Well, now that you men have completely trashed the financial system, banking and, basically, the entire global economy, we women are going to have to (as usual) clean up the mess. First Iceland, now this. This time, however, there are going to be a few changes around here- that is, according to people familiar with the matter.
Would the world economy have got into such a mess if more women had been in charge? It’s a difficult question to answer.
The economic crisis, though, could put a spotlight on what women offer as leaders who could help repair the damage.
“We’d love to think it would make a difference,” said Ruth Sealy, deputy director of the International Center for Women Leaders at Cranfield University.
Sealy said the crisis is bringing to light academic research, which includes studies showing that mixed management teams make better decisions and are more innovative.
Can women managers reduce your business risk? [Reuters]
Clearly, Lady Ruth McMadoff was fully aware that her husband’s business was a sham. But let’s travel for a few moments to an imaginary world in which Mrs. Bernie had no idea her baubles and beach houses and butter-blonde lockes were being financed through ill-gotten gains. According to Randy “The Ethicist” Cohen, Ruth had a moral obligation to stop and ask the husb where the scratch was coming from, the implication being that it was coming from a scam.
Here’s a guideline: around the time you acquire your third house (the one in Palm Beach), you must enquire, How are we paying for this? When selecting your second yacht (Little Bull, recently seized by the courts), you must pose the question: Where is the money coming from? Having benefited from a husband’s activities — for decades, not days — a spouse may not remain willfully ignorant. Adults must have some grasp of their impact upon other people, including financially. The greater your wealth, the greater your impact on others, the greater your responsibility not to be conveniently oblivious.
Really? With all due respect to Cohen, we beg to differ. Since when does marrying someone mean that you should have to take an active interest– prying or otherwise– in their business? Jim Simons made $2.5 billion last year. Is Mrs. Simons demanding a look at Renaissance’s books? Anne Dias Griffin’s Aragon Global Management turned in a considerably better ’08 than the husband’s fund. Is Ken packing the Mrs.’s lunch with love notes that read “Have a great day! PS I know you’re running a Ponzi scheme, you must be. I’m not gonna rat you out, just admit it and teach me your ways.” Ray Dalio took home $780 million. Do you see Barbara making periodic visits to the trading floor just to make sure “there’s no funny business going on here”? And even if she wanted to, who’s to say she’d be granted permission to “come on down”? This isn’t the Price Is Right, RandCo.
Update: After considering the offense that might be taken (you have no idea how many “wives of” read this site), it must be said– RandCo, morals or not, these women aren’t paid to think (let alone ask, “is this a scam?”).
Sotheby’s announced in a regulatory filing today that it will slash its dividend to 20 cents a year from 60 cents and cut 5 percent of its global headcount, on top of a 15 percent population restructuring last year. Surely it goes without saying but we’ll do so anyway– we know who’s behind this. Before jumping to conclusions, however, know that this wasn’t done out of maliciousness or even as a ruthless cost cutting measure. Money, in fact, had nothing to do with it. Rather, it’s part of a master plan going under the working title Operation Play Auction House. Slowly but surely everyone everyone will be cleared out and by next year you’ll be able to mosey on up to 72nd and York, press your nose against the glass and behold as you know who will be scurrying around the building playing the roles of security guard, curator, pressed sandwich Nazi, auctioneer and, using various wigs and affecting British accents, five different bidders.
Apparently the Justice Department is now hot on the trail for answers. Good for them! Not so good for Joseph Cassano, Andrew Forster (an executive vice president), and Thomas Athan (a managing director). Or possibly no big deal. Apparently the “investigation” consists of “looking at email traffic to try and see who was saying what to whom,” and if Team AIG-FP wasn’t in fact just a bunch of morons, perhaps they were careful about what they put in writing. But who knows. Obviously they could be criminals and dumb asses, and it’s unlikely they had an insane boss who cleaned the office in the buff and “decreed that e-mails would no longer be stored electronically,” though that’d add a delightful twist to this story.
CBS News has learned investigators are honing in on statements like one in a September 30, 2007, quarterly report, where potential accounting losses tied to its Cassano’s unit, known as AIGFP, were $352 million. And the company said it was “highly unlikely..{it} will be required to make payments.” To clients, it was an indication the company was saying it was healthier than it actually was.
