– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –
By Richard Beales
NEW YORK (Reuters Breakingviews) – Perceptions about Goldman Sachs have shaped the reality of its Facebook fundraising. The Wall Street firm is now excluding U.S. investors from buying into the social network after media scrutiny made a private placement seem too public. Facebook invites attention — but Goldman does too these days. For all its focus on clients, the firm still has a blind spot about its own public image.
– The authors are Reuters Breakingviews columnists. The
– The authors are Reuters Breakingviews columnists. The
opinions expressed are their own —
LONDON/NEW YORK, Dec 30 (Reuters Breakingviews) -
Policymakers and regulators around the world put in a lot of
work in 2010 designing post-crisis regulations. But there are
still plenty of question marks over implementation — and some
knotty issues have barely been tackled. Meanwhile, a level
global playing field looks an ever more distant dream. If
financial institutions hoped that 2010 was the high watermark
for regulation, they will be disappointed. Here’s a look at
potential developments in 2011.
The widening U.S. insider trading probe brought more arrests on Thursday. Three were technology firm employees who, together with another, earned over $400,000 moonlighting as expert consultants. That kind of gig sounds a bit too good to be true. And they are now alleged to have shared inside information with hedge funds and others. But the key question is still which bigger fish the enforcers are after.
Preet Bharara, the U.S. attorney for Manhattan, alleges that staffers at Dell, AMD, Flextronics and TSMC distributed inside information. They got their consulting work through Primary Global Research, a California firm that boasts a network of such experts.
The FBI is stabbing at soft hedge fund tissue. Monday’s raids of several funds’ offices owe something to tracking the firms’ use of third party “expert networks,” according to the Wall Street Journal. Almost by definition, these consultants risk unwittingly aiding the exchange of verboten information.
One such firm is Broadband Research, a technology industry specialist based in Portland, Oregon. In late October John Kinnucan, a principal at the firm, emailed clients with a tale of a visit from two “fresh faced eager beavers” from the FBI, according to the Journal. Despite the agents’ entreaties Kinnucan had, he said in the email, declined to wear a wire while talking to his hedge fund clients.
Felix Rohatyn would, as the dustjacket of his new memoir notes, belong in any investment banking Hall of Fame. Yet the Lazard Freres old-timer, financial savior of New York and U.S. ambassador to Paris reveals surprisingly little of himself in the book—but he does exhibit a relatively unobtrusive ego, a love of dealmaking and strong distaste for the greed of the 1980s and 2000s.
According to the 82-year-old eminence grise the financial industry is at a turning point. To be of use to companies, investors and society, it needs a return to the principles and practices he learned under the legendary Andre Meyer at Lazard starting in 1949. In Rohatyn’s world— heavily populated with the great and good of finance and politics over more than half a century—that means recognizing that “investment banking is not a business; it is a personal service where bankers work hand in hand with their clients.”
Shorts just seem to try harder. Consider David Einhorn, the fund manager famous for his prescience about Lehman Brothers. The Greenlight Capital founder has gone negative on Florida real estate outfit St. Joe. His presentation — running 139 pages, more than St. Joe’s annual report — shows the thesis has been tested. If only bulls always dug as deep.
St. Joe’s market cap is only around $2 billion after investors dumped more than 10 percent off its value after Einhorn’s speech at a high profile investment conference. The Greenlight boss must be confident if he has put his money where his mouth is and bet big against the fortunes of such a relatively small company.
Google could put some wind at the back of a fledgling green energy venture. The Internet search giant is touting its involvement in a future Atlantic Ocean power transmission scheme that could encourage as-yet-unbuilt offshore wind farms. The idea is persuasive, but for now it’s still a long shot. Google’s presence could, however, shorten the odds.
The concept of the Atlantic Wind Connection has a sweep to it that is more compelling than piecemeal projects. An offshore backbone running from New Jersey to Virginia could serve future wind farms far enough offshore to be barely visible. It would also bypass an overloaded grid on land — and avoid the property-related roadblocks that sometimes scupper new onshore transmission projects. The price tag could run to at least $5 billion. But it’s too early to think in those terms.
By Rob Cox and Richard Beales
Crises have historically spawned great cinema. Wars brought “Apocalypse Now” and “The Bridge on the River Kwai,” for instance, and high-profile crime brought “The Godfather.” Business and economics have played their part. Without the Great Depression there would be no “It’s a Wonderful Life.” But the movies, fictional or not, have yet to capture the heart of the financial panic of 2008.
In the documentary department, Charles Ferguson’s “Inside Job,” which opens in New York on Friday, comes closest yet. Narrated by Matt Damon, it pulls together many threads for understanding what went wrong and why. But it overreaches for polemical barbs, thereby undermining its credibility. At least it’s more effective than “Wall Street: Money Never Sleeps” — Oliver Stone’s sequel to the 1987 classic that introduced Gordon Gekko to the world — which opened in the UK this week.
The “flash crash,” or something like it, could happen again. There’s no real blame in a report last week from the Securities and Exchange Commission and the Commodity Futures Trading Commission on the sudden plunge in stock prices on May 6. Some fixes can be made. The broader lesson is that markets will always have tipping points.
Waddell & Reed’s $4.1 billion computerized sale of E-Mini S&P 500 futures in the middle of that spring afternoon certainly hit with a thud. Sales were programed at the rate of 9 percent of the total market volume in the previous minute, with no adjustments for price or time, parameters that often are applied to such trades.
American International Group is throwing off its shackles. But taxpayers will be locked in for a while yet. The company’s deal with the government over its $100 billion of bailout funds makes the insurer’s finances simpler and healthier. That’s potentially good for shareholders. But initially the plan largely just rearranges the government’s interests. It is hard to see how it gets taxpayers cash back any sooner, while increasing their risk.
Bob Benmosche, the AIG boss, understandably likes the deal. It will remove the New York Federal Reserve as a senior secured creditor and swap the $49 billion scarlet letter of government bailout preferred shares for common stock. That should allow him to normalize a borrowing relationship with lenders right away and give him more flexibility. As for dealing with the government, the Treasury will take on the remaining New York Fed interests, leaving only one master for AIG to deal with.