Global Investing

Bosch Boss Bashes Bloated Bank Bonuses

Bosch CEO Franz Fehrenbach

Bosch CEO Franz Fehrenbach

Everyone complains about fat banker bonuses, but Bosch Chief Executive Franz Fehrenbach is taking the debate to a new level. The head of the world’s biggest car parts maker is going to review ties with its financiers and may break off business with those that pay excessive bonuses, he told reporters. “We find it irresponsible if some big banks more or less go back to business as usual before the crisis despite what we have gone through,” he said.  He cited HSBC and JP Morgan as positive examples of good corporate behaviour. Of course it’s easier to be picky when you are unlisted and generate huge cash flow.

from FaithWorld:

POLL: Is Goldman Sachs “doing God’s work”? Its CEO thinks so

sunday-times

Check out the headline at the bottom left of the Sunday Times front page. The man the London paper calls the most powerful banker on Earth says he is "just a banker 'doing God’s work'" .

The report says Goldman Sachs chief executive Lloyd Blankfein"proudly pays himself more in a year than most of us could ever dream of — $68m in 2007 alone, a record for any Wall Street CEO, to add to the more than $500m of Goldman stock he owns" .

Goldman Sachs looks set to pay about $20 billion in bonuses for its top traders this year, at a time when the fallout from last year's financial crisis is still being felt and the United States unemployment rate has hit 10.2 percent, a 26-1/2-year high.

from David Gaffen:

Ken Lewis: When Buying the Dips Fails

In a bull market, buying on the dips works like a charm. Pullbacks in the market are quickly cannibalized by hungry investors looking for anything that smells like a bargain.

 

In a bear market, dip-buying does not work so well, as supposed bargains turn out to be value traps. This brings us to Ken Lewis, retiring as CEO of Bank of America. If dip-buying is a disaster in bear markets, Lewis engineered the M&A version of "dip buying" at the worst time not once, but twice.

He struck first with a $2 billion investment in Countrywide Financial in August of 2007, just before stock markets peaked - and after real estate was already teetering. In a good environment, it's a potentially solid investment. Not so much this one, when Countrywide was at $18 a share, and Lewis doubled down with a $4 billion buy (well, rescue) of Countrywide in January of 2008. That's hit the bank hard due to rising defaults in the housing market, which some analysts believe have not peaked.

from FaithWorld:

U.S. Catholic CEO responds to Benedict’s economic encyclical

charity-in-truthPope Benedict's encyclical "Charity in Truth" proposed a sweeping reform of the world economic system from one based on the profit motive to one based on solidarity and concern for the common good. Like other such documents in the Roman Catholic Church's social teaching tradition, the encyclical delivers a strong critique of unbridled capitalism. This can be uncomfortable for Catholics who champion free enterprise and some conservative Catholic writers reacted quickly and critically. One of them, George Weigel, wrote the encyclical "resembles a duck-billed platypus." (Image: Charity in Truth/Ignatius Press)

We wanted to hear the views of a Catholic executive, one who's involved in business rather than reacting from the sidelines. So I called Frank Keating, president and chief executive officer of the American Council of Life Insurers (ACLI). The former Republican governor of Oklahoma (1995-2003) is a former chairman of the National Catholic Review Board, which he said "sought to identify and correct the horror of sexual abuse on the part of the clergy." He is a Knight of Malta and a Knight of the Holy Sepulchre.

DB: What's your overall reaction to the encyclical?

keatingFK:"I haven't read the 30,000 words but I think what the pope is proposing is not inconsistent with other papal messages. The common denominator to all of them is the worth of the individual, the dignity of every human person. So Benedict XVI focuses on the right to life, he speaks against euthanasia, he speaks against the evil of abortion, he speaks against cloning. But at the same time he talks about duties and responsibilities to the vulnerable because the vulnerable are dignified human beings as well as those who are rich and powerful.

from FaithWorld:

Pope urges bold world economic reform before G8 summit

popePope Benedict issued an ambitious call to reform the way the world works on Tuesday shortly before its most powerful leaders meet at the G8 summit in Italy. His latest encyclical, entitled "Charity in Truth," presents a long list of steps he thinks are needed to overcome the financial crisis and shift economic activity from the profit motive to a goal of solidarity of all people.

