Joining Lt. Gov Pat Quinn's Team

Nearly a year ago, I posted my predictions for 2008. Among my cracked crystal ball observations: Hillary Clinton would be our next president.
So much for that one.
What's more, I also failed to predict a major turn in my professional life. After more than 20 years as a working journalist, much of it covering business and finance, I'm moving on to a new job as communications director for Illinois Lt. Gov. Pat Quinn.
If interested, click here for a brief description of my hiring.
It's a great assignment and obviously this is a fascinating time for Illinois. (Yes, that is an under-statement.)
In the coming days, I will be unwinding my own media business and agreements. Over the past few years, I've been very fortunate to work with good partners and clients including, Chicago magazine, Bnet.com, WBBM Newsradio 780, Businessweek and the Huffington Post.
I've also enjoyed a long association with the talented folks at WTTW/Channel 11's Chicago Tonight and Chicago Tonight The Week in Review.
These organizations give hope that good writing, editing, story-telling and investigative reporting will prevail even as the news business reconstitutes itself.
My sincere thanks to all who have read and reacted to this blog. It has only been around for about two years, but has been a blast to write.
That's enough about me.
Just one more thing: Have a great new year.

Taking a Blog Break

I'm taking some time to tend to a few personal/business dealings so Reedbiz/Bob Reed blog will be on hiatus.

Chicago Tonight: The Week In Review

Check out Chicago Tonight The Week in Review this weekend. Led by moderator Carol Marin, who's sitting in for Joel Weisman, a panel of local journalists talk about the major happenings in the Chicago-area and beyond.
This week,I'm on the panel along with newsman Phil Rogers of Channel 5/WMAQ-TV, sports reporter Cheryl Raye-Stout and political reporter Ben Calhoun, both of WBEZ-FM.
Led by Marin, we discuss the political fortunes of Illinois Gov. Rod Blagojevich, Mayor Daley's sale of city parking meters to a private firm, the fate of the local economy amid growing unemployment, and the state of Chicago's professional sports teams.
The show airs on Channel 11 at 7 P.M. Friday and again early Saturday morning.
If you're a Comcast cable TV subscriber, tap into the program at will by going to the "on-demand" menu and watching it anytime this weekend.

Advice To Team Obama: Keep FDIC's Bair

Now comes word that Timothy Geithner, President-elect Barack Obama’s choice for U.S. Treasury Secretary, is trying to push Federal Deposit Insurance Corp. Chairman Sheila Bair out of office. So much for Obama's "team of rivals" governing philosophy.
Apparently, Geithner worries that Bair is not a team player, according to Bloomberg Business News, which broke the story.
Some infighting is considered good sport, even in the Obama era. But pushing out Bair is not a wise, nor politically astute, decision. Before things get out of hand, Obama's camp needs to rethink this one and back off.
That's because dumping Bair--a federal regulator who is serving the public well during this sorry economic passage--will send out a cruel message which states: The U.S. Treasury remains committed to saving Wall Street's hide but won't be a champion of ailing home owners on Main Street U.S.A.
Indeed, Bair is an outspoken advocate for directly attacking the housing crisis. For example, after taking over IndyMac Bank, Bair's FDIC launched a plan to help troubled borrowers rework mortgages and make them more affordable.
Yes, there are some kinks in this initiative, but overall the plan is considered a blueprint for providing needed relief to those facing foreclosure.
A Republican appointment, Bair isn't shy about openly taking on the GOP's Treasury Secretary Hank Paulson and his muddled bailout effort. From the outset, she pointedly questioned Paulson's ad hoc strategy, which bounced around from buying troubled bank assets to infusing capital directly into banks without any oversight, structure or conditions.
Had Paulson paid heed to Bair's advice, the major banks--which have already scarfed up over $250 billion in taxpayer-backed funds and guarantees--would now be lending a cut of that cash haul to businesses and consumers. Instead, they are using our money to plug gaps in their balance sheets and buy other banks.
And during one of the darkest moments of the economic meltdown, Bair successfully pushed for Congress to temporarily expand the FDIC safety net, raising the insured deposit rate to $250,000 per account from $100,000. That move boosted depositor confidence and likely blunted a number of nasty bank runs.
Does Bair have critics? You bet.
She's come under fire for pushing the sale of Wachovia Bank to Wells Fargo, after the FDIC paved the way for an agreement that allowed Citigroup to buy Wachovia. At the time, Citi argued that the FDIC had gone back on its word.
Yeah, it probably did. Still, it's highly problematic that Citi could have successfully acquired Wachovia even with government welfare. Remember, this is the same Citi that recently went back for a second helping of government bailout money because it was headed for the brink. So, it looks as if Bair made the right course correction, saving taxpayers big money along the way.
Technically, Bair still has a few years left of her five-year appointment. But a critical Treasury Secretary and unsupportive President could make her remaining years pretty miserable.
One of the concerns about proposed Treasury Secretary Geithner, who runs the New York Federal Reserve Bank, is he's very close to the giant banking powers and Wall St. Sort of a Hank Paulson-type but with more hair. And you'd hate to think that since Bair was considered a candidate for Treasury Secretary that Geithner wants her out of the way.
Let's hope not. We can't afford more of the same nonsense.
But Geithner can confound the critics--and live up to his boss' desire to forge a government from a knowledgeable "team of rivals"-- by putting aside his reservations and working with Sheila Bair.

