tag:blogger.com,1999:blog-12668274961328139512024-02-07T14:56:28.680-06:00BOB REEDNews, views and comments on business and beyond.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.comBlogger144125tag:blogger.com,1999:blog-1266827496132813951.post-4970083816431911222008-12-31T14:24:00.008-06:002008-12-31T16:03:36.174-06:00Joining Lt. Gov Pat Quinn's Team<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyrFPkjzpYVrqL1CyQpAgwFBOWVtGdu4OStcSIoedbI35zkPMK4Y_JBgrBresHn1gPNAswgdeUzd_Q-FlZtV-Ocjg4Wkt60w9AL54-d67IFguxsfZdttSKH_oDT063oB-Rlci0x6cH3hg/s1600-h/open_road_large.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 150px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyrFPkjzpYVrqL1CyQpAgwFBOWVtGdu4OStcSIoedbI35zkPMK4Y_JBgrBresHn1gPNAswgdeUzd_Q-FlZtV-Ocjg4Wkt60w9AL54-d67IFguxsfZdttSKH_oDT063oB-Rlci0x6cH3hg/s200/open_road_large.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5286074935224713474" /></a>Nearly a year ago, I posted my <a href="http://businessreed.blogspot.com/2008/01/predictions-predicaments-for-2008.html">predictions for 2008. </a>Among my cracked crystal ball observations: Hillary Clinton would be our next president. <br />So much for that one.<br />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 <a href="http://www.standingupforillinois.org/">Illinois Lt. Gov. Pat Quinn.</a><br />If interested, click <a href="http://www.chicagobusiness.com/cgi-bin/news.pl?id=32380">here for a brief description of my hiring.</a><br />It's a great assignment and obviously this is a fascinating time for Illinois. (Yes, <em>that</em> is an under-statement.) <br />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, <strong>Chicago</strong> magazine, <strong>Bnet.com, WBBM Newsradio 780, Businessweek </strong>and the <strong>Huffington Post</strong>. <br />I've also enjoyed a long association with the talented folks at <strong>WTTW/Channel 11's Chicago Tonight</strong> and <strong>Chicago Tonight The Week in Review.</strong><br />These organizations give hope that good writing, editing, story-telling and investigative reporting will prevail even as the news business reconstitutes itself.<br />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.<br />That's enough about me.<br />Just one more thing: Have a great new year.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com151tag:blogger.com,1999:blog-1266827496132813951.post-72758382013184396232008-12-08T13:40:00.000-06:002008-12-08T13:43:12.937-06:00Taking a Blog BreakI'm taking some time to tend to a few personal/business dealings so Reedbiz/Bob Reed blog will be on hiatus.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com277tag:blogger.com,1999:blog-1266827496132813951.post-28320854505054202432008-12-05T14:00:00.001-06:002008-12-05T14:32:25.489-06:00Chicago Tonight: The Week In Review<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKG0Gc4a2Llp_e8OxvbqZPUV74uxK46TAh-N5Yb8e2yXcDree3jzYqoQLqfj0uVHnh3ML1txKLPk5mCy_5yv61YhAguHqejtc4ncMIWKyYgn07OrCnMdQ2lkrtUJVIQMWrwDPU6Jrn6i4/s1600-h/carolmarin.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 175px; height: 103px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKG0Gc4a2Llp_e8OxvbqZPUV74uxK46TAh-N5Yb8e2yXcDree3jzYqoQLqfj0uVHnh3ML1txKLPk5mCy_5yv61YhAguHqejtc4ncMIWKyYgn07OrCnMdQ2lkrtUJVIQMWrwDPU6Jrn6i4/s200/carolmarin.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5276399415334191042" /></a>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.<br />This week,I'm on the panel along with <a href="http://www.nbcchicago.com/station/newsteam/?page=2">newsman Phil Rogers of Channel 5/WMAQ-TV</a>, sports reporter <a href="http://home.comcast.net/~atthegame/cbio.htm">Cheryl Raye-Stout</a> and political reporter <a href="http://www.wbez.org/Biography.aspx?bio=bcalhoun">Ben Calhoun</a>, both of <a href="http://www.wbez.org/default.aspx">WBEZ-FM</a>.<br />Led by Marin, we discuss the political fortunes of <a href="http://www.illinois.gov/GOV/">Illinois Gov. Rod Blagojevich</a>, 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. <br />The show airs on Channel 11 at 7 P.M. Friday and again early Saturday morning.<br />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.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com4tag:blogger.com,1999:blog-1266827496132813951.post-47888252613465023952008-12-04T10:35:00.011-06:002008-12-04T14:24:28.765-06:00Advice To Team Obama: Keep FDIC's Bair<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0hZvd4n8KI5RQDgVFSjgpb1bhGlLpXONUC9tQcNYBR3pbunL2yKUl5B2Rw0tgo5K1jkhalknUQWSqV0dCRb2O__YYVK0zFpBZ_70s4edMkm1bpbOUkgXlKrMzkb7f38tA7v85hmFiKFQ/s1600-h/bairfdic.bmp"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 148px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0hZvd4n8KI5RQDgVFSjgpb1bhGlLpXONUC9tQcNYBR3pbunL2yKUl5B2Rw0tgo5K1jkhalknUQWSqV0dCRb2O__YYVK0zFpBZ_70s4edMkm1bpbOUkgXlKrMzkb7f38tA7v85hmFiKFQ/s200/bairfdic.bmp" border="0" alt=""id="BLOGGER_PHOTO_ID_5275983835583492146" /></a>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.<br />Apparently, <a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aTFflUwD.Qbg&refer=home">Geithner worries that Bair is not a team player, according to Bloomberg Business News, which broke the story.</a><br />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.<br />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.<br />Indeed, Bair is an outspoken advocate for directly attacking the housing crisis. For example, after taking over <a href="http://www.indymac.com/default.aspx?id=1178">IndyMac Bank, Bair's FDIC launched a plan to help troubled borrowers rework mortgages and make them more affordable</a>.<br />Yes, there are some kinks in this initiative, but overall the plan is considered a blueprint for providing needed relief to those facing foreclosure.<br /><a href="http://en.wikipedia.org/wiki/Sheila_C._Bair">A Republican appointment, Bair</a> 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.<br />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.<br />And during one of the darkest moments of the economic meltdown, Bair successfully pushed for Congress to temporarily expand the <a href="http://www.msnbc.msn.com/id/26961008/">FDIC safety net, raising the insured deposit rate to $250,000 per account from $100,000</a>. That move boosted depositor confidence and likely blunted a number of nasty bank runs. <br />Does Bair have critics? You bet.<br />She's come under fire for pushing the sale of <a href="http://online.wsj.com/article/SB122303190029501925.html">Wachovia Bank to Wells Fargo</a>, 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.<br />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.<br />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.<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8cHQMFRz4ojXyX0HGu7TprHPxQpShixz0KNOSC69jdfgVy0Jh_8ZjmJNidM4oXZMDdsLGze0NbTLjzHY-YWLq7dRuGXAcqKASc6k23X-ad2iKg-zOGqHP0dsEfgVGpDNasE8GPZuO8R4/s1600-h/geithner.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 87px; height: 110px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8cHQMFRz4ojXyX0HGu7TprHPxQpShixz0KNOSC69jdfgVy0Jh_8ZjmJNidM4oXZMDdsLGze0NbTLjzHY-YWLq7dRuGXAcqKASc6k23X-ad2iKg-zOGqHP0dsEfgVGpDNasE8GPZuO8R4/s200/geithner.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5276015919923792770" /></a>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 <a href="http://www.prospect.org/cs/articles?article=sheila_bair_for_treasury_secretary">since Bair was considered a candidate for Treasury Secretary</a> that Geithner wants her out of the way.<br />Let's hope not. We can't afford more of the same nonsense.<br />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.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com7tag:blogger.com,1999:blog-1266827496132813951.post-53210650175948981752008-11-25T11:58:00.005-06:002008-11-25T19:40:28.649-06:00Surprise! This Bank Refuses Fed Bailout<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjfz8nKwUGo98d4Y9DAc5pRxRV_4nuoh2qsRx4JeR9A9cUOeo-QQj7PNIWJneI3sxRH83LE42BaOI9dhfpYAoj5hbt4gmdTvnOwvS3g23cFKHzL9lCE-OWPWCUGVN3KatdGM-VLng7oZps/s1600-h/firstbanktrustpic.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 157px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjfz8nKwUGo98d4Y9DAc5pRxRV_4nuoh2qsRx4JeR9A9cUOeo-QQj7PNIWJneI3sxRH83LE42BaOI9dhfpYAoj5hbt4gmdTvnOwvS3g23cFKHzL9lCE-OWPWCUGVN3KatdGM-VLng7oZps/s200/firstbanktrustpic.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5272660212111949074" /></a>The way major financial institutions are feasting on taxpayer-backed bailouts, you'd think every bank in this country has on the feed bag.<br />Not true.<br />Just north of Chicago, dwelling in the <a href="http://en.wikipedia.org/wiki/Evanston,_Illinois">People's Republic of Evanston</a>, 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. <br />You see, <a href="http://www.firstbt.com/">First Bank & Trust </a>won't do business that way.<br />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.”<br />That refreshing approach makes First Bank & Trust a rarity in these dismal economic days.<br />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 <a href="http://money.cnn.com/real_estate/foreclosures/">home mortgage market was spinning out of control </a>and greatly limited making real estate investments thus avoiding big trouble.<br />Secondly, this bank isn't looking to game the system by profiting from the government-backed bailout. <br />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<a href="http://www.investorwords.com/2504/institutional_investor.html"> institutional shareholders </a>to take advantage of the bailout funding even if the lender doesn't need the cash cushion. <br />First Bank & Trust's management has a different approach.<br />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, <a href="http://vcexperts.com/vce/library/encyclopedia/documents_view.asp?document_id=77">which usually gets preferred stock </a>from any lender participating in the bailout.<br />"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 <em>Chicago</em> magazine.<br />First Bank & Trust hasn't made a big deal out of the decision to go it alone.<br />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 href="http://www.evanstonroundtable.com/index.html">a free local newspaper, </a>which is where I learned of the "No Bailout Here" decision. <br />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 <a href="http://www.jpmorganchase.com/cm/Satellite?c=Page&cid=1159304834085&pagename=jpmc/Page/New_JPMC_Homepage">JP Morgan Chase</a>, <a href="https://www.bankofamerica.com/index.jsp">Bank of America</a> or other mega-banks and doesn't bear their heavy community reinvestment burdens.<br />All that may be true.<br />Still, I feel better knowing there's at least one bank out there not looking to score a free lunch.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com5tag:blogger.com,1999:blog-1266827496132813951.post-9005197018141112202008-11-17T11:09:00.005-06:002008-11-17T15:25:41.436-06:00Cuban's Cub Pitch Hammered By SEC<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh2hJlO1-fqhoCz1zVuJiZBu2H7QV3g8s9dkd-EEbBWoCnx_1zweOBcH-EDpSSj8Lx9ec9Jf2JaF2e8aih0RMvdJovjbUTJ6Z9HTPedcWI30lQjG65HNvPEM-hBtgrg5cc6v6sWsnBnAIs/s1600-h/mark_cuban.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 158px; height: 200px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh2hJlO1-fqhoCz1zVuJiZBu2H7QV3g8s9dkd-EEbBWoCnx_1zweOBcH-EDpSSj8Lx9ec9Jf2JaF2e8aih0RMvdJovjbUTJ6Z9HTPedcWI30lQjG65HNvPEM-hBtgrg5cc6v6sWsnBnAIs/s200/mark_cuban.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5269691692938944402" /></a>When it comes to buying the Chicago Cubs, Mark Cuban no longer has game.<br />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.<br />And the SEC isn't talking about trading baseball cards.<a href="http://sec.gov/news/press/2008/2008-273.htm">Click here to read complaint</a>.<br />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. (<a href="http://blogmaverick.com/">Cuban, who writes a fun blog, comments on the SEC action but doesn't say much</a>.)<br />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? <br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-p2XTwk9TBh1ZBq5qGOGXy8D4B6BLKlP9pRXqj_4r_RTm18WveYQFWCARy856o5xKnacxwwUpPJVaVWYipp1gdsQEtquHSH5ckPr6PIAZDaUxpnHUm9JEbv3grJWcKceQM8UIflT0asY/s1600-h/budselig.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 110px; height: 110px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-p2XTwk9TBh1ZBq5qGOGXy8D4B6BLKlP9pRXqj_4r_RTm18WveYQFWCARy856o5xKnacxwwUpPJVaVWYipp1gdsQEtquHSH5ckPr6PIAZDaUxpnHUm9JEbv3grJWcKceQM8UIflT0asY/s200/budselig.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5269692090951472690" /></a>More than that, the SEC's action gives MLB Commissioner Bud Selig--<a href="http://www.suntimes.com/sports/deluca/1266088,CST-SPT-deluca07.article">who didn't want Cuban to be part of baseball's ownership society anyway</a>--the perfect reason for scuttling any offer the Texas-based entrepreneur would make.<br />You know, for the good of the game.<br />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.<br />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.<br />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. <br />That's all over now. The SEC just ejected Cuban from the field of play.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com41tag:blogger.com,1999:blog-1266827496132813951.post-43708105930119221832008-11-14T13:38:00.002-06:002008-11-14T16:02:18.881-06:00Week In Review; Rob Feder Interview<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgrHTLuvpvwZMGbYakzzHjmmlbqPBu3ChsKEA6lDOgr67DFgNX1GH4TuLnJPlkhRa0_HcdrltA5IU3Ji9Vpw_-yMSV9VsO_ff-M1Ham6vxcAQLZs-PBGZCQ1P5Ul0qvdxiqk604OuB7NoQ/s1600-h/wttwpromo.