John Thain says he put shareholders first and his interests second in deciding to sell Merrill Lynch to Bank of America.

Thain, speaking at the Reuters Global Finance Summit in New York, said a deal to sell a partial stake in Merrill Lynch to Goldman Sachs would have been better for him, but the sale of the entire Wall Street firm to Bank of America was the best outcome for shareholders.

Over a fateful weekend in September 2008, as Lehman hurtled toward bankruptcy, AIG floundered and the financial system looked into the abyss, Merrill held discussions with Bank of America, Goldman Sachs and Morgan Stanley for various transactions, Thain said.

Initial discussions with Bank of America involved either the sale of the entire company or a 9.9 percent stake and a multibillion credit line, the former Merrill CEO said.

With Goldman, discussions only involved the stake sale and the credit line. Discussions with Morgan Stanley about a strategic transaction were brief, he said.

"When Bank of America offered $29 a share on Sunday afternoon, it was clear to me that was the best thing for our shareholders," Thain said. 

Thain was fired by Bank of America soon after the deal closed, and is now considering a career in private equity and other jobs. 

"The risk to the shareholders, the risk to the company that a 9.9 percent stake and a multibillion dollar credit facility might not be enough was much too high," Thain said. "Now, for me personally, it might have been better. But my job was to protect the shareholders."

Takeo Sumino, chief operating officer of Nomura Holding America Inc, wants to make one thing clear: neither he nor his Tokyo colleagues are into the habit of breaking into song first thing in the morning at the office.

A Wall Street Journal story in July said that one group of Nomura traders sang a company song in morning meetings.

“Japan created the video game, Japan has created the karaoke culture, but that does not necessarily mean that Nomura as a company will ask people to sing a song every day,” he said, trying to debunk reports of culture clashes between Nomura bankers and their new colleagues at the former Lehman Brothers empire in Asia and Europe.

“I worked in Nomura for 22 years. I never sang a song in the morning,” he said. “If you want to sing a song or listen to my song I can take you to karaoke, but you don’t need to come to my office because I don’t sing a song.”

Sumino acknowledges that the Lehman deal has changed things at Nomura, but insists it's been in positive ways.

Bankers who could only communicate in Japanese are now rattling off e-mails and water cooler conversations in English, he told the Reuters Global Finance Summit.

“I do think a very big transition, a transformational change took place in Nomura after we started working with Lehman,” Sumino said.

“E-mail traffic in English . . . . is tremendously larger,” he said. “The number of individuals in Tokyo who used to be able to operate only speaking in Japanese, a lot of them are now communicating and writing and speaking in English.”

Small and medium-sized businesses are wild with concern that the bankruptcy filing of CIT Group will cut off the financing they use to pay employees and creditors, according to an attorney who has many apparel and retail businesses among his clients.

"My phone has not stopped ringing," said Jerry Reisman, a partner at law firm Reisman, Peirez and Reisman in Garden City, New York. Reisman said he represents 21 groups that depend on CIT for factoring and other financing. He also represents an additional four parties that have applied to CIT for new business financing.

"People were astonished. They don't know what to do," said Riesman, who took more than 10 calls during Sunday's baseball World Series game and at least 10 more on Monday morning before 10 am EST.

"They have to make payroll this week -- they don't know whether they will be able to meet obligations for payroll or for suppliers."

One of the biggest concerns is so-called antecedent debt, which refers to checks from CIT that its clients have received in the past 90 days, said Reisman.

"Any money received from CIT in payment of antecedent debt is considered a preference, and, under the bankruptcy code, has to be returned to CIT," he said. "It could cause my clients to have to file bankruptcy. This could have a staggering domino effect. It's going to be devastating. It will destroy their own businesses."

Reisman said his firm is trying to find other sources of financing for his clients. "But now the problem is, some of them don't qualify because credit markets have tightened," he said. "They don't qualify for financing from other lenders."

Dunkin Donuts franchisees are particularly concerned, said Reisman.

"I also have as clients people who want to purchase Dunkin Donuts franchises, who have applications for financing pending. CIT has been the lender of choice, and we're not sure if CIT will be able to fund the acquisitions," he said.