Surprise! This Bank Refuses Fed Bailout

The way major financial institutions are feasting on taxpayer-backed bailouts, you'd think every bank in this country has on the feed bag.
Not true.
Just north of Chicago, dwelling in the People's Republic of Evanston, is First Bank & Trust -- a 13-year-old community lender that doesn’t want any part of the U.S. government’s $700 billion bank bailout or, for that matter, any subsequent rescue plans.
You see, First Bank & Trust won't do business that way.
Says Robert R. Yohanan, CEO and one of the bank's founders: “We don’t need the money. More important, we don’t want the government as a partner.”
That refreshing approach makes First Bank & Trust a rarity in these dismal economic days.
First, it's a healthy institution that hasn't forsaken one of the main skills of successful banking: managing risk. For example a few years ago, First Bank & Trust shrewdly determined the home mortgage market was spinning out of control and greatly limited making real estate investments thus avoiding big trouble.
Secondly, this bank isn't looking to game the system by profiting from the government-backed bailout.
Believe me, one of the yet untold stories of this massive taxpayer-funded rescue is how many healthy lenders are grabbing for the government gold because it's a source of cheap and ready capital. Recently, one bank industry analyst told me that viable banks are under pressure from their institutional shareholders to take advantage of the bailout funding even if the lender doesn't need the cash cushion.
First Bank & Trust's management has a different approach.
It would rather fund bank operations through traditional means, like customer deposits, while also making a profit on sound loans. Moreover, it cringes at the prospect of selling even a slice of itself to the government, which usually gets preferred stock from any lender participating in the bailout.
"Who knows what is to come? They seem to be writing laws as they go along." says CEO Yohanan, who I spoke to while researching a story for Chicago magazine.
First Bank & Trust hasn't made a big deal out of the decision to go it alone.
For the most part, the bank's marketing initiatives travel more along the lines of neighborhood pumpkin carving contests. And to the best of my knowledge, the only mention of its bailout stance was made in a letter to the editor printed in a free local newspaper, which is where I learned of the "No Bailout Here" decision.
Yes, some critics will claim that First Bank & Trust shouldn't be held up as some shining example of restraint and fair play. They'll note this is a very small, conservative bank that caters to a niche of area business owners or operators and is surrounded by a fairly affluent depositor base. In addition, it doesn't provide the sweep of services and loans like JP Morgan Chase, Bank of America or other mega-banks and doesn't bear their heavy community reinvestment burdens.
All that may be true.
Still, I feel better knowing there's at least one bank out there not looking to score a free lunch.

Global Financial Crisis? Laugh It Up

While reading a story about Citigroup's travails on the Marketwatch financial web site, I stumbled across this ditty. A wag with the sign-on handle of Villeneuve27 posted this global view of the economy. I especially like the Enron Venture Capitalism section.
Remember Enron? That debacle looks almost quaint when compared to the shenanigans and mismanagement underway now within the world's financial arena.
Anyway, have a look and, hopefully, a few chuckles:

SOCIALISM
You have 2 cows.
You give one to your neighbour.

