Nationalization Boogeymen

FINANCIAL/BAILOUT-CEOS(Updated with references from Paul Kanjorski’s office)

Lined up to pay their dues, Wall Street CEOs met their congressional inquisitors on Capitol Hill, sparking bouts of righteous indignation peppered with cringe moments worthy of The Office.

Pennsylvania Democrat Paul Kanjorski implored the posterboys for an era of high finance gone bad to “please find a way to return that money before you leave town,” referring to hundreds of billions of dollars in taxpayer bailout funds that officials believe were poured into unwarranted bonus payments instead of being used to revive the business of lending to America. At least he said please.

The message was clear. Though they may never have been instructed to lend the funds when they got them, that’s what Congress wanted. Bankers need to get back to the business of lending. That’s what they were being bailed out for. Never mind that the business of lending, conducted with adequate credit checks, was not what they were doing before, and that prudence in a period of high inflation would preclude much new lending today.

Kanjorski, chairman of the House subcommittee on capital markets and insurance, is himself the subject of a telling tale of befuddlement making its way around the Internet. In an interview on C-Span he said money market investors pulled $550 billion from their accounts, prompting the Fed to step in on Sept 15 and stop the panic by closing money market accounts. His estimation was that “$5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed.”

It looks increasingly like he didn’t have all his facts in presentable, working order. Felix Salmon of says he can’t find any reporting of money market funds being closed by the government, and neither can we. Andrew Leonard at also questions the numbers. Kajorski’s office pointed us to a September New York Post article citing traders as saying money markets were pushed to the wall with $500 billion in sell orders, about a fifth of the entire market, and comments the congressman made at a hearing with then Treasury Secretary Henry Paulson, apparently referencing this report.

Wall Street bankers — so humble, so frugal!!!

BERNANKE/It is amazing how the prospects of a grilling in Washington can make Wall Street’s CEOs behave. Until a little while ago, these were the masters of the masters of the universe. An elite group of highly paid stars who rarely showed signs of vulnerability, who rarely seemed to doubt their place at the top of the heap. But take a look at the testimonies they have prepared for today’s hearing at the House Committee on Financial Services and it looks like they have begun to embrace the new era, the new religion.

You would be forgiven in thinking they had all also hired the same speechwriter. They mostly stress they are prudent, frugal, humble, though not quite yet apologetic — it will be interesting if that changes once the grilling begins. Here are some of the themes:

Public anger towards Wall Street is justifiable:
“It is abundantly clear that we are here amidst broad public anger at our industry. In my 26 years at Goldman Sachs, I have never seen a wider gulf between the financial services industry and the public. Many people believe — and, in many cases, justifiably so — that Wall Street lost sight of its larger public obligations and allowed certain trends and practices to undermine the financial system’s stability.” — Lloyd Blankfein, CEO of Goldman Sachs Group.

from MediaFile:

Hi, I’m Gregory Lee, banker for The New York Times

We've heard in recent days that The New York Times has gotten some interest in its stake in the Boston Red Sox, but it seems like whatever offers are being discussed, they must not be enough for the publisher.

In the murky, mysterious world of mergers and acquisitions, companies and their bankers and financial advisers tend to operate far below the radar -- only surfacing to leak the news in The Wall Street Journal that a deal is close at hand.

Not this time. While the Journal did get the tip-off back in December, the Times on Wednesday simply issued a press release inviting all comers to take a look at the stake. Not only that, the Times published the name of the Goldman Sachs banker handling the sale, along with his phone number. Usually, as a reporter, you have to cash in lots of chips to get digits like that.

Evercore gets league table boost; Lazard left in the cold

Pfizer Inc’s $68 billion deal to buy Wyeth gave boutique investment banking firm Evercore Partners a huge jump in the rankings of merger advisers, while Lazard Ltd got left on the sidelines.

One mega-deal was enough to catapult Evercore, which advised Wyeth along with Morgan Stanley, into the list of Top 10 advisers. Evercore now stands at No. 7 for the global and U.S. rankings, up from No. 24 and No. 16 in 2008, according to data from Thomson Reuters.

Morgan Stanley stands at No. 2 globally with 15 deals, and No. 3 in the United States with 10 deals, according to Thomson Reuters.

Goldman draws bailout critic’s ire

Goldman SachsFirst Bill Perkins likened the architects of the $700 billion U.S. bailout to communists. Now the Houston-based venture capitalist is going after the capitalists.

In his latest full-page ad in the New York Times, Perkins raises a question about the propriety of Goldman Sachs buying the majority of Constellation Energy’s London-based commodities business.

“Question #1: Does anyone else find it troubling that a government bailed out bank (Goldman Sachs) is buying a European Energy Speculation Outfit? It’s your money!!!”

Happy Thanksgiving, Citigroup

Thanksgiving has come early for embattled Citigroup. The second-largest U.S. bank by assets received a pardon of sorts from the government late on Sunday, getting a $20 billion lifeline – the biggest bank bailout yet.

