Bloomberg News

Feds Launch Probe Of Wells Fargo Housing Practices

by Janell Ross on April 12, 2012

Huffington Post…

Wells Fargo & Co., the nation’s largest mortgage lender, is facing the second of at least two federal probes into how it treats minority borrowers and the properties it owns in minority neighborhoods. Department of Housing and Urban Development officials confirmed this week that the agency will investigate allegations lodged against the bank Tuesday by the National Fair Housing Alliance. The alliance complaint accused Wells Fargo of working to maintain and market bank-owned foreclosed properties in predominantly white communities far more aggressively than it does in mostly black and Latino neighborhoods. Alliance investigators found that only about 7 percent of homes repossessed by Wells Fargo in mostly white communities had 10 or more maintenance problems, such as detached gutters, broken windows or doors, which can damage the property or the likelihood that it will sell. By comparison, 20 percent of homes reclaimed by Wells Fargo in predominantly Latino neighborhoods were in similarly poor condition. This disproportionate neglect not only deepens and extends the nation’s housing crisis but further batters the very communities hardest hit by the foreclosure crisis, said Shanna Smith, president and CEO of the Washington, D.C.-based alliance. The complaint follows a nine-month investigation in which the National Fair Housing Alliance evaluated the state of 1,000 bank-owned foreclosed homes in nine metro areas from California to Washington, D.C. Investigators found “overwhelming” and “troubling” evidence that six of the nation’s major banks market and maintain foreclosed homes in predominantly white neighborhoods differently than they do in others, according to a report issued by the agency last week. The pattern was pronounced in communities up and down the income scale. During the investigation, alliance investigators evaluated 218 properties reclaimed by Wells Fargo. Vickee Adams, a spokesperson for San Francisco-based Wells Fargo, did not respond to repeated requests for comment this week. However in a telephone interview Adams told Bloomberg News that the bank does not know if it owns the problem properties identified by the National Fair Housing Alliance or if it has simply been hired to oversee and manage them for another owner. The bank works with a property manager to maintain its stock of foreclosed homes, Adams told Bloomberg. She also insisted that the bank does not engage in discriminatory business practices. “Wells Fargo conducts all lending-related activities in a fair and consistent manner without regard to race,” Adams told Bloomberg. Among the many properties the alliance evaluated, bank-owned homes in communities of color were 42 percent more likely to have visible maintenance problems, such as overgrown grass, hanging gutters and damaged eaves or siding than those in comparable white neighborhoods. Foreclosed homes in mostly black and Latino neighborhoods were 34 percent more likely to be littered with trash and debris, and 82 percent more likely than bank-owned properties in white communities to have broken or boarded-up windows. Anyone who assumes that the bank may have a legitimate business reason for neglecting homes in communities of color has made a series of inappropriate and inaccurate assumptions, Smith said. Most of the homes the alliance evaluated were in lower middle to upper middle income neighborhoods. “It ultimately does not matter if a home is in a wealthy neighborhood or not. It doesn’t matter the condition at possession by the lender,” said Smith. “We were looking at what is routine maintenance and is required [at minimum] to maintain the home. We are talking about mowing the lawn, raking the leaves, shoveling the snow away, locking doors and fixing broken widows either by repair or boarding them up and removing trash. None of those issues have anything to do with the actual condition of the property at [the time the bank took] possession.” When it came to evaluating what the banks were doing to market the homes, the alliance investigators looked for a “for sale” sign. And here again, there were dramatic differences. Vacant and foreclosed bank-owned homes in white neighborhoods were 33 percent more likely to be designated with professional real estate signs that were visible from the street. Homes in black and Latino neighborhoods had signs made of construction paper or cardboard, or had no sign at all. Failing to maintain a foreclosed home makes life harder for the neighbors of the problem property, and it can also drag down median home prices and sales activity in entire cities, said David Blitzer, managing director and chairman of the index committee at S&P Indices, which includes the S&P/Case-Shiller Home Price Index. Many people are afraid to buy homes in neighborhoods studded with neglected properties, Blitzer said. And those who are brave enough to do so will almost never pay asking price. They want to bargain hard, which by extension shapes the national housing outlook, said Blitzer. “What seems like one neighborhood’s problem really does affect the broader market,” said Blitzer, who had not seen the complaint filed Tuesday. Should HUD find evidence that the alliance’s complaint against Wells Fargo is accurate, the federal agency can attempt to negotiate a settlement with the bank. If the parties are unable to reach an agreement, the Justice Department could file suit against the bank. The Justice Department is already probing the bank’s lending activities in the period before the housing bubble burst in 2007. Wells Fargo has been accused of steering black borrowers into higher-cost and higher-risk subprime loans that made foreclosure more likely, Bloomberg News reported in July. That month, the Federal Reserve also forced Wells Fargo to pay an $85 million fine in connection with the bank’s practice of steering buyers who could have qualified for better loans into subprime mortgages and falsifying information on key documents. “We will not hesitate to hold financial institutions accountable, including one of the nation’s largest,” Attorney General Eric Holder said in a statement issued by the Justice Department after the federal law enforcement agency reached a record-setting $335 million settlement with Wells Fargo competitor Bank of America for engaging in similar activities. “These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin.”

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Feds Launch Probe Of Wells Fargo Housing Practices

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Bernard Starr: Corporations Plan for Post-Middle-Class America

by Bernard Starr on April 6, 2012

Huffington Post…

American corporations have pretty much written off the middle class. Their actions declare that the middle class is moribund. And they should know since they have been in the front lines shooting down and decimating the middle class. Indeed, American business has dismantled much of its manufacturing and has eliminated untold numbers of other middle class jobs, sending them overseas where cheap labor fattens corporate profits at the expense of American workers. That’s why the employment and housing markets are struggling on life support, food stamp use is at an all-time high and the ranks of the working poor are swelling — while corporate profits soar and the S&P 500 stocks show the best first quarter since 1998. In view of the assault on American jobs and workers is it any wonder that a Stanford University study reveals a dramatic drop in American families living in middle class neighborhoods — from 65 percent in 1970 to 44 percent in 2009. Robert Borosage, President of the Institute for America’s Future, adds this alarming note : “The broad middle class — the triumph and strength of America’s democracy — is sinking. Unless we change course dramatically, we will become even more a nation of haves and have-nots.” Brookings economist Ron Haskins dismisses the notion of a suffering middle class. In his Washington Post commentary on March, 29th, “The Myth of The Disappearing Middle Class,” he argues that “when the insurance value of health care and the value of certain government transfer payments are included in income… the disappearing middle class appears pretty healthy.” Doesn’t this sound like Mitt Romney’s comment — “I’m not concerned with the very poor because we have safety nets there” — applied to the middle class? So I guess we don’t have to worry about anyone. Let’s break out the champagne! But Jared Bernstein, Senior Fellow, Center on Budget and Policy Priorities, disputes Haskins rosy picture and insists that the middle class has been “squeezed” by the economic downturn. “Squeezed” doesn’t adequately capture the dire state of the middle class though, confirmed by the actions of U.S. industries that are revising their business plans. What is corporate America’s response? Rather than mounting crash programs for generating solid middle class jobs they have figured out how to profit from the sinking ship. Corporate America is shifting its focus in product development and marketing to serve the “hourglass economy.” The hourglass has two chambers connected by a slim channel. Translated into economic terms, or better yet, the emerging picture of America, the two chambers represent rich and poor, with virtually nothing in the middle. Worse, while the traditional hourglass has two equal chambers, the economic hourglass does not. One chamber contains a small percent of the population and most of the wealth and the other is filled with the bulk of Americans, who have little access to resources and diminished hope for prosperity. The hourglass economy has become so entrenched that Bloomberg News credits it with dividing Americans and defining U.S. politics. Leading the rush into the hourglass economy are some icons of American industry, like Proctor and Gamble. Here’s what Melanie Healey, group president of P&G’s North America business, said to the Wall Street Journal about what her company did when it started losing market share to competitors who were catering to the low end market: “It has required us to think differently about our product portfolio and how to please the high-end and lower-end markets …That’s frankly where a lot of the growth is happening.” P&G is not alone in catering to the top and bottom of the hourglass and ignoring the middle, according to WSJ columnist Ellen Byron. H.J. Heinz Co is expanding its offerings of lower-priced products to celebrate the hourglass model. And shooting for the high-end, Saks, Inc. is growing its line of pricier products to serve the deep pocketed consumer segment that accounts for most of its growth. Many other retailers are generating impressive year-to-year gains by marketing to the top and bottom consumers including Coach, Lululemon Athletica, Whole Foods, Family Dollar and Costco. The hourglass economy is even impacting the “green” industry. Eco-friendly products are typically costly and, therefore, appeal to wealthier consumers. Green marketers are struggling to find strategies for making their products appeal to a cash strapped low-end market. Citigroup was quick to notice the hourglass trend that was taking root in 2009. To help investors cash in on the demise of the middle class Citigroup recently issued an hourglass investment advisory that highlights 20 stocks of companies targeting low-end consumers and 15 companies targeting the high-end ones. Showing that the hourglass economy is real and gaining momentum, Citigroup’s hourglass index posted a whopping 56.5 percent return between Dec. 10, 2009 and Sept. 1, 2011, according to financial reporter Patrick Martin. Since business models are projected well into the future, corporate America’s hourglass strategy forecasts a long grim road ahead for the middle class. Yet politicians continue to express their heartfelt concern for the middle class, pledging to shore up this segment of the population. Are they just placating us while secretly supporting the hourglass strategy of their corporate sponsors? Is it possible that you and I know that corporate America has abandoned the middle class but that politicians are ignorant of this stark reality?

