Dec. 10 (Bloomberg) -- Credit-Based Asset Servicing and Securitization LLC, a subprime mortgage investor written off by its owners, completed the sale of its Litton Loan Servicing business and named Goldman Sachs Group Inc. as the buyer.
The sale allowed C-Bass to reach an out-of-court restructuring with its creditors, the New York-based company said in a statement today. Litton deals with homeowners on behalf of mortgage companies if the borrowers don't pay their bills on time. While terms weren't announced today, Radian Group Inc., part owner of C-Bass, said last month the unit would be sold for about $467.9 million to an unnamed acquirer.
Goldman, the world's largest securities firm, may be betting it can pick up Litton at a depressed price. C-Bass's owners wrote off their entire equity investment of more than $900 million this year, even while Litton continued to operate. Chief Financial Officer David Viniar said in September that his firm was hunting for ``distressed assets.''
Subprime loans are made to people who have weak credit. With home lenders refusing to refinance borrowers who might default, ``the loans stay in the portfolio longer, making them more valuable,'' Richard Bove, an analyst at Punk, Ziegel Co., said in an interview last month when the Litton sale was announced.
Litton is based in Houston and has more than 1,000 employees servicing more than 400,000 U.S. customers, the statement said.
Why Goldman Bought
C-Bass was among more than 100 mortgage lenders and investors forced to halt operations or find buyers in 2007 amid the worst housing slump in 16 years. Its majority owners were MGIC Investment Corp. and Radian, the nation's No. 1 and No. 3- ranked mortgage insurers.
Blackstone Group LP advised C-Bass, which received legal counsel from Hunton and Williams.
Katie Monfre, a spokeswoman for Milwaukee-based MGIC, Tim Lynch a spokesman for Philadelphia-based Radian, and Peter Cerwin, a spokesman for New York-based C-Bass, didn't return voicemail messages left after business hours.
Tuesday, December 11, 2007
DATAWATCH - China Nov imports, exports remain largely stable - Goldman Sachs
BEIJING (XFN-ASIA) - China's imports and exports for November remained largely stable and in-line with expectations, Goldman Sachs (NYSE:GS) said.
China's exports in November grew 22.8 pct year-on-year to 117.62 bln usd, while imports were up 25.3 pct at 91.34 bln usd, reflecting strong demand.
Growth of imports could drop off in the coming months as policy tightening becomes more pronounced, Goldman Sachs said.
However, the increasing intensity of policy tightening is likely to put pressure on domestic demand growth going forward, and therefore the current strength of imports growth is unlikely to be sustained,' it said.
It added that while the trade surplus remained high at 26.3 bln usd, its year-on-year growth rate was low at 14.8 pct, similar to October's 13.5 pct and far below the average growth of 69.4 pct in the first nine months.
China's exports in November grew 22.8 pct year-on-year to 117.62 bln usd, while imports were up 25.3 pct at 91.34 bln usd, reflecting strong demand.
Growth of imports could drop off in the coming months as policy tightening becomes more pronounced, Goldman Sachs said.
However, the increasing intensity of policy tightening is likely to put pressure on domestic demand growth going forward, and therefore the current strength of imports growth is unlikely to be sustained,' it said.
It added that while the trade surplus remained high at 26.3 bln usd, its year-on-year growth rate was low at 14.8 pct, similar to October's 13.5 pct and far below the average growth of 69.4 pct in the first nine months.
Monday, December 10, 2007
Gordon Brown asks Google to help the poor
Gordon Brown asks Google to help the poor
By Lucy Cockcroft
Last Updated: 9:13am GMT 10/12/2007
The Prime Minister is in talks to involve leading international companies, including internet giant Google and investment banking firm Goldman Sachs, to tackle a “development emergency” in the world’s poorest countries.
Mr Brown said UN poverty targets for 2015 are half way complete
Discussions have been held with 20 major players in the private sector in to persuade them to put their expertise into action to improve skills and infrastructure, and provide investment capital.
Gordon Brown hopes the plan will put the international community back on course to achieve seven UN development goals by 2015, directed at reducing poverty in all its forms including hunger, lack of income, education, and enterprise.
A UN report has shown that the international community is on course to miss goals for tackling poverty, education, health and sanitation, unless something more is done.
Among the companies that have been approached to help ways for increasing growth and encouraging enterprise in poor countries also include telecoms company Vodafone, and American supermarket firm Wal-Mart.
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Gordon Brown said: “We are half way to the target date of 2015, but a long way off track to our goals and face a development emergency.
"2008 should be a development year and mark a call to action from everyone - not just rich and poor governments but civil society, faith groups, trade unions and even the private sector.
“There are 72 million children not going to primary school, in some countries one woman in six dies in childbirth, over a billion people do not have access to safe drinking water.
“The international community needs to face up to this development emergency.
“We know what to do - we need to keep our promises and act. I am therefore calling for an millennium development goals action meeting during the UN general assembly in September to re-examine and galvanise our efforts.”
The Prime Minister is expected to speak on his plans at a conference involving the private sector in London in the spring, at the summer 2008 meeting of the G8 in Japan and a UN session in New York in the autumn.
The emphasis on the role of the private sector marks the start of a new phase in the development strategy, although the role of multinational companies in helping the world’s poorest is likely to be controversial.
Kevin Watkins, editor of the UN’s annual human development report, said achieving growth without attempting to tackle inequality would not put the global community back on course to achieve the millennium development goals.
“We are all in favour of high growth,” he said,
Lady Vadera, development minister, has said that growth was the “single biggest factor separating success from failure” in developing countries.
She will be speaking to multinational corporations about the prospect of initiatives in financial services, mobile telephones and agriculture over the coming year.
By Lucy Cockcroft
Last Updated: 9:13am GMT 10/12/2007
The Prime Minister is in talks to involve leading international companies, including internet giant Google and investment banking firm Goldman Sachs, to tackle a “development emergency” in the world’s poorest countries.
Mr Brown said UN poverty targets for 2015 are half way complete
Discussions have been held with 20 major players in the private sector in to persuade them to put their expertise into action to improve skills and infrastructure, and provide investment capital.
Gordon Brown hopes the plan will put the international community back on course to achieve seven UN development goals by 2015, directed at reducing poverty in all its forms including hunger, lack of income, education, and enterprise.
A UN report has shown that the international community is on course to miss goals for tackling poverty, education, health and sanitation, unless something more is done.
Among the companies that have been approached to help ways for increasing growth and encouraging enterprise in poor countries also include telecoms company Vodafone, and American supermarket firm Wal-Mart.
advertisement
Gordon Brown said: “We are half way to the target date of 2015, but a long way off track to our goals and face a development emergency.
"2008 should be a development year and mark a call to action from everyone - not just rich and poor governments but civil society, faith groups, trade unions and even the private sector.
“There are 72 million children not going to primary school, in some countries one woman in six dies in childbirth, over a billion people do not have access to safe drinking water.
“The international community needs to face up to this development emergency.
“We know what to do - we need to keep our promises and act. I am therefore calling for an millennium development goals action meeting during the UN general assembly in September to re-examine and galvanise our efforts.”
The Prime Minister is expected to speak on his plans at a conference involving the private sector in London in the spring, at the summer 2008 meeting of the G8 in Japan and a UN session in New York in the autumn.
The emphasis on the role of the private sector marks the start of a new phase in the development strategy, although the role of multinational companies in helping the world’s poorest is likely to be controversial.
Kevin Watkins, editor of the UN’s annual human development report, said achieving growth without attempting to tackle inequality would not put the global community back on course to achieve the millennium development goals.
“We are all in favour of high growth,” he said,
Lady Vadera, development minister, has said that growth was the “single biggest factor separating success from failure” in developing countries.
She will be speaking to multinational corporations about the prospect of initiatives in financial services, mobile telephones and agriculture over the coming year.
Sunday, December 9, 2007
Goldman Sachs, AQR Hedge Funds Fell 6% in November (Update3)
Dec. 7 (Bloomberg) -- Hedge funds run by Goldman Sachs Group Inc. and AQR Capital Management LLC fell in November as swings in financial markets confounded the computer-driven trading models used by the quantitative managers.
Goldman's Global Alpha, which started 2007 with more than $10 billion, dropped 6 percent, bringing the decline for the year to 37 percent, according to an investor in the fund. AQR's $4 billion Absolute Return fund is down 11 percent, after losing about 6 percent last month, said a client of the firm, based in Greenwich, Connecticut.
Losses in November extended beyond quant managers to stock pickers such as James Pallotta, whose Raptor fund declined 3.1 percent. Traders were tripped up by increased volatility, as the Standard & Poor's 500 Index rose or fell by more than 1 percent on 12 trading days last month, compared with four days in October. The Reuters-Jefferies/CRB Commodity Price Index moved more than 1 percent on 10 days in November.
Hedge-fund managers globally lost an average of 1.4 percent in November, bringing the average 2007 gain to 10.2 percent, according to the HFRI Index, a monthly estimate released today by Chicago-based Hedge Fund Research Inc. using a sample of managers worldwide. The benchmark S&P 500 ended the month down 4.2 percent, the most since December 2002.
Raptor and Old Lane
Raptor, overseen by Pallotta for Greenwich, Connecticut- based Tudor Investment Corp., lost 8.5 percent this year, according to investors. The fund had about $8.5 billion in assets in August. Pallotta, who is based in Boston, has posted an average annual return of 19.2 percent since Raptor opened in October 1993, almost double the gain of the S&P 500.
The Old Lane hedge fund acquired this year by Citigroup Inc. lost 1.4 percent in November, trimming its 2007 gain to 2.7 percent, according to a report sent to clients yesterday. The fund, which has about $4 billion in assets, has lagged behind average industry returns since it was started in 2006 by Vikram Pandit and other former Morgan Stanley executives. Pandit is a candidate for the Citigroup chief executive officer job vacated by Charles Prince, according to people familiar with the discussions.
All the fund investors asked not to be named because returns are private. Representatives of the managers declined to comment.
Repeat of August
Multistrategy managers like Old Lane trade a range of stocks, bonds and commodities in an effort to profit from price differences between securities. Such funds gained 0.5 percent on average last month, bringing their gains so far this year to 9.3 percent, according to Hedge Fund Research.
For quant managers, November was a reprise of August, when market volatility swamped their computer models. Global Alpha lost 22.5 percent that month, its biggest monthly decline, on currency and stock trades. On top of the losses, withdrawals may leave the New York-based fund's managers with about $4 billion, investors said.
Some quants fared better. Highbridge Capital Management LLC's Statistical Opportunities fund gained less than 1 percent in both October and November, trimming its 2007 decline to about 14 percent, according to investors. The $1.5 billion global stock fund had been down 16 percent as of Aug. 8, according to a letter sent to investors at that time.
Long-Short Gain
Highbridge's $2 billion long-short stock fund gained about 5 percent in November and 33 percent this year. Long-short managers buy stocks they expect to rise and hedge those bets with short sales. In a short sale, an investor sells borrowed stock expecting to repay the loan with shares repurchased after the price falls. Highbridge, with more than $30 billion in assets, is a unit of New York-based JPMorgan Chase & Co.
New York-based manager D.E. Shaw's Oculus fund gained 1.1 percent last month and 21.5 percent this year. The firm's managers use computer programs to find price discrepancies among securities worldwide. Its multistrategy composite fund returned 1.5 percent in November and 5.1 percent in 2007, according to an investor. D.E. Shaw manages $35 billion in assets.
QIM and Pequot
Quantitative Investment Management LLC, a Charlottesville, Virginia-based hedge-fund manager, gained 3.4 percent in November in its largest fund, bringing its 2007 return to 27.4 percent, according to a Dec. 3 client letter obtained by Bloomberg. The $1.7 billion managed-futures fund uses computer-driven models to select purchases of securities to be delivered at a future date.
QIM was started in April 2003 by Jaffray Woodriff, its CEO; Michael Geismar, its president; and Greyson Williams, who oversees technology operations. The firm manages $2.7 billion, according to the client update.
Pequot Capital Management Inc., Arthur Samberg's Westport, Connecticut-based firm, returned 5.3 percent last month and almost 18 percent this year in its $400 million Short Credit fund. Wagers on rising subprime-mortgage defaults contributed to the gain for manager Steve Zamsky.
``While there is plenty of reason for concern, the contrary view may be that we will get through the current period without a recession or a bear market,'' Byron Wien, Pequot's chief investment strategist and former Morgan Stanley senior stock strategist, said in a December client letter obtained by Bloomberg.
Strategy by Strategy
So-called equity-hedge managers lost 2.4 percent on average last month, making their strategy one of the worst-performing, according to Hedge Fund Research. Such managers bet on rising prices of equities and hedge their risks by also shorting stocks they expect to decline.
Event-driven managers, who bet on securities of companies going through transitions such as mergers and spinoffs, declined 2.1 percent. Funds that focus on the securities and government debt of emerging-market countries lost 2.8 percent, Hedge Fund Research said today in a statement.
Fixed-income arbitrage funds were one of the few to rise in November, with a 1.3 percent average return, compared with the 0.8 percent average gain among the broader universe of fixed- income managers who bet on mortgage-backed, high-yield, convertible and other types of debt.