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 187px; height: 210px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgrHTLuvpvwZMGbYakzzHjmmlbqPBu3ChsKEA6lDOgr67DFgNX1GH4TuLnJPlkhRa0_HcdrltA5IU3Ji9Vpw_-yMSV9VsO_ff-M1Ham6vxcAQLZs-PBGZCQ1P5Ul0qvdxiqk604OuB7NoQ/s320/wttwpromo.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5268606745278162578" /></a>Check out Chicago Tonight The Week in Review this weekend. Led by moderator 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 <a href="http://www.chicagotribune.com/business/columnists/chi-davidgreising,0,6064325.columnist">David Greising</a>, business writer/columnist with the Chicago Tribune, <a href="http://www.suntimes.com/news/washington/bio-washington.article">Laura Washington</a>, opinion columnist for the Chicago Sun-Times and <a href="http://www.suntimes.com/sports/couch/index.html">Greg Couch</a>, sports columnist for the Sun-Times.<br />Lots to chat about including: Speculation about who will fill President-elect Obama's Illinois Senate seat; CTA fare hikes; new efforts to bail out local homeowners; and, of course, Da Bears, Bulls and Cubs (without closer <a href="http://sports.yahoo.com/mlb/players/5982/career">Kerry Wood</a>). <br />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.<br />After Weisman's Week in Review, <a href="http://www.wttw.com/main.taf?p=42,8,1&pl=New%20Video%203">John Callaway interviews Robert Feder, former Sun-Times TV and radio columnist,</a>who recently took a buyout and left the paper. <br />For those of us who miss Rob's daily observations, this interview promises to be a great way to reconnect--even if it's for only 30 minutes or so.<br />Have a great weekend.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com5tag:blogger.com,1999:blog-1266827496132813951.post-50248621189111349042008-11-11T17:06:00.007-06:002008-11-13T11:18:22.668-06:00Congress Takes Aim At Griffin's Citadel<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhq5Ebz9t3QSChn244zEcgtVyoAXIuzS3gWgmmkNOKUhYCqeB0n-QKiOzKuLkmv8CgMqzWud-LT86sPHrwLz_Lv3CQJQqBauGyopQVz-X5l5HFM6l0gKiimNRzrlT5gM6mSLP0ni8MhPA0/s1600-h/Griffin1.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 143px; height: 200px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhq5Ebz9t3QSChn244zEcgtVyoAXIuzS3gWgmmkNOKUhYCqeB0n-QKiOzKuLkmv8CgMqzWud-LT86sPHrwLz_Lv3CQJQqBauGyopQVz-X5l5HFM6l0gKiimNRzrlT5gM6mSLP0ni8MhPA0/s200/Griffin1.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5267570000445637698" /></a>Ken Griffin, local hedge fund magnate and one of the country’s wealthiest men, is the anti-Trump. Unlike The Donald, Griffin hates being noticed. Even in good economic times, or when making one of his eye-popping philanthropic donations, Griffin steers clear of the spotlight. <br />All that is about to change this Thursday.<br />Griffin is among a handful of hedge fund managers and experts taking center stage to explain to the country, via a Congressional panel, <a href="http://oversight.house.gov/story.asp?ID=2271">just what hedge funds do and what role they're playing in the deteriorating U.S. economy</a>.<br />Inquiring minds want to know.<br /><strong>(Update: The hearings are underway today. Click on <a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aYgmAk8g3nVo&refer=home">the Bloomberg Business News link</a> for reports or go to a House-provided <a href="http://oversight.house.gov/story.asp?ID=2274">video link</a> and web site.)</strong><br />For Griffin, who founded and runs <a href="http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=2920263">Citadel Investment Group</a>, it does not promise to be an enjoyable session. Aside from his intense dislike for publicity, Griffin is up against Democrat Henry Waxman, who chairs the committee,and is known for being pro-regulation and not very happy with the investment banking/hedge fund world. The <a href="http://www.henrywaxman.house.gov/bio.htm">combative Waxman </a>isn't shy about publicly broiling Captains of Commerce who think otherwise.<br />And Griffin despises the idea of greater scrutiny of his company, which has $20 billion in assets under management, or the aggressive policing of the hedge fund industry.<br /><a href="http://www.reedbizonline.com/docs/hedge_fun.pdf">When I spoke to him in a rare interview in 2005</a>, Griffin strongly asserted there were enough checks and balances within the financial system so the notion that hedge funds were unregulated was "fanciful". <br />His point: Get out of the way and let the free market boogie! <br />That attitude paid off handsomely for Citadel's investors and Griffin. For much of the last decade, Citadel posted annual investor returns in excess of 20 percent. As a result, Citadel management made a bundle by charging clients a standing fee of two percent of assets-under-management and 20 percent of any profits, a formula known in the parlance of hedge fund circles as the “2-plus-20” rule.<br />Citadel CEO Griffin is now super-wealthy, which enables him to be a <a href="http://www.artic.edu/aic/modern_wing/campaign/griffin.html">world-class art collector and major benefactor to the Art Institute of Chicago</a> and other causes. He’s ranked 97 on this year’s list of Forbes Richest Americans with a net worth of $3.7 billion as of Aug. 31. <br />Still, Griffin might look back on August as the good old days.<br />In mid-October, Griffin held an unprecedented conference call with bondholders designed to reassure backers of Citadel’s financial prowess. At that time, two of <a href="http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aCmkPlsDhD7I">Citadel’s biggest hedge funds suffered asset declines of nearly 35 percent for the year,</a> as scared investors cashed out and ran for cover.<br />In a letter, Griffin told Citadel investors that earnings for the remainder of 2008 would be "volatile."<br />Despite Citadel’s unusual public assurances, some critics say the firm’s bad run is far from over.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjOxSjp3KWyWIdy0qjwJmYnD_7OViPs15zmSfgbmUR8Jxmq19ZHGaF6_nbjghXeElpNDw8AkCNq496QSdaFpJStae_u6_903nE4og61cHyH_EhywEPCoWfBD3ULh3OLsf-XqQc7uJjP0g/s1600-h/cramer.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 126px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjOxSjp3KWyWIdy0qjwJmYnD_7OViPs15zmSfgbmUR8Jxmq19ZHGaF6_nbjghXeElpNDw8AkCNq496QSdaFpJStae_u6_903nE4og61cHyH_EhywEPCoWfBD3ULh3OLsf-XqQc7uJjP0g/s200/cramer.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5267570167642086738" /></a> One high-profile naysayer is Jim Cramer, the influential and energetic stock-picker who appears on financial cable channel CNBC and web site TheStreet.com. He argues that investors will continue fleeing Citadel’s hedge funds. “When you are down 35 percent, they run from you, not to you,” <a href="http://www.thestreet.com/story/10444377/1/cramer-a-vulnerable-citadel.html">said Cramer in a recent web post entitled, “A Vulnerable Citadel.”</a><br />To counter its difficulties, <a href="http://www.ft.com/cms/s/0/8069471c-b028-11dd-a795-0000779fd18c.html">Citadel is concentrating on building up its non-hedge fund business</a>--something Griffin is likely to play up before Waxman's committee as he seeks to distance his company from the rest of the hedge fund riffraff.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvucduVeJGro-rcs2md5QzzINsz9XIoRfWNfVug0J8kEFBCZ4fvEAWWePI3_xzUoyCycRqJk4J8HmZc8cqPikcT7ZsG-W-9LESIkuM3stBPp2XFU0Sj2WSZYIbyZxSXbCpSw9zfh0llg0/s1600-h/waxman.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 96px; height: 110px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvucduVeJGro-rcs2md5QzzINsz9XIoRfWNfVug0J8kEFBCZ4fvEAWWePI3_xzUoyCycRqJk4J8HmZc8cqPikcT7ZsG-W-9LESIkuM3stBPp2XFU0Sj2WSZYIbyZxSXbCpSw9zfh0llg0/s200/waxman.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5267570442438244546" /></a>Still, that may not be enough for edgy legislators. <br />Expect the Waxman panel to bring up some thorny issues, including questions about how much money Citadel borrows and is it overly-leveraged? <br />(Citadel’s leverage ratio --the amount of money it borrows vs. the amount on hand—is three-to-one, which is down from the six-to-one ratio at the beginning of the year.)<br />Other questions: How much impact does Citadel have on the stock market? On any given day, Citadel can account for 6 percent of the trading on the NASDAQ and New York Stock Exchange. What happens to the rest of us, should Citadel tumble?<br />And then there's the issue of executive compensation. Don't expect Griffin's payday to go unnoticed by Waxman, who might just ask: "Is anyone worth that amount of money?".<br />Maybe no one is worthy of such a huge chunk of change. But this Thursday, publicity-shy Ken Griffin is going to earn his paycheck.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com59tag:blogger.com,1999:blog-1266827496132813951.post-46710834077737995382008-11-05T09:30:00.003-06:002008-11-05T12:39:38.224-06:00Obama, Harold, Blago and Fox. Oh my!<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-EHEori8lzF9qXIvnhykCLs2h0oXW9CyT7AkJFSipSWalYkLYSMzznpCpfVF7FEfV7KSGDNoO5yQnSHp-U-TblBA3SmW2mhjlanElWhxb5MX3hjEx_uNvUi0wa9WeG-J3Gg8d0N7xJIc/s1600-h/superobama.bmp"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 320px; height: 221px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-EHEori8lzF9qXIvnhykCLs2h0oXW9CyT7AkJFSipSWalYkLYSMzznpCpfVF7FEfV7KSGDNoO5yQnSHp-U-TblBA3SmW2mhjlanElWhxb5MX3hjEx_uNvUi0wa9WeG-J3Gg8d0N7xJIc/s320/superobama.bmp" border="0" alt=""id="BLOGGER_PHOTO_ID_5265203195839480898" /></a>No, he's not Superman. But we'll often expect him to be the <a href="http://www.supermanhomepage.com/news.php">Man of Steel</a>.<br />Yes, President-elect Barack Obama has a huge job before him. Fixing the economy, ending the war, protecting the country, reviving the middle-class, shoring up the sagging educational system, curing the health care insurance crisis and on and on.<br />And that's just what we know about. Life has a habit of surprising each and everyone of us, including the President.<br /><a href="http://www.bloomberg.com/apps/news?pid=20601103&sid=aMqMcP5e_Vgw&refer=us">Is there little doubt that Obama looked almost grim, and very determined, as he spoke before a swelling Grant Park crowd yesterday night? </a><br />Others can celebrate, but Obama--who is more realist than charismatic idealist--grasps the gravity of what lies ahead.<br />At times, the Oval Office will seem like the loneliest place in the world.<br />But when that happens, President Obama should recall the greatest lesson of his historic election campaign: You are not alone.<br /><br /><strong>Remembering Harold Washington.</strong> Speaking of charisma. The day after Harold Washington was elected Mayor of Chicago (April 23,1983) there was an electricity in the air--something Chicago never experienced.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj2fmjhd7FYk3SRHWWoAYDjsU7nD-qkIH22oXEa3Q7Mzw2faKKXcyqDdC_pvSKpj5Gq6fjVmBhFnWAoz38egsRT5wd_scfhN3zfOd55hyZ-wDGqwDIzCuc4Gl6auCT6AMk1hWsZSB870WE/s1600-h/haroldwashingtonatcbs2.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 150px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj2fmjhd7FYk3SRHWWoAYDjsU7nD-qkIH22oXEa3Q7Mzw2faKKXcyqDdC_pvSKpj5Gq6fjVmBhFnWAoz38egsRT5wd_scfhN3zfOd55hyZ-wDGqwDIzCuc4Gl6auCT6AMk1hWsZSB870WE/s200/haroldwashingtonatcbs2.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5265207644836993090" /></a><br />I recall that the city crackled with a new vibrancy because Washington had beat the odds and was going to take charge.<br />The circumstances of <a href="http://en.wikipedia.org/wiki/Harold_Washington">Washington's local election </a>and Obama's ascendancy are different and times have changed.<br />But you know what? Today, I'm feeling some of Harold's energy.<br /><br /><strong>And Illinois' New Senator Is...</strong>Tons of speculation about who <a href="http://divisionstreet.wordpress.com/tag/rod-blagojevich/">Governor Rod Blagojevich will name to replace Obama as Illinois Senator</a>. As reported here <a href="http://businessreed.blogspot.com/search?q=val+jarrett">last August, some close Obama backers want Val Jarrett</a>, while other politicos are touting Jesse Jackson Jr.<br />My suggestion? How about <a href="http://www.illinois.gov/GOV/">Rod Blagojevich</a>?<br />I'm only half-joking here, folks.<br />Blago goes to Washington and serves Obama's remaining term. (Whether he runs again is a topic for another time.)<br />Meanwhile, the able Lt. Gov. Patrick Quinn becomes Illinois governor and works with the General Assembly to break the current gridlock and actually get some things done. (And whether he runs again is a topic for another time.)<br /><a href="http://businessreed.blogspot.com/2008/06/lt-gov-quinn-on-blago-obama-and-biz.html">During an interview earlier this year,</a> I asked Quinn to speculate on various Senate-appointment scenarios. He said this one worked for him.<br />Hey, why not? A man can dream. <br />But Quinn's pragmatic side quickly kicked into gear, saying Blago would never make that call.<br />I'm sure those steeped in the machinations of Springfield politics would agree.<br />Still, I sort of like the idea.<br /><br /><strong>R.I.P. Fox News?</strong>The election night panel on Fox News resembled a wake as it reported the Democratic Party landslide and Obama's election.<br />Talk about a gloomy group.<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSqV0qD4PZaE9DmvzG1c3o4YSllOkB2VX45vbv3dGbE56giiKM1KE5bIUf8IhJyYGMfC19cKCVpMa5noVFnoNE0oOtbvdT0PPvS7HWMzXEoMyyWWlsNd5WvCJ_4aEsxkv_jt_5wFvays0/s1600-h/brittfox.