Corporate Water Reporting: Weak

Posted on May 2, 2007 by Felix

One expects hedge funds to carefully audit their use of leverage, and one expects

companies in water-intensive industries such as mining to carefully audit their

use of water.

And one would be wrong on both counts. In the wake of a Deloitte report

saying that hedge funds are very bad at managing risk, comes a comprehensive

report from Pacific

Institute making similar claims about water reporting.

The report’s authors looked at 139 large public companies in water-intensive

industries, and found no standardization in water reporting, which makes apples-to-apples

cross-company comparisons impossible. They also found precious few company water

policies; very little cognisance of water risks; and almost nothing in the way

of site-specific water information.

Now I’m not sure that all this information necessarily needs to reside in companies’

annual reports. But it should certainly reside somewhere, and I’m pretty

sure that if it’s not in the annual report, that’s a good sign that the company

simply doesn’t have the information at all.

Mari Morikawa, the lead author of the report, is quoted in the press

release:

This analysis shows that companies aren’t providing risk-relevant

information to investors and stakeholders. It may also indicate that some

companies and sectors are failing to pay attention to their most important

water risks.

Maybe better water reporting is something that socially responsible investors

should start demanding from companies they invest in.

Posted in stocks | Comments Off on Corporate Water Reporting: Weak

The Necessity of the Closet

Posted on May 2, 2007 by Felix

It’s undeniable that it was the institution of the closet which was responsible

for the sad end to Lord Browne’s career. On the other hand, is it simply far

too simplistic, bordering on the moralistic, to say that the BP CEO should simply

have come out? Matthew

Parris has a good point today:

There really is a lingering problem about homosexuality and business. When

Lord Browne told his shaving mirror, that it was not in the interests of BP’s

shareholders that his gay private lifestyle became public property, he was

not imagining the problem. One can only imagine what Vladimir Putin thinks

about gays – but this was a statesman whose confidence Browne (and BP)

needed. The Arab and Muslim world has no problem with secret homosexuality,

but every kind of problem with acknowleged and proclaimed homosexuality.

Friends of mine in business tell me that we in the world of the media and

politics, where attitudes towards homosexuality have shifted fast, do not

realise as we page onward from news and comment, and into the business section,

that we are moving into a different world, some of whose cultural values would

shock us.

There’s no easy solution to this dilemma. The head of an oil company will have

to deal with Russians and Arabs and all manner of people who would be abhorred

at the idea of dealing with an openly gay man. That in and of itself is good

reason for the board of an oil company not to promote an openly gay man to the

top job. If you’re a gay man on an upward trajectory in an oil company, then,

it benefits both you and your company to stay in the closet. On the other hand,

as we’ve seen, the closet in and of itself is a destructive institution.

If there is hope, it comes from Parris’s reference to "media and politics,

where attitudes towards homosexuality have shifted fast". He’s in the UK,

of course, where politicians are learning that coming out is not political suicide.

The US hasn’t got that far yet. But it will. And if politics can slowly move

to becoming as accepting as the media, then business can slowly move to becoming

accepting as well. But these things will, unfortunately, take time.

Posted in defenestrations | Comments Off on The Necessity of the Closet

Follow-ups: Chase, Rogoff

Posted on May 2, 2007 by Felix

Remember the video

footage of Chase leaving its customers’ information – names, account

numbers, social security numbers, loan applications, you name it – in

the trash outside its Manhattan branches? Well, Chase has now responded to it,

saying that "we are looking to see if this was an isolated situation"

(um, the whole point of the video was that it wasn’t an isolated situation:

it happened all over the city), and that "we hope that the union people

who got this personal info would not misuse it."

With all respect to Chase spokesman Tom Kelly, this is not good PR. If someone

points out a massive security hole in your operations, you thank them profusely.

You do not start casting aspersions and hinting darkly that they might

"misuse" it.

Also, Le Monde fell for the Ken Rogoff fake

Wolfowitz memo hook,

line and sinker. Pretty funny.

(HT: Dealbreaker,

Midas

Oracle)

Posted in banking, world bank | Comments Off on Follow-ups: Chase, Rogoff

Lord Browne: Victim of Homophobic Persecution

Posted on May 2, 2007 by Felix

I don’t normally read the Alphaville IM transcripts, but today’s is spot on.