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Bernard Starr: Corporations Plan for Post-Middle-Class America

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Clifford W. Smith: Meddling in Banks Causes Its Own Perils

April 4, 2012

After four of the 19 biggest financial institutions failed Federal Reserve’s stress tests, it drew a line marking the industry’s “winners” and “losers.” Winners got to raise dividends and buy back stock, driving up stock prices. The losers remained in a position where the Federal Reserve was making their decisions about what to do with their capital. This sort of regulation and oversight poses a great hazard to the banking industry. While there is a duty to prevent fraud and offer oversight on the part of the Federal Reserve, the Federal Deposit Insurance Corp (FDIC), Comptroller of the Currency and other regulators, intrusive actions could stifle financial innovation. The more that the government does to take the decision making away from people running the banks and substitutes its own judgment, the greater the risk that the banking industry emerges into something resembling the U.S. Postal Service, which is struggling to adapt to change but is constrained by a combination of government oversight and an array of legacy costs. During the past 40 years, financial services has been one of the industries in which the United States has a competitive advantage that has been exported to the world. These stress tests came about after $245 billion in federal funds was provided to the banking industry under the Troubled Asset Relief Program during the financial crisis of 2008. According to Bloomberg News, The Fed had committed $7.77 trillion in financing as of March 2009 to rescue the financial system with funds largely going to a small group of the largest banks. Yet, stress tests prior to 2008 failed to detect weakness at the banks. A column that appeared on Bloomberg.com by Jonathan Weil points to flaws in the Fed’s approach to the stress tests, which were designed to test what would happen during an economic downturn, leading to higher unemployment and a drop in housing prices. The column found the government’s approach to the stress test to be window dressing to boost confidence rather than perform reliable measures of financial health. The stress test didn’t take changes in liquidity or market conditions into account when looking at potential losses on securities. The scope of the Federal Reserve and federal government’s intervention to support banks as “too big to fail” has created its own set of problems. The perception is that a safety net is available to big banks anytime they get overextended and the taxpayers will be dragged into saving them. We are creating monumental problems down the road from regulators pursuing this disruptive, counterproductive and dysfunctional course of protecting the banks and also intervening with their operations. If there is a crisis with these banks that are regarded as too big to fail, there are tools in place to place them into receivership to protect depositors and other creditors. The proper way to do it would be to replace management, ensure liquidity with counterparties and place more of the onus on equity holders to bear some of the risk for failure. The bailouts had been too lenient on equity holders, despite the requisite drops in share price since 2008. The banks that received bailout funds without making management changes shows a degree of failed governance, as well. Poor governance can also be punished by the marketplace, since those companies will suffer from stagnant or declining share prices if they continue to keep underperforming, but entrenched management. At the heart of this matter, regulators need to realize that banks are too important of a part of America’s economy to micromanage. Regulators should just assure that investors are not being defrauded and that the banks are being transparent about their performance to investors and prospective investors, meaning they should not be dictating how balance sheets should look and how capital should be deployed. When regulators overstep their role and take too great of control, investors and ultimately the customers will be hurt by poorer service, a lack of innovation and unmet needs when it comes to managing risk or raising capital necessary to expand businesses or purchase goods. The American public then becomes the big loser from regulatory meddling. Clifford W. Smith is the Louise and Henry Epstein Professor of Business Administration and Professor of Finance and Economics at the University of Rochester’s Simon School of Business.

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Women Still Struggling To Make It To The Top Of The Ladder

April 2, 2012

Women still aren’t making it to the top of the ladder. Male chief financial officers in the U.S. get paid 16 percent more on average than their female counterparts, according to a report by GMI Ratings . In total compensation, female CFOs earn $1.35 million per year on average, compared to $1.56 million per year for male CFOs, according to the study. The female CFO at the middle of the pay ladder would see a 25.5 percent pay increase if she were male, according to the study. And there are far more male CFOs than female CFOs. Just 8 percent of the CFOs in the study were women. The large gender discrepancy in CFO pay rates could be the result of glaring pay differences in a variety of industries. Indeed, the gender pay gap is wider in the financial sector than in any other area of the economy, according to the U.S. Census. And female lobbyist CEOs earn 43 percent less than male lobbyist CEOs, according to Bloomberg News. Though the gender wage gap for CFOs is pretty wide, it’s narrower than the pay gap for average workers. Women in the U.S. were paid 19 percent less than men in 2010, according to the Labor Department. The GMI Ratings study found that female CFOs on average are paid 14 percent less than male CFOs. The gender pay gap has largely stopped retreating in the 2000s, after narrowing in the 1980s and 1990s, according to the Labor Department. Women were paid 20.6 percent less than men in 2003, while now they are paid 18.8 percent less. Part of the pay gap may be due to the fact that women tend to land in lower-paying professions, according to the Labor Department. Eight percent of female professionals had jobs in the higher-paying industries of computers and engineering in 2010, in contrast to 43 percent of male professionals. At the same time, 69 percent of female professionals worked in education and health care, compared to 31 percent of male professionals. Check out the GMI study below: GMI ratings

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Monika Mitchell: Bruce Springsteen & Wall Street’s Wrecking Ball: A Contract With America