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 150px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSqV0qD4PZaE9DmvzG1c3o4YSllOkB2VX45vbv3dGbE56giiKM1KE5bIUf8IhJyYGMfC19cKCVpMa5noVFnoNE0oOtbvdT0PPvS7HWMzXEoMyyWWlsNd5WvCJ_4aEsxkv_jt_5wFvays0/s200/brittfox.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5265222336360269074" /></a>Like the Republican Party, Fox is facing a tough decision.<br />Does it stay with its current business plan and become the "loyal opposition" to all-things-Obama? Or does it go with the "wisdom of crowds" and temper its deeply-conservative and combative approach?<br />Here's some advice: Ask yourself: What would <a href="http://video.google.com/videosearch?sourceid=navclient&ie=UTF-8&rlz=1T4GGIH_en&q=Ayn+Rand&um=1&sa=X&oi=video_result_group&resnum=4&ct=title#">Ayn Rand</a> do?<br />Then do the opposite.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com0tag:blogger.com,1999:blog-1266827496132813951.post-66160286063429090362008-11-03T16:17:00.000-06:002008-11-03T16:43:46.369-06:00Get Out And Vote....<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiFm2AeyHGe97ak0_BPqbOtFzpCUSYGqSDkU5UlhJseHV6obBrX5qIhxIfuztBddoxF_UQ11SnkGkhfe9I7u8xc6SjdG0ymnPHIK45Bmo5eTj1kNp5C1TdPyhLCePvZWI8ztzBTLBIdM0w/s1600-h/votingbooth.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 110px; height: 135px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiFm2AeyHGe97ak0_BPqbOtFzpCUSYGqSDkU5UlhJseHV6obBrX5qIhxIfuztBddoxF_UQ11SnkGkhfe9I7u8xc6SjdG0ymnPHIK45Bmo5eTj1kNp5C1TdPyhLCePvZWI8ztzBTLBIdM0w/s200/votingbooth.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5264562311135796930" /></a>OK, let's do this thing.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com0tag:blogger.com,1999:blog-1266827496132813951.post-75487807553336412812008-10-29T11:01:00.004-05:002008-10-29T13:10:06.940-05:00Economy's 'Dr. Doom' Makes Heroic Call<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbKAsuYl9J68iluyx1lYIwjXQmNtkZ1L3mrb-AHByECiytJHg78QfoVdf8gCBfp86SZQJTMssUir1Q06t4a3j5Z7e3EVATi-R5PeYdb801BOsNjxoIz5nZ_YWxWrG0EZR5qHuPGmfTsj0/s1600-h/drdoom.gif"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 189px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbKAsuYl9J68iluyx1lYIwjXQmNtkZ1L3mrb-AHByECiytJHg78QfoVdf8gCBfp86SZQJTMssUir1Q06t4a3j5Z7e3EVATi-R5PeYdb801BOsNjxoIz5nZ_YWxWrG0EZR5qHuPGmfTsj0/s200/drdoom.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5262608920422266898" /></a>He's been called Dr. Doom.<br />No, I'm not referring to the comic book super-villain and longtime nemesis of the <a href="http://www.marvel.com/universe/Fantastic_Four">Fantastic Four</a>. For the last few years that nickname has been hung on <a href="http://pages.stern.nyu.edu/~nroubini/">Nouriel Roubini, professor of economics at the Stern School of Business, New York University,</a> who in 2006 rightly predicted the economic malady now infecting the entire globe.<br />At the time, Roubini was written off by peers and Wall Street elite as an overly pessimistic crank.<br />Cranky he may have seemed, but overly pessimistic? Nope.<br />Buttressed by an uncanny ability to peer beyond the smoke,mirrors and spin of high finance, Roubini determined that an economic catastrophe was coming. The calamity would not be caused only by sub prime mortgages, which are still viewed as the ultimate culprit of the downfall, but by the planet's sub prime banking system.<br />In short, banks and investment banks (especially) really <a href="http://answers.google.com/answers/threadview?id=350436">screwed the pooch.</a><br />Collectively, they took too many unwarranted risks and didn't have the capital--that's actual money in the sock--to withstand a collapse of the consumer credit market, including trillions in saggy mortgages, home equity loans, credit cards and auto loans. <br />What's more, Roubini was the first to say the <a href="http://www.portfolio.com/news-markets/top-5/2008/09/15/Investment-Banking-Model-is-Dead">business model for the stand-alone investment bank was dead</a>. With leverage ratios in excess of 30-to-1 (for every $30 borrowed it had one dollar in cash), investment banks like Bear Stearns and Lehman Brothers would not make it through the hard times.<br />The other high priests of finance--Goldman Sachs and Morgan Stanley--abandoned their investment banking purity to become more highly-regulated bank holding companies. Meanwhile, Merrill Lynch headed for the hills by merging with Bank of America.<br />Even as the economic crisis unfolded, Roubini's views were still greeted with deep skepticism. I recall a <a href="http://www.charlierose.com/home">Charlie Rose</a> show, where the good professor was treated like a skunk at a garden party because he predicted the demise of huge investment banks and stated the traditional banking system was in big trouble.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfmzckpWbj2METtvLr7SjcnmkEjFCFGtnj6KAh0rqU1LqL3AOSMr3Xn5Yj5sw2Ldskeg1olI1rCnzzfqiLvNnSix_vNCwV3hicgQb-Kxx7TgEPBu49nDy76T0Phx5h-7eQWJOjhrierGI/s1600-h/roubini.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 89px; height: 118px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfmzckpWbj2METtvLr7SjcnmkEjFCFGtnj6KAh0rqU1LqL3AOSMr3Xn5Yj5sw2Ldskeg1olI1rCnzzfqiLvNnSix_vNCwV3hicgQb-Kxx7TgEPBu49nDy76T0Phx5h-7eQWJOjhrierGI/s320/roubini.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5262618786219316818" /></a>He was also among the first to say the Bush Administration's bailout plan was full of beans. You may recall that the original idea, advocated by our high-handed Treasury Secretary Hank Paulson, <a href="http://www.nytimes.com/2008/09/21/business/21qanda.html?em"> primarily centered on the U.S. government buying toxic mortgage-backed assets from investment houses and banks.</a><br />A bad idea, argued Roubini.<br />Instead, he said, the government needed to stabilize the financial and lending system by pumping money directly into the major banks. With that additional capital, banks will rebuild. They'll provide loans to each other again, restore confidence in the credit markets, and make more commercial lending available to worthy credits, Roubini asserted.<br />Once an obscure academic, Roubini is now teaching before a much larger audience.<br />He's all over the financial news channels, is a recurring guest on PBS and Charlie Rose, and is in demand as a speaker. <a href="http://www.rgemonitor.com/blog/roubini/">He also runs a consulting business.</a><br />Let's hope the limelight and success doesn't ruin Professor Roubini.<br />Right now, however, Roubini is staying true to his calling. He figures there's more carnage ahead for the banking system and financial markets. And he would like to see another stimulus package, worth about $400 billion, to jump start the economy because we're looking down the spout at a deep, two-year recession, he said.<br />Nobody wants to hear such gloomy predictions. But at least Dr. Doom knows what he's talking about.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com3tag:blogger.com,1999:blog-1266827496132813951.post-72393581250978099452008-10-22T11:31:00.003-05:002008-10-22T15:47:08.204-05:00Bonus Time: You Give, Wall St. Takes<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPk48endc5lRrP6J8rNNzyskM2GsNC0TF5Iabxtsi7qP2nbMZm1LbiuWVugWI_NHK_Ld1OTfBD6Aj_-1ZnAOdLUGcCHw9qcxy7G0Q0fCjPVbPJyXZS1A8E_da-Kz2nL4t1kPBbbscj-_Y/s1600-h/bonuspic1.bmp"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPk48endc5lRrP6J8rNNzyskM2GsNC0TF5Iabxtsi7qP2nbMZm1LbiuWVugWI_NHK_Ld1OTfBD6Aj_-1ZnAOdLUGcCHw9qcxy7G0Q0fCjPVbPJyXZS1A8E_da-Kz2nL4t1kPBbbscj-_Y/s200/bonuspic1.bmp" border="0" alt=""id="BLOGGER_PHOTO_ID_5260082555730924194" /></a>For most workers, the year-end bonus no longer exists, having gone the way of company-paid holiday parties and gift turkeys. Indeed, such Yuletide Cheer is rare, except on Wall Street, which is licking its collective chops in anticipation of yet another round of big annual payouts.<br />And why not? Extra effort means extra pay. And no group has worked harder at bringing down the economy and forcing a massive taxpayer-backed rescue plan than Wall Street's rat pack of wheeler-dealers, incompetents, and nogoodniks.<br />Merry Christmas, folks.<br />It's not clear yet how deep the "bonus pool" will be. But looking at the year-to-date compensation estimates, count on it being pretty cavernous. <a href="http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking">One estimate of Wall Street pay, bonus and related costs goes up to $70 billion this year.</a><br />Whatever the ultimate number, we all get the honor of pitching in. Remember your government is <em>initially</em> investing $250 billion into shoring up the nation's largest banks, including that longtime bonus-leader Goldman Sachs & Co. <a href="http://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008">It's all part of the fed's $700 billion master rescue plan.</a><br />For many of us the real question isn't how much Wall Streeters will be getting but why are they getting anything extra at all? <br />In the past when an investment bank made money, the bonus checks were passed out like candy. But now, as the traditional investment banking industry is being wiped off the face of the earth, wouldn't it be prudent to back off?<br />Apparently not.<br /><a href="http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_weil&sid=azo7aySdpFHw">Goldman is poised to hand out about $11 billion in compensation and bonuses, while Morgan Stanley is set to distribute nearly $10 billion.</a> Citigroup, JP Morgan Chase, Merrill Lynch will be doing their bonus thing, too.<br />This redistribution of wealth comes while each of these financial services companies are getting ample cash infusions from the taxpayer-backed rescue plan, courtesy of Treasury Secretary Hank Paulson (who is a former Goldman chief).<br />Obviously, solvency isn't a requirement for getting a bonus. And forget about profitability--that's out the window, too. Instead, investment banks argue that big bonuses are needed to keep the crucial "talent" on board. <br />Really? You mean with <a href="http://www.bankersball.com/2008/03/25/wall-street-job-cut-tally-34k-so-far-another-20k-projected/">Wall Street expected to cut 50,000-plus jobs in this downturn</a>,companies are still concerned about losing key staff to rivals? <br />And what type of "talent" is being bought off?<br />Are these the same big brains who developed the sub prime mortgage market, credit swaps, and other obscure financial plays that are crippling the global economy and taking down Main Street?<br />In spite of everything that's happened, Wall Street hubris is alive and well.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdtzWe4IlfBLluazfVCi_NRC_9Dkrl7YJx73zr0JeQ0NDLwsfJEnZeH-TpxNvifS9aGkPBlD88IX3T6G4utCTl9tuDQLLWC5DTB6rzrnZN7b5b-1Rt-N6pqR76Tpmd-abcHzqBE-rYUtY/s1600-h/turkeybush.bmp"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdtzWe4IlfBLluazfVCi_NRC_9Dkrl7YJx73zr0JeQ0NDLwsfJEnZeH-TpxNvifS9aGkPBlD88IX3T6G4utCTl9tuDQLLWC5DTB6rzrnZN7b5b-1Rt-N6pqR76Tpmd-abcHzqBE-rYUtY/s200/turkeybush.bmp" border="0" alt=""id="BLOGGER_PHOTO_ID_5260080380149631474" /></a>Everyone is making due with less. Much less. So why should an industry that's taken a huge role in bringing about a worldwide economic crisis still be allowed to adhere to its outdated standards as if nothing wrong has happened?<br />Yes, I know there's many innocent victims on Wall Street, people who went to work everyday and kept their noses clean. And I hate the idea of the government stepping in to control wages and bonuses.<br />But Wall Street is playing with our money now, so different rules and regulations must apply.<br />Hey, we'll gladly give up our holiday turkeys, provided Wall Street stops <a href="http://en.wikipedia.org/wiki/The_finger">flipping us the bird.</a>Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com0tag:blogger.com,1999:blog-1266827496132813951.post-419254395801221432008-10-14T16:47:00.005-05:002008-10-15T19:13:39.455-05:00Let's Rescue "The Bank of You and Me"<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKhbl0TXJ9bLj9IWTQPzF2six7ItS1dFItafqPvQ9-lqD93vFzW9rdOIAqQrV0zOQd222lAZwYeJ_FIAOrMQ4poevsUmAwMAlsdOHOwXOasCcKUUtfaJcGeihvaV1YnA-yDlXd8lbAqu0/s1600-h/milliondollarbill.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKhbl0TXJ9bLj9IWTQPzF2six7ItS1dFItafqPvQ9-lqD93vFzW9rdOIAqQrV0zOQd222lAZwYeJ_FIAOrMQ4poevsUmAwMAlsdOHOwXOasCcKUUtfaJcGeihvaV1YnA-yDlXd8lbAqu0/s200/milliondollarbill.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5257504808450174242" /></a>All this ruckus over the financial rescue package is prompting many people to cook up their own plans for saving our economy. One innovative idea goes like this: Screw bailing out banks, give money directly to the American people.<br />Internet message boards are chatting up the idea. Callers on talk radio are asking about it. One of my closest relatives rang me up this weekend to discuss it and I, in turn, brought up the concept during a dinner with friends.<br />Yes, there's something inviting about investing in "The Bank of You and Me". The plan is so simple, <a href="http://www.nytimes.com/2008/10/16/business/economy/16bernanke.html?_r=1&hp&oref=slogin">especially when compared to the government's complex, daunting and time-consuming rescue attempt.</a> Or as Sarah Palin might say: "Heck, what's not to like?"<br />Yet, before getting carried away, let's concede there will be no mass giveaway. After all, we're not bankrupt banks or insurance firms. But just for yuks, let's follow the plan's populist logic.