Posts related to ‘Regulation’

The Federal Reserve Vs. Ron Paul

There is a rumor that has been around Hollywood for decades that some of the greatest silent film comedy scripts were created by screen writers who would bribe wardens at a local insane asylum to allow a patient to sit in on their story meetings. Allegedly, some of the most hilarious moments in the history of comedic cinema came out of ideas from the minds of people who spent all of their time on locked wards. Even the craziest person in the world can give birth to an idea which is both brilliant and intelligible. Read More »

Posted on: November 20, 2009 – 4:35 am in Banking, Regulation, ,

Risks in Geithner’s Call For More Lending

U.S. Treasury Secretary Timothy Geithner spoke this morning and has effectively called for banks which have received government bail-out funds to boost their lending activities.  Geithner noted that a lack of lending and strict limits to credit might act as a buffer against a continued recovery.

The Obama administration is trying to come up with new ways to turn the credit back on for small businesses.  It is no wonder that Goldman Sachs Group (NYSE: GS) launched its initiative this morning.  The firm’s public relations and financial relations campaign is a $500 million 10,000 Small Businesses initiative aimed at fostering small business growth and job-creation for up to 10,000 small businesses.  The company plans to offer business education, mentorships, business networks, and capital.

Geithner noted that banks need “to be working with us, not against recovery.”  He also noted that it was taxpayers saving the banks rather than their great intelligence and efforts that has led to the return of bank earnings, and he said banks have some responsibility and are obliged to assist in the recovery of communities.  But, Geithner also defended banking sector earnings.  It has been noted how lending standards have tightened month after month.  Where this gets interesting though is in evaluating credit risks and interpolating that data for risks ahead.

Read More »

Posted on: November 18, 2009 – 12:16 pm in Banking, Economy, Financial Stocks, Politics, Regulation,

California Plans To Ban Some Energy-Hungry TVs

The State of California claims that as much of 10% of the region’s electricity is used by televisions. The state government is considering setting standards for TV energy consumption that would push 25% of the sets now made out of the market in 2013.

According to the AP, “Industry representatives have said the standards would force manufacturers to make televisions that have poorer picture quality.” Read More »

Posted on: November 18, 2009 – 5:53 am in Consumer Electronics, Regulation

Did NY Fed Cost Taxpayers Billions?

There are two sides to every story, and sometimes three, four or five. An audit by the Special Inspector General for the Troubled Asset Relief Program claims that the Federal Reserve Bank of New York allowed banks to get 100% of the value of complicated financial instruments that they had insured with AIG (NYSE:AIG). The transactions involved over $60 billion. The full report was issued today.

The inspector general Neil M. Barofsky claims that the Fed “refused to use its considerable leverage” to force major banks to make concessions on the money they were owed as part of their relationships with AIG. Goldman Sachs (NYSE:GS) was among the firms that benefited from the Fed’s action while Credit Suisse (NYSE:CS) actually offered to take less than 100 cents on a dollar for its insurance claims and was turned down.

Read more….

Posted on: November 17, 2009 – 5:36 am in Regulation, , ,

How Much is Benmosche Really Worth to AIG? (AIG, MET)

AIG LogoAmerican International Group, Inc. (NYSE: AIG) is under pressure today after its new CEO Robert Benmosche, who has not even had a full three months yet on the job, has effectively threatened to walk out as CEO of AIG. The reasoning is over the intense restrictions of being under the government, particularly as it pertains to compensation limits.  What is interesting is that this may be a strong CEO throwing the gauntlet at the government.  But we also want to explore what Benmosche is actually worth in real dollar terms to AIG today.  Chances are it is far more than just this 4% we have seen the stock drop today.
Read More »

Posted on: November 11, 2009 – 1:00 pm in Compensation, Editor's Picks, Financial Stocks, Insider Activity, Management Change, Regulation, Rumors, Shareholder Issues, Turnarounds, ,

Dodd’s Follies: The Most Complex Financial Regulatory System In The World

bankSenator Christopher Dodd put out his draft bill which calls for the most significant overhaul in government financial regulation is over a century. The “Restoring American Financial Stability” document has 1,136 pages, but one of the first major statements in the bill should make the balance of the proposal academic. The new legislation, among other things, means to “Enforce Regulations On The Books.” Those who drafted the bill describe this as allowing “regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefit special interests at the expense of American families and businesses.” Read More »

Posted on: November 11, 2009 – 4:48 am in Banking, Regulation

The EU Blocks Oracle (ORCL) Deal For Sun (JAVA)

uncle samLarry Ellison, the CEO of Oracle (NASDAQ:ORCL) is going to have to make some more threats if he wants the EU to approve his company’s deal to buy Sun Microsystems (NASDAQ:JAVA) for $9.50 a share. The Europeans have voiced some concerns that the combined company will have too much market share in the MySQL server software industry.