Paul Murphy, at the FT, brings

up the newspaper coverage about Lord Browne:

I couldn’t believe just how nasty and homophobic the Mail’s

coverage was this morning. Made me want to vomit.

He’s quite right. This really is, in Liz Gunnison’s words,

an attack on Browne’s sexuality. That’s not spin, that’s fact. The so-called

"allegations" against Browne, which Gunnison considers "salacious"

and "tawdry", are really nothing of the sort. Browne and Chevalier

were together for four years, during which time they spent a lot of Browne’s

money and had dinner with some important people. Browne sometimes talked about

his job, but there’s no indication that he ever told Chevalier anything that

he wouldn’t tell any journalist or analyst who asked to talk to him. In fact,

the only remotely salacious revelation is the one thing that the Daily Mail

still isn’t allowed to publish – and I’m not going to publish it either,

although it’s hardly difficult to find. Suffice to say it has no bearing whatsoever

on BP shareholders.

Browne is very much the victim here. The Daily Mail, which paid over $100,000

to Chevalier for his kiss-and-tell story, is the homophobic persecuter, using

the flimsiest of excuses to out the former BP chief. Browne shouldn’t

have tried to suppress publication. But that doesn’t for a minute excuse

what the Mail has done to him.

Back to the FT’s Murphy and Neil Hume:

NH: Hmm. Tend to agree. All these allegations are just so petty.

NH: I noticed you put a little Markets Live promo post up earlier –

and you said we were going to be making some revelations about journalists’

private lives.

NH: Who’s that – people from the Mail or Mail on Sunday.

PM: No, you!

NH: Eh?

PM: FACT: Neil Hume used his computer at work to order a Tesco’s shop

online, citing the spurious excuse that his wife was seven months pregnant.

The computer was owned by Pearson, which is a publicly listed company.

PM: FACT: Neil Hume allowed his three year old son Morgan to play Brick on

his Pearson-owned Blackberry for THREE HOURS – his excuse being that

he was driving back from Northampton at the time and was trying to keep the

kid quiet in the back of the car. With the Blackberry’s battery consequently

run down, Hume then proceeded to recharge the device on company property

PM: FACT: Neil Hume LIED to FT admin boss Martin Nielsen when claiming that

his Blackberry had fallen in the bath when in fact Hume had drowned the device

when he spilt a Martini on it.

NH: it was actually a bannna that did the damage to my Blackberry

PM: FACT: Neil Hume CHEATED his employer last month when he claimed £80

for “lunch with a contact.” In fact this was not a lunch. There

was NO FOOD involved. Hume was DRINKING with four brokers and he LOST the

spoof for the bill.

PM: FACT: Neil Hume REVEALED damaging internal information when he discussed

the state of the FT’s technology with the chief executive of a medium-sized

investment bank. “It’s just crap,” Hume is alleged to have

said at a secret lunch in St James’ arranged by a friend who used to

be in journalism. Hume vehemently denies this.

NH: Well, I am not denying that last one

PM: It’s HUBRIS Neil. It’s LIES.

PM: Your glittering career is in ruins

Posted in defenestrations, Media | Comments Off on Lord Browne: Victim of Homophobic Persecution

Hedge Fund Leverage Falling

Posted on May 2, 2007 by Felix

Are hedge funds becoming more conservative? Hedge funds being hedge funds,

of course, nobody knows for sure. But the best data there is comes from the

Financial Services Authority in the UK, which polls prime brokers and asks them

how much money they’re lending to hedge funds. And by that measure, leverage

is actually going

down, not up.

Hedge funds reduced their gearing last year by about 10 per cent, according

to a private survey by British regulators, lowering the potential for the

failure of a major firm to create a domino effect across the financial system.

The survey by the Financial Services Authority of prime brokers, the main

lenders to hedge funds, found gearing dropped from 1.86 times net equity in

April to 1.66 times in October, said people briefed on the results…

The FSA declined to give details of its findings. But it said: “The

survey shows that leverage remains at moderate levels and lending is well

covered by collateral."…

Two senior prime brokers said hedge funds were increasingly bypassing the

prime brokerages on which they have traditionally relied for borrowing, so

some of the leverage in the industry would not be seen by regulators.

Lower leverage is good news as far as the systemic risk of hedge funds is concerned.