<br />Basic premise: Instead of pumping $700 billion into the banks and into buying toxic mortgage securities, the U.S. Treasury gives every red-blooded U.S. household one million bucks. There's about <a href="http://wiki.answers.com/Q/How_many_households_are_in_the_US">112 million U.S. households</a>, according to the Census Bureau, so providing each a cool million could end up being a comparative bargain. Backers contend it will deliver the same results, or better, than the current bailout.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiLqESYLEWFvduSTJcrLbKsCT3JNH8n9h8Yze55WZTnnidaTKG8kKvgDt3giJ7vdvnTHcX2wlbJOW4Seq0POgIDohtBDso1_i9ZgXCJNHvaIYJfs7nTxbz6Kd6KGqtXuo2MGw3aZpa6WWM/s1600-h/happybanker.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiLqESYLEWFvduSTJcrLbKsCT3JNH8n9h8Yze55WZTnnidaTKG8kKvgDt3giJ7vdvnTHcX2wlbJOW4Seq0POgIDohtBDso1_i9ZgXCJNHvaIYJfs7nTxbz6Kd6KGqtXuo2MGw3aZpa6WWM/s200/happybanker.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5257494723262231618" /></a><br />Since money doesn't flow like water, some restrictions will apply. For example, any household behind in its mortgage must use the proceeds to make that bank note current or to pay it off. Result? <a href="http://en.wikipedia.org/wiki/Subprime_mortgage_crisis">End of the mortgage crisis.</a> <br />Other debts must also be paid. That means home equity loans, credit cards, student loans, child support, medical bills or other long term obligations have to be drastically whittled down. Presto! <a href="http://www.investopedia.com/terms/c/creditcrunch.asp">Credit crunch resolved.</a><br />Everyone would be required to plow a percentage of their million-dollar windfall into a safe retirement account. The payoff? Recapitalized banks and, as a bonus, the end of <a href="http://wfhummel.cnchost.com/socialsecurity.html">Social Security's troubles</a>.<br />And because everyone needs a little fun in life, any remaining cash can be used for discretionary spending. That takes care of lagging consumer confidence and the recession.<br />You know if <a href="http://voanews.com/english/2008-10-14-voa24.cfm">John McCain</a> or <a href="http://www.barackobama.com/issues/economy/">Barack Obama</a> wanted to wrap up the presidential election, all they have to do is come out in favor of this Million Dollar Baby during the next debate. Hell, maybe President George Bush should consider this option. <a href="http://www.cnn.com/2008/POLITICS/05/01/bush.poll/">It's gotta help his approval ratings</a>.<br />Sophisticated financing types and macro-economists will dismiss this bailout brainstorm as costly (the actual tab for this plan is $12 trillion--high even by Bush Administration standards) inefficient, inflationary and unpatriotic. They may even say its just plain stupid.<br />Apparently, it's smarter to print up nearly one trillion dollars in new currency in order to shore up the sagging lenders that made awful loans, didn't properly assess risk, and concocted exotic and unsafe credit instruments that nobody will ever understand.<br />Yes, let's hope the government's current economic "rescue" attempt works.<br />But if it doesn't, we can always put "The Bank of You and Me" plan into action.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com0tag:blogger.com,1999:blog-1266827496132813951.post-3717656720169603062008-10-09T10:50:00.005-05:002008-10-09T13:56:14.189-05:00Sound the Alarm! Bank Buying Ahead<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgW_3M8RhOfFm4Wd-uZjpdP1mNL9027eHSaRo6auc_3RtMx5g_ecCOMcBTHVTPLnnsKW1dH_qMMKP9A1BcsXU764WN26amZtvn4X8WoNoE-OotYPcswsdpNvNU4wju5lhLCTKUGPKPO7qw/s1600-h/paulrevere.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgW_3M8RhOfFm4Wd-uZjpdP1mNL9027eHSaRo6auc_3RtMx5g_ecCOMcBTHVTPLnnsKW1dH_qMMKP9A1BcsXU764WN26amZtvn4X8WoNoE-OotYPcswsdpNvNU4wju5lhLCTKUGPKPO7qw/s200/paulrevere.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5255186189796598194" /></a>The British bank rescue plan is coming! The British bank rescue plan is coming!<br />Treasury Secretary Hank Paulson doesn't resemble Paul Revere, <a href="http://www.nationalcenter.org/PaulRevere'sRide.html">our country's famous midnight rider</a>, but he's definitely signaling that a <a href="http://industry.bnet.com/financial-services/1000136/uk-offers-bailout-funds-to-hsbc-seven-other-banks/">British-backed effort to resolve the banking and economic crisis </a>is on the way to America. <a href="http://money.cnn.com/2008/10/09/news/economy/bc.apfn.meltdown.paulson.ap/index.htm?cnn=yes">Following the Brits lead, Paulson now wants to put taxpayer money directly into banks, often in return for ownership stakes.</a><br />Since we're all about to become bank shareholders, a few questions seem in order.<br /><a href="http://www.bloggingstocks.com/2008/10/09/washington-likely-to-put-capital-into-banks-a-great-idea-if-don/">Will taxpayers back every ailing bank that knocks on Treasury's door or only selected lenders?</a> And if we pick and choose, what's the criteria for allowing some banks to fend for themselves while giving help to others?<br />Will there be a pronounced <a href="http://en.wikipedia.org/wiki/Too_Big_to_Fail_policy">"too big to fail"</a> doctrine? <a href="http://www.bnet.com/2407-14037_23-240064.html?tag=content;col1">Bank of America</a> and <a href="http://money.cnn.com/2008/09/25/news/companies/JPM_WaMu/">JP Morgan Chase</a> (<a href="http://industry.bnet.com/financial-services/1000133/sad-but-true-global-interest-rate-cut-no-big-deal/">Citigroup and Wells Fargo </a>are also in the mix) have helped the government by taking over an ailing financial institution or two. As a result, each could come under significant financial strain. Will mega-banks have special sway or goodwill with Treasury?<br />What's the economic advantage of having taxpayers act as owners-of-last resort? Are there limits to Treasury's largess? For instance, if an investment goes even more sour, does Treasury pour additional money into it or simply walk away with a whopping loss?<br />And how does buying into banks help ease the mortgage crisis or keep people in their homes? <br /><a href="http://www.huffingtonpost.com/henry-blodget/hank-paulsons-rescue-plan_b_128261.html">Backers of this cash-for-bank equity plan argue </a>it's a faster cure for what <a href="http://www.latimes.com/news/nationworld/nation/la-fi-econ5-2008oct05,1,5881131.story">ails the economy</a>. In short order, bank balance sheets improve, fiscal confidence returns, and lenders start making loans again.<br />Abracadabra! End of credit crunch.<br />Maybe. <br />But there's plenty of risk, too. The public could eventually own a bunch of dog banks, which will require even more taxpayer funding. Already, the government is having to plow more cash into <a href="http://online.wsj.com/article/SB122348485787515823.html?mod=special_page_campaign2008_mostpop">its so-called investment in insurance menace AIG</a>, not to mention backing Fannie and Freddie.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNbWgEyOfniUvtoBOHmga0X5oPWCpmAKnHoukuz0Si1UwGk1GmlUgfnSXCqjXPgnXwAl6L0Wua9QQnJslPNkePQoWW6Gs78wSlQ8TxiN-FFIUkJLRp8rYAM1Fczrwb6BGpsIs8UKZEStg/s1600-h/toxicwastecan.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNbWgEyOfniUvtoBOHmga0X5oPWCpmAKnHoukuz0Si1UwGk1GmlUgfnSXCqjXPgnXwAl6L0Wua9QQnJslPNkePQoWW6Gs78wSlQ8TxiN-FFIUkJLRp8rYAM1Fczrwb6BGpsIs8UKZEStg/s200/toxicwastecan.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5255213523907254882" /></a><br />The original intent of the $700 billion bailout was to carve out toxic securities from banks and other lenders. <a href="http://www.247wallst.com/2008/10/paulsons-new-ba.html">That move was also meant to spruce up balance sheets and allow lending to begin anew.</a><br />Apparently, that possibility wasn't enough to ease global investor panic.<br />Cripes! Some choices.<br />One day, perhaps we'll understand how we got into this mess. <br />Until then, it appears we're stuck making ad hoc and crummy decisions that may, or may not, salvage this very serious situation.<br />This much is clear: Like Paul Revere, we're seeing the start of a revolution. This time around, however, it's a global economic revolution.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com85tag:blogger.com,1999:blog-1266827496132813951.post-5590428234758151102008-10-06T14:34:00.003-05:002008-10-06T16:33:32.067-05:00Stock Plunge, Bank Fight and More!<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsjYfdJvnluZrMuxCelVQuKJuq2bM953J7NMpPVu_LH4RlbUT3cfTYPfIxI0s3wzlVmKRLC0FLLHthq5AHeocGpvEtS5j9JOjInPVnaJ102UU2CVhDDVRw9E4O0ZkWi2zgZsZYCD7Ip1A/s1600-h/smallworldposter.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsjYfdJvnluZrMuxCelVQuKJuq2bM953J7NMpPVu_LH4RlbUT3cfTYPfIxI0s3wzlVmKRLC0FLLHthq5AHeocGpvEtS5j9JOjInPVnaJ102UU2CVhDDVRw9E4O0ZkWi2zgZsZYCD7Ip1A/s200/smallworldposter.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5254146227622842130" /></a>How does that goofy Disney song go? <br />"It's a small world, after all..."<br />Well, today's stock market plunge of nearly 800 points proves that point. It is a <em>small</em> world and we're in the midst of a full-blown global economic crisis.<br />Yes, <a href="http://money.cnn.com/2008/10/06/markets/markets_newyork/">the market rebounded but the panic-fueled free fall </a>was triggered by news that major European nations are taking drastic measures to stabilize their financial institutions and economies. <a href="http://www.nytimes.com/2008/10/07/business/07euro.html?hp">Among them: Austria, England, Iceland, Sweden and Germany.</a><br />But wait! There's more to come.<br />Europe is beginning to look a lot like Wall Street and not in a good way.<br />Many European investment banks are as highly leveraged as the our now brain-dead investment houses (aka Bear Stearns and Lehman Brothers), <a href="http://money.cnn.com/2008/10/06/news/europe.leverage.fortune/index.htm">according to a recent Fortune magazine story.</a><br />More disturbing, these stock market gyrations aren't going to ease for awhile. Expect more fallout once a very resentful Europe is forced to cook up a U.S.-like bailout plan.(European leaders are royally ticked at the U.S. for infecting the Continent's financial system with sick subprime mortgage paper.)<br />And we've yet to hear from the major Asian economics, which have their own systemic problems.<br />All together now: It's a small world, after all.<br /><strong><br />Bank fight, bank fight!</strong> Wells Fargo and Citigroup are clawing over the bones of the near-insolvent Wachovia.<br />You can read details of that tussle <a href="http://industry.bnet.com/financial-services/1000125/wells-power-play-puts-citigroup-fdic-on-defense/">here</a>.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfcVrNuo2DVhHythJLAZ6mK9kx4DUWgpR2S9NrbvUvqs-IydBhsoqaPFcuEq2l6WF-rTvG-YLEA62DPDgABWx7RQyEUQmPbzmFcrXsl7lm0qdJhFiPP6IHMeU_BNs8ysxDX_iWZfJcKqo/s1600-h/wachovia.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfcVrNuo2DVhHythJLAZ6mK9kx4DUWgpR2S9NrbvUvqs-IydBhsoqaPFcuEq2l6WF-rTvG-YLEA62DPDgABWx7RQyEUQmPbzmFcrXsl7lm0qdJhFiPP6IHMeU_BNs8ysxDX_iWZfJcKqo/s200/wachovia.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5254147770543280722" /></a><br />Suffice to say, Citigroup thought it had a deal to acquire Wachovia. That is until Wells Fargo stepped in with a better offer.<br />How will this battle be resolved?<br />My bet is that federal regulators, who started the Wachovia sales process rolling, will barter<a href="http://en.wikipedia.org/wiki/Solomon"> a Solomon-like deal.</a>The result? Basically, Citi gets the eastern half of Wachovia and Wells gets the western half. <br />In the end, both banks avoid costly, and potentially ruinous, litigation. And they end up with some decent banking properties and a whole bunch of low-cost deposits for a very reasonable cost. <br />Half a loaf, as they say.<br /><br /><strong>Flash! Economy chugs along</strong>. Despite the carnage on Wall Street, there are signs of the economy fighting back.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgr1zzD3j9h0GX1kUR6PEgz4tn-7IHL4vueU-EVjPacDymfnrSzyAveboU7FImfGuSVgkygsUQ-3sfQIkOZ1wQNoGqqRthdIjZOud4ekMCjNLkBpJa0E5ZY6TGWEIWUECeHAFtSw-WAK60/s1600-h/wrigleymars.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgr1zzD3j9h0GX1kUR6PEgz4tn-7IHL4vueU-EVjPacDymfnrSzyAveboU7FImfGuSVgkygsUQ-3sfQIkOZ1wQNoGqqRthdIjZOud4ekMCjNLkBpJa0E5ZY6TGWEIWUECeHAFtSw-WAK60/s200/wrigleymars.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5254148928948106322" /></a><br />Some evidence: <a href="http://finance.boston.com/boston?GUID=6773216&Page=MediaViewer&ChannelID=3197">Mars completed its estimated $23 billion acquisition of Chicago-based Wm. Wrigley Jr. Co. </a>(with an assist from billionaire Warren Buffett).<br />And <a href="http://money.cnn.com/news/newsfeeds/articles/djf500/200810061535DOWJONESDJONLINE000661_FORTUNE5.htm">Eli Lilly announced plans to make a $6.1 billion purchase of ImClone Systems Inc. </a><br />Now, don't we all feel a little better?Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com1tag:blogger.com,1999:blog-1266827496132813951.post-46845543107730169842008-10-02T12:54:00.008-05:002008-10-02T14:43:37.573-05:00Free Enterprise? Buffett Counts On Bailout<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMH20UIhvQ25kfAMP0Dlwh60fu0pyV6OCykSncT1dYOKCezEAwZf6PkNd2_Tur1w5Kw7VzGNdJdaigwKA9SqjZzArGcF9PyBKjrDfPj2z9DXuQinQ50AImYFRT7cXCQjn-v9VsbR9oJNs/s1600-h/buffetdq.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMH20UIhvQ25kfAMP0Dlwh60fu0pyV6OCykSncT1dYOKCezEAwZf6PkNd2_Tur1w5Kw7VzGNdJdaigwKA9SqjZzArGcF9PyBKjrDfPj2z9DXuQinQ50AImYFRT7cXCQjn-v9VsbR9oJNs/s200/buffetdq.