By Antony Currie The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Nasdaq OMX is rightly coming in for a bashing after a systems howler on its U.S. exchange left Facebook’s stock trading in the dark for much of its public market debut on Friday. Chief Executive Bob Greifeld has already fessed up that the stock exchange was at fault. But the blunder has a limited shelf life as an explanation for Facebook’s IPO flop.

The software snafu dinged confidence in the deal last week. It wasn’t just that Nasdaq postponed printing the first trade for almost half an hour – that in itself briefly sent the stock down to its original $38 offer price after initially opening at $42 a share. But the exchange’s systems then failed to confirm trades or cancellations until almost 2 p.m. (1800 GMT), leaving underwriters and investors in the third-largest debut in American history resorting to pad and paper.

Once Nasdaq’s computers got back up to speed, many buyers and sellers found the trades they thought they’d placed didn’t match up with the shares on their books. Knight Capital, for example, one of the largest market makers in U.S. stocks, discovered the net short position it assumed it had built was in fact a larger net long position, as chief executive Thomas Joyce told CNBC. He dubbed the fiasco “the worst performance by an exchange on an IPO, ever.”

All of this leaves Nasdaq on the hook financially – Joyce reckoned $100 million would not be a stretch. And the after-effects were still being felt on Monday as the exchange tried to clean up the mess. It’s hard to imagine Greifeld won’t make heads roll around Nasdaq headquarters. But a technology glitch, even one as painfully embarrassing as this, shouldn’t keep a good, or bad, story down for long.

Facebook already looked expensive at $38 a share – a March Breakingviews analysis suggested anything above $28 a share was a stretch. With the stock now a tenth below its actual offering price, the Facebook IPO officially qualifies as a bona-fide flop. Nasdaq may have helped make it so – but Facebook’s worth will soon stand, or fall, on its own.

By Antony Currie

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

JPMorgan’s Ahab has met his Moby Dick. Chief Executive Jamie Dimon has toiled at length to build a bank strong enough to withstand the greatest of storms. The $2 billion hedging hit the bank disclosed late on Thursday will put JPMorgan to the test. Its capital buffers may be safe for now, but the ramifications are apt to be broader.

The losses come from the bank’s chief investment office. That’s part of the core treasury function at JPMorgan, responsible for managing the entire firm’s balance sheet. That it was being “poorly monitored,” as Dimon conceded, is even more worrying than the discovery of a random rogue trader.

The CIO has made news of late because of reports that one of its overseas traders, Bruno Iksil, was taking such large positions in a credit index to hedge JPMorgan’s risk that he was distorting the market. Rivals labeled him the London whale. Dimon declined to discuss specifics.

But just last month, on the bank’s first-quarter earnings call, executives defended the CIO. Finance chief Doug Braunstein said the bank was “very comfortable” with its positions. Now, Dimon admits a revised hedging strategy was “flawed,” there was “sloppiness” and that “egregious mistakes” were made.

Investors have come to expect such disarming honesty from Dimon. But the mess is reminiscent of similar failings at JPMorgan before his time. In fall 2001, the bank was adamant that its overall exposure to Enron was around $900 million, before later revealing the amount was almost triple that figure. A year later, executives hosted an emergency call with investors – like the one hastily assembled on Thursday afternoon – to announce that all its trading desks had lost money even though all had remained within their risk limits.

By Antony Currie The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Lazard shareholders are getting two businesses for the price of one. The first-quarter results unveiled on Friday confirm what has become increasingly evident: asset management is its quiet powerhouse. Yet investors either give Lazard virtually no credit for it – or else negatively assess its high-profile advisory and M&A business. A Breakingviews sum-of-the-parts analysis suggests Lazard may be worth double its current $3.5 billion market value.

Assume both units grow by 10 percent this year and next. That would still leave the money-managing arm with slightly less revenue than banking, though it’s also cheaper to run. The pre-tax operating margin of about 40 percent last year was twice what the bankers generated. If that remains the case and the division’s share of the corporate costs is 10 percent of revenue by the end of next year, as Lazard expects, it should earn $340 million before tax in 2013.

A similar breakdown of investment banking yields future pre-tax income of $240 million – assuming its pre-tax margin improves to somewhere close to 30 percent, as Chief Executive Ken Jacobs hopes.

Applying the firm’s current 25 percent tax rate and the 16 times estimated 2013 earnings multiple at which rival Greenhill trades makes Lazard’s advisory business worth $2.9 billion. Valuing asset management is a little tougher, as it doesn’t have quite as comparable a peer. But using a multiple of 16, just shy of the one ascribed market leaders Affiliated and T. Rowe Price, would make Lazard’s worth $4.1 billion. Combined, that would put the firm’s value at $7 billion.

It’s not obvious Lazard can slash expenses to the extent it wants or what that might do to its tax bill. But the chasm between the market and imputed values implies either investor indifference or a poor job by Lazard making its case.