March 30, 2012

A rather caustic editorial from Bloomberg News ‘ nameless “editors” mocked Goldman Sachs defector, Greg Smith, in fake bully-on-the-playground bravura. Just like blogging commentators, it’s easy to be brave when your identity is hidden. It is even easier to be a bully when you can take a few swings and slink back under your rock in the refuge of a giant media powerhouse. The anonymous jabs aimed at Smith’s hope that integrity be part of Wall Street profit-making reveal the wide disparity between common financial models and the 21st century ethos of “Doing Well by Doing Good.” The editors retort: “Yes, Mr. Smith, Goldman Sachs Is All About Making Money,” Nowhere in that statement or any other defense of Goldman is there anything about creating value for dollars, simply a tacit endorsement of profit at any cost. What Greg Smith’s op-ed confirms is that four years after Bear Stearns collapsed under the weight of risky bets, the destructive and toxic for-profit model that created the crisis has not changed: the model that Bruce Springsteen lyrically calls “the Wrecking Ball.” Since when does the biggest baddest investment bank of them all, one that transformed from the most admired financial institution in the world to the poster-child of Wall Street evil, need to be defended from a single “mid-level” rogue employee? Since the accusation of greed and corruption struck a resonant chord of truth so deep between Wall Street’s wrecking ball and the rest of the modern world, it could not be ignored. In a powerful Rolling Stone interview with national heroes, Bruce Springsteen and comedian Jon Stewart, “the Boss” outlines “the street criminalization of the big-money Wall Street hustle” echoed in Smith’s op-ed that has lit the fire of outrage in millions of Americans. Explains Bruce: “That hustle has been legitimized over the past four years, when you have that level of risk and greed at the top of the financial industry, and people basically walking away scot-free, completely unaccountable. That lack of accountability is the poison shot straight into the heart of the country.” And so it has. The poison has created a dual society in our nation that Springsteen warns, slices “the country down the middle” — one where the powerful and well-placed follow a different set of rules from the rest of the nation. Main Street is supposed to obey the law and pay the price for its actions if it doesn’t, while Wall Street’s most powerful institutions are handed the get-out-of-jail card free by those who make and enforce the laws. To America’s citizens, the hustle of the 2008-2010 crisis and unilateral banking bailouts go far beyond government failure and move to political corruption of the highest degree. Springsteen compares the lack of accountability in the post-crisis handling of both the Bush and Obama years to the Watergate scandal, one of the darkest periods in our national history. “Watergate legitimized the hustle at the top of the game … It legitimized every street-corner thug.” Watergate made a mockery of American justice revealing a corruption so deep and pervasive that it “almost had the country brought down by it.” For Springsteen and America, the financial crisis has exposed the same. Financial historian Professor Robert Wright calls the flaws in the current Wall Street-Federal model: the socialization of risk and the privatization of profits that has ” planted the seeds of future crisis. ” Everyone in America knows, with the possible exception of a few still in denial, that the “risk takers” were rewarded by transferring Wall Street losses onto the backs of an overburdened Main Street. Every day in grade school, children put their hands over their hearts and pledge allegiance to a nation that stands for “liberty and justice for all.” Springsteen asks, “What happened to that social contract?” Where is the promise that our children pray for? What made this country great were not the bullies in the playground who laugh at the “naïve” integrity of fellow citizens. It is the shared sacrifice of our parents and grandparents who fought against injustice both on foreign and home shores to right the wrongs of an unequal dream. Those that saved every penny of their hard earned cash only to watch it evaporate during the Great Depression — a time so tough that a new president came to the aid of the powerless and demanded that America’s promise of equality be fulfilled. So here we are again: one more time. As Occupy Wall Street began the conversation last fall with a call for a fair deal for everyone, Greg Smith’s op-ed reveals that good conscience may be dead for a soul-sick Wall Street, but Main Street is still holding out hope to reinstate America’s broken social contract. The antidote for the poison shot into the heart of America is justice. Springsteen sings the struggle of many Americans who lost their jobs and homes in these post-crisis years: I’ve been lookin’ for the map that leads me home; I’ve been stumblin’ on good hearts turned to stone…We yelled “help” but the cavalry stayed home; There ain’t no one hearing the bugle blown… Springsteen’s ballad asks the questions the nation asks of its leaders: Where the eyes, the eyes with the will to see Where the hearts, that run over with mercy Where’s the love that has not forsaken me Where’s the work that set my hands, my soul free The social contract implicit in America’s promise and defended by country men and women on the beaches of Normandy, the streets of Birmingham and the squatter city of Zuccotti Park is woven into every aspect of American culture from Washington, to Wall Street, to Main Street. The contract is not “All About Making Money” as some would have us believe. Rather it represents a common commitment to abolish tyranny and injustice that continues to surface in legal battles of foreclosure fraud and class actions suits against an out-of-control banking industry that became an enemy to its own people. The social contract that our culture is based on is something far greater than the myopic self-serving greed we have witnessed. It emanates from deeply embedded values established centuries ago like integrity, democratic ideals and fair play that improve with each generation. Echoed in Springsteen’s poetry is the historic promise of America to its citizens: “From sea to shining sea…Wherever this flag’s flown, we take care of our own.” Monika Mitchell is the co-author of ” Conversations with Wall Street ” — a collection of candid discussions with Wall Street market makers on ethics in the mortgage securities industry. CWWS outlines a social contract between America and the Financial Industry.

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Augusta National Golf Club’s Ban On Women Hits A Corporate Sponsorship Snag

March 29, 2012

I don’t watch a lot of golf because as near as I can tell I’m not immortal and thus can’t be wasting the finite amount of time I have on this earth watching it. But I’m at least aware of the fact that the Augusta National Golf Club, which hosts the Masters, has historically barred women from becoming members and that an activist named Martha Burk has long waged an campaign to change that policy. Burk’s efforts have thus far proven fruitless, but over at ThinkProgress, Travis Waldron reports that as a result of a collision of another Augusta tradition, a change may finally come. Or not! We’ll see. Everything basically hangs on how much fealty the golf club is willing to show to its historic corporate sponsors. See, one of the Masters’ longtime sponsors is IBM . And the golf club has honored that company’s CEO — along with the CEOs of Exxon Mobil and AT&T — with the symbolic trappings of membership. But here’s the tricky part: The new CEO of IBM is Ginni Rometty, currently ranked No. 7 on Fortune magazine’s list of the “50 Most Powerful Women in Business.” It says a lot about how casual one can be about the lack of concern that there is insufficient gender equity at the executive level in corporate America that the Augusta National Golf Club managed to make it all the way to the 21st century with the rest of us without foreseeing this eventuality. Waldron gets to the heart of the matter : Rometty’s situation, though, gives her leverage Burk never had. The CEOs of the other two Masters sponsors, Exxon Mobil and AT&T, are both members, and they’ll both be donning the club’s signature green jackets next week. If Rometty isn’t allowed to join them (and given Augusta’s history, she probably won’t be), it will send another message to the 6 million American women who play golf and countless others who watch it that even if they are capable of breaking every last one of corporate America’s glass ceilings, they aren’t capable of playing golf with the boys. It would be nice if Waldron’s pessimism ends up going unrequited by the golf club, and it takes this brave step into the present. But even if the club doesn’t, it’s still a net good that its prejudices are going to end up in the crosshairs. Nevertheless, this is still a dispiriting reminder that far too often, you don’t get justice until an injustice crosses up some staggeringly wealthy person. (See also: marriage equality in New York .) Speaking of this, maybe historic hoodie-wearer Mark Zuckerberg could help America resolve some issues right about now? READ THE WHOLE THING: How IBM Could Force an End to One ‘Tradition Unlike Any Other’ at This Year’s Masters: Gender Bias [ThinkProgress] Golf’s Masters Facing Male-Only Dilemma With New IBM CEO [Bloomberg News] Would you like to follow me on Twitter ? Because why not?

