Americas

Fannie, Freddie role funding tax cut is perilous

19 Dec 2011

U.S. lawmakers are struggling with the details of extending the payroll tax reduction. But both sides want to pay for it by raising the mortgage finance giants’ guarantee fees. That’s a needed change - but siphoning the extra money straight to Treasury sets a dangerous precedent.

Directors and officers insurance declaws clawbacks

19 Dec 2011

Forcing bosses to repay undeserved rewards is central to U.S. financial reforms. But new D&O policies are now covering the risk of lost comp - at shareholder expense. Insurers deny helping executives skirt accountability. Investors and watchdogs may see things differently.

Alwaleed pushes the limits with edgy Twitter stake

19 Dec 2011

Even though Prince Alwaleed bin Talal is known as a bold investor, his $300 mln stake in the regime-usurping social network is decisively edgy. The Saudi royal family member increases his cool factor, but supporting unregulated speech might not sit well in the kingdom.

SEC’s GSE charges underline need for revamp

16 Dec 2011

The U.S. watchdog has charged six ex-executives of Fannie Mae and Freddie Mac, the biggest bailout recipients, over subprime loans. It’s about time. Wherever the charges go, they’re symptomatic of the twisted consequences of the U.S. mortgage lending model. Its reform is overdue.

Gray market trading sucking life from IPOs

16 Dec 2011

Facebook’s float will grab headlines next year. But as Zynga’s tepid debut shows, multiple private investment rounds and the ability to trade shares before going public mean there are slim pickings when public market investors finally get their chance to participate.

Did MF Global clients forget Lehman’s lessons?

16 Dec 2011

The bankrupt broker stands accused of misusing client funds. One theory is that it used customers’ money through a legal process called rehypothecation. The U.S. imposes limits on the practice, but the UK doesn’t. It’s a lesson investors could have learned from Lehman’s collapse.

Savvy NRG step may tip scale against utility deal

16 Dec 2011

It’s uncommon to see a supplier try to spoil a marriage between customers. But the U.S. power producer is hoping to break up Northeast Utilities’ $4.7 bln takeover of NSTAR. NRG’s arguments hint at how big and inflexible a utility the deal, if approved, could create.

Fracking tie-up makes sense for shale-rich China

16 Dec 2011

Buying a piece of Frac Tech, a U.S. gas services company, for a mooted $2.2 billion would be a savvy move by China’s national energy majors. Frac Tech’s drilling technology should be easy to copy, and could help China unlock 140 years of gas supplies. The strategic benefits justify a premium price tag.

P&G didn’t crunch its Pringles partner adequately

15 Dec 2011

Troubles have escalated for Diamond Foods, the agreed buyer of the chips brand, with the SEC now probing its accounting. The scale of issues being targeted suggests the consumer giant missed early warning signs. An obsession with taxes may have clouded P&G’s vision.

Payroll tax cut creates another mess in Washington

15 Dec 2011

In a bizarre irony, Republicans now want to pass a trillion dollar spending bill and raise taxes, while the Democrats fight to extend this year’s payroll tax cut and threaten a government shutdown. Whatever the outcome of the latest bickering, the victim is the same: the economy.

Morgan Stanley job cuts more timing than substance

15 Dec 2011

It’s coal in 1,600 employees’ stockings. And axing jobs in capital-intensive areas makes the move the second Basel-pleaser this week. But the numbers are small, merely bringing the firm in line with Goldman’s annual cull. Rivals with larger trading desks will have to do more.

No happy euro Christmas for U.S. markets

14 Dec 2011

Last week’s European summit in the end did little to address the region’s immediate problems. That’s dragging down the euro, commodities - oil and gold by 5 pct on Wednesday - and U.S. stocks. It could all make for skittish trading as investors aim to avoid year-end surprises.

Fed shows outsized concern for too-small-to-fail

14 Dec 2011

The U.S. central bank spent nearly two years scrutinizing the tiny takeover of a Utah lender by prepaid debit card firm Green Dot. The soundness of even niche banks matters. But in the too-big-to-fail era, the Fed’s slow process is an unneeded deterrent to the sector’s small fry.

Avon half-makeover doesn’t make board look pretty

14 Dec 2011

Removing Andrea Jung as CEO was necessary given the cosmetic group’s performance. But keeping her on as chairman, where she can continue to meddle with strategy, is a mistake. It queers the pitch for a successor and may impede the wrenching changes that need to be made.

Bernanke birthday brings holiday from new stimulus

13 Dec 2011

With U.S. unemployment down and growth up, the Fed’s latest statement zeroed in on global problems - and didn’t introduce a QE3 program. Under such conditions, and with money supply strong, the chairman’s gift of low rates to markets may expire by the time he turns 59.

FDIC’s WaMu settlement is more fizzle than fight

13 Dec 2011

The U.S. watchdog has extracted only $75 mln from three former executives, mostly paid by insurance. For skeptics, it’s another inadequate rap for alleged financial rogues. But raising penalties and booting deals won’t help. Making suits and punishment more predictable might.

U.S. energy bill beneficiary redefines going green

13 Dec 2011

Oil billionaire T. Boone Pickens and U.S. Representative Nancy Pelosi are oddly aligned. A fuel subsidy proposal, if passed, would make them both richer because of their stakes in a “green” firm that would benefit. Congressional trading rules need an overhaul now more than ever.

Morgan Stanley housecleaning will please Basel

13 Dec 2011

Chief Executive James Gorman’s settlement with bond insurer MBIA puts a big chunk of the financial crisis legacy behind the firm. At $1.8 bln it doesn’t come cheap. But it puts Morgan Stanley on the right track by boosting regulatory capital and tidies up a very messy year.

Rumble in rock garden presages more hostile M&A

12 Dec 2011

That’s one way to read the unsolicited $4.6 bln offer that Martin Marietta Materials made for larger rival Vulcan. The deal won’t succeed without a sweetener. But the lesson is clear: if profits can’t be mined from the ground, they can still be found by cutting costs.

Slim associate bonuses fatten law partner profits

12 Dec 2011

Despite rising revenue, the big U.S. firms held year-end bounties to 2010 levels. That may reflect a junior-lawyer glut, routine-task outsourcing, client-forced savings - and some firm-owner greed. Legal grunts aren’t hurting, but the days of lavish perks and pay may be waning.