Among managers who use a variety of securities to bet on economic trends, Clarium Capital Management LLC gained 5.3 percent last month and 24 percent this year. San Francisco-based Clarium, whose $3 billion in assets are managed by Peter Thiel, was helped by wagers that securities firms' stock prices would decline and the price of oil would rise.
Moore Capital Management Inc., the New York-based firm founded by Louis Bacon that has about $13 billion in assets, declined 2 percent last month in its Moore Global Investment Fund Ltd. The fund trimmed its 2007 gain to 15 percent.
Moore Global was hurt last month by a 15 percent loss by its Canadian hedge-fund unit, which is run by former Amaranth Advisors LLC trader Manos Vourkoutiotis and invests money for other Moore funds.
Goldman's Global Alpha, which started 2007 with more than $10 billion, dropped 6 percent, bringing the decline for the year to 37 percent, according to an investor in the fund. AQR's $4 billion Absolute Return fund is down 11 percent, after losing about 6 percent last month, said a client of the firm, based in Greenwich, Connecticut.
Losses in November extended beyond quant managers to stock pickers such as James Pallotta, whose Raptor fund declined 3.1 percent. Traders were tripped up by increased volatility, as the Standard & Poor's 500 Index rose or fell by more than 1 percent on 12 trading days last month, compared with four days in October. The Reuters-Jefferies/CRB Commodity Price Index moved more than 1 percent on 10 days in November.
Hedge-fund managers globally lost an average of 1.4 percent in November, bringing the average 2007 gain to 10.2 percent, according to the HFRI Index, a monthly estimate released today by Chicago-based Hedge Fund Research Inc. using a sample of managers worldwide. The benchmark S&P 500 ended the month down 4.2 percent, the most since December 2002.
Raptor and Old Lane
Raptor, overseen by Pallotta for Greenwich, Connecticut- based Tudor Investment Corp., lost 8.5 percent this year, according to investors. The fund had about $8.5 billion in assets in August. Pallotta, who is based in Boston, has posted an average annual return of 19.2 percent since Raptor opened in October 1993, almost double the gain of the S&P 500.
The Old Lane hedge fund acquired this year by Citigroup Inc. lost 1.4 percent in November, trimming its 2007 gain to 2.7 percent, according to a report sent to clients yesterday. The fund, which has about $4 billion in assets, has lagged behind average industry returns since it was started in 2006 by Vikram Pandit and other former Morgan Stanley executives. Pandit is a candidate for the Citigroup chief executive officer job vacated by Charles Prince, according to people familiar with the discussions.
All the fund investors asked not to be named because returns are private. Representatives of the managers declined to comment.
Repeat of August
Multistrategy managers like Old Lane trade a range of stocks, bonds and commodities in an effort to profit from price differences between securities. Such funds gained 0.5 percent on average last month, bringing their gains so far this year to 9.3 percent, according to Hedge Fund Research.
For quant managers, November was a reprise of August, when market volatility swamped their computer models. Global Alpha lost 22.5 percent that month, its biggest monthly decline, on currency and stock trades. On top of the losses, withdrawals may leave the New York-based fund's managers with about $4 billion, investors said.
Some quants fared better. Highbridge Capital Management LLC's Statistical Opportunities fund gained less than 1 percent in both October and November, trimming its 2007 decline to about 14 percent, according to investors. The $1.5 billion global stock fund had been down 16 percent as of Aug. 8, according to a letter sent to investors at that time.
Long-Short Gain
Highbridge's $2 billion long-short stock fund gained about 5 percent in November and 33 percent this year. Long-short managers buy stocks they expect to rise and hedge those bets with short sales. In a short sale, an investor sells borrowed stock expecting to repay the loan with shares repurchased after the price falls. Highbridge, with more than $30 billion in assets, is a unit of New York-based JPMorgan Chase & Co.
New York-based manager D.E. Shaw's Oculus fund gained 1.1 percent last month and 21.5 percent this year. The firm's managers use computer programs to find price discrepancies among securities worldwide. Its multistrategy composite fund returned 1.5 percent in November and 5.1 percent in 2007, according to an investor. D.E. Shaw manages $35 billion in assets.
QIM and Pequot
Quantitative Investment Management LLC, a Charlottesville, Virginia-based hedge-fund manager, gained 3.4 percent in November in its largest fund, bringing its 2007 return to 27.4 percent, according to a Dec. 3 client letter obtained by Bloomberg. The $1.7 billion managed-futures fund uses computer-driven models to select purchases of securities to be delivered at a future date.
QIM was started in April 2003 by Jaffray Woodriff, its CEO; Michael Geismar, its president; and Greyson Williams, who oversees technology operations. The firm manages $2.7 billion, according to the client update.
Pequot Capital Management Inc., Arthur Samberg's Westport, Connecticut-based firm, returned 5.3 percent last month and almost 18 percent this year in its $400 million Short Credit fund. Wagers on rising subprime-mortgage defaults contributed to the gain for manager Steve Zamsky.
``While there is plenty of reason for concern, the contrary view may be that we will get through the current period without a recession or a bear market,'' Byron Wien, Pequot's chief investment strategist and former Morgan Stanley senior stock strategist, said in a December client letter obtained by Bloomberg.
Strategy by Strategy
So-called equity-hedge managers lost 2.4 percent on average last month, making their strategy one of the worst-performing, according to Hedge Fund Research. Such managers bet on rising prices of equities and hedge their risks by also shorting stocks they expect to decline.
Event-driven managers, who bet on securities of companies going through transitions such as mergers and spinoffs, declined 2.1 percent. Funds that focus on the securities and government debt of emerging-market countries lost 2.8 percent, Hedge Fund Research said today in a statement.
Fixed-income arbitrage funds were one of the few to rise in November, with a 1.3 percent average return, compared with the 0.8 percent average gain among the broader universe of fixed- income managers who bet on mortgage-backed, high-yield, convertible and other types of debt.
Among managers who use a variety of securities to bet on economic trends, Clarium Capital Management LLC gained 5.3 percent last month and 24 percent this year. San Francisco-based Clarium, whose $3 billion in assets are managed by Peter Thiel, was helped by wagers that securities firms' stock prices would decline and the price of oil would rise.
Moore Capital Management Inc., the New York-based firm founded by Louis Bacon that has about $13 billion in assets, declined 2 percent last month in its Moore Global Investment Fund Ltd. The fund trimmed its 2007 gain to 15 percent.
Moore Global was hurt last month by a 15 percent loss by its Canadian hedge-fund unit, which is run by former Amaranth Advisors LLC trader Manos Vourkoutiotis and invests money for other Moore funds.
Investec plans subprime lender sale to Goldman Sachs: report
JOHANNESBURG (Reuters) - South African investment banking and asset management group Investec (INVP.L: Quote, Profile, Research) (INLJ.J: Quote, Profile, Research) is preparing to sell its British sub-prime mortgage lender Kensington to U.S. investment bank Goldman Sachs (GS.N: Quote, Profile, Research), a South African newspaper reported on Sunday.
Discussions over Investec's disposal of Kensington are at an early stage, but could pick up steam early in 2008, according to the Sunday Times.
Investec launched a successful 273 million pounds purchase of Kensington in May in a bid to gain a foothold in the British sub-prime mortgage market. It said at the time it planned to inject money into the asset.
But the wisdom of the deal was soon questioned as banks and other financial institutions were buffeted by a global credit crunch spurred by the virtual collapse of sub-prime lending in the United States and Britain.
Leading banks have taken massive write-offs due to their exposure to sub-prime loans, which are typically made to borrowers with lower credit ratings and at higher risk of default.
But some companies, such as Goldman Sachs, have been left largely unscathed by the chaos and are now taking advantage of what some investors see as attractive valuations for certain assets in the specialty lending sector.
Discussions over Investec's disposal of Kensington are at an early stage, but could pick up steam early in 2008, according to the Sunday Times.
Investec launched a successful 273 million pounds purchase of Kensington in May in a bid to gain a foothold in the British sub-prime mortgage market. It said at the time it planned to inject money into the asset.
But the wisdom of the deal was soon questioned as banks and other financial institutions were buffeted by a global credit crunch spurred by the virtual collapse of sub-prime lending in the United States and Britain.
Leading banks have taken massive write-offs due to their exposure to sub-prime loans, which are typically made to borrowers with lower credit ratings and at higher risk of default.
But some companies, such as Goldman Sachs, have been left largely unscathed by the chaos and are now taking advantage of what some investors see as attractive valuations for certain assets in the specialty lending sector.
Saturday, December 8, 2007
MORTGAGE MELTDOWN
Interest rate 'freeze' - the real story is fraud
Bankers pay lip service to families while scurrying to avert suits, prison
New proposals to ease our great mortgage meltdown keep rolling in. First the Treasury Department urged the creation of a new fund that would buy risky mortgage bonds as a tactic to hide what those bonds were really worth. (Not much.) Then the idea was to use Fannie Mae and Freddie Mac to buy the risky loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that plan went south after Fannie suffered a new accounting scandal, and Freddie's existing loan losses shot up more than expected.
Now, just unveiled Thursday, comes the "freeze," the brainchild of Treasury Secretary Henry Paulson. It sounds good: For five years, mortgage lenders will freeze interest rates on a limited number of "teaser" subprime loans. Other homeowners facing foreclosure will be offered assistance from the Federal Housing Administration.
But unfortunately, the "freeze" is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with "working families," keeping people in their homes or any of that nonsense.
The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies - all the way up to senior management - knew about it.
I can hear the hum of shredders working overtime, and maybe that is the new "hot" industry to invest in. There are lots of people who would like to muzzle subpoena-happy New York Attorney General Andrew Cuomo to buy time and make this all go away. Cuomo is just inches from getting what he needs to start putting a lot of people in prison. I bet some people are trying right now to make him an offer "he can't refuse."
Despite Thursday's ballyhooed new deal with mortgage lenders, does anyone really think that it can ultimately stop fraud lawsuits by mortgage bond investors, many of them spread out across the globe?
The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC.
The problem isn't just subprime loans. It is the entire mortgage market. As home prices fall, defaults will rise sharply - period. And so will the patience of mortgage bondholders. Different classes of mortgage bonds from various risk pools are owned by different central banks, funds, pensions and investors all over the world. Even your pension or 401(k) might have some of these bonds in it.
Perhaps some U.S. government department can make veiled threats to foreign countries to suggest they will suffer unpleasant consequences if their largest holders (central banks and investment funds) don't go along with the plan, but how could it be possible to strong-arm everyone?
Those selling the "freeze" have suggested that mortgage-backed securities investors will benefit because they lose more with rising foreclosures. But with fast-depreciating collateral, the last thing investors in mortgage bonds ought to do is put off foreclosures. Rate freezes are at best a tool for delaying the inevitable foreclosures when even the most optimistic forecasters expect home prices to fall. In October, Goldman Sachs issued a report forecasting an incredible 35 to 40 percent drop in California home prices in the coming few years. To minimize losses, a mortgage bondholder would obviously be better off foreclosing on a home before prices plunge.
The goal of the freeze may be to delay bond investors from suing by putting off the big foreclosure wave for several years. But it may also be to stop bond investors from suing. If the investors agreed to loan modifications with the "real" wage and asset information from refinancing borrowers, mortgage originators and bundlers would have an excuse once the foreclosure occurred. They could say, "Fraud? What fraud?! You knew the borrower's real income and asset information later when he refinanced!"
The key is to refinance borrowers whose current loans involved fraud in the origination process. And I assure you it was a minority of borrowers whose loans didn't involve fraud.
The government is trying to accomplish wide-scale refinancing by tricking bond investors, or by tricking U.S. taxpayers. Guess who will foot the bill now that the FHA is entering the fray?
Ultimately, the people in these secret Paulson meetings were probably less worried about saving the mortgage market than with saving themselves. Some might be looking at prison time.
As chief of Goldman Sachs, Paulson was involved, to degrees as yet unrevealed, in the mortgage securitization process during the halcyon days of mortgage fraud from 2004 to 2006.
Paulson became the U.S. Treasury secretary on July 10, 2006, after the extent of the debacle was coming into focus for those in the know. Goldman Sachs achieved recent accolades in the markets for having bet heavily against the housing market, while Citigroup, Morgan Stanley, Bear Sterns, Merrill Lynch and others got hammered for failing to time the end of the credit bubble.
Goldman Sachs is the only major investment bank in the United States that has emerged as yet unscathed from this debacle. The success of its strategy must have resulted from fairly substantial bets against housing, mortgage banking and related industries, which also means that Goldman Sachs saw this coming at the same time they were bundling and selling these loans.
If a mortgage bond investor sues Goldman Sachs to force the institution to buy back loans, could Paulson be forced to testify as to whether Goldman Sachs knew or had reason to know about fraud in the origination process of the loans it was bundling?
It is truly amazing that right now everyone in the country is deferring to Paulson and the heads of Countrywide, JPMorgan, Bank of America and others as the best group to work out a solution to this problem. No one is talking about the fact that these people created the problem and profited to the tune of hundreds of billions of dollars from it.
I suspect that such a group first sat down and tried to figure out how to protect their financial interests and avoid criminal liability. And then when they agreed on the plan, they decided to sell it as "helping working families stay in their homes." That's why these meetings were secret, and reporters and the public weren't invited.
