Print
Comment
Email
RSS
Twitter
Obama Shames Bankers
Obama Shames Bankers
Posted Friday, January 30, 2009 - 5:09am
Amid a "hat trick" of new bad economic data (sales of new homes plummet, businesses cut orders, and jobless claims soar), President Barack Obama's economic team is weighing up a two-part bailout for the banking sector, the Wall Street Journal reports. The plan aims to help banks but not put too great a burden on taxpayers by "buying a portion of banks' bad assets and offering guarantees against future losses on some of the remainder." Yet even while the Treasury looks to help banks, Obama is beating up on the fat cat culture, excoriating top bankers as "shameful" for awarding themselves $20 million in bonuses as the economy tanked, the New York Times writes. Around the globe, other governments are wondering how the U.S. will pay for its $800 billion stimulus package. They fear that huge U.S. government borrowing will "drive up inflation and interest rates around the world," writes the NYT. Then there is the thorny issue of protectionism. Already European legislators have said they may challenge the so-called Buy American provision of the stimulus bill that "would, with some notable exceptions, ensure that only U.S.-produced iron and steel be used for construction," writes CNN Money.
On a day when Japan reported a record 9.6 percent drop in industrial production, perhaps we shouldn't be surprised to hear that Honda's net profit fell 90 percent in the fourth quarter of last year, "as the credit crisis and cautious consumer sentiment led to slow sales of even small fuel-economy cars," writes the WSJ. Staying with autos, the Detroit Free Press asks how long Ford can go it alone now that it is poised to access its final $10 billion line of credit. According to one analyst, Ford's independence play depends on "the second half [of the year] getting better." The slow expiration of the domestic auto industry is killing innovation throughout the greater economy, writes the WSJ, noting that the Big Three have long played a "nurturing role" in helping their suppliers keep up with new technology. Talking of innovation, Business Week wonders whether Detroit could learn and prosper from the Google model of open-access experimentation. Releasing a car in beta may not be as strange as it sounds. Remember the Pinto?
Hot on the heels of the Wyeth-Pfizer marriage, Swiss Big Pharma giant Roche has stepped up its bid to control California biotech company Genentech, the Financial Times reports. Having been rebuffed last year by Genentech's committee of special directors, Roche has decided to appeal directly to shareholders with an offer of $86.50 a share for the 44 percent of the company it doesn't already own.
The sun continues to shine on Amazon. While the rest of the economy drives off a cliff, the online retailer has reported an "amazing fourth quarter" that saw an 18 percent surge in revenue, Business Week reports. Amazon's "competitive pricing" succeeded in stealing sales from other Internet retailers as it enjoyed a "Wal-Mart effect with people trading down to Amazon to get better prices over the holiday,” in the words of one analyst. CEO Jeff Bezos was also keen to highlight the growing demand for Amazon's Kindle. The company is poised to unveil a new version of the electronic book reader in early February, writes the NYT. Staying in techland, Dell is preparing to enter the smart-phone market as its PC business continues to tank. Insiders tell the WSJ that Dell could go up against the likes of Apple and Research in Motion as early as next month.
Finally, from shameful bankers to shame-faced: The WSJ reports we can now count two former Merrill chief executives and a former Merrill investment-banking chief among the list of investors burned by Ponzi schemer Bernie Madoff.
Recent Today's Business Press Posts
-
Caitlin McDevittNovember 22, 2009
-
Paul SmaleraNovember 21, 2009
-
Matthew YeomansNovember 20, 2009
-
Caitlin McDevittNovember 19, 2009
-
Matthew YeomansNovember 18, 2009
Comments
Wake up Wall Street--There a New Sheriff in Town
Wall Street Better Get The Message: There is a New Sheriff in Town
We have just experienced era when political and business leaders seem to have had an almost invincible ability to avoid accountability for their reckless and negligent behavior. Sounds like lawyer talk. Well lawyers were inextricably involved in this sorry state of affairs. Lets take the Bush administration. What did all the Republican cronies like Cheney learn from the Nixon saga? Don't put yourself in weak position legally. Don't testify under oath. Better yet, don't testify. Don't provide information under threat of perjury and obstruction of justice, better yet don't provide information. They artfully avoided political accountability for a litany of constitutional abuses, executive misconduct and malfeasance.