On the other hand, if hedge funds are simply getting there leverage elsewhere,

and bypassing the prime brokerage system, that’s very bad news. After all, the

prime brokers are exactly the point at which people like Tim Geithner

want to concentrate regulatory efforts with respect to hedge funds.

Posted in hedge funds | Comments Off on Hedge Fund Leverage Falling

WSJ on the WSJ

Posted on May 2, 2007 by Felix

The Wall Street Journal, unsuprisingly, has the best coverage today on the

subject of itself. The lead

article is long, and packs in lots of information, and goes some way to

answering my question

about the future of the newspaper’s editorial independence under Rupert

Murdoch. In fact, it answers the question twice, in two opposite ways.

First comes the pessimism:

Mr. Murdoch has tended to put a strong personal imprint on papers he owns,

from the feisty tabloid New York Post to papers in Britain and Australia.

He is known for phoning editors and even reporters about individual stories.

The Post’s media and business sections sometimes delight in skewering rivals,

and Mr. Murdoch’s political preferences have been clear in the news pages

as well as the editorial page.

Similarly, News Corp.’s Fox News cable channel, despite its slogan "fair

and balanced," is considered by many liberals to pursue a conservative

agenda in its news coverage as well as its editorial opinions.

A News Corp. spokesman declined to comment on the issue of editorial independence.

Then, much lower down, comes the optimism:

Mr. Murdoch’s letter said he was prepared to structure a deal in a number

of different ways. They could include the issuing of Class A News Corp. shares;

a new class of convertible shares in News Corp.; or potentially another security

that would be issued on a tax-free basis that would pay out an attractive

dividend. Mr. Murdoch said his company’s board had endorsed the offer "enthusiastically."

He offered to set up safeguards to ensure the Journal’s editorial

independence through, for instance, creation of a separate board.

This I haven’t seen elsewhere. It’s a tantalizing tidbit, tinged with hopefulness,

but also a little hard to believe. Are there any newspapers which are

genuinely editorially independent from their owners? Even the prized independence

of the Guardian, in the UK, was achieved only by making the owner itself an

independent trust.

Posted in Media, publishing | Comments Off on WSJ on the WSJ

The Tragedy of John Browne

Posted on May 1, 2007 by Felix

Lord Browne, up until today the CEO of BP, has moved overnight

from being a beleaguered executive to being… well, let’s just say the Daily

Mail headline

is "BP Chief Resigns After Lying Over Affair With Gay Lover".

I have to disagree with my colleague Liz

Gunnison, who says that Browne is resigning over allegations that he misused

company funds on his boyfriend of four years. As ever, it’s the cover-up here

which is the real problem, not the alleged crime. BP claims

to have looked into all the allegations and found them “unfounded or insubstantive,”

and given that the source of that quotation is Peter Sutherland,

I believe them.

The real problem lies at the intersection of two explosively dangerous institutions:

the closet, on the one hand, and the UK legal system, on the other. Browne’s

ex-lover sold his story to the Mail on Sunday 15 weeks ago, but the newspaper

has been enjoined from printing anything ever since by what seems to be pretty

heavy-handed legal action on the part of Lord Browne.

Whatever the merits of the Mail’s original story, and whatever the ethics of

paying for kiss-and-tell stories such as this one, the Mail is surely right

when it says

this:

That Lord Browne should have felt free to lie deliberately and repeatedly

raises deeply worrying questions about the system of secret court hearings

which is increasingly being used by the rich and powerful to prevent the public

knowing the truth about their activities.

It is also a matter of great concern that such hearings are being used to

create a privacy law, made by judges sitting alone and in secret, without

reference to Parliament.

Lord Browne would have kept his job until his scheduled retirement in July

if he hadn’t gone to court to try to prevent the publication of Jeff

Chevalier’s story. But in trying desperately to remain comfortably in the closet,

he ended up lying repeatedly to the UK High Court – and that is why he

had to resign.

This story couldn’t happen here in the US, because the First Amendment means

no court would ever prevent a newspaper from publishing a story such as this

one. But the institution of the closet is even stronger in the US than it is

in the UK. Check

out the "50 Most Powerful Gay Men and Women in America", and count

the number of public-company CEOs. Hell, try to count the number of public-company

employees. You won’t get very far. There’s a few journalists, and that’s

about it.