The EU’s concerns became more concrete today. Read More »

Posted on: November 9, 2009 – 6:40 pm in Mergers and Buy Outs, Regulation, Software, ,

AES Debate: China’s Infrastructure Grab (AES)

bull-and-bear-imageChina is at it again buying key infrastructure access.  AES Corp. (NYSE: AES) disclosed on Friday, along with earnings, that the company was raising significant cash.  This is a capital raise which also may ‘raise some eyebrows’ because the company is selling a 15% stake to China’s sovereign wealth fund, China Investment Corporation.  The stake sale will bring in $1.58 billion for expansion of global projects.  AES also announced a Letter of Intent to sell a 35% minority stake in its global wind generation business valued at $571 million on top of the stake sale.
Read More »

Posted on: November 7, 2009 – 11:59 am in China, Emerging Markets, Infrastructure, Mergers and Buy Outs, Private Equity, Regulation, Utilities,

FOMC: Very Little Optimism, Very Little Action

bankThe Federal Open Market Committee’s notes said that economic activity has picked up since the group’s September meeting, but certainly not enough for the Fed to do anything about it.

The FOMC said it will maintain the target range for the federal funds rate at 0 to 1/4 percent, and will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. Read More »

Posted on: November 4, 2009 – 2:26 pm in Regulation

Chris Dodd, Bank Reformer, Finally Loses His Mind

bankSenator Christopher Dodd wants to create the greatest single debacle in the history of US financial market and bank regulation. He will propose putting four authorities into one, combining the Federal Reserve, Federal Deposit Insurance Corp,  Office of Thrift Supervision, and the Comptroller of the Currency. The move would put several dysfunctional agencies into one.

Dodd has failed to look at the practical aspects of rolling up several authorities which have thousands of federal employees and which have performed their current roles for decades. The effort would be so Herculean that it might still be going on after the next presidential election. The daily regulation of the banking industry would certainly suffer due to the confusion that an elimination of some of the agencies would involve.

Of course, Dodd wants to do all this within a year of a near collapse of the credit and financial markets and during a period when these portions of the economy are still fragile. Otherwise, it is a fine idea.

Douglas A. McIntyre

Posted on: November 4, 2009 – 7:28 am in Regulation

More E.U. Roadblocks in Sun-Oracle Deal (ORCL, JAVA)

Burning Money PicThere are reports from the Financial Times that were also just noted on CNBC that are almost baffling.  It seems that the European Commission may issue a formal objection to the Oracle Corp. (NASDAQ: ORCL) buyout of Sun Microsystems Inc. (NASDAQ: JAVA).  The reasoning is that Oracle has apparently refused to offer any concessions to European regulators.

While a formal set of objections would not constitute a formal merger blockage, that is the first real step to a formal block.  This is also not set in stone yet and does not mean that either Oracle nor the E.U. will offer concessions.
Read More »

Posted on: November 3, 2009 – 4:44 pm in Law, Mergers and Buy Outs, Regulation, Software, Technology Companies, ,

The Fed Asks Banks To Read Its Mind

bankBankers from the nation’s 28 largest banks were called to regional Federal Reserve offices across the country today to get a message from the agency. That message was that they should not wait for new guidelines that will align banker pay with risk. They should guess what the guidelines will be and apply them to 2009 pay packages. Bankers have not been very good at being bankers for the last two years and asking them to be clairvoyants as well seems too much. Read More »

Posted on: November 3, 2009 – 4:58 am in Banking, Regulation

Small Books Stores, Hurt By Amazon, Try To Strike Back

magazinAmazon (NASDAQ:AMZN), Target (NYSE:TGT), and Wal-Mart (NYSE:WMT) are apparently sharply limiting the number of books customers can buy under their programs to sell popular titles at discount prices. Book publishers have already claimed that the three companies are trying to monopolized book distribution.

The Wall Street Journal surmises that the reasons for the restriction on the number of books any one customer can buy has been set at two or three is that small book stores are buying the books and then marketing them up in price for their customers. While that may be true, the entrepreneur with one or two stores cannot offer the discounts that Amazon can. The huge e-commerce company can afford to lose money on the titles because visitors to it website may but other items. The book shop owner cannot afford to adopt the same tactic. Read More »

Posted on: October 30, 2009 – 6:08 am in Media, Regulation, , ,

Galleon Warnings May Have Come A Decade Ago

bearThe SEC missed a number of signals in the Bernie Madoff case. Some concerns were raised by his clients and Barron’s years before he was caught. It seems that a similar pattern holds true with Raj Rajaratnam and his firm Galleon. Several press reports say that information was being passed between Intel (NASDAQ:INTC) and Galleon as early as 1998. An FT story claims that a JP Morgan (NYSE:JPM) employee raised a red flag about Galleon in 2001.

