Ben Walsh

Bank of America has joined Goldman Sachs in making a new commitment to clean energy. BofA is making a $50 billion dollar 10-year plan, which is $10 billion more than Goldman over the same time frame, so it wins the headline arms race. But BofA’s announcement shares the same faults as Goldman’s. (Full disclosure: I used to work in the Goldman’s Environmental Markets Group, which in part set and tracked the firm’s green initiatives).

Both announcements are deeply depressing. These dollar figures are basically the amount of financing and investment the banks will offer to businesses and consumers to do things like expand wind and solar energy production and increase energy efficiency. It you listen to the story banks tell about what they are great at — raising capital, allocating risk, etc. —  they should be diving into this market.

But instead of ambitious plans, we get very small amounts of good wrapped up in press releases aimed at grabbing headlines and generating glossy sustainability reports. It’s pretty pathetic, but not entirely surprising. Since the financial crisis, banks have largely failed in their efforts to prove their social utility; climate change is no different.

Just how minute is BofA’s $50 billion decade-long commitment (aka $5 billion a year) in the context of their other businesses? In 2011, they extended $557 billion in credit and raised $644 billion in capital for clients. Of that $1,201 billion, $5 billion is just 0.4%. That’s just not enough. The International Energy Agency estimates that the global economy needs $36 trillion in additional green investment by 2050 (just under $1 trillion a year). 0.4% of capital raised and credit extended certainly is not a number BofA should be praised for.

There’s also the small problem of BofA’s large role in financing US coal companies. Topping the US coal-financing league table is directly at odds with the intent of their environmental commitment. They do have a corporate policy on coal, but it’s phrased to mean as little as possible and restrict lending to only a few offenders. BofA will “phase out financing of companies whose predominant method of extracting coal is through mountain top removal”. [emphasis added] They also strangely say that mountaintop removal mining can be done with minimal environmental impact. I don’t know anyone not paid by the coal industry who’s ever come to that conclusion.

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Heading into Jamie Dimon's testimony before the Senate Banking Committee, Andrew Ross Sorkin, Bloomberg View, Occupy the SEC and many others offered up the questions they would ask JPMorgan's chairman and CEO. But this was, after all, the Senate Banking Committee, whose members are no strangers to JPMorgan's campaign donations.

The Senators by and large met our low expectations, delivering performances that Brian Beutler said "turned the cross-examination into a coronation, and exposed the extent to which elected officials still feel compelled to genuflect to powerful financial interests". Dimon decidedly got the best of his questioners, so much so that David Weidner said he came "off too much like a know-it-all. His inner confidence and cockiness have come to the surface".

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This weekend Spain requested the bailout it had previously denied it needed – here's the official statement (PDF). The Spanish government has formed the Fund for Orderly Bank Restructuring (FROB), which will accept loans of up to $125 billion from the euro zone and inject needed capital into its banks. The final details of the aid, however, will not be set until the European Commission conducts its own assessment of Spanish banks' financial health.

Markets shrugged at the news. "The hourglass … has been turned over, but each time it's happened in Europe over the past few years there seems to be less and less sand in it," as one analyst put it.

To find the bright spots in last week’s terrible jobs report, you had to look pretty hard. Joe Weisenthal thinks he’s found it, again, in healthcare employment: of the 69,000 jobs created in May, over 30,000 were in healthcare. And healthcare hasn’t seen a negative employment month since 2007. Long term, Joe is even more bullish, calling the chart below of healthcare employment since 1990 a “thing of beauty”.

America, afterall, is “ageing. This is the industry of the future!” [emphasis original] I’ve always found this triumphalism deeply dystopic and morbid: don’t worry, in the economy of the future, we’ll all be sick and/or doctors. What’s not to like!

We should care about jobs and we should care about health outcomes. But we should only care about healthcare jobs if they improve health outcomes or the economy. And a new study from the New England Journal of Medicine says they don’t and that rising healthcare employment hurts other sectors of the economy:

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The Center on Budget and Policy Priorities has a report out concluding that talk of a fiscal cliff is misguided and counterproductive. The CBPP prefers the idea of a fiscal slope: that's more accurate, they say, because the "economy will not immediately fall off a cliff into recession the first week in January if the policy changes mandated by current law take effect".

