Emily Chasan

Ever wonder how General Motors is holding onto its top talent? 

After a traumatic bankruptcy and series of federal bailouts, the company still owes billions of dollars to the U.S. and Canadian governments. It lost $1.2 billion in its latest quarter, and only sees a slight uptick in auto sales next year.    

The days of banner-year profits and bonuses must seem far off for GM's executives and finance staff.  GM's Chairman has already said pay caps imposed on companies by the U.S. government's pay czar make it tough to hire executives.

While other job opportunities are obviously limited in Detroit, and they may have nowhere better to go in the industry,  the company's plans for a 2010 IPO has emerged as a key staff retention tool, one of its top executives said on Tuesday.

In comments to the Financial Executives International Current Financial Reporting Issues conference in New York, Nick Cyprus, vice president, controller and chief accounting officer at GM said:

"I have a tool that my peers don't have. We have an IPO coming up in the next half-a-year to a year or whatever it takes. That's a great tool, too. Getting the experience of taking General Motors public again is not only a great tool from an experience perspective and resume builder, but it's also a great experience in that if things work out well there are potential wealth opportunities. In essence, the taxpayers get paid back and people who have delivered get an opportunity to make some money."

GM  is planning to arrange a revolving line of credit in preparation for an eventual IPO, which would probably be one of the biggest in 2010 if it is able to keep up with its time schedule.

If you were a GM employee, or an investor for that matter, how excited would you be about this IPO?

 The idea that financial firms whose collapse could create trigger broad economic problems should come up with their own living wills has been gaining traction lately.

After the confused attempt to bailout or save Lehman Brothers, Bear Stearns and AIG in 2008, some regulators have been suggesting that banks and important financial institutions plan for their own demise.

A senior Canadian finance official said on Wednesday that the Group of Twenty (G20) are thinking about the idea as a way to avoid financial meltdowns.

 Even one of the top financial advisors unwinding Lehman Brothers' has said a living will would have helped.

But is it the banks or the regulators that oversee them who should come up with these living wills? Should they come up with them together? Who would have better incentives to prevent systemic issues?

The issue was discussed on Wednesday at a Practising Law Institute conference in New York by  H. Rodgin Cohen, a mergers & acquisitions lawyer at Sullivan & Cromwell in New York, who personally worked on deals like JPMorgan-Bear Stearns, Barclays-Lehman, and Wells Fargo-Wachovia last year.  Here is what Cohen told the conference:    

"I do think we have it somewhat backwards on all this emphasis on the living wills for these institutions. Actually the living will isn’t the institution’s responsibility. It is truly surprising to me that sitting in a locked desk somewhere there isn’t a living will which the relevant supervisor has for each institution. Clearly that did not exist last year, and hopefully we have it today. "

So who should come up with these "living wills"? Banks or Regulators or both?

U.S. Securities regulators on Thursday sued a well-connected Kuwaiti financier, saying he reaped millions in suspicious profits after false takeover reports briefly sent shares of Harman International Industries soaring this week.

Reuters reporter Ransdell Pierson was in the office working the Sunday shift when he received a fax with the purported takeover offer.  Unable to verify the authenticity of the fax, Reuters did not publish the story.  Here is Ransdell's first person account of what happened, and a copy of the fax. Would you have questioned its veracity?

Ransdell Pierson:

I was scouring newspapers on a Sunday shift in the Reuters New York bureau and waiting for news about distressed lender CIT Group, when the phone finally rang and broke my reverie. "Newsroom," I said, and the caller replied, "Your Jeddah bureau is closed today. Can I send you a fax?" The male caller, who I imagined to be a middle-aged office aide frustrated by the thankless chore of delivering his fax, said it was a press release about a deal. Something about one company buying another for about $3 billion.
"If it's such a big transaction, shouldn't this news be coming over the PRNewswire or BusinessWire?" I asked him. He explained that it was the weekend, so faxing a press release was the best route.
I gave him a fax number and he called back, irritated the document hadn't gone through. I gave him another fax number and he soon called back again, more irritated than before. So I gave him the number of a third Reuters fax machine, but told him that it needed to include contact information for all the parties. "Otherwise, we can't authenticate it." "OK, you'll have it," he replied.