Now lets consider what has happened in the financial services industry. Until recently, our securities laws forced Wall Street to worry about the way it conducted business. Don't play by regulatory rules with origins in Roosevelt's New Deal and sooner or later the SEC or an Elliot Spitzer clone will hunt you down. You had to worry about adequate disclosure and a battery of rules designed to protect Joe public and the sanctity of the markets. If you misbehaved, you also had to worry about a ravenous plaintiff's bar charged with the duty of prosecuting claims on behalf of investors unable to fend for themselves (for a generous fee, of course).
Those New Deal rules are still there. However, Wall Street managed to water everything down to the point where a man made Katrina hits the financial markets and there is little or no means to hold the perpetrators accountable. The SEC was either clueless or too feeble to chase the bankers who designed, peddled and later lied about their exposure to toxic asset backed securities. What about Credit Default Swaps? Oh, those so called financial weapons of mass destruction are not securities within the meaning of the securities laws. Those are cutting edge risk management tools.
How about so called victims like poor old AIG banding together to sue those who set them up with these improvised financial explosive devices. Never mind, those were sold to sophisticated institutions and "accredited" investors more than able to fend for themselves. Sales to these financial sophisticates are not subject to the same legal regime. We now see that "sophisticated investor" means one who expects to be bailed out by Uncle Sam.
Finally, you won't be seeing any widows and orphans starting class action suits, because no one sold them any securities. Instead, they are accused of being culpable in the great sub-prime meltdown because they fell prey to the army of mortgage brokers who aggressively peddled shadow bank loans. Mortgage brokers owned by who else? Wall Street investment banks like Merrill, Lehman and Bear Stearns. Shadow bank loans? Yep, AAA legal advice.
Let the markets regulate themselves! That is the fundamentalist mantra of the lords of the Street. Well, that is what the markets were actually doing until the SEC decided to act on the shorts. Self regulation came in the surprising form of punishment by the shorts. After all, it was the hedge fund industry, Messrs Einhorn et al, and not the SEC that called Lehman and AIG to the carpet. The SEC, fixed the short problem. Trading bets against financial institutions were temporarily banned. In a comic twist, the SEC planed to force hedge fund managers to testify under oath. Something more than you can expect from the likes of Harriet Myers and Alberto Gonzalez. Ultimately, the reckless bets that the investment banks made with shareholder capital went unpunished.
Well you begin to see how what seems like one big scam is actually a legally airtight apparatus for screwing the public in an indirect manner, albeit without being held legally accountable. Time to throw out all of the New Deal regulatory assumptions and start all over again. Wall Street, like the Bush administration, managed to innovate its way out of accountability.
Next came the TARP bailout. Hank Paulsen, a former Goldman Sachs honcho connived Joe taxpayer into shelling out billions to save a corrupt and broken financial juggernaut. Plenty of new opportunities for Wall Street bankers to make a killing cleaning up their own mess.
As we have seen, Paulsen threw the first tranche of TARP money out of the helicopter without attaching any strings. No one seems to be able to explain where the money has gone or the magnitude of the losses yet to be uncovered. Now we learn that billions of dollars were paid in bonuses to employees of institutions that are essentially insolvent absent taxpayer largess. Paulsen and his fellow Goldman Sachs henchman Neel "Kash n Carry" can be credited with designing an opaque bailout that lays perfect ground cover for the continuing incompetence and greed of the scions of Wall Street.