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Gucci & Guess Take Their ‘G’ Battle To Court

March 29, 2012

Who owns the letter “G”? Guess and Gucci have finally faced off in court over that question. According to Bloomberg News, Gucci is accusing Guess of engaging in a “massive, complicated scheme to knock off Gucci’s best-known and iconic designs,” in the words of Gucci’s lawyer, Louis Ederer. Gucci filed a suit in New York federal court in 2009, claiming that the LA-based fashion brand infringed on its trademarks by imitating four specific Gucci signatures: the green and red stripe; the interlocking “G” pattern; the square “G” and the brand name’s delicate script font. Guess, claims Gucci, sold more than $221 million worth of products featuring these trademark infringements. But the battle, which was finally argued before a judge on Wednesday, may be too old and drawn-out. Guess not only refutes Gucci’s claims of trademark infringement — “[Guess] has no reason to be like Gucci and it did not scheme to be like Gucci,” said Guess’ attorney, Daniel Petrocelli — but also claims that Gucci “sat on its rights” for at least seven years before suing , according to Bloomberg News. In addition, Petrocelli argued that despite certain instances of ambiguously similar designs ( one sneaker in particular, seen below, was cited ), consumers would not mistake Guess products for Gucci’s. According to Business Week , Petrocelli claimed that of the 1,495 Guess products Gucci accused of infringements, 99 percent “could never be confused with Gucci.” The case, a long time in the making, is set to last up to three weeks , says Women’s Wear Daily . And while we’re no lawyers, we decided to take a look ourselves. See a few Guess and Gucci products below — do you think the similarities are lawsuit-worthy?

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WATCH: The Super-Rich’s Favorite New Toy

March 19, 2012

To check out the new favorite toy of the mega-rich, you’ll have to do some deep sea diving. That’s because that new plaything is a single-person submarine designed to venture seven miles underwater to the Challenger Deep — the deepest place in the ocean. This week, Titanic and Avatar director James Cameron plans to set a new record at the helm of his submarine by riding solo and spending six hours down under the sea collecting footage for National Geographic, according to ABCNews.com . Earlier this month, he broke another world depth record by taking the capsule five miles below the ocean’s surface to the New Britain Trench, according to the The New York Times . “It’s a blast,” Cameron said in an interview with NYT . “There’s nothing more fun than getting bolted into this and seeing things that human beings have never seen before. Forget about red carpets and all that glitzy stuff.” His partner in a broader mission to explore the deepest underwater locations is billionaire and Virgin Group founder Richard Branson, who originally unveiled a single-person submarine back in April 2011, according to ABCNews.com . Bailey S. Barnard, associate editor of Robb Report, a magazine for the ultra-wealthy, said the vessel is becoming so popular that he plans to feature it as part of the magazine’s upcoming “Toys of Summer.” Though an underwater submarine may seem a bit extreme, spending money on quirky items isn’t anything new for the super rich. Last week, Bloomberg News reported that some ultra wealthy families have emergency rooms worth $1 million in their own homes.

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Goldman Heir On Op-Ed: ‘Spot On’

March 16, 2012

Goldman Sachs just ain’t what it used to be. Even according to a guy with the last name Goldman. Henry Goldman III, the great-grandson of Goldman Sachs ‘ founder Marcus Goldman, told Business Insider that he thinks Greg Smith’s op-ed in The New York Times criticizing the investment bank’s “toxic” environment was “spot on.” Smith’s piece, which also served as his resignation letter from the firm, argued that Goldman’s once client-focused culture shifted to one that valued profit above all else. “I thought the article was a reflection of Wall Street in general and ‘let buyer beware,’” Goldman told Business Insider . “It’s certainly something friends of mine have discussed ad infinitum.” Though Goldman’s voice may be one of the most authoritative on the issue, he certainly isn’t the first person to chime in following Smith’s op-ed and claim that the firm has changed for the worse. Former Federal Reserve Chairman Paul Volcker said that when Goldman went public in 1999 and “became a trading operation,” it started focusing less on its clients. “That changed the mentality, I’m afraid,” Volcker said of Goldman Sachs at the Atlantic’s Economy Summit Wednesday. “It’s a business that leads to a lot of conflicts of interest.” Hank Greenberg, the Ex-AIG CEO, expressed similar sentiments in an interview with Bloomberg Television Thursday. “[Goldman's IPO] was a change in culture and that change in culture then continued on and you didn’t have investment bankers running the firm, you had traders running the firm and traders have a short term memory,” Greenberg said in the interview . “That change really has changed the culture of Goldman Sachs, it is not the Goldman Sachs that represented companies as an investment banker.” Still, not everyone is jumping on the Goldman-hater bandwagon. In a memo to his staff Thursday, JPMorgan Chase CEO Jamie Dimon said of the reaction to the op-ed: “I want to be clear that I don’t want anyone here to seek advantage from a competitor’s alleged issues or hearsay — ever,” according to the Wall Street Journal . You can add billionaire New York City Mayor Michael Bloomberg to the list of Goldman supporters too. He visited the company headquarters on Thursday and met with Goldman CEO Lloyd Blankfein and other employees. “The mayor stopped by to make clear that the company is a vital part of the city’s economy, and the kind of unfair attacks that we’re seeing can eventually hurt all New Yorkers,” Stu Loeser, a spokesman for the mayor told Bloomberg News.

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Goldman Sachs? Just Fine, Thank You

March 15, 2012

For those wondering whether the bad press that has plagued Goldman Sachs in recent weeks is likely to affect the firm’s bottom-line, industry insiders say probably not. “Goldman’s reputation is that they’re tough and rapacious, and that they’re out to get as much money for Goldman as possible,” Dick Bove, an analyst at Rochdale Securities told The Huffington Post on Wednesday -– echoing a point he’d made earlier on Bloomberg News . “I can’t remember a period in which people have said, ‘you know, I really love Goldman Sachs.’ It’s usually Goldman with a curse attached to it.” On Wednesday, The New York Times published an explosive op-ed by a Goldman Sachs executive named Greg Smith, who accused the firm of fostering a culture that consistently places its own interests above those of its clients. “I can honestly say that the environment now is as toxic and destructive as I have ever seen it,” Smith wrote. “To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money.” That op-ed comes just a few weeks after the Times reported the firm had positioned itself on both sides of a merger where it served as financial advisor -– telling one company to accept a takeover offer from another company Goldman had a stake in. The recent press has been so bad that after the op-ed ran Wednesday, Forbes magazine demanded the ouster of the firm’s longtime CEO Lloyd Blankfein. But some of those who follow the bank closely, said the headache is likely to be little more than that. “I don’t even think this op-ed will tarnish Goldman’s name [on Wall Street],” said Bove. The problem, according to Bove and others, is that Goldman Sachs, despite its increasingly bad reputation on main street, is still something of a gatekeeper in the financial world. The firm remains a marquee name with access to some of the most lucrative deals on Wall Street. “If Goldman Sachs comes along with some big deal… how can you just walk away from the firm?” said Marc Pado, an investment advisor at DowBull who previously worked at the bond trading firm Cantor Fitzgerald. “[Goldman Sachs] clients have a fiduciary duty to their shareholders to get the best value. They’re going to say ‘we really don’t care about this. We know Goldman is going to get [us] the best price.” That sentiment echoes a point Goldman clients have made in response to the The New York Times op-ed piece. Forbes reported in an email circulated after the op-ed ran that Whitney Tilson, managing partner of hedge fund T2 Partners, (both a client of and an investor in Goldman) wrote, “Our investment thesis on Goldman is simple: when all the dust settles, it will remain the premier investment banking franchise in the world.” Goldman, for its part, responded to Smith’s condemnation in an internal email, according to Bloomberg Businessweek . “We were disappointed to read the assertions made by this individual that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients,” Blankfein wrote his employees. As for the question of Blankfein’s fate, Forbes’ call for his ouster came on the heels of earlier reports that his departure was already in the works and could happen as early as this summer . Bove, however, thinks otherwise. “If they fire him, Goldman will look like they’re admitting that this article is correct,” he told The Huffington Post. Greg Smith is “giving Mr. Blankfein a longer term in his job.”