The next time that Paulson is before the Senate Finance Committee, instead of asking, "How much money do you think we should give your banking buddies?" I'd like to see New York Sen. Chuck Schumer ask him what he knew about this staggering fraud at the time he was chief of Goldman Sachs.
The Goldman report in October suggests that rampant investor demand is to blame for origination fraud - even though these investors were misled by high credit ratings from bond rating agencies being paid billions by the U.S. investment banks, like Goldman, that were selling the bundled mortgages.
Bankers pay lip service to families while scurrying to avert suits, prison
New proposals to ease our great mortgage meltdown keep rolling in. First the Treasury Department urged the creation of a new fund that would buy risky mortgage bonds as a tactic to hide what those bonds were really worth. (Not much.) Then the idea was to use Fannie Mae and Freddie Mac to buy the risky loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that plan went south after Fannie suffered a new accounting scandal, and Freddie's existing loan losses shot up more than expected.
Now, just unveiled Thursday, comes the "freeze," the brainchild of Treasury Secretary Henry Paulson. It sounds good: For five years, mortgage lenders will freeze interest rates on a limited number of "teaser" subprime loans. Other homeowners facing foreclosure will be offered assistance from the Federal Housing Administration.
But unfortunately, the "freeze" is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with "working families," keeping people in their homes or any of that nonsense.
The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies - all the way up to senior management - knew about it.
I can hear the hum of shredders working overtime, and maybe that is the new "hot" industry to invest in. There are lots of people who would like to muzzle subpoena-happy New York Attorney General Andrew Cuomo to buy time and make this all go away. Cuomo is just inches from getting what he needs to start putting a lot of people in prison. I bet some people are trying right now to make him an offer "he can't refuse."
Despite Thursday's ballyhooed new deal with mortgage lenders, does anyone really think that it can ultimately stop fraud lawsuits by mortgage bond investors, many of them spread out across the globe?
The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC.
The problem isn't just subprime loans. It is the entire mortgage market. As home prices fall, defaults will rise sharply - period. And so will the patience of mortgage bondholders. Different classes of mortgage bonds from various risk pools are owned by different central banks, funds, pensions and investors all over the world. Even your pension or 401(k) might have some of these bonds in it.
Perhaps some U.S. government department can make veiled threats to foreign countries to suggest they will suffer unpleasant consequences if their largest holders (central banks and investment funds) don't go along with the plan, but how could it be possible to strong-arm everyone?
Those selling the "freeze" have suggested that mortgage-backed securities investors will benefit because they lose more with rising foreclosures. But with fast-depreciating collateral, the last thing investors in mortgage bonds ought to do is put off foreclosures. Rate freezes are at best a tool for delaying the inevitable foreclosures when even the most optimistic forecasters expect home prices to fall. In October, Goldman Sachs issued a report forecasting an incredible 35 to 40 percent drop in California home prices in the coming few years. To minimize losses, a mortgage bondholder would obviously be better off foreclosing on a home before prices plunge.
The goal of the freeze may be to delay bond investors from suing by putting off the big foreclosure wave for several years. But it may also be to stop bond investors from suing. If the investors agreed to loan modifications with the "real" wage and asset information from refinancing borrowers, mortgage originators and bundlers would have an excuse once the foreclosure occurred. They could say, "Fraud? What fraud?! You knew the borrower's real income and asset information later when he refinanced!"
The key is to refinance borrowers whose current loans involved fraud in the origination process. And I assure you it was a minority of borrowers whose loans didn't involve fraud.
The government is trying to accomplish wide-scale refinancing by tricking bond investors, or by tricking U.S. taxpayers. Guess who will foot the bill now that the FHA is entering the fray?
Ultimately, the people in these secret Paulson meetings were probably less worried about saving the mortgage market than with saving themselves. Some might be looking at prison time.
As chief of Goldman Sachs, Paulson was involved, to degrees as yet unrevealed, in the mortgage securitization process during the halcyon days of mortgage fraud from 2004 to 2006.
Paulson became the U.S. Treasury secretary on July 10, 2006, after the extent of the debacle was coming into focus for those in the know. Goldman Sachs achieved recent accolades in the markets for having bet heavily against the housing market, while Citigroup, Morgan Stanley, Bear Sterns, Merrill Lynch and others got hammered for failing to time the end of the credit bubble.
Goldman Sachs is the only major investment bank in the United States that has emerged as yet unscathed from this debacle. The success of its strategy must have resulted from fairly substantial bets against housing, mortgage banking and related industries, which also means that Goldman Sachs saw this coming at the same time they were bundling and selling these loans.
If a mortgage bond investor sues Goldman Sachs to force the institution to buy back loans, could Paulson be forced to testify as to whether Goldman Sachs knew or had reason to know about fraud in the origination process of the loans it was bundling?
It is truly amazing that right now everyone in the country is deferring to Paulson and the heads of Countrywide, JPMorgan, Bank of America and others as the best group to work out a solution to this problem. No one is talking about the fact that these people created the problem and profited to the tune of hundreds of billions of dollars from it.
I suspect that such a group first sat down and tried to figure out how to protect their financial interests and avoid criminal liability. And then when they agreed on the plan, they decided to sell it as "helping working families stay in their homes." That's why these meetings were secret, and reporters and the public weren't invited.
The next time that Paulson is before the Senate Finance Committee, instead of asking, "How much money do you think we should give your banking buddies?" I'd like to see New York Sen. Chuck Schumer ask him what he knew about this staggering fraud at the time he was chief of Goldman Sachs.
The Goldman report in October suggests that rampant investor demand is to blame for origination fraud - even though these investors were misled by high credit ratings from bond rating agencies being paid billions by the U.S. investment banks, like Goldman, that were selling the bundled mortgages.
Freddie Mac Chairman and CEO Richard Syron to Address Goldman Sachs Financial Services...
Freddie Mac Chairman and CEO Richard Syron to Address Goldman Sachs Financial
Services CEO Conference
MCLEAN, Va., Dec. 7 /PRNewswire-FirstCall/ -- Freddie Mac (NYSE: FRE)
Chairman and CEO Richard Syron will address the Goldman Sachs Financial
Services CEO Conference 2007 in New York City on Tuesday, December 11, 2007,
at 10:00 a.m. Eastern Time.
A live webcast of the speech will be available through a link on Freddie
Mac's Investor Relations Web page at
www.FreddieMac.com/investors/webcasts/index.html. The webcast archive will be
available beginning at approximately 3 p.m., Eastern Time, on Tuesday,
December 11, 2007, and will remain available for approximately six months.
Freddie Mac is a stockholder-owned corporation established by Congress in
1970 to support homeownership and rental housing. Freddie Mac purchases
single-family and multifamily residential mortgages and mortgage-related
securities, which it finances primarily by issuing mortgage-related securities
and debt instruments in the capital markets. Over the years, Freddie Mac has
made home possible more than 50 million times, ensuring financing for one in
six homebuyers and more than four million renters.
SOURCE Freddie Mac
Media, Michael Cosgrove, +1-703-903-2123, or Investors, Dan Smith,
+1-571-382-4732, both for Freddie Mac
Services CEO Conference
MCLEAN, Va., Dec. 7 /PRNewswire-FirstCall/ -- Freddie Mac (NYSE: FRE)
Chairman and CEO Richard Syron will address the Goldman Sachs Financial
Services CEO Conference 2007 in New York City on Tuesday, December 11, 2007,
at 10:00 a.m. Eastern Time.
A live webcast of the speech will be available through a link on Freddie
Mac's Investor Relations Web page at
www.FreddieMac.com/investors/webcasts/index.html. The webcast archive will be
available beginning at approximately 3 p.m., Eastern Time, on Tuesday,
December 11, 2007, and will remain available for approximately six months.
Freddie Mac is a stockholder-owned corporation established by Congress in
1970 to support homeownership and rental housing. Freddie Mac purchases
single-family and multifamily residential mortgages and mortgage-related
securities, which it finances primarily by issuing mortgage-related securities
and debt instruments in the capital markets. Over the years, Freddie Mac has
made home possible more than 50 million times, ensuring financing for one in
six homebuyers and more than four million renters.
SOURCE Freddie Mac
Media, Michael Cosgrove, +1-703-903-2123, or Investors, Dan Smith,
+1-571-382-4732, both for Freddie Mac
Friday, December 7, 2007
CA Jumps After Goldman Sachs Upgrade
Goldman Sachs Upgrade Sends CA Shares Higher Ahead of Analyst Day
NEW YORK (Associated Press) - Shares of CA Inc. jumped Friday after Goldman Sachs upgraded the management software maker.
Analyst Sarah Friar upgraded CA to "Buy" from "Neutral." She added the stock to the Goldman Sachs "Americas Buy List," calling the company a "favorite turnaround for early 2008."
"We believe cash flow growth will begin to 're-synch' with the company's robust net income growth as we move into next year, driven by margin expansion, and drawing greater attention to this often overlooked name," Friar wrote in a note to clients.
She doesn't expect CA to give specific guidance for fiscal 2009, which starts for the company in April, at its analyst meeting on Dec. 17. But she said the meeting will likely be a positive catalyst for the stock, as she expects the company to give details on its plan for revenue growth in the "mid-high single digits, cash flow growth more in-line with net income growth and margin improvements closer to the 30 percent-plus range."
"This is the first analyst day for CA in years, and the first time CFO Nancy Cooper has been able to formally lay out some detail on vision and targets since she joined the company last year," Friar wrote.
The Islandia, N.Y.-based company, formerly known as Computer Associates, is emerging from an accounting scandal which sent former CEO Sanjay Kumar to prison for 12 years last year. In early November, the company posted a nearly threefold increase in its second-quarter profit.
Shares rose 91 cents, or 3.6 percent, to $26.38 Friday. The stock has traded between $22.46 and $28.46 in the past 52 weeks. Top of page
NEW YORK (Associated Press) - Shares of CA Inc. jumped Friday after Goldman Sachs upgraded the management software maker.
Analyst Sarah Friar upgraded CA to "Buy" from "Neutral." She added the stock to the Goldman Sachs "Americas Buy List," calling the company a "favorite turnaround for early 2008."
"We believe cash flow growth will begin to 're-synch' with the company's robust net income growth as we move into next year, driven by margin expansion, and drawing greater attention to this often overlooked name," Friar wrote in a note to clients.
She doesn't expect CA to give specific guidance for fiscal 2009, which starts for the company in April, at its analyst meeting on Dec. 17. But she said the meeting will likely be a positive catalyst for the stock, as she expects the company to give details on its plan for revenue growth in the "mid-high single digits, cash flow growth more in-line with net income growth and margin improvements closer to the 30 percent-plus range."
"This is the first analyst day for CA in years, and the first time CFO Nancy Cooper has been able to formally lay out some detail on vision and targets since she joined the company last year," Friar wrote.
The Islandia, N.Y.-based company, formerly known as Computer Associates, is emerging from an accounting scandal which sent former CEO Sanjay Kumar to prison for 12 years last year. In early November, the company posted a nearly threefold increase in its second-quarter profit.
Shares rose 91 cents, or 3.6 percent, to $26.38 Friday. The stock has traded between $22.46 and $28.46 in the past 52 weeks. Top of page
EXTRA CREDIT: Paulson Faces Tough Crowd On Subprime Strategy
NEW YORK -(Dow Jones)- Treasury Secretary Henry Paulson may never have had to deal with this sort of pressure before he moved from the helm of Goldman Sachs.
His briefing Thursday on the government's plan to prevent a housing crisis was defending more than just a strategy that can't possibly address the full implications of the subprime market's collapse.
At stake was his personal credibility as a Treasury Secretary with the industry smarts to conjure a market-driven response to the biggest threat to the U.S. economy in almost a decade.
So far, Paulson has yet to enjoy a clear success in tackling this crisis, either from the political angle - the issue of keeping people in their homes - or from the capital markets angle that should arguably be his forte.
Informal Opposition
Though the Treasury's plans on both of these angles enjoys considerable industry support in public - the loan modification deal is backed by the American Securitization Forum - they have drawn widespread informal opposition from market participants.
The government's strategy to avert a mass of foreclosures in the coming year among subprime borrowers is already facing staunch criticism from those who say it won't reach the most embattled homeowners, who can't afford their mortgages at even the current "teaser" interest rate.
And within minutes of the government's briefing Thursday, ratings agency Standard & Poor's - charged with its own share of complicity in the subprime mess - said that the plan to freeze mortgage reset rates for five years could lead to further downgrades to the securities they back.
Paulson's capital market salve is no closer to fruition. Indeed, several weeks after he announced the plan to create a Super SIV, a structured investment vehicle sponsored by three Wall Street heavyweights and administered by an asset manager, the project is still grounded, amid talk of a lack of demand. Instead, banks such as U.K. banking giant HSBC Holdings (HBC) have led the way in taking their tainted investments in these vehicles back onto their balance sheets.
A Long And Winding Road
Paulson himself was clearly on the defensive against such charges Thursday, reiterating that there is "no silver bullet" to dispatch the mortgages crisis. Moreover, he described it as part of an "evolving" policy, thereby reminding everyone that this problem is far from over.
Indeed, this is a problem unlike any that faced his predecessors. William Kline, senior fellow at the Petersen Institute for International Economics, argues that, even if there were a silver bullet, the financial technology involved in the subprime crisis has blurred the target.
