Rating agencies’ shield against lawsuits has holes 13 Nov 2007 US courts have often accorded credit ratings constitutional protection as free speech. But this muchtouted barrier to litigation could be permeable and all the more so because the most recent CDOinduced credit mess is anything but massmarket.
Blackstone predictably disappoints investors 12 Nov 2007 The private equity group is not alone in having a complicated business. But its investors are grappling with three different measures of profit, a structure still in transition and a shortage of benchmarks. Still, lacklustre earnings shouldn't have surprised them.
Chuck prints much less money than Stan on exit 9 Nov 2007 Prince is leaving Citi with a nestegg worth less than $30m. O Neal left Merrill with $160mplus. Partly that reflects Citi s weaker stock performance. But the bigger bank seems to be less generous at the top, too. Let s hope it can stick to that as it looks for a new CEO.
Negative convexity magnifies subprime losses 8 Nov 2007 No, it s not a flaw in bankers eyeglasses. It's part of the reason Morgan Stanley says it lost $3.7bn on a mortgage bet despite correctly betting prices would fall. Negative convexity can help turn a modest flaw in a trader's assumptions into a whopping loss.
Fed squeeze keeps getting tighter 8 Nov 2007 As the financial troubles in the US deepen, the central bank looks increasingly likely to cut rates again in December. But that would only increase the pressure on the dollar, which is already in near freefall against the euro. And increase the risk of higher US inflation.
Have banks got the joke about SuperSIV? 8 Nov 2007 The belief that the fund s just a way to bail rivals out of a mess seems to have made many reluctant to support it. But a firesale of SIV assets could dump some $150bn of bank debt on the market. That would be painful for everyone.
How will Wall Street’s laggards keep their talent? 7 Nov 2007 So far this year, compensation is up 21% at Goldman Sachs. At Merrill it s down 15% and plunging at Citi. To retain their stars, the likes of Merrill and Citi will have to create a culture of Haves and Have Nots at bonus time. This creates a big challenge for their incoming CEOs.
Wall Street pain gives small research shops a shot at fame 7 Nov 2007 Lesser known analysts are coming out with bigger estimates of Wall Street losses. That could be because they re more independent. Their calls vary in quality. But they also attract a lot of useful publicity.
Why super senior doesn’t always mean super safe 6 Nov 2007 Citigroup yesterday tried to reassure investors with the disclosure that the bulk of its US mortgage exposures are to super senior tranches of ABS CDOs. On its own, this statement offers no comfort at all. It all depends on what bonds the structures are referencing.
UK property funds could escape the worst 6 Nov 2007 When German commercial property weakened in 2005, withdrawals from investment funds had to be blocked to stop a stampede for the exit. The UK property market is weakening, but funds aren't likely to need such extreme measures, thanks to more trustworthy valuations.
Bischoff now most powerful Brit on Wall St 5 Nov 2007 The appointment of the former Schroders boss as Citi interim CEO makes him arguably the most influential Brit in global finance, if only for a short while. Not that Bischoff, born in Germany, is that British. But neither are many of the other candidates.
Dear Hank, please come to Citi 5 Nov 2007 Could Citigroup chairman Robert Rubin, formerly of Goldman Sachs and the US Treasury secretary, be thinking about persuading fellow Goldman alumnus and current Treasury boss Hank Paulson to replace Chuck Prince? If he was, this is what he might say.
Citi needs a plumber with a taste for dismantlement 4 Nov 2007 Chuck Prince took over amid regulatory tumult, but gave the impression he hadn t mastered Citi s complexity. The bank needs a confidenceinspiring leader unwedded to Sandy Weill s legacy of expansion, with an understanding of the waterworks of finance, like John Thain, and a willingness to take them apart.
Two ways for Barclays to settle investor nerves 2 Nov 2007 The UK bank s shares have slumped 12% in two days on fears that Barcap is sitting on big undisclosed credit losses. So far Barclays' response has been unconvincing. It needs to come clean on its exposures; and CEO John Varley should be the one to do the talking.
Japan’s GCA bets on better M&A market abroad 2 Nov 2007 Crossborder M&A activity between Japan and the US is booming. So it's natural for dealmakers on both sides of the Pacific to want a bigger piece of the action. But Japanese M&A boutique GCA's $780m purchase of Savvian looks like a case of GCA going overboard.
Corporate earnings games show a diseased system 2 Nov 2007 A study by consultants REL shows that US companies manipulate their fourth quarter earnings. Talk about shortterm thinking. But analysts and boards expect no less. The consultants suggest rolling 12month targets. But lower CEO pay and better job security would help more.
Cheyne £101m payout shows poor timing 2 Nov 2007 Sure, it doesn t look good when a hedge fund pays fortunes to its staff shortly before investors in one of its funds are wiped out. But Cheyne is on safer ground than most. Its investors have generally done well; the losers have been bondholders who should have known the risks.
Jimmy Cayne’s foibles spark up Wall Street 1 Nov 2007 The Bear Stearns boss was reported by the WSJ to have smoked pot while offduty at a bridge tournament. While it may have the industry atwitter, this would be no big deal on its own. But combined with his golfing and playing cards during the firm s crisis it raises questions about his overall judgement that Bear s board and its shareholders must consider.
Citi may be forced into a breakup 1 Nov 2007 The bank s board and CEO Chuck Prince have long resisted such a move, even though it would have unlocked value. But now they may have no choice. The bank s capital ratios look to be inadequate and that s before considering the $80bn in its SIVs and any further credit problems. If it comes to a firesale, Citi s board will have to put new management in place.
US stockmarket gets credit fright 1 Nov 2007 Financials exposed to the credit crunch were particularly savaged during today s stock plunge. In light of mounting revelations of the extent of mortgage CDO losses and Citi s capital issues, that makes sense. What s curious is why it took so long.