In the latest Act of the Bailout Soap Opera, BAC's CEO Ken "Screwless" Lewis is claiming that management of BAC should not be held accountable for proceeding with the Merrill Lynch merger despite having knowledge of surprise mega losses last December. His defense, "the Feds made me do it". This Bailout defense is the latest twist in the science of executive non-accountability. The bonus hissy fight between Screwless Lewis and John "Complain" Thain is a comedy that rivals Abott and Costello's "Who's on First" (http://www.youtube.com/watch?v=sShMA85pv8M)
There you have it. The TARP Bailout has created a black-hole of corporate accountability. If you are a stakeholder (a shareholder, creditor, bondholder, taxpayer) it is impossible to divine who the Boards and CEOs running these companies think they owe their fiduciary duty to.
The Obama Administration certainly has its work cut out for it. It looks like we are off to a good start. Someone should have read the "riot act" to the Consumer Finance Industrial Complex long ago. Yesterday, President Obama took the first shot across Wall Street's bow. "Shameless" behaviour will no longer be tolerated. He characterised Wall Street's 2009 bonus payout as "the height of irresponsibility". Concurrently, a message was sent to Citigroup, --your not leaving on a 50 million dollar taxpayer subsidised jet plane. Richard Parson's, Citigroup's incoming Chairman, met with Obama earlier this week. One can only imagine what was said in that meeting.
One hundred years ago a prominent Wall Street lawyer named Franklin Keyes, published a tract entitled: "Wall Street Speculation, Its Tricks and Its Tragedies". In it he said: "Wall Street is dominated by some of the brainiest and shrewdest men in the country, natural born sharpers and schemers, and before the average man can get the better of them, except through the merest chance, he will have to eat brain food for a long time."
Finally, we have a President who has eaten plenty of brain food for a long time. Wall Streets Captains of Kleptocracy better get the message: There's a new sheriff in town.
WilliamBanzai7
Wake up Wall Street--There a New Sheriff in Town
Wall Street Better Get The Message: There is a New Sheriff in Town
We have just experienced era when political and business leaders seem to have had an almost invincible ability to avoid accountability for their reckless and negligent behavior. Sounds like lawyer talk. Well lawyers were inextricably involved in this sorry state of affairs. Lets take the Bush administration. What did all the Republican cronies like Cheney learn from the Nixon saga? Don't put yourself in weak position legally. Don't testify under oath. Better yet, don't testify. Don't provide information under threat of perjury and obstruction of justice, better yet don't provide information. They artfully avoided political accountability for a litany of constitutional abuses, executive misconduct and malfeasance.
Now lets consider what has happened in the financial services industry. Until recently, our securities laws forced Wall Street to worry about the way it conducted business. Don't play by regulatory rules with origins in Roosevelt's New Deal and sooner or later the SEC or an Elliot Spitzer clone will hunt you down. You had to worry about adequate disclosure and a battery of rules designed to protect Joe public and the sanctity of the markets. If you misbehaved, you also had to worry about a ravenous plaintiff's bar charged with the duty of prosecuting claims on behalf of investors unable to fend for themselves (for a generous fee, of course).
Those New Deal rules are still there. However, Wall Street managed to water everything down to the point where a man made Katrina hits the financial markets and there is little or no means to hold the perpetrators accountable. The SEC was either clueless or too feeble to chase the bankers who designed, peddled and later lied about their exposure to toxic asset backed securities. What about Credit Default Swaps? Oh, those so called financial weapons of mass destruction are not securities within the meaning of the securities laws. Those are cutting edge risk management tools.
How about so called victims like poor old AIG banding together to sue those who set them up with these improvised financial explosive devices. Never mind, those were sold to sophisticated institutions and "accredited" investors more than able to fend for themselves. Sales to these financial sophisticates are not subject to the same legal regime. We now see that "sophisticated investor" means one who expects to be bailed out by Uncle Sam.