It’s shocking and depressing that in 2007 a figure of Lord Browne’s stature

still feels the need to go to extraordinary lengths to try to remain in the

closet. I look forward to the day when it is unremarkable for a public company’s

CEO to be openly gay; at the moment, it’s still, unfortunately, unheard-of.

Posted in defenestrations | Comments Off on The Tragedy of John Browne

News Corp-Dow Jones: Hope Yet For Rupert

Posted on May 1, 2007 by Felix

The unions hate

it. The owners are going to vote

against it. The New York Observer says that it’s sunk.

So is there any hope for Rupert Murdoch in his bid to buy Dow

Jones?

In a word, yes: and a lot of the reason is in the stock price. The Bancrofts

allowed Murdoch’s bid to get this far, rather than dismissing it out of hand,

as they’ve done with any number of bids in the past. Murdoch himself described

the bid as "friendly". So the Bancrofts look as though they’re holding

out for a higher sum, rather than simply refusing.

What’s more, the Bancrofts, as controlling shareholders, do actually have a

fiduciary duty to the non-controlling shareholders, as Gary Lutin

notes here.

If the company turns out not to be for sale and the share price collapses back

to where it was pre-bid, there’s going to be a lot of very unhappy shareholders

that the Bancrofts will have to answer to.

Finally, there’s almost certain to be a bidding war, now that Dow Jones is

in play. If anything, the problem is that there aren’t going to be enough investment

banks to advise all the possible suitors – which range from the Washington

Post and the New York Times through Pearson and Reuters to GE and even Yahoo.

Not to mention the occasional billionaire with a yen for a trophy publication

or any number of private-equity shops for whom $5 billion or $6 billion is the

kind of money you find down the back of the sofa on a Sunday afternoon.

I just can’t see a situation wherein the Bancrofts retain control of the company

and the Journal, as IAPE 1096 would like. This still looks very much like the

beginning of the end of their days as media magnates. And if they’re going to

sell anyway, there are definitely pretty

good reasons to sell to Rupert.

Posted in M&A, Media, publishing | Comments Off on News Corp-Dow Jones: Hope Yet For Rupert

Does Economics Reduce Poverty?

Posted on May 1, 2007 by Felix

If you ask a development economist to pick one metric which best encapsulates

the poverty problem worldwide, there’s a good chance you’ll end up looking at

the number of people living on less than $1 a day. Kash

Mansori today reminds us that number has been dropping substantially: from

almost 1.25 billion people in 1990 to under a billion in 2004. With the continued

torrid economic growth of China, it’s surely lower still today.

Kash says that "there’s nothing that we do in economics that is more important".

But in saying so he simply assumes that economists are in some way

responsible for the improvement in this number. If you ask me, the improvement

is not due to economics but politics – specifically, Chinese politics.

Look at the same number ex China, and I think you’ll have a harder time persuading

me that any amount of economics has made the world a less poverty-afflicted

place.

Remember that China has, historically, always been the largest economy in the

world. As it grows back from the historical aberration of Mao to its more customary

geopolitical position, China will do wonders for global poverty reduction simply

by dint of its sheer enormity. But I don’t think you can thank economists for

that.

Posted in development, economics | Comments Off on Does Economics Reduce Poverty?

Wolfowitz, Rogoff, and Intrade

Posted on May 1, 2007 by Felix

Over at Intrade,

the Wolfowitz.Resign.Apr07 contract has expired at 0, after trading as high

as 43 on April 24. (Which means that the people betting at Intrade reckoned

there was a 43% chance of Paul Wolfowitz resigning last month.)

Meanwhile, the June, September, and December contracts are alll trading at about

60, albeit with very little liquidity.

The problem, of course, is finding someone willing to go short, and bet that

Wolfie will still have his job in a few months’ time. As far as I can tell,

the board is pretty adamant that he has to go, and the only question is how.

Even Wolfowitz seems to be coming round to the realization that you can’t be

a leader if you don’t have any followers.

In any case, you have to read Ken Rogoff’s spoof

memo over at Foreign Policy. When someone of Rogoff’s stature can laugh

in Wolfowitz’s face like this, you know it’s all over.

