Kerviel: the crime that really didn’t pay 5 Oct 2010 SocGen's rogue trader has been sentenced to three years in prison and a 5 bln euro fine for racking up huge derivatives losses. The extraordinary penalty dwarfs Kerviel's small personal gains. Add the time behind bars, and this looks a deterrent that financiers will understand.
Tax fraud is Greece’s Achilles’ heel 5 Oct 2010 The government is ahead of IMF/EU targets for cutting its deficit, as its new budget shows. But revenue is seriously lagging, due to the country's massive tax fraud and evasion. Athens wants to sort this out but, as last week's tax amnesty shows, this won't be easy.
Feds might bail out U.S. cities and states 4 Oct 2010 Historically that hasn t happened, but the EU s example could make it more likely. Two possible structures for bailouts are budgetavoiding federal guarantees and regulationbending Federal Reserve bond purchases. Either way, politics may make rescues hard to resist.
Iraq’s oil bounty may not flow far so fast 4 Oct 2010 By raising proven reserves by 25 pct and trumping Iran, Baghdad helps its case with OPEC. With vast areas still unexplored, it may also be just the first upward revision of many. But Iraq s poor infrastructure and shaky politics may yet delay an increase in global supply.
EU unlikely to fall for China’s Greek ploy 4 Oct 2010 We're such nice guys, we'll even buy Greek debt, says China's PM on his European tour. It looks like an attempt to curry favour with the euro zone as the U.S. piles on pressure to revalue the yuan. But the euro zone isn't likely to and certainly shouldn't swallow the bait.
Bank morality no substitute for proper regulation 4 Oct 2010 Financial chiefs deserve support for highlighting an ethical basis for what they do. But instilling individual integrity in banks looks a stiff task, and won't be enough to make the system fairer. That will only happen when even big institutions carry the can for their follies.
Swiss regulators place faith in CoCo bonds 4 Oct 2010 UBS and Credit Suisse will have to hold a 19 percent capital buffer, with almost half in bonds that convert into shares in times of stress. The banking commission s demands are less severe than some feared. The Swiss endorsement could also help bring the CoCo market to life.
AIA’s $30 billion IPO is sensibly priced to go 4 Oct 2010 The Asian insurer's topend valuation will be slightly higher than the offer from UK Prudential it rejected in June. Though the price looks unchallenging relative to Asian peers, owner AIG will keep half of the stock for at least a year. Leaving some cash on the table is smart.
Flash crash report shows how, er, crashes happen 4 Oct 2010 There's no real blame. Preexisting jitters and one large trade, overlaid with computerized trading and data glitches, led U.S. stock market liquidity to dry up briefly on May 6. Some fixes are possible. But the broader lesson is that markets will always have tipping points.
Goldman UK special bonus doesn’t seem quite right 4 Oct 2010 About 80 partners received an extra bonus in August after restraint shown last year left the bank vulnerable to poaching. But paying the bonus this way means it escapes the UK's windfall tax. Goldman should give the tax it saved to charity.
UK coalition must impose equality of misery 4 Oct 2010 Higherrate taxpayers will forfeit automatic state handouts for their children, probably from 2013. This is rough justice and creates new tax anomalies, but is sensible. The well off should bear more of the pain from the UK s spending cuts. Yet top earners continue to escape.
Scarred TPG swims again with Hollywood sharks 4 Oct 2010 With a 35 pct stake in CAA, the buyout firm is entering the cutthroat world of representing movie stars. Locking in partners and funding for the agency s expansion should help mitigate risk. But as TPG knows too well from its MGM flop, Tinseltown often gets the best of outsiders.
Sanofi pushes ahead with spurned Genzyme bid 4 Oct 2010 The French pharma group is taking its rebuffed $69ashare offer directly to the U.S. biotech's shareholders. This shows Sanofi's confidence that it can clinch a deal, and worry that waiting will make its target more expensive. But a sweeter offer is still more than likely.
Art imitates Wall Street in Dealbreaker.com sale 4 Oct 2010 The Internet site that thrives on skewering the financial set finds itself in an ironically Wall Streetstyle pickle. Its owner wants to sell, but its editor wants more of the spoils. It s like a big dumb bank buying a securities firm employees get the rewards or they walk.
In rush to make rules, CFTC should keep it real 4 Oct 2010 The U.S. watchdog has little time to churn out small print for derivatives trading. Wall Street is worried that the hurry and the agenda of CFTC boss Gary Gensler might bring heavyhanded results. It s partly predictable bleating, but overzealous rules could cause damage.
Politics is Portugal’s biggest financial problem 4 Oct 2010 Bond investors are punishing Portugal more than its larger neighbor Spain. Both countries face similar challenges, and Spain's may in some ways be more acute. The difference is that Portuguese politicians haven't yet agreed on how to tackle it.
Jain’s rights issue reluctance could go down badly 1 Oct 2010 Unlike his boss, the head of Deutsche's investment bank is not taking up his full entitlement to buy shares in the German lender's 10.2 bln euro cash call. There are good reasons why Jain may not be stumping up fresh cash. But they won't help his chances of becoming the next CEO.
Ireland’s bailout is a clever financial wheeze 1 Oct 2010 The government's bank rescue has left a gaping deficit for 2010. But the cash cost will be spread over 10 years, while other expenses aren't included in the national debt. If Ireland can persuade investors it has capped its losses, however, the manoeuvres will be worth it.
M&A indies should enjoy their moment in the sun 1 Oct 2010 Boutiques and their ilk grabbed a whopping 20 pct of the U.S. fee pot this year, triple their share a decade ago. Bulgebracket banks have faced distractions and defections. Independent advice has been as de rigueur as midsize deals. That favors small firms but it won't last.
M&A bidders should be careful what they wish for 1 Oct 2010 Convenience store chain CoucheTard and car rental firm Hertz are walking away from companies they put into play. Their targets now look set to go to rivals, strengthening the competition. Avoiding bidding wars is usually smart not kicking one off may have been smarter.
Banks must avoid loans race as LBOs return 1 Oct 2010 Leverage is creeping back up again on European buyouts. Banks insist there's no danger. Fees and interest margins are higher, loans smaller and the risk syndicated more widely than in the boom. Still, banks must resist competitive pressure to offer eager LBO firms too much debt.
Obama could use another deal maker by his side 1 Oct 2010 The rest of his presidency is likely to require agreement with Republicans on tax and budget issues. His departing chief of staff, Rahm Emanuel, was once an investment banker and understood how to close a deal. Negotiating skills are still in high demand at the White House.
Excessive costs make U.S. rail look a boondoggle 1 Oct 2010 The $117 bln Amtrak estimate for the BostonWashington highspeed rail service far exceeds the $17 bln cost of China's longer highspeed train or the adjusted costs of earlier services in France and Japan. U.S. public sector contracting may be more economic drain than stimulus.
Modest TARP losses only tip of bailout iceberg 1 Oct 2010 The $700 bln fund may lose just $50 bln, an improvement on earlier estimates. But the U.S. committed trillions of dollars elsewhere to prop up the system. Much of that may be recovered, but Fannie and Freddie alone show TARP will only be a fraction of the whole cost.
Repsol’s $18 bln Sinopec venture ticks every box 1 Oct 2010 The Spanish energy giant is selling 40 pct of its Brazilian unit to China's Sinopec at a rich price. Repsol gets needed exploration funds, locks in a flush partner and stays in the driving seat. As for Sinopec, potential for more oil in Brazil means it may not be overpaying.