But when the single-sheet document arrived seconds later, it was bereft of any contact info.
Topped by a legitimate-looking APG logo [standing for Arabian Peninsula Group] , it described an offer by the group to buy U.S. stereo equipment maker Harman International Industries. It was plausibly well written, so I did not dismiss it out of hand. But I was skeptical.

Finding no references to the Arabian group in the Reuters databases or Google, and unable to reach any Harman officials for verification, I was glad I hadn't sent any headlines out about the "deal" on the Reuters wire.

I followed up by calling my editor at home and telling him about the calls, and the fax. He said the 100 percent premium for Harman, in this economy, seemed outlandish. "I'm sure it's a hoax."
Even so, the last thing I did that night, after going home, was to do one last Google search -- to see if any other news organizations had carried the "news." The headline from the press release did appear on one or two websites, but not on any major news organizations. I slept well.

Chrysler LLC, having sold off all its best assets to the "New Chrysler" owned by Fiat, its union and U.S. and Canadian governments, is now going by a new name in bankruptcy court: Old Carco LLC.

On court dockets, the company is now referred to Old Carco LLC (f/k/a Chrysler LLC). The name, while not exactly subtle, refers to the eight plants and various old obligations the new company didn't want and decided to leave in bankruptcy. Creditors of the Old Chrysler are not expected to recover much from those assets and some even said in court last month that they assumed those assets have "no value."

It's quite typical in bankruptcy for companies to change their name once they sell their assets. For example Department store Boscov's became BSCV Inc and retailer Sharper Image Corp became TSIC Inc.

 But now that "Old Carco" is taken, we're taking suggestions. If General Motors successfully sells itself in bankruptcy court later this month,  what should the "Old GM" be called?

Reuters' Emily Chasan will be sending live updates from the Chrysler sale hearing in U.S. Bankruptcy Court on Friday starting at 9 a.m. Read her updates on DealZone or follow the DealZone Twitter account.

Opponents seeking to slow down Chrysler's blitz through bankruptcy court received unexpected support for their argument on Wednesday: Chrysler's lead attorneys. 
    An email that turned up during discovery showed that Jones Day attorneys tried to discourage the U.S. government from setting a June 15 deadline for completing a sale of most of the automaker's assets to a group led by Fiat.
    A lawyer for a group of Indiana pension funds, which oppose the sale, read the email in court which showed Jones Day attorneys said the tight schedule would undermine the credibility of their case, called the time frame a mistake and said it would "stuff the judge" by forcing such a rapid hearing schedule.
    "The debtor lost that one," said the Indiana fund's attorney, Glenn Kurtz of White and Case, referring to Jones Day recommendation regarding the deadline.
    Judge Arthur Gonzalez overruled Jones Day attorneys who objected to entering the email, which the U.S. Treasury released during discovery, because it was not meant to be public and tapped into Chrysler's legal strategy.

-By Tom Hals and Emily Chasan

The U.S. Securities and Exchange Commission has proposed about a dozen different restrictions on short sellers in the past few days, including an outright ban for financial stocks, but it hasn't replaced the primary restriction on short sellers that was in place for most of the century.

The "uptick rule" or "tick test" required short sellers to sell at a price above the last price paid for a stock, or at the price of the stock's last trade if it was higher than the previous price. The rule had been in effect since 1938, but the SEC removed the rule last year, on July 6, 2007, after saying it was "obsolete." 

The SEC studied its removal, running a pilot program on 1,000 stocks starting in May 2005 through April 2006, a year when the bull market was just getting going and the Standard & Poor's 500 index rose about 13 percent on its way to record highs.  Now that the S&P is down more than 14 percent since the beginning of this year,  getting rid of the rule has been blamed for increased volatility, and calls for its return could get louder as the process of market re-regulation gathers pace.

"The SEC did one of the dumb things that has been done to hurt this market, doing away with the uptick rule," said Don Hodges, president of Hodges Capital Management.  

The uptick rule was removed just as subprime mortgages started their meltdown in August last year, which would have been a great time for investors to get short. They did, and short interest has risen to record highs this year.  

So the remaining question then  is, did the uptick rule really do anything? Check out this chart of nonblock money flow for listed U.S. stocks.

It shows stocks purchased at higher prices (upticks) versus stocks purchased at lower prices (downticks)  for the last two years. That big switch in the middle toward downticks hit around July 6, 2007.