(Via Bayesian

Heresy)

Posted in technocrats, world bank | Comments Off on Wolfowitz, Rogoff, and Intrade

Murdoch-Dow Jones Roundup

Posted on May 1, 2007 by Felix

Larry

Kudlow calls the proposed purchase of Dow Jones by News Corp "totally

awesome", while investor Michael

Price says "this really would be unbelievable". Everybody’s excited,

although it’s not clear exactly what it is they’re excited about. (Actually,

in Price’s case it is clear: he owns 350,000 shares of Dow Jones, so he’s excited

about having made over $7 million today.)

Barry

Ritholtz reckons it’s not the newspaper which is driving this deal: "Murdoch’s

obvious interest is using the Dow Jones infrastructure to power the News Corp

Business channel which will be competing with CNBC sometime in the coming year,"

he says. Meanwhile, the New

York Times tells us that "The bid for Dow Jones in part reflects Mr.

Murdoch’s belief that combining the company’s print and online assets

with a television outlet could prove immensely valuable and competitive."

I’m sure that Murdoch is justifying the $5 billion price tag by looking at

TV synergies. But I also have a very strong feeling that what he really

wants is the Journal, price be damned. It’s the closest thing that the US has

to a quality national newspaper, and I’m sure that Murdoch would want to move

it further in that direction, making it more accessible to a broader audience

and competing more with the New York Times. The Journal, right now, is bone

dry, and that’s not an attribute one readily ascribes to Murdoch properties.

One question which has been bugging me: Murdoch is known for micromanaging

the editorial side of his newspapers. If you edit the Sun, or the Times, or

the New York Post, you will talk to Rupert a lot, and he will

tell you what to print. Why didn’t any heads roll after the New York Post splashed

Dick Gephardt all over its front page, saying he was John Kerry’s choice for

VP? ‘Cos the story came straight from Rupert.

All serious US newspapers have an almost religious belief in editorial independence,

the Wall Street Journal included. In Rupert’s mind, freedom of the press belongs

to those who own one, and I can’t imagine him recusing himself from editorial

decisions. Whether and how he tries to square that circle will be fascinating

to see.

Posted in Media | Comments Off on Murdoch-Dow Jones Roundup

Murdoch bids for Wall Street Journal

Posted on May 1, 2007 by Felix

Rupert Murdoch has made many bigger deals than his $5 billion

bid

for Dow Jones. But if he’s successful, this will still be one of his crowning

achievements. Murdoch is a king of all media: his Fox brands are hugely profitable,

and his MySpace acquisition was a thing of genius. But underneath it all he’s

a newspaperman, and the Wall Street Journal is the kind of property that newspapermen

spend entire lifetimes dreaming about owning.

Martin

Peers, reporting for the Journal, says that a bidding war might be in the

offing:

The offer could set off a bidding war for Dow Jones, owner of one of the

most storied franchises in American newspapers. Possible rival suitors include

the Washington Post Co., the New York Times Co. and possibly even Bloomberg

LP.

To that list one would probably have to add one if not more private-equity

groups, who have the kind of cash that newspaper companies tend to lack.

One big question: What would happen to the Journal’s formidable unions if Murdoch

took over? Are they powerful enough to be able to block a deal from even happening

in the first place? Murdoch doesn’t have quite the same union-busting reputation

on this side of the pond as he does in the UK, but I doubt that he’d exactly

be welcomed with open arms.

Posted in M&A, publishing | Comments Off on Murdoch bids for Wall Street Journal

Were There Accounting Problems at New Century?

Posted on May 1, 2007 by Felix

Lynnley

Browning has a big (1,350-word) piece in today’s New York Times on something

known as "gain on sale accounting" in the subprime mortgage indusry.

Browning makes it clear that such accounting treatment is decidedly dodgy, and

she even mentions Enron.

To read Browning’s account, New Century Financial, and other subprime mortgage

originators, were booking future income as present earnings, were hiding losses,

and were manufacturing earnings out of thin air – all through the use

of gain-on-sale techniques.

But no one should read Browning’s account without reading Tanta’s

gloss on it. Tanta is a mortgage expert, and she gets increasingly puzzled by

assertions and contradictions in Browning’s piece. Eventually she concludes

that the real problem at New Century was not devious accounting at all: it was

simply the fact that the company didn’t have sufficient loan-loss reserves.

On the evidence only of these two pieces, I’m tempted to agree with Tanta rather

than Browning. On the other hand, Browning has clearly talked to experts who

think that there was an accounting problem at New Century. It’s possible that

there was indeed a problem, but that she just didn’t explain it very well. Maybe

the FT or WSJ will pick up the story and try to get to the bottom of it.