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5252637239502260034" /></a>Throughout this ongoing economic crisis, the hardcore anti-bailout crowd crows that everything can be fixed if we just act more like multi-billionaire Warren Buffett.<br />Apparently, Buffett sees gold where others envision only muck. So, the "Oracle of Omaha" is digging deep--but not too deep, mind you--<a href="http://money.aol.com/news/articles/_a/bbdp/can-warren-buffett-rescue-the-market/198481">to acquire ownership stakes in a couple of venerable but wobbly institutions, namely GE and Goldman Sachs.</a><br />Some view his buying spree as <a href="http://blog.al.com/spotnews/2008/10/shelby_sessions_to_oppose_new.html">proof-positive that there's gobs of hearty, private investors out there ready to buy, buy, buy into these sagging financial institutions.</a> Just hang tight, they argue on CNBC and other outlets, because the private investor cavalry will save the day, allowing taxpayers to hang onto the $700 billion required to get the federal economic bailout (sorry, rescue plan) up and running.<br />I wish that were true. But it isn't.<br />In fact, the <a href="http://beginnersinvest.about.com/cs/warrenbuffett/a/aawarrenbio.htm">shrewd yet homespun Buffett </a>is probably counting on the bailout more than most of us.<br />By investing at least<a href="http://www.bloomberg.com/apps/news?pid=20601109&sid=aJT7IsmvAQXs&refer=home"> $5 billion in Goldman Sachs</a>, Buffett is betting a bailout will become law and that the U.S. Treasury will get moving and buy much of the toxic commercial paper on the books of Goldman and many other financial institutions.<br />Free of such nasty and corrosive investments, Goldman's balance sheet should quickly perk up. With Buffett's backing, Goldman is free to pursue its new strategy of being a bank holding company, while continuing to sell fee-generating investment banking services.<br /><a href="http://www.nytimes.com/2008/10/02/business/02electric.html">Same goes for GE.</a><br />Buffett expects the bailout to ease the lending burdens of GE's financial unit.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVQAemrpQJ28Vwz4yKC2njPUeC6DMGi3L6bVZdBM6mvzZnUE9znm1V8nQKDTRL2kfDee38sI8icV4IWSUf07hFfzfLOIeWPoxsptALDYWwX6Rs4qmuCBSFGgiNoyW3gStW5eReGrYAEsI/s1600-h/buffettbook.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVQAemrpQJ28Vwz4yKC2njPUeC6DMGi3L6bVZdBM6mvzZnUE9znm1V8nQKDTRL2kfDee38sI8icV4IWSUf07hFfzfLOIeWPoxsptALDYWwX6Rs4qmuCBSFGgiNoyW3gStW5eReGrYAEsI/s200/buffettbook.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5252635563082105938" /></a>It will also alleviate much of the credit crunch, which should free up financing that will make it easier for GE's customers to purchase its goods and services.<br />Don't kid yourself, Buffett knows the score. <a href="http://www.huffingtonpost.com/2008/09/23/warren-buffett-backs-bail_n_128643.html">That's why he favors a bailout!</a><br />Believe me, without the distinct possibility of a taxpayer rescue, Buffett doesn't go anywhere near Goldman, GE or anything else. Remember, before a bailout plan surfaced he stopped one of <a href="http://www.huffingtonpost.com/2008/09/10/warren-buffett-no-longer_n_125278.html">his insurance firm's subsidiaries from insuring bank deposits above the amount guaranteed by the federal government</a>.<br />And keep in mind that Buffett is only the best-known of a small band of wealthy investors plunking down cash and waiting for bailout relief.<a href="http://industry.bnet.com/financial-services/1000115/with-bailout-in-sight-big-private-investors-open-bank-checkbook/"> Scores of other well-heeled interests are making the same play. </a><br />But those who argue that private investment alone is enough to fix this mess can't see past their ideology.<br />Nope, private investors are buying some well-known brand names--JP Morgan Chase and Morgan Stanley for starters--in <em>anticipation</em> of a government-led bailout, not because of some ardent belief in the Free Enterprise system.<br />This is a painful time and we need public and private capital to save the economy from ruin.<br />But let's be honest: Warren Buffett can't do it all by himself.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com7tag:blogger.com,1999:blog-1266827496132813951.post-5463210684471798362008-09-29T14:53:00.004-05:002008-09-29T16:22:28.632-05:00GOP Fallback: When In Doubt Blame Pelosi<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEif9QFIhPYTDUD68KzrqXggix7haHQV9CQQrcgU4Yc9NSWbLQ20-EtkrDtye3HxAagYEFT93B0y5nhRrAiuYywcOoq9lT67jdvrZy8_10m8zwiLLVKxYgYLeB5cUSIT_2pvKE6-9vvdwHU/s1600-h/fiddlinggeorge.gif"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEif9QFIhPYTDUD68KzrqXggix7haHQV9CQQrcgU4Yc9NSWbLQ20-EtkrDtye3HxAagYEFT93B0y5nhRrAiuYywcOoq9lT67jdvrZy8_10m8zwiLLVKxYgYLeB5cUSIT_2pvKE6-9vvdwHU/s200/fiddlinggeorge.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5251555900776722482" /></a>Do you hear a fiddle? Because it sure feels like Rome is burning.<br />It's no huge surprise that the Bush Administration's massive economic rescue bill <a href="http://news.yahoo.com/s/ap/20080929/ap_on_bi_ge/financial_meltdown">wasn't passed in the House of Representatives</a>. Know anyone who approves of this thing? No, it is a deeply-flawed piece of legislation and even the reworked version, which includes greater taxpayer and consumer protection, cost too much and will likely accomplish too little.<br />But after watching the reaction of leading House Republicans, who are responsible for killing this bill, it's hard to believe that Congress can come up with something more worthwhile. <br />Why?<br />Because hardcore GOP opposition is preoccupied with petty and stupid political matters--primarily the conduct of some House Democrats, who support this wildly unpopular bailout bill served up by the <em>GOP's own wildly unpopular president </em>.<br />Instead of saying "this bill sucks, let's kill it and draft another, pronto", GOP leaders and obstructionists are ranting that the proposed bailout just went down in flames because of <a href="http://blogs.wsj.com/washwire/2008/09/29/house-republicans-blame-pelosis-speech/?mod=googlenews_wsj">House Speaker Nancy Pelosi's tart tongue.<br /></a>To the GOP's collective horror, Democrat Pelosi got up before the lower chamber, prior to the vote, and stated the obvious: This financial crisis occurred on the <a href="http://www.nypost.com/seven/09192008/postopinion/opedcolumnists/illusions_lost_129800.htm">GOP's watch and during President Bush's nearly eight years of mass destruction.</a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMwhw4XFiAqAqHznxTLISwG1eWzuXJLR-6VMefV0mZ7MY8p8Ea8rjyzGQuQPvgeMrD_lzU8l0b7IOyA3TaHZb9pIXTx-RcghViIQ_3f9f2alJ6f177WyHOadCTXqhJ6F1DOOL1LZ2rLPw/s1600-h/cryingbaby.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMwhw4XFiAqAqHznxTLISwG1eWzuXJLR-6VMefV0mZ7MY8p8Ea8rjyzGQuQPvgeMrD_lzU8l0b7IOyA3TaHZb9pIXTx-RcghViIQ_3f9f2alJ6f177WyHOadCTXqhJ6F1DOOL1LZ2rLPw/s200/cryingbaby.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5251548238347739122" /></a><br />Well, boo, friggin' hoo.<br />Yeah, that's the first time Republicans have ever heard that one.<br />If the ultra-conservative GOP wing has a real plan for rescuing this economy then let's see it. If not, then let's go with this plan and move on.<br />But don't insult the country, or waste its time, with this political nonsense and talk of bruised feelings. Save it for <a href="http://www.foxnews.com/">Fox News</a>. <br />This economy is in deep trouble and, like it or not, a bailout plan is needed.<br />So stop fiddling around.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com2tag:blogger.com,1999:blog-1266827496132813951.post-46427259078601911452008-09-24T12:19:00.013-05:002008-09-26T13:08:31.590-05:00Buy Hasty Fed Bailout Now, Regret It Later<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQ5lMVEaO1hHv6H_vRNHOF9FJcbvXxhnlNa9mOZlQhi-ze080Co2I_hWeEWCL2msfmlAW3lbOI_Vh2XWCB2bknX5DMKlS-aQtwIJ3MhAg4ozx6CRqAAlBgS36tT2jGrlQQrFWIoSoS1ZI/s1600-h/paulson_bernanke.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQ5lMVEaO1hHv6H_vRNHOF9FJcbvXxhnlNa9mOZlQhi-ze080Co2I_hWeEWCL2msfmlAW3lbOI_Vh2XWCB2bknX5DMKlS-aQtwIJ3MhAg4ozx6CRqAAlBgS36tT2jGrlQQrFWIoSoS1ZI/s320/paulson_bernanke.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5249657734653951874" /></a>In the teeth of a previous housing recession, a real estate agent looked me dead in the eye and said: "You have to buy now. Time is running out." Not true. It took a little longer, but my wife and I ended up buying the right house, although not from that agent.<br />Building a false sense of urgency is a bad salesperson's favorite tactic. It's the "get it now, while they last" theory of business and those who fall for it usually get burned.<br />That's why it's proper and just for lawmakers to take some time evaluating the proposed $700 billion federal economic bailout plan now being pitched to Congress. The plan's backers--President Bush, Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke--don't like waiting around and are <a href="http://online.wsj.com/article/SB122217048963566935.html?mod=special_page_campaign2008_mostpop"> pressing lawmakers to just shut up and sign on the dotted line.</a><br />Those three gents are right about one thing: We're in a real economic jam. But any dope can see that now. And I guarantee it will get worse if investor confidence is not restored to the market, so lenders can start making <em>good </em>loans again.<br />But pushing ahead without any significant effort to vet this plan is absurd and a sure-fire recipe for compounding our fiscal disaster.<br />Congress must question this bill and press for more safeguards.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0N5s50AfL6IG0_qJQJfnARQXqxHKwjRSNsGiy26gKmEiNnHi-pOa-AjWJSnBUNRfg6AkZbVetCjyRTMSZTlWrfm54EwSPCL99ch4cmLxM_0GuLTDVyPWlqjxqBt6KcpopPPA6rJnbvrM/s1600-h/jamesarnessmi3.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0N5s50AfL6IG0_qJQJfnARQXqxHKwjRSNsGiy26gKmEiNnHi-pOa-AjWJSnBUNRfg6AkZbVetCjyRTMSZTlWrfm54EwSPCL99ch4cmLxM_0GuLTDVyPWlqjxqBt6KcpopPPA6rJnbvrM/s200/jamesarnessmi3.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5249658796084327842" /></a><a href="http://money.cnn.com/2008/09/20/news/economy/treasury_proposal/index.htm">Have you read this thing?</a> Basically it's like Paulson is declaring <a href="http://en.wikipedia.org/wiki/Martial_law">Martial law</a> over the U.S. economy. No court can stop him. No lawmaker dare question the Treasury Secretary's rulings.<br />Most maddening was<a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aHNCK5_dBZJQ&refer=home">Paulson's initial refusal to give on the issue of capping CEO pay</a>. At this dire point in time, why does he care? Under pressure from Congress and angry taxpayers, Paulson caved on the compensation issue, which should help move the bailout process along.<br />We need to construct a systemic approach to solving this problem. What Paulson and Bernanke are rightly trying to do is cook up a structure to handle this enormous, often amorphous, problem of bad credit securities and loans.<br />But they don't have the right to do it without any accountability. I mean, isn't the lack of checks and balances how we got into this whole subprime lending and <a href="http://viva-freemania.blogspot.com/2008/09/global-credit-crunch-explained-in-words.html">credit crunch mess?</a><br />Earlier this week, a longtime Wall Street trader went on CNBC and dismissed opposition to the bailout as just another Democratic Party conspiracy. He said if the Dems were going to hang ornaments, like CEO compensation and oversight, on this bill that investor confidence will be lost.<br />You see, the Wall Street guys still don't get it.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEFP7bZ_MinFLjeIhzs3vTTziBsCs9pI_Dw0rPF8wl4HuC5l1hAA0YkM5VOTtBtnd_ukbT_aTnzUsa_Tj8DMfbrsdig5LLB72_TVP3J4axDmahSCxjTlmRRtOgF83RnwDK1r11moPOkzU/s1600-h/screw_tk.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEFP7bZ_MinFLjeIhzs3vTTziBsCs9pI_Dw0rPF8wl4HuC5l1hAA0YkM5VOTtBtnd_ukbT_aTnzUsa_Tj8DMfbrsdig5LLB72_TVP3J4axDmahSCxjTlmRRtOgF83RnwDK1r11moPOkzU/s200/screw_tk.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5249663887544110402" /></a><br />They're worried about losing investor confidence when they should be more concerned about the lack of confidence the American people have in them and this proposed solution.<br />Soon enough, a bailout plan will be passed. Taxpayers will be on the hook. The economy will suffer. We're screwed. And it's damn unfair.<br />So members of Congress, take some time and try to get it right. After all, that may be the best investment this country can make right now.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com0tag:blogger.com,1999:blog-1266827496132813951.post-35666729334428074842008-09-18T14:25:00.008-05:002008-09-19T10:45:23.820-05:00Why I Won't Shed Tears For Wall Street<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaN6CW1MRZTho0lNrN5BEF9IGDCPGxpufqChVbZwQQLY_AQHq6IRo9ZlyJZqU60mcOJdmwQChd-Hr18sGTlkohktRLaG5-fRTmMUTukYKKV7eYhzC5laPq83vxPrM9Q01oyHTALaGQ6rQ/s1600-h/wallstreetcrash.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaN6CW1MRZTho0lNrN5BEF9IGDCPGxpufqChVbZwQQLY_AQHq6IRo9ZlyJZqU60mcOJdmwQChd-Hr18sGTlkohktRLaG5-fRTmMUTukYKKV7eYhzC5laPq83vxPrM9Q01oyHTALaGQ6rQ/s200/wallstreetcrash.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5247497128282582274" /></a>Call me small-minded, or vindictive, but I don't feel sorry for Wall Street.