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As Lenders, Hedge Funds Draw Insider Scrutiny (NYT)
NEWSFLASH: In case you haven't noticed a pattern yet, the media is seriously banging the 'hedge funds are dangerous' drum these days. When was the last day that went by without a story about how much power they wield? Though the average person has no idea what a hedge fund is, we're sure that if the stories keep coming, hedge fund reform will grow to be a critical issue in the mind of the public (we're not there yet). The latest concern is that hedge funds that lend money to public companies -- and thus have inside information -- might then trade the stock. Still, if anything, this situation would indicate the folly of insider trading legislation, as it's not clear who is being harmed by the practice. But, it all basically boils down to the same thing; hedge funds are big -- scary big.
Home Depot, Altria Help Lead Campaign to Dampen 'Spitzerism' (Bloomberg)
Every politician these days dreams of being the next Eliot Spitzer. He turned a state AG position into a national force, instantly making himself much more powerful than many Senators, or even New York's own governor -- a position he will soon assume. And, conversely, more and more companies are dreaming of candidates that could be described as the Anti-Spitzer. Large companies and the Chamber of Commerce have been putting a lot of money forth to promote the campaigns of "pro-business" candidates that are nothing like Eliot Spitzer. Let's just hope these guys don't multiply when attacked.
Blue-Chip Gains Rouse Bears (WSJ)
As the Dow makes new records on a daily basis, it's interested to note which faces from the past are coming out of the woodwork. The return of Joe Battipaglia has been in full force for some time. Same with Mary Meeker. But in the bull's shadow is the bear, and a few well known ones are making noise again -- of course they'd have to be at this point. The Journal takes a look at three of them -- Merrill Lynch & Co.'s Richard Bernstein, J.P. Morgan Chase & Co.'s Douglas Cliggott and Morgan Stanley's Byron Wien -- and notes that all of them saw the top in 2000, and that they're all making noise again. And they command respect, not just for being right, but for not sounding the same note throughout their careers. That's unlike someone like David Tice of the Prudent Bear Fund, who, well, pretty much has to be bearish all the time. So, you've been warned.
UnitedHealth Finds Options Backdated; McGuire to Exit (Bloomberg)
Here's a yawner; yet another CEO -- who isn't Steve Jobs -- has resigned on account of backdating options. Just from the details, it doesn't sound like there's much wiggle room for the guy to make a case. The CEO of UnitedHealth, William McGuire, allegedly set option dates at the low point each quarter regularly since 1994. With a $66 billion market cap, UnitedHealth is the biggest company to lose its chief over options to date.
Verizon May Spin Off Its Directories Unit (NYT)
Even though nobody uses the phone book anymore, the directories business remains ridiculously profitable. It's strange. And for many telecom companies, you have to strip out the phonebook business from the rest to get a true picture of their actual operations. It looks like Verizon will spin of its directories business, and float it as a publicly traded company. There had been several private equity suitors (natch), but none could pay enough to justify the enormous tax bill the company would've seen on the sale. A public spin off is thus intended to ease this burden.
State supports more sick leave (CNNMoney)
Earlier this Summer, Massachusetts passed a universal health insurance bill that had rare bi-partisan support. That's because it wasn't based on government model, as it instead compelled every individual to buy health insurance -- which for the poor would be subsidized. The bill probably has many flaws, which will become apparent, but for the most part it was, again, seen as an interesting step. Now a bill is being considered that probably won't see such across-the-aisle love; a bill that would obligate each employer to provide 12 weeks of sick leave per year per employee --12 weeks as in 3 months. Whatever legislator proposed this is clearly living in a fantasy land, where if we just wish something to be true, it will be. Perhaps someone should tack on an amendment abolishing gravity.
3 ex-Enron employees face new fraud charges (Reuters)
One of the implausible aspects of the Enron trial was the presence of so many criminals in one place. It's one thing for there to be a few bad apples that conspire and bring the whole thing down, but if you believe the prosecution, there were tons of evil people involved in the company, at all levels, from the floor traders to the risk managers. Some sociologists might chalk this up to the banality of evil or whatnot, but it still seems like a surprising coincidence. And so it's all in a day's news that three more charges have been filed against ex-Enron employees. The employees were involved in one of Andy Fastow's SPEs, which were the subject of much notoriety.
Morgenson on pay consultants (Ideoblog)
If it's the weekend, you can be sure there's a Gretchen Morgenson column in the Times criticizing executive pay (she must be jealous). And if it's Monday, you can be sure that law prof Larry Ribstein has thoroughly trashed it. We'd love to host a debate between these two. In the latest installment, Larry takes on Gretchen's theory that the real scoundrels behind soaring executive pay are none other than (drumroll please) pay consultants. Outside advisers who wield considerable clout who's goal it is to drive salaries higher. Of course, as Larry points out, the has no theory as to why this would be, or how pay consultants achieved any stature of respect in the first place. Though if you've written a column about executive pay every week for the last year, you probably have to start scraping the barrel for some ideas.
Further Dissent on Grameen (Organizations and Markets)
We were excited last week that the Nobel Prize for Peace had gone to an economist who had pioneered the use of microloans to help the poor in developing countries. But beneath all of the adulation and enthusiasm, many fundamentalist capitalists are voicing skepticism, noting that the institution didn't turn a profit so it was really just like a regular charity, along with other complaints. But this criticism misses the point entirely. What's fascinating -- and what should make the capitalist get excited -- is that a model (call it a charity model if you will) based on tying the money to entrepreneurship, and the discipline of having to pay the money back, is superior than one based on money with no strings attached. Say what you will about the Grameen Bank, or its ideology, but that's a powerful lesson, and for many people a surprising one.