How will CIT’s bankruptcy affect your business? Post your comments below:

Shares in Geely Automobile have risen some 40 percent in the past month partly on hopes the Chinese carmaker's parent company will buy Volvo. Ford has named Geely as preferred bidder for the Swedish marque. But on this occasion it could be better to travel hopefully than to arrive.

Buying Volvo would be a huge mouthful for Geely. If it goes ahead, Geely and founder Li Shufu will have to write Ford a cheque for $2 billion. But that's just for starters. Volvo lost $1.5 billion last year. Assuming it continued at the same rate during Geely's first year of ownership, the Chinese would pretty quickly be in for $3.5 billion.

By way of comparison, that is almost 20 percent more than Geely Automotive's enterprise value of just $3 billion. And it doesn't include any further investment Geely might make. The long-term plans being talked about in the media suggest the total could hit about $10 billion. Achieving an acceptable return on that would require a dramatic turnaround in Volvo's fortunes.

Staunching the losses won't be easy in the short term. The deal offers few quick fixes. Geely will find it hard to reduce Volvo's costs because it doesn't have any Western operations of its own to integrate. It will depend for the most part upon the supply arrangements that Volvo already has with Ford and others, and these are unlikely to go down in price because of the takeover. Geely has already said that if its offer goes through it will retain Volvo's factories, research centre, trade union agreements and sales network.

Whether the deal works or not depends upon whether Geely can successfully implement what seems to be its longer-term plan. This is to turn Volvo around and transform its own fortunes by taking the Swedish marque into China as a locally-owned brand.

Geely Automotive is currently the smallest of the big Chinese carmakers, producing about 300,000 cars a year, and the most significant purely private sector operator. Like Volvo, which makes a similar number of cars, what Geely lacks is scale.

China is now the world's largest automotive market. According to JD Power sales will reach 8.2 million cars in 2009, and grow to 12 million by 2016. The big opportunity then is to bring Volvo to China, where its S40, S60 and S80 are already positioned as luxury vehicles. A mere 5 percent share of the three segments these models compete in would amount to 300,000 units in 2009, and nearly 400,000 units in 2012.

That's the ambition. But getting there will take supreme execution. Geely will need to work with Volvo's domestic management, and Chinese companies do not have much of a tradition of managing complex global companies. One comfort is that Geely is a purely private company and therefore less likely to be distracted by Beijing-inspired investment and production targets.

A second is the presence of Goldman Sachs which is investing $250 million in Geely bonds with warrants over 15 of the company. This makes Goldman the most significant outside investor. The Volvo deal could in theory be a dry-run for other Chinese takeovers of other global brands, so Goldman will have every incentive to help make it work.

Nonetheless, the execution risk remains daunting. Even though Geely Automotive's shares trade at just 15 times next year's earnings, compared with an Asia Pacific sector mean of 30 times, there is still room for disappointment.

Why put cash into JJB Sports? Investors are apparently so keen to do so that the sports retailer expects to raise 100 million pounds -- more than its market capitalisation of just over 80 million.

At first glance, it is hard to see why. Britain is in the grip of a deep recession and only a few months ago, JJB was flirting with administration. Its shares have fallen 90 percent in two years. If that wasn't enough, the company is embroiled in price fixing probes by the OFT and the Serious Fraud Office.

Clearly, JJB has benefited from the effect of a buoyant stock market into which investors still seem keen to put cash. As a stock that has fallen a long way, JJB is more likely to rebound once doubts about its future are lifted.

But there's more to it than that. Many investors are trying to pick those that will emerge strongest in their sectors. They are backing JJB because they see it as a potential winner.

Under executive chairman David Jones the group is positioning itself to sell high quality sports clothing and equipment -- in contrast to Mike Ashley's Sports Direct discount chain, the UK's largest sports retailer.

But a bigger factor is that while the sportswear market remains quite fragmented, many smaller independents are finding it hard to raise cash. So even if people are buying fewer Manchester United strips overall, more of those who do are defaulting to the bigger retailers. So JJB should take market share.

If investors buy that argument, why back the number two over the number one?

Firstly, Sports Direct is out of favour with the City after a disastrous stock exchange debut in 2007. Sports Direct may find it tougher to find willing lenders.