In 1989, when then-Treasurer Nicholas Brady intervened in the Latin American debt crises with his loan restructuring plan, there was nothing like the risk dispersion that's been created via synthetic and structured debt deals. "In a sense, Paulson is dealing with a less transparent problem than either the Latin crisis or the LTCM crisis," said Kline.
Crucially,the subprime mortgages crisis is impervious to Paulson's greatest strength. His ties to the market as a 32-year veteran of Wall Street and former Goldman Sachs CEO can't muster the massive consensus he needs for a swift resolution. For this, he must prevent a storm of litigation among the myriad small- and medium-sized institutions holding mortgage-backed securities and the structured products they underpin.
When Long Term Capital Management collapsed back in 1998, then New York Fed Chairman Bill McDonough could run through a rolodex of the leading banks and talk them down from a fire sale of redeemed assets.
"If all these mortgages were held by the 15 largest banks, they could all agree to freeze rates," said Kline.
Instead, they are held by investors around the world, listed on balance sheets from major pension funds to the smallest local governments.
But it is premature to judge Paulson too harshly on these counts. His two most recent predecessors, John Snow and Paul O'Neill, commanded little respect on Wall Street, nor did they enjoy a long or smooth tenure in the administration.
Treasury may nevertheless have gained a better handle on this crisis by now had it been a little swifter to act.
"It would've been better if the Treasury had more ambitious plans outlined earlier," said Douglas Elmendorf, senior fellow at Brookings Institute in Washington. "But I'm pleased at all the steps that they have taken."
Officials will have plenty of time to hone their approach. The clear subtext to Thursday's conference is that the market strain will not ease any time soon. Lending conditions have seized nastily heading into the year end, with soaring rates on one-month lending between banks, and there's no reason to assume that they will fall back in the new year.
"Maybe this will help relax financial markets a bit, but they're still worried about the unknown losses held by financial institutions," Elmendorf said.
It's this massive unknown quantity - even after the string of large-scale writedowns announced by Wall Street firms over the past earnings season - that needs ultimately to be addressed by officials serious about solving the capital markets problem.
"We need to have these positions valued appropriately. " said Joseph Mason, Associate Professor of Finance at Drexel University's LeBow School of Business.
His briefing Thursday on the government's plan to prevent a housing crisis was defending more than just a strategy that can't possibly address the full implications of the subprime market's collapse.
At stake was his personal credibility as a Treasury Secretary with the industry smarts to conjure a market-driven response to the biggest threat to the U.S. economy in almost a decade.
So far, Paulson has yet to enjoy a clear success in tackling this crisis, either from the political angle - the issue of keeping people in their homes - or from the capital markets angle that should arguably be his forte.
Informal Opposition
Though the Treasury's plans on both of these angles enjoys considerable industry support in public - the loan modification deal is backed by the American Securitization Forum - they have drawn widespread informal opposition from market participants.
The government's strategy to avert a mass of foreclosures in the coming year among subprime borrowers is already facing staunch criticism from those who say it won't reach the most embattled homeowners, who can't afford their mortgages at even the current "teaser" interest rate.
And within minutes of the government's briefing Thursday, ratings agency Standard & Poor's - charged with its own share of complicity in the subprime mess - said that the plan to freeze mortgage reset rates for five years could lead to further downgrades to the securities they back.
Paulson's capital market salve is no closer to fruition. Indeed, several weeks after he announced the plan to create a Super SIV, a structured investment vehicle sponsored by three Wall Street heavyweights and administered by an asset manager, the project is still grounded, amid talk of a lack of demand. Instead, banks such as U.K. banking giant HSBC Holdings (HBC) have led the way in taking their tainted investments in these vehicles back onto their balance sheets.
A Long And Winding Road
Paulson himself was clearly on the defensive against such charges Thursday, reiterating that there is "no silver bullet" to dispatch the mortgages crisis. Moreover, he described it as part of an "evolving" policy, thereby reminding everyone that this problem is far from over.
Indeed, this is a problem unlike any that faced his predecessors. William Kline, senior fellow at the Petersen Institute for International Economics, argues that, even if there were a silver bullet, the financial technology involved in the subprime crisis has blurred the target.
In 1989, when then-Treasurer Nicholas Brady intervened in the Latin American debt crises with his loan restructuring plan, there was nothing like the risk dispersion that's been created via synthetic and structured debt deals. "In a sense, Paulson is dealing with a less transparent problem than either the Latin crisis or the LTCM crisis," said Kline.
Crucially,the subprime mortgages crisis is impervious to Paulson's greatest strength. His ties to the market as a 32-year veteran of Wall Street and former Goldman Sachs CEO can't muster the massive consensus he needs for a swift resolution. For this, he must prevent a storm of litigation among the myriad small- and medium-sized institutions holding mortgage-backed securities and the structured products they underpin.
When Long Term Capital Management collapsed back in 1998, then New York Fed Chairman Bill McDonough could run through a rolodex of the leading banks and talk them down from a fire sale of redeemed assets.
"If all these mortgages were held by the 15 largest banks, they could all agree to freeze rates," said Kline.
Instead, they are held by investors around the world, listed on balance sheets from major pension funds to the smallest local governments.
But it is premature to judge Paulson too harshly on these counts. His two most recent predecessors, John Snow and Paul O'Neill, commanded little respect on Wall Street, nor did they enjoy a long or smooth tenure in the administration.
Treasury may nevertheless have gained a better handle on this crisis by now had it been a little swifter to act.
"It would've been better if the Treasury had more ambitious plans outlined earlier," said Douglas Elmendorf, senior fellow at Brookings Institute in Washington. "But I'm pleased at all the steps that they have taken."
Officials will have plenty of time to hone their approach. The clear subtext to Thursday's conference is that the market strain will not ease any time soon. Lending conditions have seized nastily heading into the year end, with soaring rates on one-month lending between banks, and there's no reason to assume that they will fall back in the new year.
"Maybe this will help relax financial markets a bit, but they're still worried about the unknown losses held by financial institutions," Elmendorf said.
It's this massive unknown quantity - even after the string of large-scale writedowns announced by Wall Street firms over the past earnings season - that needs ultimately to be addressed by officials serious about solving the capital markets problem.
"We need to have these positions valued appropriately. " said Joseph Mason, Associate Professor of Finance at Drexel University's LeBow School of Business.
Wells Fargo to Present at Goldman Sachs Financial Services CEO Conference 2007
SAN FRANCISCO, Dec. 6 /PRNewswire-FirstCall/ -- Wells Fargo & Company
(NYSE: WFC) said today that Chairman Richard M. Kovacevich is scheduled to
deliver a presentation at the Goldman Sachs Financial Services CEO Conference
2007 in New York on Wednesday, December 12, at 9 a.m. Eastern Time.
A live audio webcast of the presentation will be available at the
following addresses: www.wellsfargo.com/invest_relations/presents
cc.talkpoint.com/GOLD006/121107a_rc/?entity=wells.
A replay of the webcast will be available for six months.
Wells Fargo & Company is a diversified financial services company with
$549 billion in assets, providing banking, insurance, investments, mortgage
and consumer finance through almost 6,000 stores and the internet
(wellsfargo.com) across North America and internationally. Wells Fargo
Bank, N.A. is the only bank in the U.S., and one of only two banks worldwide,
to have the highest credit rating from both Moody's Investors Service, "Aaa,"
and Standard & Poor's Ratings Services, "AAA."
SOURCE Wells Fargo & Company
Media, Janis Smith, +1-415-396-7711, or Investors, Bob Strickland,
+1-415-396-0523, both of Wells Fargo & Company
(NYSE: WFC) said today that Chairman Richard M. Kovacevich is scheduled to
deliver a presentation at the Goldman Sachs Financial Services CEO Conference
2007 in New York on Wednesday, December 12, at 9 a.m. Eastern Time.
A live audio webcast of the presentation will be available at the
following addresses: www.wellsfargo.com/invest_relations/presents
cc.talkpoint.com/GOLD006/121107a_rc/?entity=wells.
A replay of the webcast will be available for six months.
Wells Fargo & Company is a diversified financial services company with
$549 billion in assets, providing banking, insurance, investments, mortgage
and consumer finance through almost 6,000 stores and the internet
(wellsfargo.com) across North America and internationally. Wells Fargo
Bank, N.A. is the only bank in the U.S., and one of only two banks worldwide,
to have the highest credit rating from both Moody's Investors Service, "Aaa,"
and Standard & Poor's Ratings Services, "AAA."
SOURCE Wells Fargo & Company
Media, Janis Smith, +1-415-396-7711, or Investors, Bob Strickland,
+1-415-396-0523, both of Wells Fargo & Company
Goldman Sachs buy of Sintonia stake cleared by EU
BRUSSELS, Dec. 6, 2007 (Thomson Financial delivered by Newstex) -- The European Commission said it has cleared Goldman Sachs (NYSE:GS) Group Inc's Goldman Sachs Infrastructure Partners fund's proposed acquisition of a 5 pct stake in Sintonia SA.
The deal was examined under the EU's 'simplified' merger review procedure for cases which the commission believes do not pose competition concerns.
Sintonia is owned by Sintonia SpA, the infrastructure investment company of the Benetton family, whose indirect assets include stakes in Telecom Italia SpA and Atlantia SpA. (OOTC:ATASF)
In July, the Goldman Sachs fund and Mediobanca Di Credito Finanz SpA -- which is also buying a 1 pct stake in Sintonia -- said they have also committed to underwriting a capital hike for Sintonia that, in the second phase, will allow the two new partners to reach respective stakes of 25 pct and 5 pct, on a fully diluted basis.
The deal was examined under the EU's 'simplified' merger review procedure for cases which the commission believes do not pose competition concerns.
Sintonia is owned by Sintonia SpA, the infrastructure investment company of the Benetton family, whose indirect assets include stakes in Telecom Italia SpA and Atlantia SpA. (OOTC:ATASF)
In July, the Goldman Sachs fund and Mediobanca Di Credito Finanz SpA -- which is also buying a 1 pct stake in Sintonia -- said they have also committed to underwriting a capital hike for Sintonia that, in the second phase, will allow the two new partners to reach respective stakes of 25 pct and 5 pct, on a fully diluted basis.
Wednesday, December 5, 2007
China Nov CPI growth seen at decade-high 6.7 pct - Goldman Sachs
BEIJING (XFN-ASIA) - Goldman Sachs said it expects China's consumer price index (CPI) inflation for November to reach a decade-high 6.7 pct year-on-year.
China's CPI growth has topped six pct over the past three months, reaching highs of 6.5 pct in both August and October.
China is due to announce key November indicators, including CPI, next week.
In a note, Goldman Sachs (nyse: GS - news - people ) said it expects producer price index growth to accelerate to 3.5 pct on the back of higher prices of oil, steel and coal.
China's October PPI was up 3.2 pct year-on-year.
Meanwhile, Goldman Sachs said it expects export growth to hold up, with the trade surplus likely to hit a new record of 27.5 bln usd.
Industrial production growth is forecast to rebound to 19 pct, but fixed-asset investment growth is likely to ease due to the disappearance of low base effects, Goldman Sachs said.
Retail sales growth is forecast to remain steady amid continued strength in income growth, it added.
Growth rates of loans and money supply are likely to see visible deceleration, the note said.
Goldman Sachs added that Chinese authorities are likely to maintain their tightening stance, with one more hike in benchmark interest rates seen before the end of the year.
The central bank is also expected to allow the yuan to appreciate at a faster rate.
China's CPI growth has topped six pct over the past three months, reaching highs of 6.5 pct in both August and October.
China is due to announce key November indicators, including CPI, next week.
In a note, Goldman Sachs (nyse: GS - news - people ) said it expects producer price index growth to accelerate to 3.5 pct on the back of higher prices of oil, steel and coal.
China's October PPI was up 3.2 pct year-on-year.
Meanwhile, Goldman Sachs said it expects export growth to hold up, with the trade surplus likely to hit a new record of 27.5 bln usd.
Industrial production growth is forecast to rebound to 19 pct, but fixed-asset investment growth is likely to ease due to the disappearance of low base effects, Goldman Sachs said.
Retail sales growth is forecast to remain steady amid continued strength in income growth, it added.
Growth rates of loans and money supply are likely to see visible deceleration, the note said.
Goldman Sachs added that Chinese authorities are likely to maintain their tightening stance, with one more hike in benchmark interest rates seen before the end of the year.
The central bank is also expected to allow the yuan to appreciate at a faster rate.
Tuesday, December 4, 2007
Goldman, Morgan, Merrill, Lehman Profit Estimates Cut (Update2)
Dec. 4 (Bloomberg) -- Wall Street's four-biggest securities firms had their earnings estimates cut by JPMorgan Chase & Co., which said additional writedowns on fixed-income assets and a slowdown in mergers and acquisitions will hurt profit.
JPMorgan analysts led by Kenneth Worthington said New York- based Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. will probably face weak credit markets for the next two to three quarters.
``We expect writedowns of fixed-income inventory and a slowdown in M&A,'' Worthington wrote.