The problem isn’t lost on Jacobs. He’s releasing far more information in his letter to shareholders this year, partly to address the valuation gap. But if he isn’t able to persuade them, Jacobs might find himself needing to heed the same advice his bankers would give any other client facing a similar dilemma – and consider breaking up Lazard.

By Antony Currie The author is a Reuters Breakingviews columnist. The opinions epxressed are his own. For a firm like Goldman Sachs that is so used to standing out from the crowd, the prospect of being in the middle of the pack must grate beyond belief. But after a spate of governance and image problems, executives at the investment bank should relish its first-quarter results getting lost in the crowd.

Goldman managed an annualized return on equity of 12.2 percent. That’s bang in line with universal banking rivals JPMorgan and Wells Fargo – and with what Citi’s core business appears to have achieved. But its first quarter fell short of JPMorgan’s investment bank, which, after stripping out the accounting hit on its own debt, cranked out a 23 percent ROE.

The comparison isn’t perfect. JPMorgan’s unit doesn’t carry the costs of the entire group. But other measures support the differences. Based on the imprecise value-at-risk metric, Goldman decreased its overall risk appetite to start the year while JPMorgan’s increased slightly. And with its larger balance sheet and lending relationships, Jamie Dimon’s bank may have benefited more from the sharp uptick in trading in interest-rate-sensitive businesses.

Goldman’s prudent approach probably translated into lower revenue than traders might otherwise have generated. But the result also could offset some concerns that the bank led by Lloyd Blankfein treats clients like muppets, an accusation leveled by a mid-level employee in a stinging and public letter of resignation.

Governments, which haven’t always been happy with Goldman’s actions, should at least be pleased with the latest figures. A third of the bank’s earnings were allocated to global state coffers, far more than its 18.7 percent tax rate in the previous quarter. Compensation, at 44 percent of revenue, is still higher than some peers. That arguably shortchanges shareholders – but Goldman’s board, which recently flouted good governance with its choice of a lead director – also opted to hand them a greater share of profit by raising the dividend by almost a third.

This not-too-hot, not-too cold earnings dish is decidedly average. But the lack of much, if anything, to pick on also must provide a welcome respite for Goldman.

By Antony Currie The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Step aside Jamie Dimon. The JPMorgan chief can usually be relied on for a feisty and fresh letter to his bank’s shareholders – one that has come to be more closely watched than others written by his peers. Even Warren Buffett has showered praise on Dimon’s epistles. This year, though, his efforts fall a bit flat. That clears the way for the pen of Robert Wilmers. The boss of regional bank M&T has a take on the state of financial markets that makes it the must-read missive of the season.

That doesn’t mean investors should crumple or disregard Dimon’s letter. His 38-page opus covers plenty of important ground. The sections explaining market-making and share buybacks are informative – but aren’t necessarily new either. In fact, many of Dimon’s musings rehash old ground, including his gripes about the Durbin Amendment, Basel III being anti-American and other regulation he has attacked in the past.

For those who like Dimon’s traditional brand of fire, however, Wilmers is the place to turn in 2012. What makes the M&T chief’s 22-page dispatch stand out is a thoughtful and at times blunt assessment of the industry – and beyond.

For one, Wilmers offers a sound defense of U.S. regional banks that will strike a chord in the era of too big to fail. He’s no fan of Wall Street, deriding almost three decades of “a pattern of investing in areas where they possessed little knowledge,” appearing to “seek dominance at the expense of leadership” and stating that they “continue to distort our economy.” He even dug up some provocative figures to support his case. Take this one: the top six banks, presumably JPMorgan included, have been fined $47.6 billion for at least 207 transgressions since 2002.

The letter does at times read like a litany of complaints. Accounting, rating agencies, government-sponsored enterprises and regulators all come in for his scorn. But it all manages to come together as a well-made argument that greed and incompetence have undermined both trust and decent leadership in the financial sector. Dimon might not agree with all the points Wilmers makes. But he’ll be hard-pressed to find fault with the tone.

By Antony Currie

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Wall Street shouldn’t get too excited about the latest recovery. Helped in part by a more stable Europe, investment banks have started 2012 far better than they ended 2011. They probably raked in more revenue in all areas but M&A and buying and selling equities in the first three months of the year. But false dawns have marked each of the past two years. And even if this comeback sticks, most firms will need considerably more trading and deal-making to earn decent returns.

That isn’t to say the recent improvement can be sniffed at. Fees in the first quarter from selling new bond deals shot up a whopping 87 percent from the end of the year, according to Thomson Reuters data, as investors piled back into riskier securities like high-yield debt. Improving markets also pumped up asset prices, meaning banks should – hedges permitting – record some gains on their balance sheets.

This effect in turn spurred greater fixed-income trading revenue – average daily trading volume in U.S. high-grade debt jumped 40 percent, according to Trace data. Even compensation for arranging equity deals improved, rising 27 percent, despite a lackluster market for initial public offerings.