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Surprised? Those Big Banks That Got Taxpayer Money Are Still Taking Huge Risks

March 7, 2012

The big banks that critics claim caused the financial crisis may have gotten bailed out, but they apparently haven’t learned their lesson. Large banks that got government bailouts through the Troubled Asset Relief Program (TARP) now are taking more risks than banks that didn’t get taxpayer money, according to a working paper from the Federal Reserve. The findings call into question one of the government’s main justifications for TARP: that propping up large banks would stabilize a financial system at the brink and keep credit flowing. Instead, it seems that big banks that received the bailout funds — many after pressure from government officials — have been lending less than those that didn’t get the money, according to the Fed. Furthermore, the loans that the bailed-out banks are making are riskier than those of their not-bailed out counterparts. It appears that the biggest bailed out banks are proving the economic theory of moral hazard to be true — namely that institutions that aren’t punished for risk-taking will continue to take risks. On the other side, small banks that received bailout money now are taking fewer risks than other banks. That’s probably because increased capital requirements for the small banks that received bailout money had a larger impact on smaller institutions, according to the Fed. The Fed’s findings echo concerns already raised by some experts that bailing out banks with few strings attached would create a tier of too-big-to-fail banks that continue to take excessive risks. Neil Barofsky, the former special inspector general of TARP , wrote last year that big banks “have become effectively guaranteed by the government no matter how reckless their behavior.” Nobel Prize laureate Joseph Stiglitz , a professor at Columbia University and a left-leaning economist, wrote in January that TARP hardly helped the economy, since much of the money went to bonuses instead of lending. “It was wrong to think that the bankers would mend their ways — that they would start to lend, if only they were treated nicely enough,” Stiglitz wrote. But the Treasury Department has held fast in its defense of TARP. Treasury Secretary Timothy Geithner said that it “first put out the financial fire.” Timothy Massad, the Treasury Department’s acting assistant secretary for financial stability , said last year that “to suggest that [increased risk-taking] is TARP’s main legacy is to ignore the facts, and to confuse the response to a crisis with the need to address the causes of the crisis,” according to Bloomberg News.

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World’s First At Home Male Fertility Test To Hit Stores In April

February 27, 2012

For couples struggling to conceive, tackling fertility issues often falls to the woman . But now there’s a new way to pinpoint fertility problems without leaving your home, Bloomberg News reports . Even more revolutionary, the test is for men. Dubbed SpermCheck Fertility , the new home kit allows men to determine whether or not their sperm count levels are adequate for conception with a simple test in lieu of an expensive and possibly embarrassing doctor visit. In order to take the test, the man must combine his semen with a solution in a bottle and then put drops of the mixture on a test strip , explains Bloomberg. A red line indicates the sperm count is normal, while a negative result shows no color. Already approved by the FDA and ready for commercial sale, SpermCheck assesses sperm count with 98 percent accuracy in about 10 minutes , explains TIME magazine. According to Spermcheck’s website, more than 7 million couples are affected by infertility problems each year , though only 20% of men get tested even though half are actually the one responsible for the couple’s inability to conceive. “Men have historically avoided this type of semen analysis because it can be embarrassing and inconvenient for them to go to a physician or lab for this type of test,” Ray Lopez, CEO of SpermCheck said in a press statement . Stores will begin stocking the $39.99 test in April. Until then, consumers can purchase the kit online from Walgreens and CVS .

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More Americans Traveling Far And Wide To Get To Their Jobs

February 23, 2012

Stuck in traffic or on a train for upwards of an hour getting to work today? You should probably just stop whining. More Americans are choosing long commutes — sometimes more than 100 miles — instead of selling their homes and moving their families closer to their jobs. The rise in the number of so-called super-commuters far outpaced the growth of the workforce between 2002 and 2009, according to research by Mitchell Moss, a New York University urban policy professor. Super-commutes from the Dallas-Fort Worth area to Houston have more than tripled since 2002, and commutes from Austin and San Antonio to Houston, from northern California to Los Angeles, and from Boston to Manhattan have more than doubled, according to Moss. Super-commutes to Manhattan have jumped 60 percent since 2002. Incredibly, about 13 percent of workers in the Dallas and Houston regions live in another area. The rise of the super-commute highlights that the economy is recovering but still far from healthy. Since there are so many unemployed people willing to make sacrifices to work, a number of people are willing to take the first good job offer that they get, even if it is in a different city. They often shoulder the cost of the trip. Moreover, since household formation has plunged and potential homebuyers are only willing to buy homes at a steep discount, many homeowners often cannot sell their homes at a price that’s equal to or more than what they owe. The share of Americans that have moved has reached a record low, according to Census data cited by The New York Times . House prices still are 33 percent lower than their 2006 peak, according to the S&P/Case-Shiller Home Price Indices. Another reason for the boost in super commuters? The spread of Internet access also has allowed workers to work remotely from home or during their commutes, NYU’s Moss noted. These super-commuters are more likely to be under 29 years old than the average worker, and for good reason. Rob Franklin, 40, who lives and works in Houston during the week and sees his family in Austin only during weekends, told Bloomberg News that his distant job in finance has taken a toll on his family life . “My daughter turned 8 years old on Monday and I was here in Houston,” Franklin told Bloomberg News . “She was crying.”

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Video: Merkel Names Gauck as German Presidency Candidate

February 20, 2012

Feb. 20 (Bloomberg) — Chancellor Angela Merkel named Joachim Gauck, a pro-democracy activist from the former East Germany, as the unity candidate for the mainly ceremonial role of German president after the resignation of the incumbent amid corruption allegations. Owen Thomas and Linzie Janis report on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

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Video: Usara Expects Thai Economic Recovery in Second Half

February 20, 2012

Feb. 20 (Bloomberg) — Usara Wilaipich, an economist at Standard Chartered Pcl in Bangkok, talks about the outlook for Thailand’s economic growth. Thailand’s economy contracted last quarter as the worst floods in almost 70 years disrupted output by manufacturers from Western Digital Corp. to Honda Motor Co., putting pressure on policy makers to revive growth. Usara speaks with John Dawson on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

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Video: Miller Says HSI Volatility Index Futures Satisfy Need

February 20, 2012

Feb. 20 (Bloomberg) — Shane Miller, head of flow index trading for the Asia Pacific region at Barclays Capital, talks about the Hong Kong stock market’s launch of Asia’s first volatility index futures and the outlook for trade flows in the region. He speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

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Video: Wong Favors China Overseas Land, Resources Land, Vanke

February 20, 2012

Feb. 20 (Bloomberg) — Nicole Wong, a Hong Kong-based property analyst at CLSA Asia-Pacific Markets, talks about China’s real estate market and developers’ stocks. China’s January home prices recorded their worst performance in at least a year, with none of the 70 cities monitored by the government posting gains as Premier Wen Jiabao reiterated his determination to maintain property curbs. Wong speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

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Video: IG’s Weston Sees Nikkei as Current `Index of Choice’

February 20, 2012

Feb. 20 (Bloomberg) — Chris Weston, an institutional trader at IG Markets in Melbourne, talks about the factors influencing global stock markets. Weston speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

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Video: GE’s Dean Says Southeast Asia Aviation `Booming’

February 20, 2012

Feb. 20 (Bloomberg) — Stuart Dean, Southeast Asian president of Fairfield, Connecticut-based General Electric Co., talks about the company’s business strategy for the region. He speaks from Kuala Lumpur with John Dawson on Bloomberg Television’s “First Up.” (Source: Bloomberg)

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Video: Epstein Says China’s Diamond Demand Will Overtake U.S.