<br />Yes, I realize we're in a crisis and suffering through the roughest economic patch since the Great Depression. And I appreciate it isn't nice to pick on someone when they're down. <br />But I'll be honest, being charitable is not my first instinct here. There's part of me that resents Wall Street, especially its slew of money-hungry CEOs, cavalier investment bankers, heartless merger and acquisition specialists, and red meat-loving traders. I'll add to this lot the relentless gang of stock market pundits and pickers, who rant against even modest industry regulations or investor protections for fear of <a href="http://en.wikipedia.org/wiki/Free_market">derailing their fantasy of a pure "free market" society.</a>To each and every one of them I say: "Tough luck, folks. Your day of reckoning has come. You're getting just what you deserve."<br />It's too bad so many innocent people will have to pay for their avarice and hubris--<a href="http://www.msnbc.msn.com/id/26776397/">especially those being tossed to the curb without work or prospects.</a><br />This is not some sudden backlash brought on by my staggering 401K portfolio or a rant sparked by uncontrolled panic that the stock market is forever down and out.<br />No, this resentment has been building for some time.<br />For more years than I care to remember I've reported and commented on business. When I began plying my trade as a pup reporter, publicly-owned companies didn't fixate on their stock prices as they do now. The stock price was an important component of something more grand: How well the company was managed; product quality; innovations; customer satisfaction--you know, <em>the business.</em><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXhyphenhyphenJ4S_oeK6KnSjSzfLqIchIU2HNXnpLKfBDwM7txaFi1HkQDht38oq-R6iDxgZMlwQSjr0X7XMR_14Y8zSFy03ZjMNanzPnfXD8hvH5hELZfN9MLqtqpgzaFpjKrcxf5n9LPVyg9VOU/s1600-h/wallstsign.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXhyphenhyphenJ4S_oeK6KnSjSzfLqIchIU2HNXnpLKfBDwM7txaFi1HkQDht38oq-R6iDxgZMlwQSjr0X7XMR_14Y8zSFy03ZjMNanzPnfXD8hvH5hELZfN9MLqtqpgzaFpjKrcxf5n9LPVyg9VOU/s200/wallstsign.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5247491764898793410" /></a>And Wall Street? That was a place where companies went to raise capital for expansion and new products.<br />This was not a perfect dynamic. Often, top management was removed from the real world. But, on balance. I'd argue companies that focused on their knitting, and not merely pleasing shareholder interests and investment analysts, usually produced leaders in big industries like automotive, consumer products, financial services, technology, etc.<br />Over time that changed. Shareholders--especially institutional shareholders with ties to Wall St.-backed financial muscle--started pressing companies for greater returns. The mantra: <em>Maximize shareholder value</em>.<br />So, what mattered before didn't any longer. Shrewd CEOs quickly learned to bow to the almighty stock price or risk getting dumped. In essence, companies were being managed by institutional shareholders, backed by Wall St. investment houses. <br />For years, this situation has made life miserable for <a href="http://www.valuebasedmanagement.net/faq_shareholder_stakeholder_perspective.html"> management teams that don't always meet or exceed quarterly profit and stock price expectations.</a><br />I recall a conversation with a CEO of a major company who ruefully told me that business wasn't the same anymore. Why? Because long term planning and investment were out and share price trumped every other concern.<br />Now ask yourself: How many companies have been damaged in the name of maximizing shareholder value? How many unnecessary mergers, spin-offs and other dumb deals were spawned just to give the stock a jolt? How many jobs and benefits were cut because Wall St. said that was an easy path to operating "efficiencies" and greater short-term returns? <br />Wall St defenders will argue that shareholders made a killing. Some did, some didn't. But I guarantee you that every investment bank involved in these transactions walked away with ample fees and never looked back.<br />Not satisfied with disemboweling Corporate America, investment banks turned to Main Street.<br />Once there, <a href="http://www.coolavenues.com/know/fin/vijay-credit-crunch-1.php">they encouraged lenders to keep making questionable subprime mortgages.</a>Yeah, banks and mortgage lenders caused their share of problems by originating these awful loans. But Wall St. investment firms compounded the problem by manufacturing a market for these crappy credits, packaging and selling them to big and small investors globally in return for fat fees that translated into hefty annual bonuses.<br />Any attempt to throttle back this excess through regulation, or sheer common sense, was beaten back by Wall St.'s protector class--those bellicose traders, pundits, economists and stock gurus who blindly fight even the most minor regulatory enforcement. You know, the crew that ends up regularly on <a href="http://kudlow.com/">CNBC's Larry Kudlow show.</a> Their type helped provide cover to the Bush Administration, which didn't want to stop the mortgage music anyway.<br />The real irony? The investment banks caused all this mischief on borrowed money. The bankrupt <a href="http://www.washingtonpost.com/wp-dyn/content/article/2008/09/15/AR2008091502703.html">Lehman Brothers</a>, the near-bust <a href="http://www.usatoday.com/money/industries/banking/2008-03-17-bear-stearns-bailout_N.htm">Bear Stearns </a>(now part of JPMorgan Chase) along with "independents" <a href="http://industry.bnet.com/financial-services/1000104/goldmans-longshot-vow-beat-odds-go-it-alone/">Goldman Sachs </a>and <a href="http://industry.bnet.com/financial-services/1000105/morgan-stanley-takes-its-place-on-firing-line/">Morgan Stanley </a>had leverage ratios in excess of 30 before it hit the fan.<br />That means for every dollar in the pot they borrowed $30. And these guys were being paid huge money for financial advice?<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVb9T7rGUNJd1TelkGnyaEeyYySyCSd8i0b1Rd3aOJcUy4S3RzBIsuu43SQQw7mBWuPzVw2GBIo7wzMLuAD1ngjfhqhWJhTq2CiXp7dRwbKZsdU9n9NEx6_Zv1L1nOY8bxv2v0lm-K9kE/s1600-h/logansquare2.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVb9T7rGUNJd1TelkGnyaEeyYySyCSd8i0b1Rd3aOJcUy4S3RzBIsuu43SQQw7mBWuPzVw2GBIo7wzMLuAD1ngjfhqhWJhTq2CiXp7dRwbKZsdU9n9NEx6_Zv1L1nOY8bxv2v0lm-K9kE/s200/logansquare2.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5247494106338539330" /></a>In my old neighborhood, we had a saying: If you owe someone a little money, they have you. If you owe them a lot of money, you have them.<br />Wall St. owes us a lot for these taxpayer-backed bailouts. Man they got us good and that's why I'm not shedding any tears.<br />Instead, I'm concerned that when this financial mess has passed, Wall St. is going to try and get us again.<br />And then we'll all have a good cry.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com0tag:blogger.com,1999:blog-1266827496132813951.post-25209936601116481472008-09-15T14:02:00.003-05:002008-09-15T15:38:17.046-05:00In A Gloomy Economy, Signs of Light<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRmFF03np7bsNBmtvtLJdRqql1r5T-xBN-GlhsvPJyYSp4mpdcdcYCn4F62Fvjpf-RHzoZno-g5QG6qlXF6RODu7t9a4aWXC9T5CB4OQXBTpnTNrB5xTDggUMcX9vaqb5Iutha9mxnaRw/s1600-h/mlynchbull2.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRmFF03np7bsNBmtvtLJdRqql1r5T-xBN-GlhsvPJyYSp4mpdcdcYCn4F62Fvjpf-RHzoZno-g5QG6qlXF6RODu7t9a4aWXC9T5CB4OQXBTpnTNrB5xTDggUMcX9vaqb5Iutha9mxnaRw/s320/mlynchbull2.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5246336107100487490" /></a>At a time when the stock market is plunging and a once-venerable Wall Street investment house is going bankrupt, it may seem like all is lost. <br />Not true.<br />In fact, amid the carnage, some examples have emerged that stir --shall we say--a cautious optimism about getting free of this mess.<br />Specifically, I'm referring to three major deals that were just announced:<a href="http://industry.bnet.com/financial-services/1000101/to-win-bofa-investors-ceo-lewis-must-cut-merrill-costs/">Bank of America is acquiring Merrill Lynch </a>in an all-stock transaction worth $50 billion; <a href="http://www.bizjournals.com/losangeles/stories/2008/09/15/daily5.html">Walgreen's is offering $3 billion to buy Longs Drug Store</a> chain; and <a href="http://www.fool.com/investing/general/2008/09/15/best-buy-steals-napster-for-a-song.aspx">Best Buy is spending about $120 million to acquire Napster</a>.<br />These are not fire sales (yes, even the Merrill buyout), borne of desperation like some recent deals. Nor are they <a href="http://consumerist.com/5046333/nobody-panic-government-seizes-freddie-mac-fannie-mae">federally-funded bailouts ala Freddie Mac and Fannie Mae.</a><br />Instead, they're private sector deals designed to help buyers (or potential buyer in Walgreen's case because it's going up against CVS for Longs) expand and grow within their industries. <br />Each requires funding and financing, which helps make the credit markets hum. More important, they display faith in the U.S. economy's prospects. After all, who would plop down millions of dollars if they thought the downward spiral was never going to end? <br />That may be especially true of the BofA-Merrill transaction. Considering the bankruptcy of investment house Lehman Brothers, along with the prevailing dankness on Wall Street, BofA is paying a significant premium to acquire Merrill Lynch.<br />Why? Because once this current crisis subsides, <a href="http://industry.bnet.com/financial-services/1000100/as-lehman-fades-into-history-bofamerrill-looks-to-the-future/">BofA sees prospects of a global financial services market and wants to be a top-tier player in that competition. </a>Merrill can help it get there.<br />True, these buyouts won't soon diminish the nightmare brought on by the subprime mortgage meltdown and subsequent troubles.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgyZLSS3YNxeXNE9pGOdYwFTxXpp40bebYg7zhOEj3_7U-dimUSCTVlS1hq8GEiBQxlbUlXP8KOP2mxaAuGWQArWdivXUz7be6moHZa6H3BdAp1YOIELVXoSDh_Bygd5p0F65glrZJXx0k/s1600-h/wallstreet4.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgyZLSS3YNxeXNE9pGOdYwFTxXpp40bebYg7zhOEj3_7U-dimUSCTVlS1hq8GEiBQxlbUlXP8KOP2mxaAuGWQArWdivXUz7be6moHZa6H3BdAp1YOIELVXoSDh_Bygd5p0F65glrZJXx0k/s200/wallstreet4.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5246337723661392594" /></a><br />We're confronting a very real problem and it's going to take a Herculean effort--on the part of government, finance and consumers--to pull us out of the tar pit.<br />That said, there's reason to be hopeful during these dark days. So lighten up, there's still life in old economy yet.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com0tag:blogger.com,1999:blog-1266827496132813951.post-63502184578065765872008-09-11T14:43:00.013-05:002008-09-12T15:28:31.344-05:00Who Pays For Bogus UAL Bankruptcy Post?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMCROLqKbFDpHwBSxZJ7FoYgeCwiDQqkSyMG1bvtJLzl6E_Xte9QB3_Xj9AQXnwQowFmz4Te9EKyVO1XAZVkvWp7gFMqa9f2V_ExAhdGmOmZ0relPOCOgtcxqzdD6UZSPzot4536GhCUE/s1600-h/moneybag2.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMCROLqKbFDpHwBSxZJ7FoYgeCwiDQqkSyMG1bvtJLzl6E_Xte9QB3_Xj9AQXnwQowFmz4Te9EKyVO1XAZVkvWp7gFMqa9f2V_ExAhdGmOmZ0relPOCOgtcxqzdD6UZSPzot4536GhCUE/s200/moneybag2.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5244875360616046146" /></a>Show me the money.<br />Chances are that's what some angry UAL Corp. shareholders will soon be saying. It's a demand expected to surface in legal actions that may arise from the controversial Internet posting of a news story and headline <a href="http://www.chicagotribune.com/business/chi-thu_google-tribunesep11,0,1599683.story">earlier this week that stated the airline concern had filed for bankruptcy protection</a>. <br /><em>UAL didn't enter bankruptcy.</em> But the story--which was six-years-old and in an archive--was mysteriously plucked from a Tribune Co.-owned Florida newspaper web site by search engine Google and blasted over the web. Ultimately, the entry made its way into the system of <a href="http://about.bloomberg.com/">financial news and information provider Bloomberg,</a> which ran a UAL bankruptcy headline on its terminals, prompting a brief but massive sell-off Monday before the mistake was discovered and corrected.<br />UAL lost about $1 billion in market capitalization during the free fall as its stock price tumbled from about $12 to $3 per share until trading was halted. <a href="http://finance.yahoo.com/q?s=UAUA">Today, UAL shares remain below the $12 mark.</a><br />All of which sparks some questions that haven't been thoroughly addressed yet in the crush of news coverage about this debacle. They include: Can shareholders recoup losses or are they stuck? Do they have a case for being injured? If so, who gets sued for damages? Who is ultimately liable for this situation? Does UAL, in its capacity as a representative of shareholders and stakeholders, have grounds to sue for damages?<br />I rang up <a href="http://www.investmentfraud.pro/">Andrew Stoltmann, one of Chicago's better-known shareholder rights attorneys,</a> for some perspective. (I've interviewed <a href="http://www.investmentfraud.pro/bio.asp">Stoltmann</a> many times, for print and radio, and he gets right to the point.)<br />Yes, he said, expect shareholders who believe they unjustly suffered losses to take their cases to court. The reason this hasn't happened already, he surmises, is that shareholders don't know who to sue--yet.