Everything isn’t rosy, however. Fees from completed mergers fell by a quarter, U.S. equity trading volume was 8 percent lower and banks will again have to take annoying hits to revenue because of improvements in their own liabilities. Even allowing for these, net income should be much improved. Jefferies, for example, posted a 60 percent increase in earnings on a one-third jump in revenue for the three months to February.

But it will still leave most banks almost certainly wallowing in mediocrity. Jefferies eked out only a 9.5 percent return on equity, probably below its cost of capital. And Goldman Sachs may generate a mere 11 percent return even though FICC revenue could almost treble to $3.7 billion, analysts at Credit Suisse estimate.

By Antony Currie

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Goldman Sachs seems determined to ride roughshod over its shareholders. It’s true the bank’s stock is close to nudging back above book value – a sign that owners are getting more comfortable with the balance sheet and earnings power. But with its new appointment to lead director, Goldman’s management and board are showing a startling disregard for decent corporate governance.

Just last week the firm persuaded the American Federation of State, County and Municipal Employees to withdraw a proposed shareholder vote next month to separate the roles of chairman and chief executive. But the bank did so simply by changing the title of its top board member from presiding director to lead director, maybe throwing in a few extra duties for good measure.

That stitch-up is now being followed by a smackdown. Goldman is giving the job to the wrong guy. This was the ideal chance to appoint someone unquestionably independent with a reputation for asking tough questions. James Schiro doesn’t fit the bill.

For starters, he has already been a Goldman director since 2009, so it’s pretty hard to call him wholly independent. Given the circumstances, new blood would have been preferable.

Second, while Schiro was chief executive of PricewaterhouseCoopers between 1998 and 2002, the Securities and Exchange Commission discovered all sorts of breaches of auditor independence rules, including one where Schiro himself owned stock in a company PwC audited. Schiro was never charged with wrongdoing, but it does leave his judgment in question.

By Antony Currie

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

How hard is it to put a price on mac ’n’ cheese? Clearly, it was tougher than Credit Suisse and JPMorgan, the underwriters on the initial public offering of Annie’s, bargained for. Shares of the humble pasta and organic food maker have doubled since trading opened on Wednesday. And that’s not the only U.S. debut investors are devouring. Online advertising firm Millennial Media stock also nearly doubled when it launched on Thursday. More deals are teed up than the market has seen in a single week for over a decade. But there’s still reason for the enthusiasm to be curbed.

All the froth is more a sign of recovery than exuberance. After all, the first quarter has been a game of two halves. Many deals struggled early. In February, for example, 69 percent of IPOs priced below the range bankers were pitching to investors, according to Bank of America Merrill Lynch. Some 10 deals have been withdrawn so far in 2012, too, compared with just six in the same period a year ago.

March has been more buoyant, thanks to encouraging news on the U.S. economy, bank stress tests and agreement on the Greek bailout. Nevertheless the IPO market’s resurgence is still in its early days. For one thing, money has actually been flowing out of equity mutual funds of late. And most new listings have been pretty small. Having bumped up the price twice this week, Annie’s sold just $95 million of stock.

Only three companies this year have sold more than $300 million in shares – and all of those have been over the past two weeks. Car parts manufacturer Allison Transmission was the largest, at a relatively modest $690 million. That’s a far cry from the $5 billion or more that Facebook aims to sell in May. The feverish pitch around the social networking giant is creating its own unique ecosystem of demand. But the extra time to stabilize the recovering market for new listings should also help the company and its advisers serve up a more sensibly valued IPO.

By Antoy Currie The author is a Reuters Breakingviews columnist. The opinions expressed are his own. The botched BATS initial public offering could be disastrous for the upstart electronic exchange. It scrapped its market debut on Friday after shares crashed from their $16 opening to just 2 cents after a “serious technical failure.” It’s a potential killer for the company, which is already the focus of investigations into high-frequency trading. The good news is that the stumble didn’t catalyze a broader market meltdown.

That at least offers some reassurance that the infrastructure of U.S. equity markets is far more robust than it was at the time of the so-called Flash Crash of May 2010. Markets tanked 9 percent in seconds then, after a few random trades kicked off a tailspin across the many electronic trading platforms and exchanges handling U.S stocks.

Friday’s flop had the latent power to create a similar fiasco. BATS accounts for some 11 percent of U.S. equity trading volume, much of it from firms using supercomputers moving in milliseconds. Instead, the damage was limited. There was the hit to Apple, the $600 billion powerhouse, whose shares were briefly halted after dipping 9 percent. The erroneous trades were swiftly nullified before the iPad maker’s stock was back up and running.

It’s a welcome sign that improved circuit breakers installed after the Flash Crash appear to be working well. That won’t, however, comfort BATS employees or investors, including the IPO’s underwriters Morgan Stanley, Citigroup and Credit Suisse.

Wall Street traders, however, can be pretty agnostic about where to send their orders. And BATS is hardly the first exchange to have technological issues – though greater scrutiny of, or even restrictions to, high-frequency trading may harm BATS more than others.