February 20, 2012

Feb. 20 (Bloomberg) — Ari Epstein, chief executive officer of the Antwerp World Diamond Centre, talks about the outlook for diamond demand and investment. China is now ranked second-largest consumer of polished diamonds after the U.S., with $5 billion worth of sales a year, Epstein said. He spoke with Bloomberg’s Stephen Engle in Beijing on Feb. 17. (Source: Bloomberg)

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Video: Allen Says Technology Solves Problems, Frustrates

February 18, 2012

Feb. 17 (Bloomberg) — David Allen, chief executive officer of the David Allen Co., talks about the impact of technology on productivity. He speaks with Cory Johnson on Bloomberg Television’s “Bloomberg West.” Emily Chang also speaks. (Source: Bloomberg)

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Bill Moyers: The Party People of Wall Street

January 30, 2012

A week or so ago, we read in the New York Times about what in the Gilded Age of the Roman Empire was known as a bacchanal — a big blowout at which the imperial swells got together and whooped it up. This one occurred here in Manhattan at the annual black-tie dinner and induction ceremony for Kappa Beta Phi. That’s the very exclusive Wall Street fraternity of billionaire bankers and private equity and hedge fund predators. People like Wilbur Ross, the vulture capitalist; Robert Benmosche, the CEO of AIG, the insurance giant that received tens of billions in bailout money; and Alan “Ace” Greenberg, former chairman of Bear Stearns, the failed investment bank bought by JPMorgan Chase. They got together at the St. Regis Hotel off Fifth Avenue to eat rack of lamb, drink and haze their newest members, who are made to dress in drag, sing and perform skits while braving the insults, wine-soaked napkins and petit fours — those fancy little frosted cakes — hurled at them by the old guard. In other words, a gilt-edged Animal House , food fight and all. This year, the butt of many a joke were the protesters of Occupy Wall Street. In one of the sketches, the bond specialist James Lebenthal scolded a demonstrator with a face tattoo, “Go home, wash that off your face and get back to work.” And in another, a member — dressed like a protester — was told, “You’re pathetic, you liberal. You need a bath!” Pretty hilarious stuff. The whole affair’s reminiscent of the wingdings the robber barons used to throw during America’s own Gilded Age a century and a half ago, when great wealth amassed at the top, far from the squalor and misery of working stiffs. Guests would arrive in the glittering mansions for costume balls that rivaled Versailles, reinforcing the sense of superiority and the virtue of a ruling class that depended on the toil and sweat of working people. That’s consistent with the attitude expressed by several of these types after Occupy Wall Street sprung up; bankers told the Times on the record that they could understand the anger of the protesters camped on their doorstep; but privately, a hedge manager said , “Most… view [it] as ragtag group looking for sex, drugs, and rock ‘n’ roll.” So sayeth the winners in our winner-take all economy. The very guys who were celebrating at the St. Regis because they were too big to fail. Even when they fell flat on their faces, the government was there to dust them off, bail them out and send them back to fight the class war with nary a harsh word or punishment. Talk about a nanny welfare state. None of this was by accident. The last three decades have witnessed a carefully calculated heist worthy of Robert Redford and Paul Newman in The Sting — but on a massive scale. It was an inside job, politically engineered by Wall Street and Washington working hand-in-hand, sticky fingers with sticky fingers, to turn the legend of Robin Hood on its head — giving to the rich and taking from everybody else. Don’t take our word for it — it’s all on the record. The biggest of the big boys was Citigroup, at one time the world’s largest financial institution. When the meltdown hit in 2008, the bank cut more than 50,000 jobs and you and other taxpayers shelled out more than $45 billion to save it. And how are Citigroup executives doing? Nicely, thank you. Last year, its CEO, Vikram Pandit, took home $1.75 million in base salary, and was awarded $3.7 million in deferred stock. According to the Times , “Citigroup is expected to disclose the rest of his pay, cash, be it upfront or deferred, in March. In addition, while not necessarily for work performed in 2011, Mr. Pandit last year was awarded a $16.7 million retention bonus, plus stock options that could add $6.5 million to the package’s overall value.” Makes you want to cry out, “Retain me! Retain me!” To be fair, Vikram Pandit was at the World Economic Summit in Davos, Switzerland last week, where he told Bloomberg News , “It’s important for the financial system to acknowledge that there’s a great deal of anger directed at it… Trust has been broken. Banks have to serve clients, not serve themselves.” What’s more, he has said that the “sentiments” expressed by Occupy Wall Street demonstrators were “completely understandable.” This, in contrast to the financial industry official who told a reporter that the protesters’ issues were “a lot of sound and fury, signifying nothing.” Or, as they used to say while partying down at the court of Louis XVI and Marie Antoinette, let them eat petits fours. See more at BillMoyers.com , including his most recent full show on how big banks are rewriting the rules to our economy , featuring a candid interview with former Citigroup CEO John Reed.

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The Latest Bankers To Hear Bad Bonus News

January 26, 2012

As Wall Street adjusts to a less profitable chapter in its history, bankers may be finally feeling the pain that many American workers have known for some time. Slow global economic growth and a boost in regulations are among the reasons banks raked in lower profits last year. As a result, institutions ranging from Bank of America and Credit Suisse to Goldman Sachs gave lower bonuses to employees for 2011. In addition, some firms cut the size of compensation to lower levels than at any point since the 2008 financial crisis. BofA, which informed employees of their bonuses on Thursday, has decided to freeze base salary levels and limit cash bonuses to $150,000 for some bankers, Bloomberg reports. Employees who are netting as much as $1 million in total bonuses will receive limited cash, with the rest of their bonuses being diverted into BofA shares. Credit Suisse, a major Swiss bank, also told senior bankers that their total compensation would be 30 percent lower on average than in 2010, according to a separate Bloomberg report. These recent moves mirror pay cuts across the banking industry. Bonus day at Goldman Sachs was “a bloodbath,” one mid-level employee told CNBC. The investment bank set aside 21 percent less money for compensation and benefits than in the previous year. Many Citigroup employees received bonuses that were smaller than is typical, or even nonexistent for 2011, according to The New York Times . JPMorgan Chase set aside 9 percent less money in compensation for its investment banking unit, the Wall Street Journal reports. In addition, Morgan Stanley capped 2011 cash bonuses at $125,000 and didn’t give cash bonuses to its top executives, according to The New York Times . But some Wall Street workers had more pressing issues to contend with last year than simply a cut in pay. Many bankers already have been forced to leave their jobs, with Wall Street laying off more than 200,000 bankers in 2011 alone. Some banks continue to cut back. Vikram Pandit, chief executive of Citigroup, said in an interview with Bloomberg Television that he plans to slash Citigroup’s expenses by $2.5 to $3 billion in 2012. Citigroup already is laying off 5,000 employees, according to Bloomberg News.

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At Davos Summit, Income Inequality Is A Major Concern

January 25, 2012

High in the Swiss Alps, the global wealth gap is being identified as a source of misery and unrest. Participants in the annual World Economic Forum summit in Davos, Switzerland are citing worldwide income inequality as a problem that needs immediate attention, according to multiple reports. The political, cultural and business leaders convening in Switzerland this week are the latest group to express pointed concern over the growing gulf between the planet’s richest and poorest citizens. Several of the wealthiest Davos attendees have told the press that they believe the current lopsided distribution of wealth is unsustainable — that the “global social-economic order will change, if we want it or not,” in the words of one industrialist quoted in Bloomberg . It’s not just them. The Forum’s annual Global Risks report names “severe income disparity” as the issue most likely to affect the world over the next 10 years . And a poll of Davos participants conducted by Bloomberg News found that more than half believe income inequality is bad for economic growth — a conclusion also reached by the International Monetary Fund last year . About two-thirds believe governments should take active steps to address the issue, the survey also found. The Davos summit, taking place this week, comes after nearly a year of international protests inspired by a lack of economic opportunities, from Tahrir Square to Zuccotti Park , and on the heels of numerous studies showing much of the world’s population struggling with deprivation. It also comes just a day after President Barack Obama criticized the current level of wealth disparity in the U.S. during his State of the Union address, calling it ” the defining issue of our time .” At the moment — as one Davis panel discussed Wednesday — 1 percent of the world’s families control 40 percent of the wealth , and one third of the world’s workers, or about 1.1 billion people, are either unemployed or impoverished . Historically, income inequality has been shown to correlate with social unrest , and the current conditions of scant opportunities and ever-more concentrated wealth have been linked to a rise in protests and civil disobedience worldwide . The Occupy movement itself has established a presence at Davos, with a handful of protesters spending this week in igloos and staging demonstrations outside the conference center. One Occupier told reporters that he and his fellow protesters believe the wealthy and powerful Davos participants are more concerned with accruing profits than fostering social justice.