<br />In fact, since the bogus UAL story emerged, there have been claims flying between Tribune Co., which owns the Florida Sun-Sentinel web site where the old bankruptcy story appeared, and Google. <br />Both <a href="http://www.poynter.org/column.asp?id=101&aid=150374">Tribune and Google have issued conflicting statements</a> about what happened.<br />Stoltmann, says one thing is for certain: "Someone is to blame."<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyQ444VzSBssdg54B691GaPCSJzb2dDNoy-Njocdt67okJWj5ZNJ4Ulkbuuh3DSpCEFarpgdf0RNoTYaQSn8APBSH3zDk60McGOXOx0ko1eZO2bdRPRDpnYupp8OHExsMR9ta8WT7A2Q8/s1600-h/courtcartoon.gif"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyQ444VzSBssdg54B691GaPCSJzb2dDNoy-Njocdt67okJWj5ZNJ4Ulkbuuh3DSpCEFarpgdf0RNoTYaQSn8APBSH3zDk60McGOXOx0ko1eZO2bdRPRDpnYupp8OHExsMR9ta8WT7A2Q8/s200/courtcartoon.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5244876069046288514" /></a> He contends lawsuits will raise hot-button issues of "liability" or "negligence". Among those most eager to make up for any losses will be investors who had <a href="http://www.investopedia.com/terms/s/stop-lossorder.asp">"Stop-loss" </a>orders attached to their UAL stock positions. They may never recoup their losses, he notes. (The NASDAQ, where UAL is traded, is not busting or rescinding any of the UAL trades sparked by the faulty bankruptcy post).<br />Who's going to feel the wrath of UAL shareholder lawsuits?<br />Now, that's an interesting question. There's <a href="http://www.tribune.com/">Tribune Co</a>., which has nearly $13 billion in debt, and then there's <a href="http://www.google.com/corporate/">Google, one of the richest and most profitable companies on the globe.</a><br />Hmmmm, which would you pick?<br />Actually, it could be one or all of the companies involved in this matter, most of which probably have some type of business insurance to help protect against damages, Stoltmann says.<br />Still, chances are this situation is not going to just blow over. <br /><a href="http://online.wsj.com/article/SB122116243599624423.html">The SEC is conducting a preliminary investigation.</a><br />UAL is still outraged. When I spoke to the company earlier this week it did not back off of its previous statement that the Tribune's Florida newspaper started this mess. Perhaps <a href="http://www.tribune.com/pressroom/releases/2008/09102008.html">Tribune </a>and <a href="http://googlenewsblog.blogspot.com/2008/09/update-on-united-airlines-story.html">Google's</a> more recent statements will temper that view. We'll see.<br />That said, I'll give Attorney Stoltmann, the last word on this matter today.<br />"It will be," he says " a <a href="http://en.wikipedia.org/wiki/Pandora's_box">Pandora's box</a> of litigation."Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com7tag:blogger.com,1999:blog-1266827496132813951.post-23053835465342228702008-09-08T11:23:00.002-05:002008-09-08T22:31:10.338-05:00Let's Get Story Behind Faulty UAL Post<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiFEioY8st6F0a_40qcWuu_mhc9L54j629T4_qHz4rTAhH3GeyH7ZUqEZPNt0cWj5aM9Lq4yy3gF-QmjUYDOP5jI1DDzrkkw3O5V4lBX5f7AoZ8K-Mzux1H0PzbAJPYVc7CdgAQboAplVA/s1600-h/united%2520airlines1.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiFEioY8st6F0a_40qcWuu_mhc9L54j629T4_qHz4rTAhH3GeyH7ZUqEZPNt0cWj5aM9Lq4yy3gF-QmjUYDOP5jI1DDzrkkw3O5V4lBX5f7AoZ8K-Mzux1H0PzbAJPYVc7CdgAQboAplVA/s320/united%2520airlines1.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5243729564702348754" /></a>Well, you got to hand it to the Tribune Co. It made people feel sorry for United Airlines, one of those businesses the public just loves to hate. <br />Before going on, I need to say this: United Airlines' parent company has NOT filed for bankruptcy. <br />For awhile there today, investors were afraid UAL Corp.--United's parent company--was on an inbound flight back into bankruptcy court. Why? Because a story on the <a href="http://www.sun-sentinel.com/">Florida Sun-Sentinel web site</a>--owned by the Chicago-based Tribune Co.--reported the airline was filing for Chapter 11 bankruptcy reorganization. <br />One problem: That story was dead wrong. The posting was a six-year-old Chicago Tribune story with the date changed, according to a very ticked-off UAL. The inaccurate post's <a href="http://www.streetinsider.com/Insiders+Blog/UAL+Corp+(UAUA)+Halts+Trading+After+Bankruptcy+Report+Slams+Stock/3971148.html">headline was picked up by Bloomberg </a>, Wall Street's electronic bible, and within a few minutes a sell off occurred and <a href="http://www.marketwatch.com/news/story/uals-wild-ride-shows-sector/story.aspx?guid=%7B32F82452%2D8A6B%2D4A3C%2DA3A6%2D2F53B159BC76%7D">UAL's stock plummeted from about $12 per share to nearly zilch--until trading was halted</a>. Amid the craziness, the post and headline were taken down.<br />UAL is demanding Tribune management, led by CEO Sam Zell, conduct an investigation and reveal what happened. I suspect the <a href="http://finance.google.com/finance?client=ob&q=NASDAQ:UAUA">NASDAQ, which makes a market in UAL shares </a>and where today's trading is being reviewed, will also want to know how this debacle occurred. Maybe securities regulators will start asking questions, too.<br />Considering the fallout and damage to UAL and investors, Tribune Co. should examine this problem and make its findings public. Here's a few questions to start with:<br />Did someone screw up? If so, how and why?<br />Was it a systematic breakdown? A software problem? Did an online producer simply click away and not understand the importance of the story? Was there a lack of management oversight that allowed this story to be blasted into cyberspace?<br />More troubling, was it intentional?<a href="http://www.forbes.com/2008/09/08/ual-tribune-bankruptcy-biz-media-cz_ja_tvr_0908ualstory.html"> Knowing how Internet rumors can pollinate</a>, did some knave decide to sell short and make a killing?<br />What can be done, so this doesn't happen again? <br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtGtW1nChj6Ozr-aysGp2pWUp4o9Crb0tSLO9QqEB_VfvLdREYxWDq85g36JtqxUQ5BYl4Fsn9ZHQkEn5X6SvaigbNS1sg267rA-dybV88AuW0waQC34BInP92oqplpfFn2YHMtQtlDfg/s1600-h/salem.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtGtW1nChj6Ozr-aysGp2pWUp4o9Crb0tSLO9QqEB_VfvLdREYxWDq85g36JtqxUQ5BYl4Fsn9ZHQkEn5X6SvaigbNS1sg267rA-dybV88AuW0waQC34BInP92oqplpfFn2YHMtQtlDfg/s200/salem.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5243728595082769394" /></a>I'm not talking witch hunt or publicly pillaging some content producer who didn't know any better. Nor is this meant to sound sanctimonious. Having been in business journalism for a long while, I know bad things can happen to anyone at any time. <br />But let's not be too empathetic. With millions of dollars at stake--along with the <a href="http://www.tribune.com/">Tribune Co.'s</a> credibility--everyone linked to this faulty process should be called on the carpet. At the very least, TribCo web producers should be put on notice about being extra careful when handling reports of bankruptcy, bank failures or issues pertaining to the solvency of a business.<br />TribCo.'s not alone. Bloomberg needs to question its decision to pick up a bankruptcy report on a Chicago-based airline from a Florida newspaper's web site. That's the type of story that should ring alarm bells, no? But I can speak from experience and say Bloomberg takes its relationship with users very seriously, so expect some quick corrective action there.<br />What happened to UAL today was a run on the bank--except it wasn't depositors asking for their money back, it was investors.<br />And UAL didn't need to add to its list of woes. <br />This is a company struggling with labor strife, increased fuel costs, and passenger unrest. Who can blame it for being angry, even if its stock has rebounded?<br />The popularity of the World Wide Web may have lured media executives into thinking that news is a mere commodity, or worse, that it doesn't matter what appears on the Internet because it's a blip in time and cyberspace. <br />Today's UAL screw-up should help put that fable to rest.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com7tag:blogger.com,1999:blog-1266827496132813951.post-3905647777574025022008-09-04T09:46:00.004-05:002008-09-04T14:25:13.025-05:00Chi-Town Activists? Joke Is On GOP<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhl7JjFFdzLtqenC8Pf2IZeR-jW1nAfw-JO5p13LCZ7fFTODlXDrRYNva2GIwrFVQGQMSfvSbVb7CPNdCj8Z3mvsMOzRHnSyySR3hd7kooJeL-yJDc0hLI5K9vI3lkl0UBvKcjg8gpI11U/s1600-h/addams2.gif"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhl7JjFFdzLtqenC8Pf2IZeR-jW1nAfw-JO5p13LCZ7fFTODlXDrRYNva2GIwrFVQGQMSfvSbVb7CPNdCj8Z3mvsMOzRHnSyySR3hd7kooJeL-yJDc0hLI5K9vI3lkl0UBvKcjg8gpI11U/s200/addams2.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5242180133074492578" /></a>Yeah, that Jane Addams was a funny gal. Who wouldn't laugh at a community organizer who spent her adult life<a href="http://images.google.com/imgres?imgurl=http://www.famous-people.info/pictures/Jane-Addams.jpg&imgrefurl=http://www.famous-people.info/Women.html&h=337&w=268&sz=90&hl=en&start=30&usg=__3sb2yazUkFqj7x01CWO0W6FvKMM=&tbnid=YulVrV2k1Xm-mM:&tbnh=119&tbnw=95&prev=/images%3Fq%3Djane%2Badams%26start%3D20%26gbv%3D2%26ndsp%3D20%26hl%3Den%26sa%3DN"> feeding hungry, homeless children and fighting for social reform</a>?<br />Founder of Hull House? Nobel Peace Prize winner? Please, enough with the jokes.<br />What's that you say? It's not funny.<br />You're right. Only someone with a sick sense of humor would deride activists who toil in Chicago's worse neighborhoods, dedicating time and effort to providing poor and disenfranchise citizens with a voice in the political and social process.<br />Someone with a warped view like Sarah Palin, the Republican Party's newly-crowned vice-presidential nominee. Or Rudy Giuliani, who lusted for the GOP's presidential nod, but instead settled for making a keynote speech Wednesday before the party hopefuls.<br />Speaking to the convention, Sarah and Rudy poked fun at Democratic opponent Barack Obama's background as a community organizer from Chicago's inner-city. In doing so, they also derided the importance of such activism--slights that got the crowd yukking it up on cue.<br />I expect this duo to disagree with and attack the Democratic presidential candidate's politics and record. But it's a cheap, cheap shot to deride Obama's background as a community organizer, while in the same breath also diminishing the crucial role such activism has long had on improving Chicago and the world.<br />Perhaps they can take their eyes off of the <a href="http://portal.gopconvention2008.com/speech/details.aspx?id=43">GOP talking points </a>to reflect on the contributions such activists have made. As Sarah and Rudy chided Chicago activism, I recalled scores of community organizers who've made huge contributions by following in Jane Addams footsteps.<br />I thought of the late Florence Scala. This <a href="http://www.spartacus.schoolnet.co.uk/USAWscala.htm">daughter of an Italian tailor</a> gave the first Mayor Richard Daley fits when he set out to bulldoze her West Side neighborhood and build the University of Illinois.<br />Scala didn't prevail against the mighty machine and took some knocks during her tussle with City Hall. But she also scored some important victories. Along the way, this brave yet modest woman--who later in life refused to have libraries or parks named after her--left a legacy and blue print for taking on the powerful and vested interests.<br />Then there's Gail Cincotta, a feisty and formidable fair housing advocate who dueled with the downtown banking giants over their redlining practices. Cincotta, who died a few years ago, was instrumental in forming a coalition of housing advocates that forced the banks--which were closing inner-city branches and heading for the suburbs--to end the exodus.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEib5CUAnvyY3WNZ9VX42N1fnNlc6Ci3p2aDkKa4_PWzH-7N5wwg5sufk96gzmBrxmAIJ39bSkysOd4NRiPxz6sM3fv99IX5Ygsws1BIYBSkl_vV1ITYePCq_yTsYY7ff4Z42AKDg_D3d28/s1600-h/bank2.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEib5CUAnvyY3WNZ9VX42N1fnNlc6Ci3p2aDkKa4_PWzH-7N5wwg5sufk96gzmBrxmAIJ39bSkysOd4NRiPxz6sM3fv99IX5Ygsws1BIYBSkl_vV1ITYePCq_yTsYY7ff4Z42AKDg_D3d28/s200/bank2.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5242222281215877490" /></a>Cincotta did the impossible. She convinced stubborn and fearful downtown bank executives that reinvesting in urban areas was also good business. To make that case, <a href="http://www.nhi.org/online/issues/90/homestead.html">Gail and her cohorts did tons of protesting, picketing and lobbying outside bank buildings and at annual shareholder meetings.</a><br />While Sarah and Rudy chided community activism, I recalled Mary Nelson, founder of <a href="http://www.bethelnewlife.org/contribute.asp">Bethel New Life on Chicago's West Side</a>. For decades, Nelson doggedly sought private and charitable funding (she called them "seven layer cakes" of financing) needed to slowly rebuild abandoned buildings that had become havens for drug use and crime. <br />Now, those buildings are spruced up apartments and retail stores. I've seen them. <br />There's still a long way to go, but progress was made because of those "funny" activists like Scala, Cincotta, Nelson and their backers.<br />There's more that I'm not mentioning. Yet, even if you don't know them personally, you're probably aware of the organizations they helped spawn. They include: the <a href="http://www.citizensutilityboard.org/">Citizens Utility Board</a>, which strives to keep the power and telecom companies honest; <a href="http://www.woodstockinst.org/">Woodstock Institute</a>, which made lethargic state lawmakers aware of the excesses of payday lenders and the mortgage crisis, and <a href="south shore bank chicago">South Shore Bank</a>, which infuses capital and business disciplines into sagging residential properties and commercial districts, revitalizing neighborhoods, states and even other countries.