These new short selling restrictions are much more complicated, and haven't been studied. Maybe it would have been just as easy for the SEC to bring back the uptick rule.

-By Emily Chasan and Mark McSherry

The market for scandal-ridden finance merchandise keeps getting pricier.

Among the littany of Bear Stearns golf balls, teddy bears, and tote bags on eBay, one of the top price getters is a holiday card signed by recently indicted former Bear Stearns hedge fund manager Ralph Cioffi, with the bidding now at $81.

Cioffi, was arrested and arraigned on charges of conspiracy and securities fraud last week after a federal criminal probe into the collapse of two funds he oversaw.

The disintegration of Cioffi's funds helped kick off the credit crisis last summer, but we're stumped at what's behind the high bid for the holiday card.

The eBay bidders seem to find it even more appealing than the business card of Samuel Israel III, the fugitive Bayou Group hedge fund manager who engineered the $2 trillion hedge fund industry's most brazen and long-running fraud and most recently faked his suicide. Israel's card sold for just $61 last week.

So how do you think Cioffi's card became more valuable Sam Israel's?

NEW YORK - While  not exactly the epic Star Wars battle between Darth Vader and Luke Skywalker, the heated contest for the Democratic nomination for U.S. president is spawning its own cadre of action figures that can debate right in your living room.

Novelty action-figure companies are scrambling to get ready for the November election and the figures are already starting to pop up on campaign trails.

This week a supporter handed presumptive Republican nominee Sen. John McCain a Hillary Clinton figure at a campaign rally in Pennsylvania. According to The Lighter Side Co., which ships the figure, she is wearing pearls, a 3-piece suit, and will dance to a modified version of "My Country 'Tis of Thee."

Novelty gag gifts like this are popular with U.S. college students, their makers say, so there should be no surprise that Sen. Barack Obama figures are seeing a spike in popularity.

"He makes a good action figure," said Jason Feinberg of Jailbreaktoys.com, which will begin taking orders for its Obama figure (right) next month. "He has a little bit of the superhero thing that's associated with action figures -- the slender build, a hopeful message," Feinberg said.

For those hoping Clinton and Obama will work out their differences,  Herobuilders.com offers "Obama and Hillary Dream Team" action figures (below).  And if you want to use the action figures as an informal polling device, individual Obama figure sales have been outpacing Hillary sales for the past three months,  according to Herobuilders.com President Emil Vicale.

"We typically know what's going to happen in advance,"  said Vicale, whose site will start shipping a plush "Obamakinz" doll next week as well. "Last time we pretty much had to give away the (John) Kerry action figures whenever we sold a (George W. ) Bush figurine." 

While a Hillary pet chew toy and nutcracker have also been floating around this year, oddly, we couldn't find any action figures for McCain, a former Navy pilot and prisoner of war in Vietnam.  Not to worry though, the senator from Arizona does have a mask and bobblehead doll coming soon. 

Click here for more Reuters 2008 campaign coverage. 

Photo credit: Reuters/Tim Shaffer (Sen. John McCain hands a Hillary Clinton doll that was given to him by a supporter to an aide during a town meeting event at the Springfield Country Club in Springfield, Pennsylvania, March 14, 2008.)

In a race where every vote for the Democratic nomination for president counts, Hillary Clinton lost one on Wednesday when New York Gov. Eliot Spitzer resigned amid media reports linking him to a prostitution ring.

Spitzer, who The New York Times said was caught on a federal wiretap arranging to meet a prostitute at a Washington hotel last month, was a superdelegate committed to the senator from New York.

Each Democratic governor is given superdelegate status automatically, meaning they can make their own choices about which candidate to support at the Democratic National Convention in August.

But the status is awarded to the governor, not the individual who holds the post. The Democratic National Committee said earlier this week that Spitzer would no longer serve as a superdelegate if he stepped down.

Lieutenant Gov. David Paterson will replace Spitzer as governor on Monday, but he already holds superdelegate status as a member-at-large. Paterson, who spoke at the Democratic National Convention in 2004, is also committed to Clinton, but he only gets one vote.

Maybe the real question is: Will one vote still matter come August?

Photo credit: Reuters/Mike Segar. Spitzer celebrates with Clinton after the New York State midterm elections in New York on November 7, 2006.