Also under scrutiny is a November 7 press release where AIGFP upped that potential accounting loss to $550 million.
Earlier: Retirement Agreeing With Joe Cassano
Though he claims to be unmoved by share price, it is hard to imagine that Buffett is totally ignoring the crazy ride that is Berkshire’s share price, or the constant drubbing the firm (and WB himself) keeps taking over the variety of “Financial Weapons of Mass Destruction” it has collected over the last several years. Bloomberg, gleeful as a grandfather telling war stories to the grandkids and pawning off that scar he got falling off the ladder changing the kitchen lightbulb while drunk as a war wound, isn’t missing this chance to retell the story, and is, therefore, on the case again:
Chief Executive Officer Warren Buffett’s increasing use of derivatives — contracts whose value is based on the performance of stocks or bonds or the outcome of a specific event. That Buffett once called derivatives “time bombs” doesn’t calm investors.
Berkshire held contracts with a combined notional value of $67.3 billion at year-end. While this figure is used mostly for reporting purposes and isn’t indicative of potential losses, it dwarfs the company’s $25.5 billion in cash.
Though not quite as bad as the sinkhole it fell into back in February, Berkshire is getting tagged again and, at least to the extent you can believe any reason financial journalism comes up with to describe stock movements, the Berkshire Puts seem as good a reason as any. Sort of.
We’ve managed to harp on the poor reporting surrounding the Berkshire Puts more than once before, so it should come as no surprise that these are no ordinary puts and that Berkshire’s exposure isn’t typical of options writers. In this connection, we think we can be forgiven for thinking the issue of Berkshire’s ratings is a bigger one than the options themselves.
Berkshire’s 31% Decline Spurred by Derivatives Buffett Derided [Bloomberg]
Instead of banning short-selling outright, why not squeeze settlement times so tightly as to make it de facto impossible? Eddy Wymeersch, chairman of the Committee of European Securities Regulators pointed out that moving settlement from the rough European (and just about everywhere else) standard of T+3 to T+0 “would largely enable us to eliminate short selling.”
Of course, Wymeersch probably meant naked short selling, which delivery gaps tend to facilitate (stricter delivery requirements were among the recent efforts to curb the practice, in fact). But we think this a fantastic idea beyond just short selling restrictions. In fact, this approach could be the cure for financial crisis at large. It is true that the technology exists today to move to T+0 settlement. But why stop there? Why not move to T-1 settlement? Or, now that we think of it, T-3 settlement? The system we envision would work like this:
Trade Day Minus 5 (T-5):
After conversion of the Treasury’s NYSE Euronext, FINRA and owner/member preferred shares to common, the Treasury has become the DTCC’s majority shareholder and simply provides the bid and ask data for the day based on guidance from the Economic Recovery Advisory Board and recordings made during Paul Volcker’s late afternoon nap time. Prices are subject to the “uptick only” rule, meaning that no bid made at the same price as the last bid made may be made until there is first a bid uptick. This prevents stagnated pricing and undue “sideways” volatility.
Allotments and purchase assignments for the upcoming trading day are generated by rotation/capital balancing algorithm at DTCC’s headquarters. The resulting trade matches are netted and crosses harmonized to reduce the number of environmentally wasteful sheets of paper used in the printout.
T-4:
The final trade matches and prices are vetted by the Economic Recovery and Political Retribution Advisory Board. This body is currently run by Andrew Mark Cuomo, but he reportedly failed to press the “Door Open” button quickly enough when Rahm Emanuel was running for the elevator last week and Larry Summers apparently overheard Cuomo mutter “run you fucker, run” under his breath so the big AMC might be OUT.
T-3:
Funds are automatically deducted from checking and savings accounts (or added to the purchaser’s debt account at LIBOR + 11 plus “no cash” penalty. Overdrafts and related fees are a prime source of new “DTCC revenue” for those banking institutions currently favored by Tim Geithner). Trade confirmations are sent via USPS and should arrive by T+19.
T+0:
Shares are delivered to the lucky buyer. (Optional).