Following are some of his proposals. The italics are from the original text. Do you think they are realistic food for thought or idealistic notions with no hope of being put into practice?

    "There is urgent need of a true world political authority. .. to manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration... such an authority would need to be universally recognized and to be vested with the effective power to ensure security for all, regard for justice, and respect for rights." The economy needs ethics in order to function correctly - not any ethics whatsoever, but an ethics which is people-centred..." "Financiers must rediscover the genuinely ethical foundation of their activity, so as not to abuse the sophisticated instruments which can serve to betray the interests of savers. Right intention, transparency, and the search for positive results are mutually compatible and must never be detached from one another." "Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value... there is nevertheless a growing conviction that business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference... What should be avoided is a speculative use of financial resources that yields to the temptation of seeking only short-term profit, without regard for the long-term sustainability of the enterprise, its benefit to the real economy and attention to the advancement, in suitable and appropriate ways, of further economic initiatives in countries in need of development." "One possible approach to development aid would be to apply effectively what is known as fiscal subsidiarity, allowing citizens to decide how to allocate a portion of the taxes they pay to the State."
(Photo: Pope Bendict, 1 July 2009/Tony Gentile)

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from Summit Notebook:

Nasdaq president to finance companies: come hither

A fertile planting ground for tech, biotech and even some energy offerings, Nasdaq OMX has historically struggled to lure listings in some other areas, notably financial services.

Now, that could be about to change, Nasdaq OMX President Magnus Bocker said at the Reuters Exchanges and Trading Summit. As Nasdaq looks for ways to attract new listings and end a virtual drought in IPOs, it sees financial services firms as one of the most promising areas.

That Nasdaq would at least be hoping to narrow the gap in financial services listings with NYSE, the traditional ruler of the space, is not as out of left field as it might sound.

from MacroScope:

Japanese lessons

Japan, slightly sidelined by the U.S.-UK "special" relationship and the Franco-German alliance at the G20 summit, is keen to stress the country can offer lessons to be learned from the country's banking crisis in the 1990s.

Here's a re-cap of what happened. In 1992, then-PM Miyazawa warned of a financial crisis unless banks were recapitalised using public funds now. Yet no action was taken. Between 1995 and 1997, staggering 5 financial institutions failed, forcing the government to inject public funds into 21 banks in 1998. Then two major banks were nationalised, then the government injected additional capital into 32 banks.

U.S. Treasury Secretary Timothy Geithner experienced the crisis himself as a financial attache at the U.S. embassy in Tokyo in the 1990s.

There’s no reset button

Mohamed El-Erian, chief executive officer of PIMCO (not pictured below), painted a bleak picture of the global economy at a press briefing of Allianz Global Investors earlier today.

“This is not the crisis within the global system. This is the crisis of the global system,” El-Erian says.

“Internal circuit breakers are meant to deal with crises within the system. The crisis of the system challenges all the circuit breakers. There is no reset button.”

from DealZone:

Allen Stanford: Tales from Mexia

stanfordTrying to report the comprehensive story of Allen Stanford, the Texan billionaire that the U.S. Securities and Exchange Commission has accused of perpetrating an $8 billion fraud, is like trying to reassemble 100 documents after they've been through the shredder.

Stanford's business and sports interests and the subsequent investigations into them stretch across the ocean, through numerous government agencies and courts and into the lives of people in places big and small.

As usual, there was too much to fit into any one story.

Last week I flew from New York to Houston and drove about three hours north to Mexia, Texas the small town where Stanford grew up. I wrote about Mexia here, and about Stanford's complicated personal ties -- apparently he charmed women as well as investors and has left an angry trail of both, including an estranged wife, several girlfriends and six children with four women.

A lot of witches but no more crises?

As financial markets wrap up the final full trading week of 2008, investors are contending with “quadruple witchings”, that is the day on which stock index futures, stock index options, stock options and single stock futures all expire.

French investment bank Calyon says that in addition the U.S. Treasury debt future also expires on Friday. “More witches than a Hallowe’en party,” the bank said in a note to clients.

“It is Friday, six days before Christmas in the middle of a credit crunch and this will only amplify the movements.”