Posted in housing | Comments Off on Were There Accounting Problems at New Century?

How Not to Keep Your Job

Posted on May 1, 2007 by Felix

I spent my recent flight from LA to New York engrossed in Charlie

Wilson’s War, a rip-roaring book by George Crile about the CIA’s operations

in Afghanistan in the wake of the Soviet invasion there. Charlie Wilson reminds

me of no one so much as Alan Clark, the English politician

and diarist: both of them behaved atrociously but somehow got away with it through

being utterly up-front about their personal failings.

Randall Tobias is the opposite of Charlie Wilson: his peccadilloes

pale in comparison to Wilson’s, but his hypocrisy is far worse. Lawrence

MacDonald explains:

As the top U.S. official responsible for development, and the former head

of the multi-billion-dollar President’s Emergency Plan for AIDS Relief

(PEPFAR), Tobias was responsible for overseeing implementation of the "Anti-Prostitution

Pledge."

Under the pledge, organizations that receive USAID or PEPFAR funds must adopt

specific positions opposing prostitution. Health providers, humanitarian organizations,

and AIDS advocates have argued (for example, in a May 2005 letter to President

Bush signed by 200 groups) that the pledge impedes their efforts to win the

trust of those people who are most likely to contract and spread HIV.

According to Nandini Oomman, director of CGD’s HIV/AIDS Monitor, these

restrictions undermine HIV prevention efforts, by prohibiting organizations

that receive U.S. funds from providing services, such as condoms and HIV testing

and counseling, to women involved in sex work–precisely those women who need

these services the most. Worse, the pledge bars recipient NGOs from helping

such women using funds from other donors.

MacDonald does recognize that Tobias’s immediate resignation was not a foregone

conclusion, and says that he "looks like a hero" in comparison to

Paul Wolfowitz, who is stubbornly refusing to resign unless

and until he is cleared of all wrongdoing.

Wolfowitz, inerestingly, served in much the same role under George

W Bush as Alan Clark did under Margaret Thatcher.

If accused of wrongdoing, Clark would always be open and never be defensive.

Maybe Wolfowitz should have spent more time studying those diaries.

Posted in defenestrations, development, technocrats | Comments Off on How Not to Keep Your Job

Real Estate Datapoints of the Day

Posted on May 1, 2007 by Felix

Value,

in dollars per square foot, of the HSBC building in London’s Canary Wharf: $1,976

Value, in dollars per square

foot, of Rockefeller Center in Midtown Manhattan: $1,400

It’s true that the HSBC building is much newer, and is custom-designed for

the needs of a modern global bank. But still. It’s in Canary Wharf.

It’s worth noting that Norman Foster’s "erotic gherkin", a/k/a 30

St Mary Axe, sold

for £630 million, which works out at $2,512 for each

of its 500,000 square feet.

Yes, the strength of the pound makes such comparisons a little invidious. But

we econobloggers

like them all the same.

Posted in housing | Comments Off on Real Estate Datapoints of the Day

Department of Home Security

Posted on May 1, 2007 by Felix

How much money can companies spend on security for their executives? On Friday,

Michelle Leder

found that fashion company Guess was spending $158,000 a year on "home

security" for CEO Maurice Marciano. Today, MarketBeat

ups the ante:

Last month, Google disclosed compensation of $532,755 for personal security

for CEO Eric Schmidt, which made up most of his stated compensation. On Friday,

Amazon.com revealed that the company spent about $1.2 million for security

arrangments for Chairman and CEO Jeff Bezos, who received minimal pay.

I’d love to know what this money goes on: I have visions of the kind of security

systems that are always deviously circumvented in heist flicks. Do those things

actually exist in real life? And if so, are they owned by the likes of Marciano,

Schmidt, and Bezos?

Posted in pay | Comments Off on Department of Home Security

Hostile Bankers

Posted on May 1, 2007 by Felix

A loyal yet anonymous reader (his institution is almost certainly involved

in the ABN deal in one way or another) sends me more information on the subject

of hostile takeover bids in the banking industry. Is there, indeed, a banker

other than Fred Goodwin of RBS who goes in for such things?