Securities firms and banks have announced more than $50 billion of losses and writedowns for assets linked to the collapse of the U.S. subprime mortgage market this year. Merrill, UBS AG and E*Trade Financial Corp. have ousted their chief executive officers as a result, and Morgan Stanley and Bear Stearns Cos., the fifth-biggest U.S. securities firm, sacked No. 2-ranked executives.
JPMorgan, which is also based in New York, lowered its 2008 earnings estimate for Goldman, the biggest securities firm by market value, to $22.57 a share from $23.50. The bank said Morgan Stanley, the second-biggest of the top four, will probably earn $6.35, instead of the $7.05 estimate JPMorgan previously expected.
Merrill's estimate dropped to $7.82 from $8.05 and Lehman's fell to $7.03 from $7.35.
Goldman Pick
Worthington said JPMorgan favors New York-based Goldman because it's the ``most diversified by product and geography and least dependent on the mortgage business.''
Goldman shares are the only ones to show a gain this year among the biggest U.S. securities firms, rising 14 percent through yesterday. Morgan Stanley is down 23 percent in 2007, Merrill lost 37 percent, and Lehman dropped 21 percent. Bear Stearns Cos. has declined 40 percent this year.
JPMorgan analysts led by Kenneth Worthington said New York- based Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. will probably face weak credit markets for the next two to three quarters.
``We expect writedowns of fixed-income inventory and a slowdown in M&A,'' Worthington wrote.
Securities firms and banks have announced more than $50 billion of losses and writedowns for assets linked to the collapse of the U.S. subprime mortgage market this year. Merrill, UBS AG and E*Trade Financial Corp. have ousted their chief executive officers as a result, and Morgan Stanley and Bear Stearns Cos., the fifth-biggest U.S. securities firm, sacked No. 2-ranked executives.
JPMorgan, which is also based in New York, lowered its 2008 earnings estimate for Goldman, the biggest securities firm by market value, to $22.57 a share from $23.50. The bank said Morgan Stanley, the second-biggest of the top four, will probably earn $6.35, instead of the $7.05 estimate JPMorgan previously expected.
Merrill's estimate dropped to $7.82 from $8.05 and Lehman's fell to $7.03 from $7.35.
Goldman Pick
Worthington said JPMorgan favors New York-based Goldman because it's the ``most diversified by product and geography and least dependent on the mortgage business.''
Goldman shares are the only ones to show a gain this year among the biggest U.S. securities firms, rising 14 percent through yesterday. Morgan Stanley is down 23 percent in 2007, Merrill lost 37 percent, and Lehman dropped 21 percent. Bear Stearns Cos. has declined 40 percent this year.
U.S. Stock-Index Futures Fall; Goldman, Merrill Shares Decline
Dec. 4 (Bloomberg) -- U.S. stock-index futures dropped after JPMorgan said deteriorating debt markets will reduce earnings at Wall Street's four biggest securities firms through next year.
Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. fell after JPMorgan analysts said the brokerages may write down debt-related holdings in the fourth quarter. Brokerages also declined after Punk Ziegel & Co. analyst Richard Bove advised selling shares of Bear Stearns Cos., Goldman and Lehman.
Standard & Poor's 500 Index futures expiring in December retreated 8.1 to 1,467.4 as of 8:33 a.m. in New York. Dow Jones Industrial Average futures lost 67 to 13,282. Nasdaq-100 Index futures slid 15.5 to 2,059.5. Benchmark indexes in Europe and Asia also fell.
U.S. benchmark indexes declined for the first time in five days yesterday after Deutsche Bank AG analyst Mike Mayo said bond losses will hurt brokerage profits. Financial companies, which account for 18 percent of the S&P 500's value, have tumbled 17 percent as a group this year as securities firms and banks announced more than $50 billion of writedowns for mortgage-related assets.
Goldman, Sachs & Co. strategists today reduced their earnings estimates for companies in the S&P 500 to account for profit shortfalls in the banking industry.
Brokerages Slump
Goldman, the world's largest securities firm by market value, dropped $5.89 to $221. Morgan Stanley slipped 53 cents to $51.75. Merrill declined 91 cents to $58.15. Lehman dropped $1.38 to $60.
Slumping credit markets will reduce the securities firms' earnings from debt underwriting and advising on mergers and acquisitions, JPMorgan analysts led by Kenneth Worthington wrote in a research note. The declining value of some debt securities including collateralized debt obligations held by the brokerages may force them to report further writedowns in the fourth quarter, Worthington wrote.
Punk Ziegel's Bove reduced his rating on shares of Bear Stearns, Goldman and Lehman to ``sell'' from ``market perform.''
ConocoPhillips, the third-biggest U.S. oil company, slid 11 cents to $80.14 in Germany. Exxon Mobil Corp., the largest energy company, dropped 34 cents to $88.51.
Crude oil fell after an OPEC delegate said the group would discuss a production increase at its meeting tomorrow. The contract for January delivery slid as much as 96 cents, or 1.1 percent, to $88.35 a barrel in New York.
Michael Moran, Abby Joseph Cohen and Michelle Kim, who are part of Goldman's New York-based research team, reduced their prediction for per-share profit growth this year to 0.7 percent, down from 4 percent previously. Earnings in 2008 will increase 5.6 percent for companies in the benchmark, down from an earlier estimate 7.5 percent growth, according to the report.
Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. fell after JPMorgan analysts said the brokerages may write down debt-related holdings in the fourth quarter. Brokerages also declined after Punk Ziegel & Co. analyst Richard Bove advised selling shares of Bear Stearns Cos., Goldman and Lehman.
Standard & Poor's 500 Index futures expiring in December retreated 8.1 to 1,467.4 as of 8:33 a.m. in New York. Dow Jones Industrial Average futures lost 67 to 13,282. Nasdaq-100 Index futures slid 15.5 to 2,059.5. Benchmark indexes in Europe and Asia also fell.
U.S. benchmark indexes declined for the first time in five days yesterday after Deutsche Bank AG analyst Mike Mayo said bond losses will hurt brokerage profits. Financial companies, which account for 18 percent of the S&P 500's value, have tumbled 17 percent as a group this year as securities firms and banks announced more than $50 billion of writedowns for mortgage-related assets.
Goldman, Sachs & Co. strategists today reduced their earnings estimates for companies in the S&P 500 to account for profit shortfalls in the banking industry.
Brokerages Slump
Goldman, the world's largest securities firm by market value, dropped $5.89 to $221. Morgan Stanley slipped 53 cents to $51.75. Merrill declined 91 cents to $58.15. Lehman dropped $1.38 to $60.
Slumping credit markets will reduce the securities firms' earnings from debt underwriting and advising on mergers and acquisitions, JPMorgan analysts led by Kenneth Worthington wrote in a research note. The declining value of some debt securities including collateralized debt obligations held by the brokerages may force them to report further writedowns in the fourth quarter, Worthington wrote.
Punk Ziegel's Bove reduced his rating on shares of Bear Stearns, Goldman and Lehman to ``sell'' from ``market perform.''
ConocoPhillips, the third-biggest U.S. oil company, slid 11 cents to $80.14 in Germany. Exxon Mobil Corp., the largest energy company, dropped 34 cents to $88.51.
Crude oil fell after an OPEC delegate said the group would discuss a production increase at its meeting tomorrow. The contract for January delivery slid as much as 96 cents, or 1.1 percent, to $88.35 a barrel in New York.
Michael Moran, Abby Joseph Cohen and Michelle Kim, who are part of Goldman's New York-based research team, reduced their prediction for per-share profit growth this year to 0.7 percent, down from 4 percent previously. Earnings in 2008 will increase 5.6 percent for companies in the benchmark, down from an earlier estimate 7.5 percent growth, according to the report.
Monday, December 3, 2007
Goldman Global Securities Co-Head to Retire
NEW YORK (Reuters) - Thomas Montag, one of Goldman Sachs Group Inc's (GS.N: Quote, Profile, Research) three co-heads of global securities trading, plans to retire at the end of this month after 22 years at the investment bank, according to an internal memo.
Goldman Sachs confirmed the memo but declined further comment. No successor has been named.
Montag, 50, ascended to one of the biggest jobs on Wall Street in October 2006, succeeding Gary Cohn, who had been named co-president of the investment bank in July 2006.
Montag's departure comes as the meltdown in subprime mortgages, collateralized debt obligations and takeover loans has generated more than $50 billion in losses for investment banks and driven a dozen senior executives from their jobs.
In the memo, Goldman, which has not reported losses or write-downs this year, denied that Montag's departure was linked to the recent environment.
"Tom has played a leading role in the development of the firm's derivatives businesses in Europe and Asia," Goldman Chief Executive Lloyd Blankfein and co-Presidents Gary Cohn and Jon Winkelried said in the memo, circulated on Friday.
Montag joined Goldman in 1985, was named partner in 1994, and became a member of the firm's management committee in 2002.
For three years in the late 1990s he was global head of derivatives based in London. He was best known for leading Goldman's Japan operations during a period in which he was that country's largest individual taxpayer.
Montag returned from Japan earlier this year. In New York, together with Goldman's Asia Chairman Michael Evans and Europe Chairman Michael Sherwood, he led Goldman's largest business, the trading of equities, fixed income, commodities and currencies.
Goldman Sachs confirmed the memo but declined further comment. No successor has been named.
Montag, 50, ascended to one of the biggest jobs on Wall Street in October 2006, succeeding Gary Cohn, who had been named co-president of the investment bank in July 2006.
Montag's departure comes as the meltdown in subprime mortgages, collateralized debt obligations and takeover loans has generated more than $50 billion in losses for investment banks and driven a dozen senior executives from their jobs.
In the memo, Goldman, which has not reported losses or write-downs this year, denied that Montag's departure was linked to the recent environment.
"Tom has played a leading role in the development of the firm's derivatives businesses in Europe and Asia," Goldman Chief Executive Lloyd Blankfein and co-Presidents Gary Cohn and Jon Winkelried said in the memo, circulated on Friday.
Montag joined Goldman in 1985, was named partner in 1994, and became a member of the firm's management committee in 2002.
For three years in the late 1990s he was global head of derivatives based in London. He was best known for leading Goldman's Japan operations during a period in which he was that country's largest individual taxpayer.
Montag returned from Japan earlier this year. In New York, together with Goldman's Asia Chairman Michael Evans and Europe Chairman Michael Sherwood, he led Goldman's largest business, the trading of equities, fixed income, commodities and currencies.
Sunday, December 2, 2007
Goldman considers investment to rescue ISTC
By John Murray Brown in Dublin
Published: December 1 2007 02:00 | Last updated: December 1 2007 02:00
Goldman Sachs is considering an investment in International Securities Trading Corporation, the troubled Irish lender forced into interim examinership this week after one of its banks demanded part repayment of its loans.
According to bankers familiar with the negotiations, the US investment bank has been approached to consider a rescue operation, as have a number of other financial institutions such as Silverpoint Capital and Avenue Capital, two hedge funds.
Officials say it is a reflection of the important role that ISTC played in providing capital to a wide number of financial institutions that international bankers are now ready to consider a rescue.
"This is more than a story about a few Irish investors who lost a load of money," said one advisor.
The Irish investor list is described as Who's Who of Dublin's business elite and includes Denis O'Brien, the telecommunications entrepreneur, and Sean Quinn, the Fermanagh-based business who is reputedly Ireland's richest man.
The group includes a large number of Irish builders and developers.
But it also includes international figures such as Sir Peter Sutherland, the former Irish European Union commissioner and Goldman Sachs International chairman.
The crisis was triggered three weeks ago when Moody's downgraded about €210m (£150m) worth of structured investment vehicle assets, forcing ISTC to announce that it would take a €70m charge.
This downgrading of its debt scuppered plans to raise liquidity via a convertible bond issue, which Dermot Desmond, the financier, had agreed to finance.
Dresdner Bank, one of ISTC's 30-odd lenders, then demanded repayment on a €176,250 debt, which the Irish company was unable to meet, forcing it to seek the protection of the Irish courts.
In its petition to the courts, ISTC estimated the loss to the company of a forced liquidation would be €871m.
The company raised €165m in equity when it launched in March 2005. It also has €280m of subordinated debt issued as notes, which is held by a range of international financial institutions. In addition, it has €155m of unsecured debt. On top of that the banks lent about €2.7bn. The creditor group includes Merrill Lynch, Morgan Stanley, Deutsche Bank, and Citigroup.
Tiarnon O'Mahoney, ISTC chief executive, estimated some banks could lose as much as €100m.
Published: December 1 2007 02:00 | Last updated: December 1 2007 02:00
Goldman Sachs is considering an investment in International Securities Trading Corporation, the troubled Irish lender forced into interim examinership this week after one of its banks demanded part repayment of its loans.
According to bankers familiar with the negotiations, the US investment bank has been approached to consider a rescue operation, as have a number of other financial institutions such as Silverpoint Capital and Avenue Capital, two hedge funds.
Officials say it is a reflection of the important role that ISTC played in providing capital to a wide number of financial institutions that international bankers are now ready to consider a rescue.
"This is more than a story about a few Irish investors who lost a load of money," said one advisor.
The Irish investor list is described as Who's Who of Dublin's business elite and includes Denis O'Brien, the telecommunications entrepreneur, and Sean Quinn, the Fermanagh-based business who is reputedly Ireland's richest man.
The group includes a large number of Irish builders and developers.