The bank had been widely thought to be too big to fail because of its global reach. Chief Executive Vikram Pandit and other top management will keep their jobs, but the government will have the final say on executive pay packages.

Citigroup’s shares lost 20 percent of their value on Friday, closing at $3.77, down 60 percent for the week and reaching their lowest level since December 1992. The group’s market value fell to $20.5 billion. That’s a far cry from the good old days of late 2006 when the bank’s market value topped $270 billion.

Bank dealmaking circus=recruiting bait?

Some in the financial industry apparently smell opportunity in the latest round of mergers and blood-letting among top banks.

Referring to the Wells Fargo takeover of Wachovia as the WWF and placing Bank of America CEO Ken Lewis atop a bucking Merrill Lynch bull are just a couple of the attention-getting devices financial sector recruiting firm RJ & Makay uses in its latest promotional You Tube video.

Branching out from a previous video aimed at Merrill Lynch brokers, the new “Billion Dollar Video” (the company claims assets from advisers brought to them via these viral recruiting tools represent billions of dollars) targets all financial advisers but specifically appeals to those currently at Merrill Lynch and Wachovia.

Meanwhile, Back in Ohio

goldman.jpgThe Wall Street Journal reports National City is in talks with a number of banks about a possible sale. It says Pennsylvania’s PNC Financial Services and Toronto-based Bank of Nova Scotia are among the potential bidders. In late September, NatCity said it had no need or plan to raise capital. A lot has changed since then.
In July, Merrill Lynch analyst Guy Moszkowski speculated that Wall Street giant Goldman Sachs would buy a deposit-taking bank to help it fund its businesses. By the fall, Goldman was no longer an investment bank at all, opting to become a deposit-taking bank holding company under heavy pressure from the Fed and the Treasury.
Goldman has been National City’s financial advisor, so there is a relationship to work on. Mozkowski said it was clear Goldman had considered a move to buy an old-world bank, but that it was not likely to go for it over the summer. Now Goldman has a big mid-western partner in the form of billionaire, Warren Buffett, who bought a $5 billion chunk of the Wall Street titan. It’d be interesting to see what the oracle of Omaha thinks about such a deal. If nothing else, trading at $2.23 a share on Wednesday, it’s not like they would be getting fleeced. 
But Ohio is one of the hardest hit of the Midwest states suffering from the economic malaise, and so may be one of the last to see any traction in a bank recovery. It may take incentive beyond National City’s low stock price to tempt a buyer. 

* ING Direct, the online banking arm of ING Group, said it is acquiring more than 3 billion pounds ($5.3 billion) worth of British deposits from Icelandic online savings providers icesave and Kaupthing Edge.

* Oil and gas exploration company Denbury Resources said it shelved its $600 million Conroe Field acquisition due to turbulent capital markets, even as it enhanced its bank credit line and trimmed its 2009 capital budget to preserve liquidity.

Before the Bell: Buffett’s ball


There’s nothing like a belle to bring a festive mood to an otherwise gloomy ball, and today that honor belongs to Goldman Sachs, which has drawn attention – and money – from none other than Warren Buffett.

Stock futures are pointing up on news of the uber-investor’s plan to purchase a $5 billion stake in the bank. And Japanese media say that Sumitomo Mitsui Financial Group is also looking to buy in.

But the fate of the Wall Street bailout plan remains the $700 billion question. Congress is continuing discussions today, with Fed chief Ben Bernanke testifying before the House Financial Services Committee.

Skinny Dipping

buffett3.jpgWhen pressed on why he buys into certain businesses, Warren Buffett likes to say he buys only businesses he understands. 
Certainly the $5 billion his Berkshire Hathaway Inc plans to plow into Goldman Sachs preferred stock immediately doesn’t represent an outright ownership stake. So perhaps the second-richest American won’t need to understand as much of what the so-called rocket scientists at Goldman do – which is a whole lot less, now that the bank is going commercial bank and its strategies built over decades are in tatters.
Another of Buffett’s truisms is that when the markets turn sour the problems are exposed, “you always find out who’s been swimming naked when the tide goes out,” he told CNBC television in August. “We found out that Wall Street has been kind of a nudist beach.”

He gave himself time to ogle before deciding where to plant his towel. Perhaps even more sexy than Goldman’s business is the stunning premium he’s picking up.
For its $5 billion, Berkshire gets preferred stock that carries a 10 percent dividend. It also gets warrants to buy $5 billion of common stock, or 43.5 million shares, at $115 per share, within five years, which could give it a roughly 9 percent stake in Goldman. That’s a paper profit on the warrants alone of $437 million, based on Goldman’s closing stock price on Tuesday.

Other deals of the day:

* Sumitomo Mitsui Financial Group, Japan’s No. 3 bank, plans to invest in Goldman Sachs Group, Japanese media said, in what would be the third big Japanese investment this week on Wall Street.