There is also a specific reason why Sports Direct may be a relative loser. The SFO and OFT investigation into possible price fixing and fraud hangs over both JJB and Sports Direct, but as the whistleblower on alleged cartel activity, JJB gets immunity, leaving Sports Direct to take the rap.

All that makes JJB an obvious pick, but there's no certainty it will come out ahead. Fresh capital will help it restock the shelves of its 253 stores, rebuild relationships with Nike and Adidas and refurbish its shops, and so emphasise the difference between it and Sports Direct or the pure sports fashion focus of JD Sports.

Investors who subscribe to a share issue will be banking on JJB proving it can become more than an also-ran.

Norway's $420 billion oil fund is rattling the cage of some of the foreign companies in which it has invested. As a shareholder it deserves praise for putting its head above the parapet. But as a sovereign wealth fund it is treading a fine line.

Norges Bank Investment Management (NBIM) has been stung into action by a combination of domestic political pressure to account for its investments and heavy losses on some parts of its extensive external investment portfolio.

NBIM has publicly chastised Volkswagen for its plans to take over Porsche assets as part of a cosy merger between the two German carmakers. A detailed letter to VW Chairman Ferdinand Piech, published in full on its website, doesn't mince words.

The fund's list of gripes is pretty long, ranging from conflicts of interests, a lack of transparency, questionable financial and strategic logic for the deal to concerns about the treatment of minority shareholders.

NBIM's intervention may well be too late to have any effect on the outcome of the planned tie-up. Only legal action by the fund, which had a 0.35 percent stake in VW at the end of 2008, could prevent the deal.

Nevertheless, the VW letter goes further than NBIM has before in openly criticising one of the companies in its extensive portfolio of 8,000 equity investments. This is unlikely to be a one-off, as NBIM is attempting to raise its profile.

At a presentation in London last week it laid out the tools it has at its disposal for achieving its goals. These include dialogue and engagement, contact with regulators, proxy voting, shareholder proposals and legal action.

NBIM has used this to good effect in the case of Constellation Energy  where it managed to block a unit of Warren Buffett's Berkshire Hathaway from taking over the energy group by successfully postponing a shareholder meeting. And it is seeking a change in bylaws at four U.S. companies where it is demanding the appointment of an independent chairman.

A similar tactic at Sara Lee Corp resulted in a change to the U.S. consumer goods and food group's rules. On one level, NBIM should be applauded. Its actions are precisely the kind that large institutions should be taking to ensure the companies they own are governed properly. This is a duty that many shareholders failed to perform in the past.

In the U.S. activist investors such as Calpers -- the country's biggest public pension fund -- have been doing this for years.

However, NBIM's position is complicated because it is the arm of a sovereign government. Agitating for change at foreign companies leaves it open to accusations that it is interfering inappropriately in the affairs of other countries. That charge has mostly been levelled at sovereign wealth funds (SWFs) from the Middle East and Asia that have taken high-profile stakes in Western companies.

NBIM, which is far more transparent than most other SWFs and based in a neutral Nordic country, has a more credible claim to be a dispassionate investor rather than a tool of Norwegian foreign policy. Nevertheless, it should not be surprised if its activism is met with a backlash.

  By Neil Chatterjee
    The U.S. has promised it will hunt down tax evaders.
    And it seems tax evaders are on the run.
    DBS bank, based in the growing offshore financial centre of
Singapore, told Reuters it had been approached by U.S. citizens
asking for its private banking services. But when told they would
have to sign U.S. tax declaration forms, the potential clients
disappeared.  
    Swiss banks also approached DBS on the hope they could
offload troublesome U.S. clients to a location that so far has
not been reached by the strong arms of Washington or Brussels.
    DBS said no thanks. In fact many private banks and boutique
advisors now seem to be avoiding U.S. clients.
    Will this spread to other nationalities, as governments
invest in tax spies and tax havens invest in white paint?
    Is this the end of offshore private private banking?

Like doting parents of teenagers who have spent their allowance and keep coming back for more, shareholders have so far been extraordinarily forgiving when stumping up cash to bail British companies out of debt. At some point, however, they will lose their patience and say "no".