But it also includes international figures such as Sir Peter Sutherland, the former Irish European Union commissioner and Goldman Sachs International chairman.
The crisis was triggered three weeks ago when Moody's downgraded about €210m (£150m) worth of structured investment vehicle assets, forcing ISTC to announce that it would take a €70m charge.
This downgrading of its debt scuppered plans to raise liquidity via a convertible bond issue, which Dermot Desmond, the financier, had agreed to finance.
Dresdner Bank, one of ISTC's 30-odd lenders, then demanded repayment on a €176,250 debt, which the Irish company was unable to meet, forcing it to seek the protection of the Irish courts.
In its petition to the courts, ISTC estimated the loss to the company of a forced liquidation would be €871m.
The company raised €165m in equity when it launched in March 2005. It also has €280m of subordinated debt issued as notes, which is held by a range of international financial institutions. In addition, it has €155m of unsecured debt. On top of that the banks lent about €2.7bn. The creditor group includes Merrill Lynch, Morgan Stanley, Deutsche Bank, and Citigroup.
Tiarnon O'Mahoney, ISTC chief executive, estimated some banks could lose as much as €100m.
Friday, November 30, 2007
Goldman Sachs (GS) NewsBite - Goldman Sachs to Invest in ISTC
Goldman Sachs Group Inc. (GS) opened at 232.65. So far today, the stock has hit a low of 228.25 and a high of 234.22. GS is now trading at 228.29, up 3.91 (1.68%). The stock hit its 52 week high of 250.70 in October and set its 52 week low of 157.38 in August. GS fell between June and August, but has been moving sideways recently. Goldman Sachs shares have been rallying today on news that the company and several other investment banks are interested in investing in Irish specialist lender International Securities Trading Corp (ISTC). According to the Irish Times newspaper, ISTC had debts of 871 million euros due to the crisis in the structured investment vehicle market. Technical indicators for the stock are bullish but deteriorating while S&P gives GS a positive 4 STARS (out of 5) buy rating. If you’re looking for a hedged trade on this stock, consider a December bull-put credit spread below the $195 level. GS stock could fall up to 14.6% before expiration and this position would still be profitable.
Thursday, November 29, 2007
Goldman Sachs' Road to Riches
Number of city and state governments that have hired Goldman Sachs to advise them on privatizing highways: 4
Amount that Goldman Sachs clients recently put into a fund that invests in infrastructure such as highways: $3 billion
Amount that Goldman Sachs gave to a PAC established by its lobbying firm, Hillco Partners, to push a 2001 Texas ballot measure allowing privately operated roads: $10,000
Minimum amount Goldman Sachs paid Hillco lobbyist J. McCartt, a former aide to Texas governor Rick Perry, between 2002 and 2005: $95,000
Difference between the amount Goldman Sachs offered for Houston's 83 miles of toll roads in 2005 and what a subsequent study found they were really worth: 86 percent
Number of county commissioners who voted to privatize: 0
Number of Goldman Sachs funds that invested in Australian toll road operator MIG while the bank was advising Indiana on its privatization deal with MIG: 3
Amount it would cost to drive through NYC's Holland Tunnel if a MIG-style toll pricing scheme had been put in place at its inception: $185
Amount that Goldman Sachs clients recently put into a fund that invests in infrastructure such as highways: $3 billion
Amount that Goldman Sachs gave to a PAC established by its lobbying firm, Hillco Partners, to push a 2001 Texas ballot measure allowing privately operated roads: $10,000
Minimum amount Goldman Sachs paid Hillco lobbyist J. McCartt, a former aide to Texas governor Rick Perry, between 2002 and 2005: $95,000
Difference between the amount Goldman Sachs offered for Houston's 83 miles of toll roads in 2005 and what a subsequent study found they were really worth: 86 percent
Number of county commissioners who voted to privatize: 0
Number of Goldman Sachs funds that invested in Australian toll road operator MIG while the bank was advising Indiana on its privatization deal with MIG: 3
Amount it would cost to drive through NYC's Holland Tunnel if a MIG-style toll pricing scheme had been put in place at its inception: $185
Wednesday, November 28, 2007
Cold Call
On Wall Street, Bob Rubin was brilliant at finessing risk. As Treasury secretary, his invisible hand saved the economy (not to speak of Clinton's presidency). So why'd he make that embarrassing Enron call?
(Photo: Associated Press)
It's been a few years since former Treasury secretary Robert E. Rubin has swept down from Mount Olympus and saved American capitalism. Since bowing out of government in 1999, Rubin has been ensconced in Citigroup CEO Sandy Weill's office of the chairman doing -- well, it's hard to say exactly what.
He takes calls from billionaire Mexican financiers who want to sell their banks to Citigroup (Citigroup bought Banamex in 2001). He does the lecture circuit, lending his glow to dewy-eyed Citigroup clients all over the world. He even goes down to Washington every now and then to see his old pal Alan Greenspan and primly lecture the Bush administration about blowing the surplus.
For the most part, though, he stays above it all: sitting in his corner office right next next to Weill's with his stocking feet up on the desk while a clutch of Citigroup executives -- including vice-chairman Deryck Maughan, Salomon Smith Barney CEO Michael Carpenter, emerging-markets chairman Victor Menezes, and, most recently, the newly appointed president, Robert Willumstad -- sweat mightily to position themselves as the 68-year-old Weill's successor.
On November 8, though, Bob Rubin's invisible hand got that old itch. Enron's stock was in free fall, and though the energy-trading company was still far from a household name, he feared the company's bankruptcy would be a dire event. Citigroup, one of its longstanding bankers, had more than a billion dollars in loans outstanding to Enron. But Rubin had larger concerns. He had been told by his bankers working on the deal, Salomon's Carpenter and syndicated-loan head Chad Leat, that a rescue package was almost assembled. The night before, a group of the highest-level Citigroup and JP Morgan Chase bankers cobbled together a deal that would merge the fast-sinking Enron with its Houston competitor Dynegy.
But for the deal to go through, the credit-ratings agencies needed to be dissuaded from downgrading Enron's mountain of debt to junk status. With a downgrade, the deal would be off and Enron would most likely go bust. In Rubin's eyes, Enron's implosion would rock not only the energy markets but global markets as a whole -- just as the collapse first of the Mexican peso and then of Mexico's stock market in 1994 had wobbled markets worldwide.
So Bob Rubin did what Bob Rubin does. On his own, without consulting Weill or anyone else, he picked up the phone and made what he thought would be the most discreet of calls to Treasury Undersecretary Peter Fisher. Rubin and Fisher weren't strangers -- Rubin knew him from his Treasury days, when Fisher worked at the New York Fed.
"Hey, Peter," Rubin proposed, "this is probably not such a good idea, but what do you think about putting a call in to the ratings agencies? Maybe they could work with Enron's bankers to see if there might be an alternative to an immediate downgrade."
It was a cheeky proposal: Rubin was asking the federal government to meddle in the private business of the independent ratings agencies, Moody's and Standard and Poor's, on behalf of a company with manifold financial and spiritual links to the current administration. Not to mention the fact that he was a major shareholder and executive of one of the two banks that stood to lose the most if Enron went under. "Gee, Bob," Fisher smartly demurred, "I'm not sure if that's advisable at this point."
Consensus within Treasury at the time was that an Enron flameout, contrary to what Rubin was thinking, would not threaten the financial and energy markets. Rubin's intentions may well have been noble, and he had his own qualms about Treasury's getting involved with the ratings agencies. When he sensed Fisher's hesitation, though, he quickly backed off. He had tried to do his bit, and that would be that.
"He was putting on his éminence grise hat," says Michael Holland of Holland and Co. "Rubin is an arbitrage trader; he makes decisions quickly. He viewed Enron as a financial-markets issue. In his mind, if a downgrade occurs, it's 'Katie, bar the door.' "
Nevertheless, splashed all over the front page of the Times, the gesture made it seem -- and perception is what always counts in the markets -- as if he were flacking for Citigroup's loan book.
The close-to-the-vest phone call has always been the hallmark of Rubin's style -- from his days as a Goldman Sachs arbitrageur to his celebrated stint as the White House's financial-markets shaman. But the secret to Rubin's phone calls, and Rubin himself, is that they remain secret. And they remain secret because the calls never cross that invisible line that keeps the interests of the second party best served by not revealing the call.
Rewind to the booming eighties: takeover fever was rampant, and the kings of Wall Street were not Internet analysts and technology bankers but risk arbitrageurs -- brass-balled traders who bet millions on when and for what price companies would be taken over. Ivan Boesky was a semi-legend, but the best arb man of them all was Goldman Sachs's Bob Rubin.
In the spring of 1984, Rubin bet a chunk of Goldman's capital on a sleepy little company called Houston Natural Gas. It was the hot hostile-takeover stock of the moment: A rival energy concern called Coastal Corporation was buying up shares. Every arb worth his salt was long the stock. It seemed like a done deal, and Rubin bet big, taking on some leverage to spice up his return. But to the surprise of the street, Houston Natural Gas's board sent Coastal packing. In return for a $42 million greenmail payment, Coastal gave up on its merger aspirations. Guy Wyser-Pratte, then of Prudential-Bache Securities and a prominent arbitrage player at the time, remembers the moment well. "It was a terrible shock when news of the greenmail came across my ticker," he remembers. "You've just paid a huge premium for the stock, and all of a sudden the stock price collapses." So Rubin and the arb community dumped their positions for a big loss. Shortly after, HNG's board hired an ambitious, 40-year-old oilman named Kenneth Lay to run the company.
Lay had grand ambitions for the company, and within months it was in play again. This time, the bidder was a rival, an Omaha-based gas firm called InterNorth, and by the summer of 1985, InterNorth had paid $2.3 billion, in a friendly merger, for HNG. The next year, Lay, now CEO of the merged company, christened it Enron. This time, the arbs made out big. HNG's stock shot up from the low 50s to the $70 level, where the deal was priced.
Rubin by then had moved on to management, and leadership fell to Rubin protégé and fellow partner Robert Freeman. Freeman and his team stuck to the sidelines as the stock soared; Goldman Sachs was advising InterNorth on the deal.
But one of the risk arbitrageurs who did make a mint off HNG was Ivan Boesky. Since the mid-seventies, Boesky and Rubin had widely been recognized as the top arb men on the street. A Fortune article in 1977 had dubbed them, together with Wyser-Pratte and a fourth banker from Salomon Brothers, the four horsemen of Wall Street. Practically the same age, they had made millions for themselves and their firms by mastering the black arts of risk arbitrage, relentlessly working the phones, hoovering up information wherever they could find it and then trading on it. Loud, ostentatious, and a shameless epicure, Boesky was the antithesis of Rubin, who preferred his suits off the rack and a strictly light lunch at his desk. For Boesky, though, his information on InterNorth's designs for HNG proved to be too good. As would later be documented in James Stewart's Den of Thieves, Boesky had been buying his information from Martin Siegel, a takeover wizard at Kidder, Peabody, who, the government and more specifically U.S. District Attorney Rudolph Giuliani claimed, was sourcing much of his information from Goldman Sachs's arbitrage desk -- and Bob Freeman.
In February 1987, Giuliani ordered the arrest of Freeman on insider-trading charges. Rubin had been a mentor to Freeman; he had hired Freeman and taught him all that he knew. And Freeman was good, too -- he had made millions for the partnership, and his reputation on the street before his arrest had been impeccable. But as he finally admitted in 1989, when he pleaded guilty to having put a call in to Marty Siegel and selling stock on an inside tip, one thing Freeman had not learned from the master was when not to make that last, skating-too-close-to-the-edge phone call. Giuliani got his Goldman partner, though some said at the time that he was after bigger game -- Rubin himself.
To this day, Rubin resolutely defends Freeman ("Marty Siegel was lying through his teeth," he has been known to say), who was never formally charged with providing information to Siegel on HNG. And his acute dislike for the former mayor still retains its fresh edge. As for Giuliani, he could never make his larger case.
Rubin knew well enough from his days as a deal lawyer at Cleary, Gottleib in the sixties, when all the arbs would call him digging around for deal scoop, that the key to successful arbitrage was not just good information but knowing which information to use: knowing when a company will be taken over, placing your bets, riding the stock up, and, most important, knowing when to unload a position. He witnessed as well how his mentor, Gustave Levy -- a legendary Goldman arbitrageur and senior partner who helped invent and popularize the risk-arbitrage business in the forties and fifties, always seemed to know just enough to make big money on a deal but never enough to make it obvious.
Every morning at 8 a.m., Rubin would show up at his small desk on Goldman's trading floor. Spread out before him would be a slide rule, some yellow legal pads, and a telephone. And he would make his calls -- never shouting, never emoting, never breaking a sweat. With Goldman's monster balance sheet behind him, he could bet up to $50 million on a single position, and Goldman became the 800-pound gorilla in the arbitrage racket in the seventies and eighties.
"Rubin was leagues ahead of Boesky," says a rival arbitrage man from the period. "He had that steel-trap mind, and he always knew how far he could go, who he could talk to, and who he knew would shut up. He was always operating just underneath the radar. And he also had Gus Levy. Gus could call any CEO in the country and ask him: 'Is your deal safe?' That's what made Rubin so good. Goldman always seemed to have the information."