Finally, you won't be seeing any widows and orphans starting class action suits, because no one sold them any securities. Instead, they are accused of being culpable in the great sub-prime meltdown because they fell prey to the army of mortgage brokers who aggressively peddled shadow bank loans. Mortgage brokers owned by who else? Wall Street investment banks like Merrill, Lehman and Bear Stearns. Shadow bank loans? Yep, AAA legal advice.
Let the markets regulate themselves! That is the fundamentalist mantra of the lords of the Street. Well, that is what the markets were actually doing until the SEC decided to act on the shorts. Self regulation came in the surprising form of punishment by the shorts. After all, it was the hedge fund industry, Messrs Einhorn et al, and not the SEC that called Lehman and AIG to the carpet. The SEC, fixed the short problem. Trading bets against financial institutions were temporarily banned. In a comic twist, the SEC planed to force hedge fund managers to testify under oath. Something more than you can expect from the likes of Harriet Myers and Alberto Gonzalez. Ultimately, the reckless bets that the investment banks made with shareholder capital went unpunished.
Well you begin to see how what seems like one big scam is actually a legally airtight apparatus for screwing the public in an indirect manner, albeit without being held legally accountable. Time to throw out all of the New Deal regulatory assumptions and start all over again. Wall Street, like the Bush administration, managed to innovate its way out of accountability.
Next came the TARP bailout. Hank Paulsen, a former Goldman Sachs honcho connived Joe taxpayer into shelling out billions to save a corrupt and broken financial juggernaut. Plenty of new opportunities for Wall Street bankers to make a killing cleaning up their own mess.
As we have seen, Paulsen threw the first tranche of TARP money out of the helicopter without attaching any strings. No one seems to be able to explain where the money has gone or the magnitude of the losses yet to be uncovered. Now we learn that billions of dollars were paid in bonuses to employees of institutions that are essentially insolvent absent taxpayer largess. Paulsen and his fellow Goldman Sachs henchman Neel "Kash n Carry" can be credited with designing an opaque bailout that lays perfect ground cover for the continuing incompetence and greed of the scions of Wall Street.
In the latest Act of the Bailout Soap Opera, BAC's CEO Ken "Screwless" Lewis is claiming that management of BAC should not be held accountable for proceeding with the Merrill Lynch merger despite having knowledge of surprise mega losses last December. His defense, "the Feds made me do it". This Bailout defense is the latest twist in the science of executive non-accountability. The bonus hissy fight between Screwless Lewis and John "Complain" Thain is a comedy that rivals Abott and Costello's "Who's on First" (http://www.youtube.com/watch?v=sShMA85pv8M)
There you have it. The TARP Bailout has created a black-hole of corporate accountability. If you are a stakeholder (a shareholder, creditor, bondholder, taxpayer) it is impossible to divine who the Boards and CEOs running these companies think they owe their fiduciary duty to.
The Obama Administration certainly has its work cut out for it. It looks like we are off to a good start. Someone should have read the "riot act" to the Consumer Finance Industrial Complex long ago. Yesterday, President Obama took the first shot across Wall Street's bow. "Shameless" behaviour will no longer be tolerated. He characterised Wall Street's 2009 bonus payout as "the height of irresponsibility". Concurrently, a message was sent to Citigroup, --your not leaving on a 50 million dollar taxpayer subsidised jet plane. Richard Parson's, Citigroup's incoming Chairman, met with Obama earlier this week. One can only imagine what was said in that meeting.
One hundred years ago a prominent Wall Street lawyer named Franklin Keyes, published a tract entitled: "Wall Street Speculation, Its Tricks and Its Tragedies". In it he said: "Wall Street is dominated by some of the brainiest and shrewdest men in the country, natural born sharpers and schemers, and before the average man can get the better of them, except through the merest chance, he will have to eat brain food for a long time."
Finally, we have a President who has eaten plenty of brain food for a long time. Wall Streets Captains of Kleptocracy better get the message: There's a new sheriff in town.
WilliamBanzai7