to announce "a common set of principles for how to do business in nations that restrict free speech and expression, as the companies seek to combat criticism that they have helped enable censorship in those countries," the WSJ reports. In a move that mirrors the cooperation seen in recent years between major corporations and environmental groups, the tech titans (as the report calls them) reached out to groups like Human Rights First and Committee to Protect Journalists to help draft the Global Network Initiative. The upshot is a pact that intends "to protect the personal information of [the companies'] users wherever they do business and to 'narrowly interpret and implement government demands that compromise privacy,'" adds the WSJ.

Still in techland, it seems at least one company is benefiting from the recession. The Guardian reports that new signups to business social networking site LinkedIn have jumped 25 percent since September as "business people seek to keep themselves well networked as insurance in an uncertain time for jobs." LinkedIn claims 30 million users worldwide—with a very active investment banker network, no doubt.