It will be seen that this system will pretty much assure the realization of the American Dream of Equity Ownership and prevent any of the pesky crashes or “corrections” we’ve been forced to live with until now.
Watchdog mulls new curb on short selling [Reuters]
It is difficult not to be entertained by the coverage on the meteoric plunge towards bankruptcy that is Chrysler. The Journal article is pretty circumspect about some rather important details, failing even to mention bondholders until the 18th paragraph in a 19 paragraph article. The deep and heartfelt sacrifices the UAW is making are front and center:
The United Auto Workers union would eventually own 55% of the stock in a restructured Chrysler LLC under the deal reached by the union and the auto maker, according to a summary of the agreement that was reviewed by the Wall Street Journal.
Fiat SpA “eventually” will own 35%, and the U.S. government and Chrysler’s secured lenders together will end up owning 10% of the company once it is reorganized, that summary said.
Hmmm, employee owned and operated. Where have we heard that before?
The Washington Post, however, claims to have the scoop on bondholders with:
The Treasury Department reached an agreement with Chrysler’s creditors late last night that may prevent the troubled automaker from going into bankruptcy, a source familiar with the matter said this morning.
The carmaker had owed a fractious group of 45 banks, hedge funds and other firms about $6.9 billion. These creditors have agreed to write down the debt to $2 billion, the source said.
As long as one can watch from a distance, this charade is quite entertaining.
UAW to Get 55% Stake in Chrysler for Concessions [The Wall Street Journal]
Chrysler Creditors Agree to Deal With Treasury [The Washington Post]
Fortis shareholders throw a shoe!
Fortis’s extraordinary meeting had to be adjourned on Tuesday after angry shareholders raided the stage and threw shoes at the management.
Mischael Modrikamen, an activist lawyer representing 2,300 small shareholders in the once-dominant banking group, is hoping to scupper the planned sale of Fortis Bank to BNP Paribas, the French bank, in favour of recreating a Belgian financial champion.
Management including Jozef de Mey, chairman, faced several calls to resign from angry shareholders.
Fortis Rebels Disrupt EGM [FT]
Despite, among other things:
- Putting Morgan Stanley on his resume (he was a “senior vice president and senior high-tech merger adviser”) and then not taking the extra precaution to blackmail John Mack into corroborating the story.
- Stealing $3 million from an escrow account while working at a venture capital firm called Sky Capital Partners in the mid-90s, and, when confronted by his boss, shrugging and telling him, he “just needed the money.”
- Being on the phone all day making bets with bookies
- Allowing “tough-looking men” to drop by the office during business hours “all the time”
- Entertaining prosties on the company dime
- Taking $15 million in investor funds and buying himself a Gulfstream IV
- Flying a bunch of girls from work to Vegas, and on the return flight, not sufficiently drugging up onlookers so that they wouldn’t be able to give an eye-witness account that he: “had a briefcase stuffed with cash and…started throwing money to the girls, stacks of $10,000. I thought it wasn’t right to treat the girls from the office that way, like we were pimps and gamblers.” And taking pics!
- Directing employees to “create a phony documents” and then not taking the necessary steps to make sure they don’t talk.
- In a moment of weakness, feeling the need to get something off his chest, inviting a partner into his office and going, “Nasar, I want you to know we are in a Ponzi scheme.”
David Schindler, an attorney for Mr. Pang, said his client expects to be fully vindicated.
A CNBC commentator asks a question we’re probably not supposed to be asking (silly goose, you’re just supposed to roll over and take this stuff). Since he’s likely been hauled off in a body bag in the last ten minutes, we’ll repeat it now– “What if the banks refuse to raise more capital?” Bank of America is apparently submitting its rebuttal today, and in the event they get the same answer, we don’t see Lewis having the pair to say “thanks, but we’re good.” However do not underestimate the liquid courage one can grow after mainlining five bottles of Boone’s on the drive to Tim Geithner’s office, and so we ask, what if? This is a serious question that certain high-up bank officials really, really want an answer to. Is worst case scenario, like, they take the CEO’s out office, or the more disturbing and to be avoided enforced bird-watching time with Hank Paulson?