Housebuilders Barratt and Redrow are the latest to raise cash from shareholders via heavily discounted rights issues, joining a long list of companies who have gone cap in hand to investors for sums of more than 100 million pounds ($163.4 million) since the start of the year.

For now at least, everyone can feel good about the result. A rising stock market since March means shareholders can say they did the right thing in giving companies the cash needed to pay down debt, defend their credit ratings or write down previous corporate follies.

Like others before them, Barratt and Redrow say they'll use the 545.5 million pounds and 156 million pounds they are raising to strengthen their respective balance sheets.

Companies have few avenues open to them to raise new funding now that banks have largely turned off the tap. The most creditworthy companies have tapped the bond markets, but others have no real option other than to turn to shareholders.

In doing so, they are effectively holding a gun to  investors' heads. If they don't get the cash they need to refinance debts, they risk breaching bank covenants or failing to meet bond payments. If that happens, shareholders will inevitably lose out.

The alternative is a deeply discounted rights issue. This allows shareholders to redeploy some of the cash they took out of the equity market during the worst of the financial crisis. If they don't stump up, shareholders face having their stakes heavily diluted.

The recent rights issues have been remarkably similar. Of the 26 deals of more than 100 million pounds this year, the average discount to the theoretical ex-rights price (the price at which the new shares should trade) was 39 percent, according to data compiled by BNP Paribas UK Equity Capital Markets head Ben Canning. Of these, 19 had a discount to TERP of 38 to 40 percent.

So far, investors have been willing to overlook these hefty discounts and the rising fees paid to the underwriters and sub-underwriters. Bookrunners are taking a fee of 3.25-3.5 percent on deals of above 100 million pounds, well above the 2 percent they were charging a couple of years ago.

The banks argue that the fees reflect the increased risk involved in backing these cash calls given the extra market volatility. And with institutions who missed out on the early stages of the equity market rally still falling over themselves to invest, it is no wonder bankers are predicting more rights issues to come.

But at some point this gravy train will grind to a halt. A stock market correction would prompt investors to re-think their willingness to support future offerings.

If the fall is sufficiently sharp, underwriters may even find themselves having to make good on their commitment to buy shares the market does not want. It would probably be better if some investors were willing to say "no" before it gets to that.

    Buying ABN AMRO may have bankrupted Royal Bank of Scotland and Fortis, but it has proved another coup for Spain's Santander whose chairman Emilio Botin has shown his eye for a bargain.
    After flipping Italy's Banca Antonveneta for an impressive profit before the ink was even dry on the contract to take it over from ABN, Botin is now looking to float Banco Santander Brasil, including another former ABN asset, Banco Real, once part of the Dutch bank's Latin American empire.
    With Brazilian valuations riding high and the IPO market flourishing, Citigroup reckons BSB could be worth as much as $30 billion. If so, the partial sale would again demonstrate Botin's ability to spot a good deal.
    Brazil is far too important to Santander -- it accounted for 18 percent of the bank's first half profits of 4.5 billion euros -- for Botin to give up control. But a flotation of 15 percent of the Brazilian bank could raise $4.5 billion of scarce capital while giving Botin another currency for shopping in South America. lt is already Brazil's third-largest bank by assets.
    Santander has been able to keep buying through the financial crisis, becoming the biggest bank in the euro zone as a result. Botin has also picked up Sovereign Bancorp in the U.S. and Alliance & Leicester, along with the remains of failed former building society Bradford & Bingley, in Britain.
    Floating the Brazilian business would crystallise its value. It might also boost Santander's own share price, but risks investors taking the view that a global roll-out of the bank's name and brand means the parent is becoming a conglomerate rather than an integrated group.
    The possibility of attracting a conglomerate discount won't have escaped Botin, whose family still owns nearly 2.5 percent of the $115 billion bank.
    Unlike his colleagues in the banks which have failed, Botin has his family fortune tied up in the business he runs. This, surely, is a powerful reason why Santander has avoided plunging into areas where the risk was far greater than the executives knew or cared. The bank has the strength to take advantage of the fashion for things Brazilian, and he can reflect that the acquisition which sunk RBS has done him no harm at all.