Most arbitrageurs tend to be like Boesky and Levy. To be on the phone that much, to get access to the right kind of information, to keep your shirt dry when your bet goes south -- it all assumes a brashness of character, a largeness of ego.
But Rubin was different. His selflessness, the soft mutter of his voice, the self-deprecatory smirk, that worn, Waspy look -- he just stood out from the crowd. The players, the lawyers, the deal guys, came to him in droves, like moths to light. Some risk was fine -- risk is the very pith of arbitrage -- but knowing when to pull back was the true secret that the other guys could never understand.
In a way, Rubin's call to Fisher was akin to an arbitrage bet. A trade-off, if you will. He might well have scratched out a scenario or two on his yellow legal pad. The downside risk was essentially what happened: Fisher backed off, Enron collapsed, and Rubin's reputation lost a bit of its gloss. But weighed against the possible upside -- Fisher makes the call and a national tragedy is quite possibly averted (Bob saves the day again!) -- in Rubin's mind, that was a risk-reward relationship he could work with. If he had to do it today, friends say, he'd certainly do it again. He had saved Mexico in 1994, an entire country, by weighing similar pros and cons -- why not do the same for Enron?
(Photo: Associated Press)
It's been a few years since former Treasury secretary Robert E. Rubin has swept down from Mount Olympus and saved American capitalism. Since bowing out of government in 1999, Rubin has been ensconced in Citigroup CEO Sandy Weill's office of the chairman doing -- well, it's hard to say exactly what.
He takes calls from billionaire Mexican financiers who want to sell their banks to Citigroup (Citigroup bought Banamex in 2001). He does the lecture circuit, lending his glow to dewy-eyed Citigroup clients all over the world. He even goes down to Washington every now and then to see his old pal Alan Greenspan and primly lecture the Bush administration about blowing the surplus.
For the most part, though, he stays above it all: sitting in his corner office right next next to Weill's with his stocking feet up on the desk while a clutch of Citigroup executives -- including vice-chairman Deryck Maughan, Salomon Smith Barney CEO Michael Carpenter, emerging-markets chairman Victor Menezes, and, most recently, the newly appointed president, Robert Willumstad -- sweat mightily to position themselves as the 68-year-old Weill's successor.
On November 8, though, Bob Rubin's invisible hand got that old itch. Enron's stock was in free fall, and though the energy-trading company was still far from a household name, he feared the company's bankruptcy would be a dire event. Citigroup, one of its longstanding bankers, had more than a billion dollars in loans outstanding to Enron. But Rubin had larger concerns. He had been told by his bankers working on the deal, Salomon's Carpenter and syndicated-loan head Chad Leat, that a rescue package was almost assembled. The night before, a group of the highest-level Citigroup and JP Morgan Chase bankers cobbled together a deal that would merge the fast-sinking Enron with its Houston competitor Dynegy.
But for the deal to go through, the credit-ratings agencies needed to be dissuaded from downgrading Enron's mountain of debt to junk status. With a downgrade, the deal would be off and Enron would most likely go bust. In Rubin's eyes, Enron's implosion would rock not only the energy markets but global markets as a whole -- just as the collapse first of the Mexican peso and then of Mexico's stock market in 1994 had wobbled markets worldwide.
So Bob Rubin did what Bob Rubin does. On his own, without consulting Weill or anyone else, he picked up the phone and made what he thought would be the most discreet of calls to Treasury Undersecretary Peter Fisher. Rubin and Fisher weren't strangers -- Rubin knew him from his Treasury days, when Fisher worked at the New York Fed.
"Hey, Peter," Rubin proposed, "this is probably not such a good idea, but what do you think about putting a call in to the ratings agencies? Maybe they could work with Enron's bankers to see if there might be an alternative to an immediate downgrade."
It was a cheeky proposal: Rubin was asking the federal government to meddle in the private business of the independent ratings agencies, Moody's and Standard and Poor's, on behalf of a company with manifold financial and spiritual links to the current administration. Not to mention the fact that he was a major shareholder and executive of one of the two banks that stood to lose the most if Enron went under. "Gee, Bob," Fisher smartly demurred, "I'm not sure if that's advisable at this point."
Consensus within Treasury at the time was that an Enron flameout, contrary to what Rubin was thinking, would not threaten the financial and energy markets. Rubin's intentions may well have been noble, and he had his own qualms about Treasury's getting involved with the ratings agencies. When he sensed Fisher's hesitation, though, he quickly backed off. He had tried to do his bit, and that would be that.
"He was putting on his éminence grise hat," says Michael Holland of Holland and Co. "Rubin is an arbitrage trader; he makes decisions quickly. He viewed Enron as a financial-markets issue. In his mind, if a downgrade occurs, it's 'Katie, bar the door.' "
Nevertheless, splashed all over the front page of the Times, the gesture made it seem -- and perception is what always counts in the markets -- as if he were flacking for Citigroup's loan book.
The close-to-the-vest phone call has always been the hallmark of Rubin's style -- from his days as a Goldman Sachs arbitrageur to his celebrated stint as the White House's financial-markets shaman. But the secret to Rubin's phone calls, and Rubin himself, is that they remain secret. And they remain secret because the calls never cross that invisible line that keeps the interests of the second party best served by not revealing the call.
Rewind to the booming eighties: takeover fever was rampant, and the kings of Wall Street were not Internet analysts and technology bankers but risk arbitrageurs -- brass-balled traders who bet millions on when and for what price companies would be taken over. Ivan Boesky was a semi-legend, but the best arb man of them all was Goldman Sachs's Bob Rubin.
In the spring of 1984, Rubin bet a chunk of Goldman's capital on a sleepy little company called Houston Natural Gas. It was the hot hostile-takeover stock of the moment: A rival energy concern called Coastal Corporation was buying up shares. Every arb worth his salt was long the stock. It seemed like a done deal, and Rubin bet big, taking on some leverage to spice up his return. But to the surprise of the street, Houston Natural Gas's board sent Coastal packing. In return for a $42 million greenmail payment, Coastal gave up on its merger aspirations. Guy Wyser-Pratte, then of Prudential-Bache Securities and a prominent arbitrage player at the time, remembers the moment well. "It was a terrible shock when news of the greenmail came across my ticker," he remembers. "You've just paid a huge premium for the stock, and all of a sudden the stock price collapses." So Rubin and the arb community dumped their positions for a big loss. Shortly after, HNG's board hired an ambitious, 40-year-old oilman named Kenneth Lay to run the company.
Lay had grand ambitions for the company, and within months it was in play again. This time, the bidder was a rival, an Omaha-based gas firm called InterNorth, and by the summer of 1985, InterNorth had paid $2.3 billion, in a friendly merger, for HNG. The next year, Lay, now CEO of the merged company, christened it Enron. This time, the arbs made out big. HNG's stock shot up from the low 50s to the $70 level, where the deal was priced.
Rubin by then had moved on to management, and leadership fell to Rubin protégé and fellow partner Robert Freeman. Freeman and his team stuck to the sidelines as the stock soared; Goldman Sachs was advising InterNorth on the deal.
But one of the risk arbitrageurs who did make a mint off HNG was Ivan Boesky. Since the mid-seventies, Boesky and Rubin had widely been recognized as the top arb men on the street. A Fortune article in 1977 had dubbed them, together with Wyser-Pratte and a fourth banker from Salomon Brothers, the four horsemen of Wall Street. Practically the same age, they had made millions for themselves and their firms by mastering the black arts of risk arbitrage, relentlessly working the phones, hoovering up information wherever they could find it and then trading on it. Loud, ostentatious, and a shameless epicure, Boesky was the antithesis of Rubin, who preferred his suits off the rack and a strictly light lunch at his desk. For Boesky, though, his information on InterNorth's designs for HNG proved to be too good. As would later be documented in James Stewart's Den of Thieves, Boesky had been buying his information from Martin Siegel, a takeover wizard at Kidder, Peabody, who, the government and more specifically U.S. District Attorney Rudolph Giuliani claimed, was sourcing much of his information from Goldman Sachs's arbitrage desk -- and Bob Freeman.
In February 1987, Giuliani ordered the arrest of Freeman on insider-trading charges. Rubin had been a mentor to Freeman; he had hired Freeman and taught him all that he knew. And Freeman was good, too -- he had made millions for the partnership, and his reputation on the street before his arrest had been impeccable. But as he finally admitted in 1989, when he pleaded guilty to having put a call in to Marty Siegel and selling stock on an inside tip, one thing Freeman had not learned from the master was when not to make that last, skating-too-close-to-the-edge phone call. Giuliani got his Goldman partner, though some said at the time that he was after bigger game -- Rubin himself.
To this day, Rubin resolutely defends Freeman ("Marty Siegel was lying through his teeth," he has been known to say), who was never formally charged with providing information to Siegel on HNG. And his acute dislike for the former mayor still retains its fresh edge. As for Giuliani, he could never make his larger case.
Rubin knew well enough from his days as a deal lawyer at Cleary, Gottleib in the sixties, when all the arbs would call him digging around for deal scoop, that the key to successful arbitrage was not just good information but knowing which information to use: knowing when a company will be taken over, placing your bets, riding the stock up, and, most important, knowing when to unload a position. He witnessed as well how his mentor, Gustave Levy -- a legendary Goldman arbitrageur and senior partner who helped invent and popularize the risk-arbitrage business in the forties and fifties, always seemed to know just enough to make big money on a deal but never enough to make it obvious.
Every morning at 8 a.m., Rubin would show up at his small desk on Goldman's trading floor. Spread out before him would be a slide rule, some yellow legal pads, and a telephone. And he would make his calls -- never shouting, never emoting, never breaking a sweat. With Goldman's monster balance sheet behind him, he could bet up to $50 million on a single position, and Goldman became the 800-pound gorilla in the arbitrage racket in the seventies and eighties.
"Rubin was leagues ahead of Boesky," says a rival arbitrage man from the period. "He had that steel-trap mind, and he always knew how far he could go, who he could talk to, and who he knew would shut up. He was always operating just underneath the radar. And he also had Gus Levy. Gus could call any CEO in the country and ask him: 'Is your deal safe?' That's what made Rubin so good. Goldman always seemed to have the information."
Most arbitrageurs tend to be like Boesky and Levy. To be on the phone that much, to get access to the right kind of information, to keep your shirt dry when your bet goes south -- it all assumes a brashness of character, a largeness of ego.
But Rubin was different. His selflessness, the soft mutter of his voice, the self-deprecatory smirk, that worn, Waspy look -- he just stood out from the crowd. The players, the lawyers, the deal guys, came to him in droves, like moths to light. Some risk was fine -- risk is the very pith of arbitrage -- but knowing when to pull back was the true secret that the other guys could never understand.
In a way, Rubin's call to Fisher was akin to an arbitrage bet. A trade-off, if you will. He might well have scratched out a scenario or two on his yellow legal pad. The downside risk was essentially what happened: Fisher backed off, Enron collapsed, and Rubin's reputation lost a bit of its gloss. But weighed against the possible upside -- Fisher makes the call and a national tragedy is quite possibly averted (Bob saves the day again!) -- in Rubin's mind, that was a risk-reward relationship he could work with. If he had to do it today, friends say, he'd certainly do it again. He had saved Mexico in 1994, an entire country, by weighing similar pros and cons -- why not do the same for Enron?
