Although we have spoken from time to time about the managerial and cultural failings of the financial services industry, an article today in the Telegraph by Roger Bootle provides a nicely balanced, colorful, and deceptively insightful overview of the issue, while also giving a taste of how the British variant of the problem differs from […]
Read more...Henry Kaufman, aka Dr. Doom in his heyday as Salomon’s chief economist when the firm was at the peak of its power, argues in “Finance’s upper tier needs closer scrutiny,” that the very biggest financial institutions need a regulator with the savvy and reach to supervise them effectively. Kaufman put the number at roughly the […]
Read more...The Financial Times reports that the investment banking industry is considering implementing guidelines regarding compensation to ward off further criticism. However, in reality, legislators and regulators are highly unlikely to impose any kind of standards. The worst the industry faces is being hauled before Congress and called bad names for ten minutes. The absence of […]
Read more...A comment in today’s Financial Times, “The fall of a financial model,” by Jean-Louis Beffa, chairman of Saint Gobain and Xavier Ragot of the Paris School of Economics argues that the approach to financial capitalism in operation for the last decade is coming to an end. They define the model as giving a primary to […]
Read more...Alistair Darling, the UK’s Chancellor, criticized bonus payouts as too often not warranted by performance and called on boards to exercise more restraint. The attack came as a surprise, but the proximate cause seems to lavish pay for those in the City while their companies and the country as a whole is not doing all […]
Read more...Some have taken notice that investment banks are much more cavalier with other people’s money that they are with their own dough. We’ve gone further in earlier posts, saying that investment banks shouldn’t be public companies (scroll towards the end). A Bloomberg article points out the obvious: the Street has sustained losses unimaginable in the […]
Read more...Martin Wolf’s current comment is great fun. He makes a recommendation which is logical and well argued but so contrary to the prevailing orthodoxy that it is sure to elicit a lot of ire. And I guarantee it will be misconstrued as well. Wolf notes that banks (and we can include investment banks) have succeeded […]
Read more...The Wall Street Journal broke the story that Bear Stearns’ 74 year old chairman James Cayne has told board members he will give up his CEO role but stay on as chairman. 57-year old president and investment banker Alan Schwartz is expected to assume the CEO post. I complained back in November that the Wall […]
Read more...UBS is getting heat on multiple front on the planned investment of $11.5 billion, the bulk of which comes from the Singapore Investment Corporation, and the remainder from a secretive Middle Eastern investor. Initially, this development seemed like a coup, for the Swiss bank announced further writeoffs seen as deep enough to take it through […]
Read more...Yet another cash infusion for an investment bank suffering losses by the Chinese (the first was Bear Stearns). China state-controlled China Investment Corp, is buying securities that offer a current yield of 9% and convert into as much as 9.9% of the firm. However, the investment fund will receive no board seat or management role. […]
Read more...You can fault Bear on other fronts, but the firm has an executive compensation plan that – hold your breath – requires that top brass get no bonuses if the firm misses its ROE targets. Even though the top executives could have received small bonuses this year, the Wall Street Journal reports they decided to […]
Read more...A story highlighted on the first page of the Wall Street Journal and slotted to appear on page A3, “Fidelity Succession Plan Weighs Splitting Chairman, CEO Posts,” has the earmarks of being a PR plant by the Boston-based company. And the Journal appears to have featured it as served up in return for getting the […]
Read more...This is a great post, “Why Market Leaders Don’t Listen to Investment Bankers,” by Charles Green at HuffPo. The set-up for this story is why it isn’t so dumb for companies to keep a lot of supposedly unproductive cash on hand. You can make similar argument for why companies shouldn’t divest their cash cows. A […]
Read more...The New York Times has an odd piece today, “Where Did the Buck Stop at Merrill?” which seeks to determine whether the unexpectedly $8.4 billion third-quarter writeoff was not just former CEO Stanley O”Neal’s failing, but also one of Merrill’s board. Another shoe may be about to drop, since the Wall Street Journal claimed that […]
Read more...A piece in Seeking Alpha, “Buybacks: A Wolf In Sheep’s Clothing,” by Matthew Hougan at Index Universe, does a nice job of debunking the myth that stock buybacks are a positive indicator for price performance. I’ve always had trouble with the logic of buybacks. If a company doesn’t believe that it has attractive enough prospects […]
Read more...