Michel Pebereau of BNP made two hostile bids (for Paribas

and SocGen) at the same time, winning Paribas. Also, specifically with respect

to Fred Goodwin, he hasn’t ever made a hostile bid. He certainly takes the

credit for executing on NatWest, but in the first place, George Mathewson

was CEO at the time and in the second place, NatWest was already in play when

RBS made its bid, the initial hostile offer having been made by Peter

Birt of Bank of Scotland. (Birt, Mathewson and Goodwin have all since

been knighted).

Goodwin, it should be noted, is the only one of these men who remains a banking-industry

executive, although Pebereau remains chairman of BNP Paribas.

As far as the US banking system is concerned, I can’t see a hostile bid ever

happening – there are just too many regulators who would be too hard to

placate. But you never know.

Posted in banking | Comments Off on Hostile Bankers

Giving Muckraking a Good Name

Posted on April 30, 2007 by Felix

Don’t worry, this blog isn’t about to turn into Consumerist.

(Not that that would be such a bad thing, necessarily.) But this

footage of Chase leaving its customers’ information – names, account

numbers, social security numbers, loan applications, you name it – in

the trash outside its Manhattan branches is just too scary not to share. It’s

not impartial: the video comes from Chase

Trash, which is a blog run by the Service Employeees International Union.

So treat with as much of a pinch of salt as you think it deserves. But I’m shaken

by it, I must say.

(Via Gothamist)

Posted in banking | Comments Off on Giving Muckraking a Good Name

In Which I Envy Brad DeLong’s Lunch

Posted on April 30, 2007 by Felix

I always thought the center of the universe was the corner of Broadway and

Houston, in Manhattan. I was wrong. If you’re an economist, at least, the center

of the universe would seem to have been found at the corner

of College and Bancroft, in Berkeley, at noon Pacific Time today.

On the one hand, one aspires to being a part of lunchtime conversations such

as this

one; on the other hand, one would be so intimidated that one would probably

be far too scared to even open one’s mouth. Maybe there are reasons to study

economics after all.

"So if Britain with its structural trade surpluses could run up net

foreign assets equal to twenty months’ GDP by 1913, could the U.S. run up

a net foreign liability balance equal to twenty months’ GDP by 2023?"

"By symmetry, that would mean that the rest of the world would have to

play the role of pre-World War I Britain. Yes, it could happen."

"And somebody would have to play the role of pre-World War I Argentina.

Would that be the U.S?"

"Usually in international finance the role of Argentina is played by

Argentina."

Posted in economics | Comments Off on In Which I Envy Brad DeLong’s Lunch

Will a Carbon Tax Reduce Developing-Country Emissions?

Posted on April 30, 2007 by Felix

Greg

Mankiw reckons he knows what Larry

Summers’s Big Idea is: a carbon tax. The two of them are old Harvard buddies,

so I daresay Mankiw is right. I am a bit puzzled, though, given this, from Summers’s

column:

The most serious problem with the Kyoto framework is that it is unlikely

to generate substantial changes in developing country policies. As my Indian

hosts explained on a recent visit, developing country policymakers are not

likely to accept binding targets on their energy use or greenhouse gas emissions

that fall way short on a per-capita basis of emissions levels in the industrial

world.

Nor is it reasonable to expect them on the basis of dubious projections of

economic trends and future technological developments to commit to energy

use goals that fall short of patterns observed in the rich countries.

The truth about climate change policy is that developing countries are where

most of the future action has to be. They will account for 75 per cent of

the increase in emissions over the next quarter century and are now making

the infrastructure investments that will shape their future economies.

A carbon tax is a hard enough sell when it’s one country implementing it; an

international carbon tax would be a political non-starter. So how does Summers

reckon that a carbon tax would "generate substantial changes in developing

country policies"? I guess we’ll just have to wait and see.

Posted in climate change | Comments Off on Will a Carbon Tax Reduce Developing-Country Emissions?

David Lereah, Not Quite RIP

Posted on April 30, 2007 by Felix

So, farewell

then, David Lereah.

"Why the Real Estate Boom Will Not Bust".

That was your book.

"Dow 36,000" was another.

Sorry, that

was James Glassman.

In an ideal world, the National Association of Realtors (NAR) would have kicked

its chief economist overboard for losing all credibility with anybody. In reality,

I think that he’s actually taking a step up in the world: he’s becoming "chairman

and partner" of an unspecified new enterprise being started by NAR partner

Move Inc.

