Break Up the Banks

If you think tougher government oversight will avert future financial calamities, think again. That was the message in a stunning rebuke of Big Finance on Tuesday by Bank of England Governor Mervyn King, who "made a strong call for the breaking up of some of the world's biggest financial firms," the Wall Street Journal reports. King did not mince words. "The sheer creative imagination of the financial sector to think up new ways of taking risk will in the end, I believe, force us to confront the 'too important to fail' question," the U.K.'s top central banker said in a speech on Tuesday. "The belief that appropriate regulation can ensure that speculative activities do not result in failures is a delusion." King did not end there. He grumbled that the "too big to fail"—what the Brits refer to as "too important to fail"—concept is destructive. "The scale of the support to the banking system is 'breathtaking' and we will paying for the impact of the crisis on the public finances 'for a generation,' " the Guardian writes.

Ah, but this view is little more than the crazy ramblings of a European central banker. Right? Think again. Former Fed Chairman Paul Volcker has been pressing members of Congress and the Obama administration's top financial advisers to dramatically recast America's banking sector, too, so as to prohibit commercial banks from participating in investment banking activities. "He wants the nation’s banks to be prohibited from owning and trading risky securities, the very practice that got the biggest ones into deep trouble in 2008," the New York Times writes. Volcker wants to "roll back the nation’s commercial banks to an earlier era, when they were restricted to commercial banking and prohibited from engaging in risky Wall Street activities," the newspaper adds. The Obama administration is more content to leave them intact but pile on more regulation. The clamor about how to secure the banking system is likely to grow louder now that it's been determined taxpayers are "extremely unlikely" to see any kind of return from their $700 billion emergency bailout last year of the financial sector, Bloomberg reports, citing the latest TARP audit.

Could the worst be over for Yahoo (YHOO), a firm that's become a measuring stick for the state of Internet advertising? On Tuesday, Yahoo reported sales fell 12 percent to $1.58 billion from a year ago, but there is a positive sign, indicating that spending on Internet ads is showing signs of life, the WSJ reports. "The ad dollars are starting to flow a little bit better," Tim Morse, Yahoo's finance chief, said on a conference call. The NYT notes Yahoo beat analysts' expectations. "Aided by cost-cutting, the sales of some assets and better-than-expected revenue from display ads, Yahoo’s net income more than tripled in the third quarter," the newspaper writes. Staying in tech, things aren't quite as rosy at Sun Microsystems (JAVA). The company announced on Tuesday, it would shed 3,000 more jobs as part of a restructuring as it awaits European approval for its $7.4 billion merger with Oracle (ORCL), the San Francisco Chronicle reports.

What did Bank of America (BAC) executives know and when did they know it? That's what congressional investigators want to discover as they sift through reams of internal documents relating to last year's snap purchase of Merrill Lynch, the Washington Post writes. Sources tell the Post that the files show that BofA execs "were alarmed by mounting losses" at Merrill "well before shareholders voted to approve the merger." Furthermore, investigators suspect that, "Bank of America chief executive Kenneth D. Lewis used the threat of backing out of the government-backed deal as leverage for billions more in taxpayer bailout money," the Post writes.

Can the Nook dethrone the Kindle? Yesterday Barnes & Noble (BKS) unveiled its own electronic book reader to rival Amazon's fast-selling hit. The Nook will cost $259 (the same price as the Kindle), and some of its content will also be sharable on other Nooks, cell phones, or computers. As the WSJ writes, "Barnes & Noble unveiled the Nook in Manhattan at an event well attended by CEOs of many of the industry's biggest publishing houses. Those connections helped the nation's largest bookstore chain win a concession: the ability for buyers of some e-books to lend their purchases to friends for as many as 14 days at a time."

And finally, the New York Mets may have finished near the bottom of the National League standings this season, but team ownership may have pulled off the least likely of victories this year. Mets Limited Partnership, a group connected to team owners Sterling Equities Inc., made money on its business dealings with convicted swindler Bernard Madoff, the WSJ reports, actually netting $48 million from Madoff. That money could be well spent on another starting pitcher or slugging outfielder, your correspondent hopefully notes.