Americas

Bounced Citi CDO payout tests SEC’s credibility

28 Nov 2011

Judge Jed Rakoff isn’t convinced Citi’s $285 mln deal with the U.S. regulator serves the public interest. The watchdog can only blame itself. With few exceptions, lax enforcement has earned it a toothless reputation. Going to trial gives the SEC a chance to prove it has bite.

Wall Street might just miss Barney Frank

28 Nov 2011

On the face of it, the co-author of the Dodd-Frank reforms has been more a scourge than a supporter of the finance industry. But at least the congressman, who won’t stand again next year, has a grasp of the issues. Bankers could face more uncertainty and less understanding.

Gingrich candidacy evokes elements of Nixon’s run

28 Nov 2011

The former House speaker brings wits and experience along with his spotty ethical and political track record - like fellow Republican Richard Nixon in 1968. Tricky Dick later went against the party grain opening ties with China. Gingrich could do the same on taxes and healthcare.

BRIC success shows the power of a good idea

28 Nov 2011

Goldman’s Jim O’Neill invented the acronym for the leading emerging markets 10 years ago. What started as a good economic theme became a state of mind – the embodiment of a global power shift. So far, so good, but at least one BRIC is likely to disappoint in the next decade.

AT&T boss should pay price if T-Mobile deal fails

28 Nov 2011

The telecom giant bet big it could get the $39 bln acquisition past regulators. Now, AT&T is acknowledging how tough the fight is. It’s looking more likely shareholders will be on the hook for $6 bln. If so, CEO Randall Stephenson should lose some comp - and his chairman’s seat.

"No harm, no foul" legal concept worth preserving

25 Nov 2011

The U.S. Supreme Court is due to hear arguments on Monday over a consumer’s right to sue despite suffering no obvious injury. That only encourages dubious litigation against corporate America and upends constitutional logic. The high court now has a chance to squelch such cases.

AT&T’s $4 bln admission: DT deal may be a turkey

24 Nov 2011

Happy Thanksgiving from the U.S. telco. It has acknowledged its $39 bln T-Mobile takeover may flop, taking a charge worth 10 pct of the deal to cover a record break fee. Failure would also deprive AT&T of synergies, Deutsche Tel of an exit and investment banks of a rare payday.

Ethical Economy: Good and bad news on inequality

23 Nov 2011

Before worrying too much about the excessive gains of rich country elites, rejoice in the steady global decline of inequality in the access to basic economic goods. Then worry, but not too much. Inequality at the very top is a relatively minor problem that is easy to solve.

KKR’s $7.2 bln Samson deal looks more BO than LBO

23 Nov 2011

The private equity firm and its partners are putting more than 50 pct equity down to buy the Oklahoma energy firm. That surely reflects more than Henry Kravis’ desire to bet on a hometown play. Banks are understandably nervous about lending against the promise of wildcat riches.

Leverage too risky for U.S. public pension funds

23 Nov 2011

Many still reckon on making an 8 pct annual return. That’s now unrealistic for a fairly safe portfolio, as a new Breakingviews calculator shows. Fund managers need to bring expectations down to earth. But instead, some like the dangerous idea of borrowing to juice returns.

Fed’s stress-test revamp brings good and bad news

23 Nov 2011

Submitting top U.S. banks to awful scenarios will force them to preserve precious capital, possibly delaying dividends. However, the tests will take time. And fear of scrutiny may cause U.S. lenders to speed their withdrawal from the euro zone, worsening the continent’s woes.

Gloomy outlook doesn’t thwart Netflix optimism

22 Nov 2011

The company is selling shares for a third of the price at which it recently bought them. Claims that it has enough capital despite shrinking cashflow, an expected loss next year and $3 bln of content costs due by 2014 add to the misguided cheer. Netflix prospects aren’t so rosy.

IMF cracks the door for Europe’s ‘bystanders’

22 Nov 2011

The fund’s new loan plan would allow some countries to borrow chunky sums in the heat of the crisis without the typical policy demands. The $400 bln or so will help but can’t alone save Europe. Making cash easier to access also risks allowing “innocent” nations to delay fixes.

U.S. lawmakers squandering gift from markets

21 Nov 2011

Global investors have given Congress lots of rope to rein in long-term deficits before they enter crisis mode. The committee charged with the task failed to make any progress. So far, markets are enabling such inaction. Washington, and the world, won’t always be so lucky.

Insider trading isn’t always about the money

21 Nov 2011

It may drive the modestly paid. But corporate honchos would be nuts to take the risk for that. New research, though, shows the better compensated the U.S. executive, the more likely a dodgy trade. Maybe they don’t feel rich enough. But hubris or peer envy seem a better bet.

Investors too skeptical on Gilead’s $11 bln bet

21 Nov 2011

Helped by acquisitions, the biotech made it big with drugs for HIV. Now, by buying Pharmasset, it’s trying the same trick with hepatitis C. Sure, Gilead is paying a stonking 89 pct premium. But wiping some $3 bln off the buyer’s market value looks like an over-reaction.

Ted Forstmann: a financier the 99 pct could admire

21 Nov 2011

The buyout pioneer, dead at 71, was a hard-nosed “barbarian at the gate.” But he re-engineered companies, not just their finances, and disliked junk bonds. And while Forstmann made society pages, he also donated much of his fortune. His was the kind of greed that can be good.

Exclusive: Ditching CEO won’t save US utility deal

18 Nov 2011

Northeast Utilities parted ways with the head of its biggest division, CL&P, after the utility’s bungled storm response. Investors think that makes the pending $4.7 bln takeover of NSTAR more likely. Not so fast: Connecticut plans to reopen the merger review by hook or by crook.

EU-like tricks loom as U.S. budget deadline nears

18 Nov 2011

The “super committee” has till Monday to reach consensus. That looks hard, so the temptation to fiddle a way to $1.2 trln of cuts is intense. Doing so would ape how states fudged euro entry rules. Markets and the public will probably be far less tolerant this time.

U.S. housing policy veers toward madness

18 Nov 2011

Congress has given bipartisan approval for putting the wobbly FHA back on the hook for mortgages as big as $729,750. It’s yet another sign that lack of leadership results in batty decisions. Those borrowing such large sums don’t need federal aid. And Uncle Sam needs a break.