There’s never any justice.

(Via)

Posted in defenestrations, housing | Comments Off on David Lereah, Not Quite RIP

Finance Ministry vs Central Bank

Posted on April 30, 2007 by Felix

Central bank independence is all well and good. But even if a finance minister

has no control over his country’s central bank whatsoever, it’s still shocking

to see him criticize

the central bankers in public. Especially when the finance minister in question

is Agustín Carstens, minister of economy in Mexico and

former deputy managing director of the IMF.

Carstens has come out and said that Banxico’s rate hike last week was premature

– something which might well be true, but which is hardly going to reassure

foreign investors that Mexico’s fiscal-policy authorities are working hand-in-glove

with its monetary-policy authorities.

Carstens is a very good economist, and a very powerful man, but he, like David

Bonderman, might benefit from some PR coaching. Bob Rubin

never criticized Alan Greenspan, and Hank Paulson would

never criticize Ben Bernanke – not in public. This is

exactly the same.

Posted in technocrats | Comments Off on Finance Ministry vs Central Bank

Carlyle Group Tops Private Equity Table

Posted on April 30, 2007 by Felix

Did you know there was a magazine called Private Equity International? Of course

there is, and of course it’s making headlines with that favorite trope of all

magazines: a list. Of the world 50 largest private-equity companies. And the

winner is… Carlyle

Group! Applause, please for David Rubenstein and his co-founders:

finally they’ve managed to overtake Kohlberg Kravis Roberts, at least by one

metric.

I like the metric, actually: total funds raised over the past five years. Keeps

people on their toes, doesn’t let them coast along on money raised back in the

1980s. But really its’s a four-way tie for first place, with Goldman Sachs and

Blackstone Group joining the list of shops who’ve raised $30 billion, give or

take, since 2002.

Just remember, on a 2-and-20 basis, $30 billion of assets under management

gives you $600 million a year before you make a single penny in profit. If you

return 40% a year, as some of these shops do, then your income rises to $3 billion.

Per year. Mostly taxed at the 15% capital gains rate. Nice work if you can get

it.

Posted in private equity | Comments Off on Carlyle Group Tops Private Equity Table

Ken Griffin vs John D Rockefeller

Posted on April 30, 2007 by Felix

I’m not sure what to make of Andrew Samwick’s defense

of Kenneth Griffin, against the deprecations

of Paul Krugman. Krugman’s point is that Griffin makes more,

as a multiple of average earnings, than even John D Rockefeller

made in 1894. Samwick’s defense is that Griffin is not a monopolist, and is

"confident, contrarian, and accurate". He concludes:

I spend a lot of time around college students. I spend a lot of my energy

trying to get them to display those three characteristics. Krugman seems to

think that one "Kenneth Griffin" is overvalued at 4.5 "John

D. Rockefellers." On the contrary, I think it’s a buy.

I’m not sure that Krugman considers Griffin overvalued, per se. It’s just that

if you’re making over a billion dollars a year, you can certainly afford to

pay more in the way of taxes than someone scraping by on a few hundred thousand.

In reality, however, Griffin pays less in taxes than the upper-middle

classes, not more. In other words, the question isn’t how smart or valuable

Griffin is – it’s whether society has any interest in him keeping more

of his income than people much poorer than himself.

I’d also like to point out that if you compare the net worth of Griffin

and Rockefeller, I daresay that Rockefeller would still come out comfortably

on top. Income is a lot, but it isn’t everything.

Posted in pay | Comments Off on Ken Griffin vs John D Rockefeller

BofA Threatens to Sue ABN for Three Gazillion Dollars

Posted on April 30, 2007 by Felix

If Barclays’ John Varley does end up winning ABN Amro, he

won’t be able to say that he won the bank fair and square. His poison pill just

got even more poisonous: Patrick

Hosking in London reports today that Bank of America will sue ABN Amro for

$220 billion if it doesn’t get Chicago’s LaSalle bank.

Of course, that number is so huge as to be meaningless, although Dana

Cimilluca helpfully tells us it’s "the equivalent of the gross domestic

product of Greece". Has BofA hired Roy

Pearson as a lawyer?

Posted in banking | Comments Off on BofA Threatens to Sue ABN for Three Gazillion Dollars