COMMUNISM
You have 2 cows.
The State takes both and gives you some milk.

FASCISM
You have 2 cows.
The State takes both and sells you some milk.

BUREAUCRATISM
You have 2 cows.
The State takes both, shoots one, milks the other, and then throws the milk away…

TRADITIONAL CAPITALISM
You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income.

SURREALISM
You have two giraffes.
The government requires you to take harmonica lessons

AN AMERICAN CORPORATION
You have two cows.
You sell one, and force the other to produce the milk of four cows.
Later, you hire a consultant to analyse why the cow has dropped dead.

ENRON VENTURE CAPITALISM
You have two cows.
You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows.
The milk rights of the six cows are transferred via an intermediary to a Cayman Island Company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company.
The annual report says the company owns eight cows, with an option on one more.
You sell one cow to buy a new president of the United States , leaving you with nine cows.
No balance sheet provided with the release.
The public then buys your bull.

A FRENCH CORPORATION
You have two cows.
You go on strike, organise a riot, and block the roads, because you want three cows.

A JAPANESE CORPORATION
You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk.
You then create a clever cow cartoon image called ‘Cowkimon’ and market it worldwide.

A GERMAN CORPORATION
You have two cows.
You re-engineer them so they live for 100 years, eat once a month, and milk themselves.

AN ITALIAN CORPORATION
You have two cows, but you don’t know where they are.
You decide to have lunch.

A RUSSIAN CORPORATION
You have two cows.
You count them and learn you have five cows.
You count them again and learn you have 42 cows.
You count them again and learn you have 2 cows.
You stop counting cows and open another bottle of vodka.

A SWISS CORPORATION
You have 5000 cows. None of them belong to you.
You charge the owners for storing them.

A CHINESE CORPORATION
You have two cows.
You have 300 people milking them.
You claim that you have full employment, and high bovine productivity.
You arrest the newsman who reported the real situation.

A BRITISH CORPORATION
You have two cows.
Both are mad.

AN IRAQI CORPORATION
Everyone thinks you have lots of cows.
You tell them that you have none.
No-one believes you, so they bomb the **** out of you and invade your country.
You still have no cows, but at least now you are part of Democracy….

Cuban's Cub Pitch Hammered By SEC

When it comes to buying the Chicago Cubs, Mark Cuban no longer has game.
The brash billionaire's bid to acquire the baseball team from Tribune Co. was struck a fatal blow by the Securities and Exchange Commission, which is charging the Texas businessman with insider trading.
And the SEC isn't talking about trading baseball cards.Click here to read complaint.
Cuban is innocent until proven guilty. And considering his feisty temperament, he'll likely put up a spirited defense worthy of his basketball team, the Dallas Mavericks. (Cuban, who writes a fun blog, comments on the SEC action but doesn't say much.)
Nevertheless, if Cuban weren't already out of the running to purchase the Cubs before, he sure is now. The SEC action will overshadow any Cuban-charged effort to buy the team. Who's going to lend him the money? Who would want to be part of a buyout group that's led by someone under suspicion for insider trading?
More than that, the SEC's action gives MLB Commissioner Bud Selig--who didn't want Cuban to be part of baseball's ownership society anyway--the perfect reason for scuttling any offer the Texas-based entrepreneur would make.
You know, for the good of the game.
And even if some team owners were willing to take on Selig and rally behind a big-paying Cuban (and, by proxy, raise the value of their franchises), the SEC action ends that possibility.
It's doubtful TribCo CEO Sam Zell shares Selig's relief. Zell is pushing hard to sell the team sooner rather than later. He reportedly wants $1 billion for the Cubbies, while keeping a minority stake.
Cuban, who sportswriters often describe as a beer-guzzling "fan favorite", indicated he was willing to play ball with Zell and seemed anxious to fight the baseball lords over the Cubs. At the very least, Cuban was a "buyer-on-deck" who helped keep the Cubs value high in a down economy.
That's all over now. The SEC just ejected Cuban from the field of play.