The aim of this well-intentioned re-characterization is to discourage the idea that any action, regardless of long-term effects, is preferable to the disastrous Jan 2 consequences that inaction would bring. Still, cliff or slope, the medium-term consequences are the same.

Corporate America is sitting on massive amounts of cash. But companies are not investing that capital back into their businesses in search of growth. Instead, yields on stocks continue to climb at a time when America needs jobs not dividends.

So why aren’t companies investing for growth? One answer ringing from the C-Suites of corporate America (and their Washington megaphone, the Business Roundtable) is uncertainty. Specifically, uncertainty brought on by government actions (regulation) and inaction (debt ceiling and tax expiration procrastination).

Verizon’s CEO Ivan Seidenberg has been on the warpath against gummit-caused uncertainty since 2010, saying it makes it “harder to raise capital and create new businesses”. Cisco’s John Chambers agrees with him, as does FedEx’s Fred Smith and AT&T’s Randal Stephenson. The word uncertainty appears 10 times, each negative, in the Business Roundtable’s economic plan, “A CEO plan for jobs and growth”.

Dewey & LeBoeuf filed for bankruptcy earlier this week and and now has the ignominious distinction of being the largest-ever US law firm to go under. The firm is now moving through the bankruptcy process and creditors’ losses are being tallied. Which is to say that the bankruptcy of Dewey & LeBoeuf is proceeding pretty much as bankruptcies tend to.

That’s why an article with the headline “How Dewey Is Like Lehman” by the usually on-point Stephen Lubben makes such little sense. Lubben wasn’t the only one to make the comparison: Marketplace got into the act too and James Stewart put in the early contribution, saying Dewey’s management was even more reckless than Lehman’s. The similarities to Lehman that they cite can be boiled down to bankruptcy and excessive risk taking.

High leverage, large guaranteed pay contracts for partners and falling revenue killed off Dewey. Sure, Dewey’s decision to lever up was silly and poor management, but that doesn’t make its bankruptcy more comparable to that of Lehman. In the vast catalog of financial failures, a combination of high leverage, high fixed costs and falling revenue isn’t really a distinguishing feature.

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Remember when all we had to worry about was an oversaturation of Facebook IPO coverage?

Today's jobs report was decidedly bad: The US added just 69,000 jobs in May, leaving unemployment unchanged at 8.2% and employment gains in both March and April revised down. The ranks of the long-term unemployed, those without a job for 27 weeks or more, swelled by 300,000.

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Sheila Bair, never too shy to make modest proposals, thinks that JPMorgan Chase should voluntarily split itself up:

[The] bank is worth more in smaller, easier-to-manage pieces. Let's face it, making a competitive return on equity is going to become even harder for megabanks as their capital requirements go up, their trading and derivatives activities are reined in, and their cost of borrowing rises as bond investors recognize that too-big-too-fail is over.

With its third-ever tweet, Goldman Sachs announced its intention to finance or invest $40 billion in clean energy over the next decade (also known as $4 billion a year for 10 years). But you won’t hear Goldman say $4 billion a year. In an attempt to generate impressive headlines, Goldman decided to go with a number that looked big and settled on $40 billion.

Put that commitment in the context of Goldman’s overall investing and lending activity and its lack of heft is obvious. In 2011, Goldman Sachs did $258 billion in financing and made investments worth another $4.4 billion. Goldman’s $4 billion clean energy commitment is just 1.5% of this $262 billion total. And that number drops to 1.3% if you compare $4 billion to Goldman’s 2010 financing and investing activity. If the overall levels investing and financing grow, as I’m sure Goldman is planning for, the clean energy commitment becomes even more irrelevant compared to the firm’s comparable mainline businesses.

Things don’t look much better in the context of the overall clean energy market. Compare Goldman’s commitment to the $260 billion market for clean energy investing and financing in 2011 and you get get a market share of 1.5%. I can’t imagine Goldman ever tolerating, let alone celebrating, 1.5% market share in equity underwriting, M&A or any other business it was serious about.