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Video: GM Once Again Top-Selling Automaker; Stocks Rally

January 20, 2012

Jan. 20 (Bloomberg) — Jane King summarizes the top stories this morning on the Bloomberg Business Report. (Source: Bloomberg)

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Video: EU Toughens Fiscal Pact Bowing to ECB Objections

January 20, 2012

Jan. 20 (Bloomberg) — European Union governments set tougher rules on budget deficits in the latest draft of a planned fiscal treaty, bowing to some objections raised by the European Central Bank. Linda Yueh reports on Bloomberg Television’s “First Look.” (Source: Bloomberg)

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Video: RBC’s Breza Sees Microsoft Growth From Windows 8

January 20, 2012

Jan. 19 (Bloomberg) — Robert Breza, an analyst at RBC Capital Markets, talks about Microsoft Corp.’s second-quarter profit and the outlook for Windows 8. He talks with Bloomberg’s Emily Chang on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Becker Says Delta, AMR Would Gain From a Merger

January 20, 2012

Jan. 19 (Bloomberg) — Helane Becker, an analyst at Dahlman Rose & Co., and Nancy Havens-Hasty, president of Havens Advisors LLC, talk about the bankruptcy and potential buyers of AMR Corp., the parent of American Airlines. They speak with Pimm Fox on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

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Video: Lo Warns of `Water Trouble’ in Year of the Dragon

January 20, 2012

Jan. 20 (Bloomberg) — Raymond Lo, a feng shui master, talks about the outlook for the Year of the Dragon. He speaks in Hong Kong with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

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Video: Chen Sees Opportunity in China’s Cement, Coal Stocks

January 20, 2012

Jan. 20 (Bloomberg) — Dorris Chen, head of China research at BNP Paribas SA, talks about the nation’s economy and stock market. She speaks from Shanghai with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

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Video: Bianco Says Gold May Rise, Is `Bullish’ on Stocks

January 20, 2012

Jan. 20 (Bloomberg) — James Bianco, president of Bianco Research LLC in Chicago, talks about the outlook for U.S. stocks, the implications of Europe’s debt crisis for global markets and his investment strategy. Bianco speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

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Video: Kessler Says Google Needs to Grow in Non-Search Areas

January 20, 2012

Jan. 19 (Bloomberg) — Aaron Kessler, an analyst at Raymond James & Associates, talks about Google Inc.’s fourth-quarter earnings. The owner of the world’s most popular Internet search engine reported revenue and profit that missed analysts’ estimates. Kessler speaks with Emily Chang on Bloomberg Television’s “Bloomberg West.” Bloomberg’s Jon Erlichman, Julie Hyman and Cory Johnson also speak. (Source: Bloomberg)

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Video: Boyle Says Risk Outweighing Reward in U.S. Stocks

January 20, 2012

Jan. 19 (Bloomberg) — Daniel Wiener, chief executive officer at Adviser Investments, Douglas Borthwick, managing director at Faros Trading, Kathy Boyle president, and founder of Chapin Hill Advisors, and Peter Andersen, portfolio manager at Congress Asset Management Co., talk about investment strategies, the outlook for the U.S. stock market and European debt crisis. Wiener also discusses earnings at International Business Machines Corp. and Google Inc. They speak with Pimm Fox on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

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Video: Condor’s Schapiro Expects Google’s Growth to Be `Rocky’

January 19, 2012

Jan. 20 (Bloomberg) — Kenneth Schapiro, president of Condor Capital Management, talks about Google Inc. and International Business Machines Corp.’s financial results and business outlook. Schapiro speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

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Video: MasterCard, Priceline Lead Bloomberg Businessweek 50

January 19, 2012

Jan. 19 (Bloomberg) — Bloomberg Businessweek Senior Editor David Rocks talks about the BBW50, a ranking of top-performing companies in the Standard & Poor’s 500 Index. (Source: Bloomberg)

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Video: U.S. Stocks Rise on Earnings Optimism and Jobs Data

January 19, 2012

Jan. 19 (Bloomberg) — Bloomberg’s Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a third straight day, as Bank of America Corp. rallied after swinging to a profit and jobless claims plunged to the lowest level in almost four years. Bloomberg’s Pimm Fox also speaks. (Source: Bloomberg)

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Video: News Corp. Settles With 36 Phone-Hack Victims

January 19, 2012

Jan. 19 (Bloomberg) — News Corp.’s British newspaper unit settled 36 lawsuits by phone-hacking victims including actor Jude Law and soccer player Ashley Cole, with compensation set on the basis that senior managers at the company knew of the practice and tried to conceal it. Olivia Sterns reports on Bloomberg Television’s “Last Word.”

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Video: Commerzbank Capital Increase Is Extra Option

January 19, 2012

Jan. 19 (Bloomberg) — Eric Strutz, chief financial officer of Commerzbank AG, talks about the Germany’s second-largest lender plan to raise capital. He speaks with Bloomberg’s Nicholas Comfort in Frankfurt.

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Video: Kodak Files for Bankruptcy Amid End of Era for Film

January 19, 2012

Jan. 19 (Bloomberg) — Eastman Kodak Co., the photography pioneer that introduced its $1 Brownie Camera more than a century ago, filed for bankruptcy protection from creditors after consumers worldwide moved from film to digital technology. Olivia Sterns reports on Bloomberg Television’s “On the Move” with Owen Thomas.

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Video: Kodak’s Bankruptcy; Facebook Expands Service

January 19, 2012

Jan. 19 (Bloomberg) — Jane King summarizes the top stories this morning on the Bloomberg Business Report. (Source: Bloomberg)

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Video: Roberts Says Carrefour `Too Late’ in Online Retailing

January 19, 2012

Jan. 19 (Bloomberg) — Bryan Roberts, director of retail research at Kantar Retail, discusses Carrefour’s SA fourth-quarter sales and the outlook for European hypermarkets. Roberts speaks with Linzie Janis on Bloomberg Television’s “Countdown.”

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Video: HSBC’s Morris Likes U.S. Technology Stocks, Treasuries

January 19, 2012

Jan. 19 (Bloomberg) — Charles Morris, who oversees the Absolute Return fund at HSBC Global Asset Management, discusses the outlook for equities, bonds and commodities. He talks with Linzie Janis and Owen Thomas on Bloomberg Television’s “Countdown.”

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Video: Saudi’s November Oil Output Rises to 30-Year High

January 19, 2012

Jan. 19 (Bloomberg) — Lara Setrakian reports on Saudi Arabia’s record oil production and its impact on relations with Iran. She speaks with Linzie Janis on Bloomberg Television’s “Countdown.”

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Video: Karklins-Marchay Expects `Rapid Growth’ in Ghana, Peru

January 19, 2012

Jan. 19 (Bloomberg) — Alexis Karklins-Marchay, associate at Ernst & Young LLP, talks about “rapid growth” markets including Indonesia, Ghana and Peru. He speaks with Linzie Janis on Bloomberg Television’s “Countdown.”

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Video: BNY’s Derrick Says EU May Be Prepared for Greek Default

January 19, 2012

Jan. 19 (Bloomberg) — Simon Derrick, chief currency strategist at Bank of New York Mellon Corp., discusses the possibility of a Greek debt default, Portuguese bonds and the outlook for the euro. He speaks with Linzie Janis on Bloomberg Television’s “Countdown.”