The SEC has said a number of times that the reason that large incidents of fraud are missed by its investigators is that the agency is understaffed and incapable of covering all the ground which is part of its mandate, and that is almost certainly true. Read More »

Posted on: October 30, 2009 – 5:49 am in Regulation, ,

US Healthcare System Wastes $800 Billion A Year

bearThe Administration may not need to push a healthcare reform bill though Congress. It might be better off creating laws that would wring excess out of the current system. It would avoid risking hundreds of billions of dollars in taxpayers money and would yield enough capital to help give insurance to the uninsured.

New data compiled by the healthcare analytics group at Thomson Reuters (NYSE:TRI) found that the “U.S. healthcare system wastes between $505 billion and $850 billion every year.” Read More »

Posted on: October 26, 2009 – 5:38 am in Regulation, Research,

The Fannie-Freddie Equity Conundrum (FNM, FRE)

burning-house-image4It is no secret that things could be much better at Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE).  But the last week or so has re-highlighted just how dire the situation is for these government sponsored entities and perhaps more importantly for the common shareholders. Both Freddie Mac and Fannie Mae were forced into federal conservatorship last year by Uncle Sam.

We have taken an in-depth look here at the situation and the past to get a feel for the future of these companies (GSE’s).  If you parse through the data and watch what has been happening in Washington D.C. of late, there is the clear reminder that these emperors have no clothes on.  In the world of Star Trek, these companies stockholders may be facing a Kobayashi Maru scenario.
Read More »

Posted on: October 25, 2009 – 7:45 am in Accounting, Bankruptcy, Bonds, Compensation, Corporate Governance, Cult Stock, Editor's Picks, Financial Stocks, Housing, Law, Politics, Regulation, Turnarounds, ,

Risk

bearThe Federal Reserve proposes that it will “regulate” compensation packages at the top 28 financial institutions in the US. The agency said that its new program is designed to make sure that the incentive compensation policies of banking organizations do not undermine the soundness of their organizations.  The Fed will strongly encourage pay packages that curb inordinate risk-taking.  In plain English, the Federal Reserve has usurped most of the compensatio- setting power of boards of directors and the power of board risk management committees as well. Read More »

Posted on: October 23, 2009 – 4:49 am in Regulation

The Pay Czar’s Day In The Sun

ewisPay czar Kenneth Feinberg has already effectively clipped the compensation wings of Bank of America (NYSE:BAC) CEO Ken Lewis by taking away all of his 2009 compensation. Feinberg now plans to cut the pay packages of 175 executives at seven companies receiving federal aid by as much as 50%. Some base salaries will drop to a tenth of what they are now.

Not all the managers will lose the great majority of their compensation. Some of the money will be shifted into long- term bonus pools with the theory being that the alteration will cause executives to manage for multi-year results and take on less risk for their companies. Read More »

Posted on: October 22, 2009 – 5:24 am in Compensation, Regulation, , ,

The Idea Of Breaking Up The Largest Banks Gains Ground

bankFormer Fed chief Paul Volker has argued that America’s largest banks should be broken up to prevent a situation in which another credit crisis would force the government to spend hundreds of billion of dollars to rescue them.  Almost no one in the Administration or Congress is listening to him.

The New York Times reports that “The only viable solution, in the Volcker view, is to break up the giants. JPMorgan Chase would have to give up the trading operations acquired from Bear Stearns. Bank of America and Merrill Lynch would go back to being separate companies.” The counter of Mr. Volker’s argument, which is carrying weight with the powers that be, is that the government can regulate banks enough to keep them from taking imprudent risks.

Volker’s view of the world got substantial support today from the head of The Bank of England. BOE Governor Mervyn King said in a speech, “The massive support extended to the banking sector around the world, while necessary to avert economic disaster, has created possibly the biggest moral hazard in history.” His solution is to break financial firms into pieces. One set of institutions could take risks and would be unlikely to receive any government support in the event of a credit crisis. The other institutions would take and hold deposits from people and businesses.

While Volker’s and King’s recommendations will fall on deaf ears, they will be remembered very clearly if there is another credit crisis and the world’s major governments have to get back into the financial firm bailout business.

Douglas A. McIntyre

Posted on: October 21, 2009 – 5:52 am in Regulation,

Larry Ellison Doesn’t Play Chicken

houseLarry’s Ellison, the founder and CEO of Oracle (NASDAQ:OFCL) does not make idle threats. He does not have to. In most games against his competition he holds the majority of the cards. He has taken over a number of businesses in his sector of the tech world. Those that resisted were taken over anyway. The management of PeopleSoft learned that lesson the hard way. Read More »

Posted on: October 21, 2009 – 5:05 am in Mergers and Buy Outs, Regulation, , , , , ,