United States of America

Bank regulators should get heavy on risk-weighting

22 Jun 2012

The financial and euro zone crises have shown the drawbacks of attaching varying weights to bank risk. Such models encourage unhealthy arbitrage. A tougher cap on the ratio of equity to total assets would limit abuse. So would banning risk measures that ignore extreme events.

Review: Is inequality a crisis or just capitalism?

22 Jun 2012

In “The Great Divergence”, Tim Noah offers a thought-provoking analysis of 30-odd years of widening U.S. income inequality. Yet some disparity is inevitable in any kind of market system. It’s the real decline in middle-class incomes that justifies serious concern.

Icahn may owe Goldman, but the reverse is true too

21 Jun 2012

The banking titan is suing CVR Energy, an oil refiner the uppity billionaire just bought. Goldman defended CVR and alleges Icahn blocked payment of $18.5 mln of fees. Theirs is a classic Wall Street rivalry. Maybe Icahn reckons Goldman has made enough off his activism already.

Downgraded banks should rush to borrow

21 Jun 2012

Most don’t need the cash. And despite the 15 Moody’s ratings cuts - by three notches at Credit Suisse and two at Morgan Stanley - short-term funding and collateral weaknesses should have already been fixed. But jumping back into markets quickly is the best way to show up Moody’s.

Regulator grudge match redux: Geithner vs Bair

21 Jun 2012

The former FDIC chief has formed an independent group to help push forward reforms in the U.S. financial system. The primary pressure point will be the council of regulators led by Treasury Secretary Tim Geithner. The two have sparred before. But their interests now look aligned.

Taking the leverage out of economic growth

21 Jun 2012

For two decades private sector debt in the U.S. and euro zone expanded at a faster rate than nominal GDP. The binge helped boost output, but led to the crisis. Reducing leverage without choking growth is a challenge that economists and central bankers have just begun to ponder.

Chesapeake gets short-term gravitas at the top

21 Jun 2012

At 73, former Conoco boss Archie Dunham can’t have plans to stick around and unseat Aubrey McClendon from the energy empire he has built. So investors are disappointed. But he does have his legacy to protect and the god-given heft to keep Chesapeake’s reckless founder in line.

Even crazy cheap debt can be cheaper still

21 Jun 2012

In a world of rock-bottom rates, some corporate issuers are finding ways to save even more. Time Warner Cable, a U.S. company with only U.S. customers, just sold $1 bln of 30-year paper denominated in sterling. The textbook arbitrage may save it 25 basis points. It’s easy money.

Corporate earnings hopes are still too high

21 Jun 2012

Analysts are paring back profit forecasts as euro zone worries clog the wheels of global commerce. Yet history suggests that when earnings go into reverse, the shift is rarely gradual. Investors may still be expecting too much from companies, at least in the near term.

Alliance Boots boss pulls off quite a coup

21 Jun 2012

Normally when you sell a company for a fat premium, you lose control. But Stefano Pessina has extracted both a rich price from Walgreen and will end up as by far the largest shareholder in the merged group, with a 15-16 percent stake.

Fed’s diminishing ideas bring diminishing returns

20 Jun 2012

It’s extending Operation Twist to the end of the year, leaving the Fed even more on the hook once rates rise. It also means both monetary and fiscal policy remain locked on stimulus. Yet economic and jobs growth are slowing. The drugs’ obvious effects are starting to wear off.

Quest board cleverly squeezes more out of MBO

20 Jun 2012

The software company’s directors were put on the defensive when boss Vincent Smith, who owns a third of the firm, teamed up with an LBO shop for a lowball bid. But offering new shares to Dell leveled the playing field and bagged shareholders a 12 pct higher offer.

China bean-counters should open their books

20 Jun 2012

After a rash of accounting slips, America has demanded China-based auditors hand over documents. Such meddling goes down badly in China. But if the government resists, it could end foreign listings and deprive local auditors of skills they’ll need to one day rival the Big Four.

London bankers get swift kick from Boots deal

20 Jun 2012

The UK pharmacy chain’s sale is a bitter pill for the City to swallow. Big banks that backed KKR’s 2007 mega-buyout of Boots were stuck with the debt as the crisis struck. Adding insult to injury, none were hired to advise it on the Walgreen deal. The timing couldn’t be worse.

Lehman sideshow underscores regulatory gaps

20 Jun 2012

Unable to bag Dick Fuld & Co, the SEC has spent three years suing a money market fund for its exposure to the collapsed bank. But while Lehman wreaked havoc on markets, the Reserve Primary Fund made investors essentially whole. The folly is a reminder of the watchdog’s flaws.

Dimon double gives Congress wasteful distraction

19 Jun 2012

Lawmakers from both chambers spent a total of four hours grilling JPMorgan’s boss over a loss that never put taxpayers at risk. Congress should ensure banks are well supervised, but with a runaway deficit and anemic job and GDP growth, they have more pressing work to do.

Good thing Ackman sees J.C. Penney as long-term bet

19 Jun 2012

Because it’s a dog right now. The U.S. retailer’s president abruptly left after eight months - and with $15 mln for his bad work. J. C. Penney shares fell another 9 pct and now trade around where activist Bill Ackman first bought in. Bold turnarounds are tough in the public glare.

Jilted Air Products gets only a consolation prize

19 Jun 2012

Since the U.S. hydrogen producer’s hostile bid for Airgas failed last year, it has lagged rivals. Its former prey’s dramatic outperformance exposes the $5.8 bln offer as too stingy. A smaller deal in Chile may help Air Products revive growth but is a poor Airgas substitute.

KKR gets rich prescription for top-of-market LBO

19 Jun 2012

Walgreen’s two-stage acquisition of European rival Alliance Boots should more than double the investment KKR and its partners made at the height of the 2007 boom. What the U.S. drug chain’s investors will get for their money - as much as $16.2 bln - is harder to fathom.

Lazard’s new investor isn’t passive by nature

19 Jun 2012

Nelson Peltz says his 5.1 pct stake in the Wall Street advisory shop is a bet on the current plan and management. It’s a coup to win over the uppity activist – Peltz was behind campaigns at Heinz and State Street. But CEO Ken Jacobs also probably doesn’t have much room for error.