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Video: Citigroup’s Apabhai on China Markets, Europe Crisis

January 19, 2012

Jan. 19 (Bloomberg) — Mohammed Apabhai, head of Asia trading strategy at Citigroup Inc., talks about the outlook for China’s economic growth and financial markets. Apabhai also discusses Europe’s debt crisis. He speaks with Rishaad Salamat, Susan Li, Zeb Eckert and Mia Saini on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)

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Video: Academic Lankov Says Kim Jong Un Might Start Reforms

January 19, 2012

Jan. 19 (Bloomberg) — Andrei Lankov, an associate professor at Kookmin University in Seoul, talks about the outlook for North Korea after the death of Kim Jong Il and the prospects for Kim Jong Un’s leadership. Lankov speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

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Video: Ibrahim Sees Opportunity in Android, Cloud Applications

January 19, 2012

Jan. 19 (Bloomberg) — Maha Ibrahim, a partner at Canaan Partners, talks about Facebook Inc.’s possible initial public offering, the outlook for the technology industry and her investment strategy. Ibrahim speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

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Video: Freris Doubts China Would Ease Policy Significantly

January 19, 2012

Jan. 19 (Bloomberg) — Andrew Freris, senior investment strategist for Asia at BNP Paribas Wealth Management, talks about China’s economy and banking industry. China’s banking regulator is weighing a plan to relax capital requirements for lenders after the world’s second-largest economy expanded at the slowest pace in 10 quarters, four people with knowledge of the matter said. Freris also discusses Europe’s sovereign debt crisis. He speaks in Hong Kong with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

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Janet Tavakoli: 2011: The Year 60 Minutes Misled Americans About Municipal Bonds

December 30, 2011

In previous posts, I’ve mentioned serious fiscal problems that need to be addressed at state and local levels. This varies by region and some issues are potentially solvable. I live in llinois ground zero for fraud, corruption, underfunded pension funds and general fiscal mismanagement. It’s an example of one of the first fiscal messes in the United States. This year Illinois hiked personal income taxes from 3% to 5%, and increased corporate taxes. We’ll be slammed with hidden tax increases in utilities, purchases, and more. When now Mayor Rahm Emanuel left his post as White House Chief of Staff to run his election, the Chicago mayoral race centered partly around steps, including budget cuts, needed to solve Chicago’s serious fiscal issues: See also my previous post: ” Third World America: ‘Fast-Tracking to Anarch y;” Huffington Post , August 25, 2010. On December 19, 2010, I was (at first) happy to see 60 Minutes highlight fiscal problems of states and municipalities. It explained how Illinois was late on payments to service suppliers, and it’s a huge problem for people doing business with the state. The state’s pension fund is underfunded and although 60 Minutes didn’t mention it, state pension funds are the prey of Wall Street cronies that stuff them with losses and then propose fee-loaded leveraged financial products that are bets to make up the shortfall. The 60 Minutes went completely off the rails by suggesting that these problems would lead to widespread defaults on municipal bonds in 2012. You can still view the segment, ” State Budgets: Day of Reckoning ,” on the CBS web site. A “Performance” Instead of focusing on the implication of these problems to public services including police protection, fire departments, city maintenance, and city jobs (among other things), 60 Minutes let a pundit claim these problems translate into near-term massive municipal bond defaults. Meredith Whitney, the pundit, had written a report, Tragedy of the Commons, which supposedly backed her claims. Contrary to 60 Minutes’s assertion, Meredith Whitney, a banking analyst, did not have a great track record. Gullible reporters had given her great PR for a call on Citigroup that had been correctly made many months earlier in her presence by my friend Jim Rogers, a legendary investor. I was later bemused to see that either she or her PR flacks apparently took credit for my early warnings about serious problems at AIG. (See: ” Reporting v. PR: Meredith Whitney and AIG ,” TSF , March 23, 2009.) Whitney was quoted as claiming: “Clients are not pleased with my call and I have had several death threats.” A 2008 Fortune cover story reported she had received “one death threat.” (Perhaps clients were displeased that her ignoring Rogers had already cost them thirteen points and even then she didn’t directly tell people to bail out.) With characteristic humor Rogers quipped : “Gosh, I have never received a death threat ever for saying I was short a stock or that a company would be going bankrupt. What have I been doing wrong?” Whitney told 60 Minutes: “You could see 50 sizeable defaults. Fifty to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars’ worth of defaults….It’ll be something to worry about within the next 12 8months.” A Wild Guess Whitney wouldn’t justify her analysis saying “Quantifying is a guesstimate at this point.” (” Whitney Municipal-Bond Apocalypse Short on Specifics ,” by Max Abelson and Michael McDonald, Bloomberg News, Feb 1, 2011.) 60 Minutes admitted it had never reviewed her much-touted report. It never mentioned sizeable defaults, only that there “invariably” would be defaults. It also reported that 60 Minutes was wrong about her “untarnished’ track record. Since she started her company in 2009, about two-thirds of her stock picks since starting her company underperformed market indexes. A 2008 Fortune cover story ranked Whitney 1,205th out of 1,919 equity analysts the previous year, based on stock picks. Whitney told Bloomberg’s reporters: “A lot of this is, you know it, but can you prove it? There are fifth-derivative dimensions that I don’t think I need to spell out to my clients.” As a derivatives expert I can attest that this is gibberish. But I want to hear her explanation of “fifth-derivative dimensions,” because I adore a good belly laugh. Genuine Research via Bloomberg Bloomberg is also the financial news service that has done great early work on fraud and related municipal bond defaults, because that’s a worthy story. Municipal credit issues are granular and the severity of the problem — or non-problem — depends on the specific situation. In September 2005, Bloomberg broke a story about Jefferson County’s hair raising problems, ” The Banks that Fleeced Alabama ,” by Martin Z. Braun, Darrell Preston and Liz Willen. According to the article, “taxpayers blame the $160 million in fees JPMorgan Chase and other banks have charged to arrange the county’s financing–in deals that were never put out to bid.” This year, Jefferson County filed for bankruptcy. As the year wore on, Meredith Whitney waffled and by May she told a Bloomberg radio host: “In the cycle of this municipal downturn, I stand by it. But we never had a specific estimate for that.” Fortunately, Joe Mysak, a Bloomberg print reporter exposed that for the nonsense it was. Whitney had indeed given a one-year time frame on 60 Minutes and had called for hundreds of millions in defaults with 50 to 100 or more in defaults. (” Meredith Whitney Trips Over Her Muni Default Tale ,” May 19, 2011.) A Stellar Performance Whitney’s prediction of “hundreds of billions” of defaults was way off the mark. Even with Jefferson County’s $943 million filing, defaults for 2011 were down from 2010. Bonds that dipped into reserves to make payments totaled only $24.6 billion according to Richard Lehmann, publisher of the Distressed Debt Securities Newsletter. Defaults defined as bonds that missed payments are down to only $2.1 billion from $2.8 billion in 2010. In 2011, municipal bonds had stellar performance as an asset class returning more than 10% of potentially tax exempt returns. They beat the S&P, treasuries, corporate bonds and most commodities. (” Whitney’s Armageddon Belied by ’11 Returns ,” by Martin Z. Bruan, Bloomberg News , December 16, 2011). CNBC Schools 60 Minutes As for the actual analysis in Meredith Whitney’s Tragedy of the Commons report, it seems that it had serious flaws at least when it came to Nevada. Nevada State Treasurer Kate Marshall appeared on CNBC to debunk Whitney’s claim that Nevada’s municipal bonds were troubled. Marshall challenged Whitney’s analytics saying (among other things) that Whitney apparently misinterpreted a PEW report on pension plan liabilities. Nevada only represented 1/16th of the plan, and state employees pick up half the tab. Marshall then explained why Nevada’s municipal bond claims paying ability is much better than it would appear to the casual observer. The economy was still tough, but Nevada managed in anticipation of the ongoing crunch. Property tax revenues dropped, but sales tax revenues were up, gambling revenue was up, and business modified tax revenues were up. Her cash position in June 2011 was much better than 2010.

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