<br />All of these organizations, and many more, continue to fight the good fight at the grassroots level.<br />Was Barack Obama the most effective community activist Chicago has ever seen? Probably not.<br />But I wouldn't dare diminish what he choose to do on those city streets. On this score, the Dem's campaign rhetoric is spot on. Obama could have gone straight out of college into the welcoming arms of Wall Street or LaSalle Street and made big bucks. But, he didn't.<br />Instead, he went to work on Chicago's South and West Sides trying to help those who were chronically unemployed and under-represented. <br />You see, that's what community organizers do.<br />Maybe Sarah, Rudy and the GOP think it's just a punchline designed to degrade Obama's resume. <br />But, seriously folks, that type of work is no joke.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com70tag:blogger.com,1999:blog-1266827496132813951.post-62240124397566909482008-09-03T13:19:00.007-05:002008-09-04T09:16:30.838-05:00First, Kill All Publicly-Traded Law Firms<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihys5DACaIBimn4EjjgAa2m2dweDc6vcD3isGb8_Xq9kUEjvp7JNkYAk6O3ZvJWZkDBlLTJVTcuBkTCJE1O8YB3nqKaK8-JNYW_GpCED1uIPGHJ3mjIs3NnZ2s85ESL88W3eyXkwo7fnU/s1600-h/barrister1.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihys5DACaIBimn4EjjgAa2m2dweDc6vcD3isGb8_Xq9kUEjvp7JNkYAk6O3ZvJWZkDBlLTJVTcuBkTCJE1O8YB3nqKaK8-JNYW_GpCED1uIPGHJ3mjIs3NnZ2s85ESL88W3eyXkwo7fnU/s200/barrister1.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5241892417271893954" /></a>Great Britain's law firms will have the option of becoming publicly-traded companies in 2011, according to the latest Economist magazine. That means investors, from individuals to institutional players, could buy stock in the British-based XYZ Law Firm Inc.--or something like that, old chap-- as if it were <a href="http://www.mcdonalds.com/">McDonald's Corp.</a> or <a href="http://www.pg.com/en_US/index.shtml">Procter & Gamble </a>Co..<br />Eventually, this is a trend that will make its way across the pond to the United States, home of some of the <a href="http://www.ilrg.com/nlj250">world's largest and most successful law firms</a>. Yes, it would take some tinkering with laws and regulations, but don't dismiss the possibility of law firms or their subsidiaries being traded one day on the <a href="http://www.nyse.com/">New York Stock Exchange</a> and other exchanges.<br />Of course just because something can happen doesn't mean it should. I shudder at the thought that law firms, which usually are <a href="http://en.wikipedia.org/wiki/Law_firm">private partnerships</a>, will convert to publicly-traded entities. I'm not alone, the <a href="http://blogs.wsj.com/law/2007/03/30/the-publicly-traded-law-firm-2/">American Bar Association isn't wild about the idea either and prohibits selling shares in law firms to non lawyers.</a><br />There are incentives for going public. Firms can put a value on their partnerships, name and equity partners could cash out with rich paydays, and the stock can be used as currency for merging or acquiring competitors. Naturally, the investment bankers like it because it's a new treasure trove of fees.<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiveXmC7EShXZWnMZNkxbcp6kpk2F5brmCsWSX0GtMb_UofZkk4BgcLL1dUdX4g2DC4FVFv5D6b8bSws20rbI3Eywu0b9g8lWA7M7RZD7AIdMdPh3AAZK-0upJcgMVLdNMfc0xfL5HK2Vk/s1600-h/toon343.gif"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiveXmC7EShXZWnMZNkxbcp6kpk2F5brmCsWSX0GtMb_UofZkk4BgcLL1dUdX4g2DC4FVFv5D6b8bSws20rbI3Eywu0b9g8lWA7M7RZD7AIdMdPh3AAZK-0upJcgMVLdNMfc0xfL5HK2Vk/s320/toon343.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5241886418185495426" /></a>However, there's plenty of downside for the law firms, clients and investors.<br />First and foremost, there's a huge potential for conflict of interest. Remember, a law firm is suppose to exist to represent the interest of its clients (at least that's what they say).<br />As a publicly-traded concern, a law firm opens itself up to immediate questions over <a href="http://www.businessdictionary.com/definition/conflict-of-interest.html">conflict of interest </a>with every significant decision or strategy being called into question. For instance, is the law firm filing a lawsuit strictly in its client's interest or because the legal action promises to generate billings that will boost the law firm's share price?<br />And even if conflicts are well-managed, there's other inherent problems.<br />Running a large law firm is akin to herding cats. Compared to even the most dysfunctional publicly-traded concern, large <a href="http://www.lawsociety.org.sg/running_practice/pdf/managing_Law_Firm.htm">law firms are more difficult to manage</a>, prone to greater in-fighting and a bastion of petty fiefdoms.<br />More important, many law firms don't have a handle on their expenses. As the Economist points out, few managing partners know their firm's profits per billable hour--even though that's how the money is generated. That is a key ratio.<br />Cost Control? Forget about it.<br />For decades, law firms have focused on making money and wooing clients, not cutting costs. And while that's beginning to change, though mergers and cut backs, it's a long way from reaching the discipline required by successful publicly-traded companies.<br />Indeed, <a href="http://en.wikipedia.org/wiki/Public_company">as shareholder-owned companies</a>, law firms would be under greater pressure to contain associate starting salaries, fire under-performing partners, and sell those gleaming glass towers they all like so much. <br />Can you imagine the sheer joy a professional troublemaker,like shareholder activist Carl Icahn, would have going after some fat cat legal firm and compelling it to count the paper clips?<br />Despite all this, I'd be for publicly-traded law firms if they'd end up providing better counsel and service to their clients. Unfortunately, that wouldn't be the case.<br />These days, a publicly-traded company's first concern is increasing shareholder value. Everything else comes in second. <br />In a few years, that's something the Brits are going to discover.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com6tag:blogger.com,1999:blog-1266827496132813951.post-80148133308658972862008-08-29T10:26:00.003-05:002008-08-29T12:28:55.373-05:00Internet Limits, Bill Daley and Obama...<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUT6MzY4oxI_UfYigG-SPi_-Vl-5axz2HY8Ne35nkvFhbrPnchOqsEyw-XTWfRB5LNC4pDmvvm5CsCRbjcibKKbG8dab1a6UshJ2SQXJ6ES5hxZHr2UhQcfrHRh-aepRnTO2St53dyDCc/s1600-h/comcast1.bmp"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUT6MzY4oxI_UfYigG-SPi_-Vl-5axz2HY8Ne35nkvFhbrPnchOqsEyw-XTWfRB5LNC4pDmvvm5CsCRbjcibKKbG8dab1a6UshJ2SQXJ6ES5hxZHr2UhQcfrHRh-aepRnTO2St53dyDCc/s320/comcast1.bmp" border="0" alt=""id="BLOGGER_PHOTO_ID_5239964832577656338" /></a> It's three posts in one! <br /><br />Those who believe the Internet is an unlimited force of nature are in for a surprise. Now comes word that Comcast will <a href="http://news.yahoo.com/s/nm/20080829/wr_nm/comcast_internet_dc">limit customers Internet usage starting Oct. 1.</a>The cable TV/Internet/phone service provider says its running out of capacity to service all its customers, so it has to force big users to cut back or pay more. <br />So much for the myth that the Internet is without constraint.<br />Already, media empires, e-commerce players, entrepreneurs and global corporations, which are tailoring business models to depend on the World Wide Web, are finding the Internet is straining to meet demand and that Net capacity is more taxed than ever before.<br />Which underscores a fact of business life: Whether its the information superhighway or a concrete highway, infrastructure must constantly be improved and upgraded. And that can be expensive.<br />Companies may think the Internet is a perpetual free ride but it's quickly becoming a toll road.<br />At the very least, Internet providers--like Comcast--<a href="http://www.usatoday.com/travel/deals/inside/2008-05-07-new-airline-fees_N.htm">are going to go all airline on us</a>. Expect them to start charging extra fees for the basic services we've come to use.<br />Email? That's 100 for $2 a month. Want to watch video? That's another $5. Blogging? Well, let's not go there.<br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtNbAD4QDlrsxyrxlaBT9Sac8qyZg58pMdasGIc7ivNPLxTI9qq9BIpqw0YctqsErHjyepbYBpXjY_s3XQq6h04X6MxHdWIm20akFUj0w2voADsWNSNkFhFT7w3vl8d3Qt8oCnT2nOiRM/s1600-h/billdaley5.gif"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtNbAD4QDlrsxyrxlaBT9Sac8qyZg58pMdasGIc7ivNPLxTI9qq9BIpqw0YctqsErHjyepbYBpXjY_s3XQq6h04X6MxHdWIm20akFUj0w2voADsWNSNkFhFT7w3vl8d3Qt8oCnT2nOiRM/s320/billdaley5.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5239607293439236370" /></a><strong>Running for Guv? It's Bill Daley's call.</strong><br />Bill Daley, youngest brother of Chicago's politically powerful Daley family, is interested in running for governor of Illinois.<br />Hey, youse gotta problem wit dat?<br />Mark Brown, a top-notch political columnist for the Chicago Sun-Times, does. In a recent column, he tells Bill not to run, <a href="http://www.suntimes.com/news/brown/1131847,CST-NWS-brown28.article">arguing that we've topped out on Daleys in powerful posts and don't need another in the governor's mansion</a>. A troika of <a href="http://egov.cityofchicago.org/city/webportal/portalEntityHomeAction.do?entityName=Mayors+Office&entityNameEnumValue=30">Chicago Mayor Richard Daley,</a> <a href="http://en.wikipedia.org/wiki/John_P._Daley">Cook County finance chairman John Daley</a>, and a Governor Bill Daley would be too great a concentration of power for one family, Brown asserts.<br />I agree that's a ton of clout centered within one family. But I disagree with his advice to Bill Daley.<br />If Bill Daley wants to run for governor then he should do so. From there, it's up to the voters to decide if there's too many Daleys running the place.<br />Have faith, they'll know what to do.<br />More than that, however, I'm troubled at the suggestion that anyone should step back from competing for any opportunity because of their family lineage or history. We can't pick our parents or our siblings. It's what we do with our lives that's important.<br />So it seems the first order of business is whether Bill Daley is qualified to be governor. On that score, let's give the man his due.<br />This isn't some wet behind the ears kid who's being groomed to take daddy's job. Nor has he squandered his birth right or failed to make his own way in the world.<br />Right now, <a href="http://en.wikipedia.org/wiki/William_M._Daley">Bill Daley's resume </a>stacks up against anyone else who's thinking of a gubernatorial run. Over the course of his professional life, he's distinguished himself as a lawyer, businessman (he's held high posts at two Chicago banks--<a href="http://www.aboc.com/page.cfm?id=3327">Amalgamated Bank</a> and <a href="http://www.jpmorganchase.com/cm/Satellite?c=Page&cid=1159304834085&pagename=jpmc/Page/New_JPMC_Homepage">JP Morgan Chase</a>)and public servant (Commerce Secretary under President Bill Clinton.)<br />If he runs, some opponents will seek to diminish these efforts. They'll also say his family is a political cabal. Bill Daley, who has never run for public office, will have to fight back and make his case to voters. <br />Here's one guarantee: Should he run in the Democratic Party primary for governor, Bill Daley won't be at a loss for opponents--no matter how mighty his family. <a href="http://www.illinois.gov/GOV/">Governor Rod Blagojevich</a> is itching for another campaign, and he'll be joined by <a href="http://www.standingupforillinois.org/">Lt. Gov. Pat Quinn</a>, <a href="http://www.illinoisattorneygeneral.gov/">Attorney General Lisa Madigan</a> and a few more. <br />As much as anyone, Daley's got the right to run for the state's top slot. <br /><br /><strong>Dems, Obama sparkle. GOP next.</strong><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSB7hXUepX72zbiHq94ZOifxn9iDkpvb9vvPR1Id8CkJdWTDZfRHfrtlO8udBPta8G_Kp3dJza_UXyW0jSEjEu7sOqBM9-WILyXf9Dt8DbzK1ky4OKPw1-iUsGQ_TWmFRmOZv5vNiCUw4/s1600-h/convention2.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSB7hXUepX72zbiHq94ZOifxn9iDkpvb9vvPR1Id8CkJdWTDZfRHfrtlO8udBPta8G_Kp3dJza_UXyW0jSEjEu7sOqBM9-WILyXf9Dt8DbzK1ky4OKPw1-iUsGQ_TWmFRmOZv5vNiCUw4/s200/convention2.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5239975685185293314" /></a>That was a whale of a convention the Democratic Party held in Denver. It was topped by presidential nominee Barack Obama's impressive, and very strong, acceptance speech. <br /><a href="http://www.judybarrtopinka.com/">Judy Barr Topinka</a>, a staunch Illinois Republican (yes, there are still a few out there) and a Channel 11 political commentator, said the Dem's Thursday night showing from <a href="http://opinion.latimes.com/opinionla/2008/08/invesco-field-h.html">Mile High Stadium</a> (aka Invesco Field) reminded her of China's eye-popping opening ceremonies for the Summer Olympics this year.<br />She got that right. <br />The <a href="http://www.johnmccain.com/">GOP's John McCain </a>gets going this week. He's got a tough act to follow.Bob Reedhttp://www.blogger.com/profile/06952150326503426979noreply@blogger.com0