Tuesday, November 27, 2007
COVER STORY WALL STREET'S SPREADING SCANDAL
The web spun by Ivan Boesky threatens to snare more dealmakers and alter takeover rules. Already Congress is talking tough, bankers are turning skittish, deals are coming unstuck, and some raiders are retreating. Still, corporate managers can't breathe easy. LIKE TREMORS signaling great shifts in the earth's strata, the Ivan Boesky insider trading scandal heralds a fundamental change in the takeover game. ) Deals will now be seen in a wholly new light, and the government may change the rules for raiders and traders. To many, the disclosure that arbitrager Boesky was using stolen confidential information from Drexel Burnham Lambert investment banker Dennis Levine proves what was long suspected: that millions in takeover profits have been going to those who rigged the game. Says Chairman James F. Bere of Borg-Warner, itself the target of a recent takeover offer: ''We knew in our own minds that the playing field wasn't level, but if we had told you that, you would have said, 'Show me.' Now we have our proof.'' The takeover surge of the past few years is now suspect. Short of divine omniscience, no one will ever know which deals were tainted and which were clean. But in the aftermath of the Boesky case, proposed takeovers will be scrutinized more closely by financiers and investors. Do they really make economic sense? Or are they the product of too much junk bond borrowing power, greedily and recklessly used? Dealmaking will go right on. Just 11 days after the Boesky newsquake, three fresh bids were unveiled. The Limited, a Columbus, Ohio, retailer, made a joint offer with shopping mall magnate Edward J. DeBartolo Sr. for Carter Hawley Hale Stores. American Brands, a consumer products company, announced that it would try to acquire Chesebrough-Pond's, best known for such products as Vaseline and Ragu spaghetti sauce. A group led by Minneapolis raider Irwin Jacobs proposed to buy Borg-Warner. Many other would-be acquirers are rushing to beat tax law changes that take effect on January 1 (FORTUNE, December 8). The pace of takeovers and financial restructuring will nevertheless slow, though not nearly enough to comfort chiefs of target companies. The leading characters in the scandal will be hauled before Congress and bathed in a glare of publicity not seen since J. P. Morgan Jr. got photographed with a midget in his lap in 1933. This time the pictures will be live, in color, and on your evening news. Any investment bank caught with an in-house crook will be slapped with lawsuits that could wipe out the firm. The downfall of America's most flamboyant arbitrager came when that Wall Street wonder kid Dennis Levine began singing last spring. It appears from SEC documents that he disclosed how he curried favor with Boesky by tipping him off in advance of takeover announcements -- gratis at first. Ultimately Levine and Boesky struck a more formal deal: Levine would feed valuable insider information to Boesky in exchange for up to 5% of the profits Boesky collected on the basis of that information. Boesky, who has agreed to pay a fine of $50 million and return another $50 million in illegal profits to any company, or investor, that can demonstrate it lost money from Boesky's moves, is also cooperating with the continuing SEC investigation. For weeks before the announcement that he had admitted wrongdoing, Boesky is said to have allowed investigators to tap his office telephone. The SEC will not comment on the most persistent rumor: that at least one prominent investment banker has been implicated and is plea- bargaining with the government. WHERE THE SEC'S probe will lead, no one knows. ''When we start one,'' says SEC Chairman John Shad, ''we pursue it down all the avenues it takes us. This doesn't mean that all the people we have subpoenaed have done something wrong, but they may lead us to someone who has.'' The SEC has already subpoenaed Drexel Burnham, the leading underwriter of junk bonds that was also Boesky's investment banker and an investor in one of his limited partnerships (see following story). Among the individuals said to have been subpoenaed are Michael Milken, who runs the firm's big junk bond trading operation in Beverly Hills; Martin Siegel, a managing director in Drexel's mergers and acquisitions department; and Carl Icahn, a big-time raider and Drexel client. Though Boesky will plead guilty to a criminal charge that could put him in prison for five years, some Wall Streeters say he got off easy. The most bitter reaction was from other arbitragers, who lost hundreds of millions when takeover stocks they held fell sharply immediately after the SEC's announcement. In possession of the all-time hottest piece of inside information -- that the regulators planned to go public with his case -- Boesky sold off blocks of those same takeover stocks before they dropped. Says one angry arbitrager: ''That son of a bitch is outrageous.'' While the prices of many takeover stocks recovered some of their lost ground, three major deals fell apart, all because of the new climate of uncertainty. First Wickes Cos. disclosed it couldn't come up with ''satisfactory financing'' of its $1.7-billion offer for Lear Siegler. Then Anglo-French financier Sir James Goldsmith abruptly called off his $49-a-share offer for Goodyear Tire & Rubber, partly because of what he called ''this ghastly Boesky affair.'' Finally Ronald Perelman, who won Revlon last year in a bitter + struggle, dropped his hostile $4.1-billion bid to take over Gillette Co. In an unusual twist to that truce, Perelman's investment banker, Drexel, agreed not to finance the acquisition of Gillette stock for three years. The stocks of all three companies, already down, slipped further after these announcements. Not coincidentally, all three deals depended, directly or indirectly, on high-yield debt securities -- that is, junk bonds. While the current interest rate on long-term government bonds is around 7.5%, recent junk bond issues have sold at yields of 12.5% or more. Risky though the bonds are, Drexel and its king of junk, Michael Milken, convinced a broad clientele of institutional investors that many of them represented greater value than their ratings suggested. Investors, salivating over the promise of fat yields even as interest rates on most other securities were falling, loaded up. Starting in 1984, Drexel pioneered the use of junk bonds to help finance takeovers, especially the unfriendly kind that commercial banks and blue-blood investment firms had tended to shy away from. With Drexel providing advice along with the financing, the raiders came to seem invincible. Now Drexel is ''a bleeding shark,'' says J. P. Guerin, a California investor who heads PSA, the West Coast airline. Drexel's close relationship with Boesky suggests that the firm or some of its employees could become implicated in the affair. Neither Drexel nor any of its employees have been charged with any wrongdoing. But the Boesky news shook the junk bond market for a few days before prices firmed. What if key Drexel players, such as Milken, are implicated in the Boesky episode? Most experts agree with Asher Edelman, a takeover artist now pursuing an unfriendly $1.9-billion bid for Lucky Stores. ''Listen,'' he says, ''Mike Milken is absolutely brilliant, but nobody is irreplaceable.'' If Drexel's role in the junk bond market should diminish, the market would shrink until eager competitors filled the void. Such a shrinkage could also reduce other kinds of credit for a time. In many cases leveraged buyouts or stock raids are financed only in part by junk bonds, which supplement other types of debt. These include commercial bank loans made on the expectation that the borrower will quickly pay back by selling assets of the target company -- with such second-stage sell-offs often financed by junk bonds. If the supply of junk bond credit declines, bankers are likely to be stingier with their own loans. One Chicago banker says he intends to postpone commitments for leveraged-buyout deals until the dust settles. With Drexel crippled, takeover entrepreneurs say, the heaviest impact would be on the biggest deals. ''No one has come close to demonstrating Drexel's capacity to raise big money,'' notes Joseph Rice, president of the New York leveraged-buyout firm of Clayton & Dubilier. Says William Farley, a Drexel client who acquired Chicago-based Northwest Industries two years ago and is now trying to take part of it public: ''The market for megadeals could be severely crimped.'' Some lesser deals could also come unstuck. Investors in junk bonds presumably would demand an even higher yield to make up for the market's lesser liquidity. The portfolio manager of a major university endowment fund says that even slightly higher borrowing costs would have torpedoed many of the deals he has seen over the past year -- especially those that, in his words, ''required an act of faith.'' The broad reappraisal now under way brings into question the role arbitragers, or arbs, play in takeover battles. This role is not always fully understood. Arbs, who manage portfolios for institutions and trade for investment banking houses, are heavily concentrated in New York. Honest arbs fulfill a useful function. They make the financial markets more efficient by ironing out discrepancies in the prices of stocks, options, futures, and interest rates. For example, when a stock option price gets out of line with the underlying stock, the arbs buy the undervalued security and sell the overvalued one, and prices tend to converge again. ARBS PLAY a different role in takeovers. Once an offer is made, or sometimes when it is merely rumored, they bet on the outcome. If they buy the target company's stock, they assume the risk of getting stuck with a loss if the deal falls apart. Meanwhile, they have added to the market's liquidity by enabling itchy stockholders uncomfortable with uncertainty to bail out at a higher price. Many risk arbitragers have been unusually good at sniffing out takeovers. Boesky was too good -- because he was being tipped off. For instance, the day before InterNorth announced a bid to acquire Houston Natural Gas, Boesky's ''crystal ball'' told him to buy 300,000 shares of HNG. Two weeks later he had banked a cool $4.1 million in profits. The new chairman of the Senate Banking Committee, Senator William Proxmire, wants to rein in the arbs. He is considering a proposal that in effect would redefine when a shareholder becomes a full-fledged shareholder. In the event of an unfriendly tender offer, only those who owned the stock at least 30 days before the formal offer would be entitled to have their shares counted. Says Proxmire: ''There's no reason to let the arbs vote in a takeover battle.'' Proxmire, who pushed a similar idea last session without success, also believes hostile bids ought to require the approval of two-thirds of all shares rather than a simple majority. While his proposal will get a better hearing in the new Democrat-controlled Congress, it will be a tough sell. Many will argue that all shareholders should be treated equally. What's more, writing legislation affecting takeovers is extremely complex and is not made easier by the divided stances of various business lobbies. The Reagan Administration has opposed takeover curbs until now, but this could change. After the Boesky news, the White House decided to reappraise its position on insider trading and takeovers. Even if no law passes, the arbs -- indeed, everyone speculating on takeover stocks -- are bound to be more circumspect from now on. Many who relied on Boesky's coattails may exit the risk arbitrage business. As one who plans to stay in puts it, ''The slimiest arbs are getting squeezed out.'' Harold Simmons, who joined the ranks of the big-league raiders with his recent takeover of NL Industries, a chemical and oil services company, would be happy with no arbs at all. ''They force prices to go higher than they otherwise would,'' he says. Another prominent raider, who asks not to be identified, has a different view: ''Arbs grease the skids. They make the target company a little more nervous. You'll still do the deal without them, but it will be slower going.'' Even before the Boesky affair made headlines, the SEC was leaning toward taking one modest advantage away from the raiders: the sneak attack. Under present rules investors have to file notice with the SEC as soon as they accumulate more than 5% of a company's shares. The catch is that they have a ten-day grace period before the filing is due. In the meantime, of course, a raider, or any other investor, can go on secretively building up his position. By the time he files he may actually own 10% or more. He must report significant further changes in his holdings -- again, after ten days. Meanwhile, risk arbitragers, perhaps recognizing the trading footprints of a ; takeover in the making, may start buying shares in the same company. By the time the startled management of a company knows who is buying its stock -- or why -- it may be too late to mount a defense. Some merger experts regard the ten-day grace period as an anachronism. Today's most rudimentary technology enables an acquirer to file the minute he crosses the 5% threshold. If Congress requires that such filings be made within two days, as the SEC hopes, the impact will be felt most by raiders out to greenmail a company, not buy it. That's because an important chunk of their profits from a raid depends on being able to buy a lot of stock cheaply, before other investors bid the price up to reflect the possibility of a takeover. Through publicity alone Congress will keep Wall Street under the spotlight for months. The Senate Banking Committee, and possibly other congressional panels, will be holding hearings. An expected deluge of lawsuits will make more headlines. FMC Corp., the large machinery manufacturer and defense contractor, is studying the possibility of suing Boesky and Goldman Sachs, which advised the company in a recent recapitalization plan involving a buyback of stock. SEC documents say that David Brown, a former Goldman Sachs investment banker who pleaded guilty to insider trading violations earlier this year, passed word about FMC's confidential recapitalization plan to Ira Sokolow of Shearson Lehman Brothers, who passed it to Dennis Levine. He passed it to Boesky, who turned a quick profit by buying FMC shares -- thereby kicking up the price -- before the company announced its plan. Winning such lawsuits could be difficult. To have a good chance of winning, the plaintiff must show that the investment bank breached its fiduciary duty and benefited from doing so. But the mere threat of huge fines -- and the criminal convictions already received by Levine and his youthful confederates -- will have a powerful impact on future dealmaking. Says Sam Zell, a Chicago raider who has acquired three New York Stock Exchange companies this year: ''You get market discipline for many reasons. But the most important is fear. Now there is fear, and there will be discipline.'' THE RAIDERS, roundly condemning Ivan Boesky and his ilk, insist that they will keep doing what they have been doing. Says T. Boone Pickens Jr., the chairman of Mesa Petroleum who made runs at several giant oil companies: ''The main event -- the restructuring of corporate America -- will go on.'' While the scandal has greatly discredited the takeover craze, the key players are far from sated, and the investment banks are tripping over themselves in pursuit of business. Shortly after Boesky's fall Simmons disclosed, ''Just yesterday I got calls from two investment bankers saying that if Drexel goes down, they'd sure like to have my business.'' Most important, the investors whose money has made merger mania possible, many of them the pension and profit-sharing funds of major U.S. corporations, seem in no mood to trade junk bonds for high-grade bonds that yield less. Though deals will be fewer, the quality seems bound to improve. Salomon Brothers' chief economist Henry Kaufman, no friend of raiders, has long predicted that unrestrained takeovers could eventually bring serious trouble for the economy. But recently he told a group of international bankers and finance ministers, ''There will continue to be more mergers, more consolidation.'' If the suppliers of the capital behind those transactions act more judiciously, as Kaufman believes they will after Boesky, future deals will be ''more worthy than some that have been consummated in the recent past.''
New York Authorizes $1.6B in Liberty Bonds For Goldman Sachs's New Headquarters
The state's Liberty Development Corporation authorized issuance of $1.6 billion in Liberty Bonds yesterday for a $2 billion, 40-story office building near ground zero to house the consolidated world headquarters of Goldman Sachs Group Incorporated.
A spokeswoman for the Empire State Development Corporation, which controls the Liberty agency, said several other approvals are necessary before the bonds are issued, and a public hearing will be scheduled for September. The spokeswoman, Deborah Wetzel, said yesterday's vote approved the bond issue unanimously.
Some mayoral candidates and some civic groups have criticized the Goldman deal, on the ground that the four month delay in completing negotiations with the banking giant cost the city and the state better terms.
Other incentives planned for Goldman include at least $150 million in tax breaks. Yesterday, the Empire State Development Corporation approved about $23 million in job retention grants as part of the larger deal. Other tax incentives will proceed through the Battery Park City Authority, a state agency, according to a spokeswoman for the city's Economic Development Corporation, Janel Patterson.
Following the terrorist attacks of September 11, 2001, Congress authorized the city and the state each to issue $4 billion in tax-exempt Liberty Bonds, with a total of $6.4 billion allotted for commercial projects and $1.6 billion for residential. The Goldman Sachs deal represents 25% of the city's and state's total commercial allotment, and more than twice the second-highest allocation, the $650 million authorized through the city's Economic Development Corporation for a Bank of America building near Bryant Park in Midtown.
The developer who has a lease for the former site of the World Trade Center, Larry Silverstein, has said he is seeking the remaining $3.4 billion in commercial bonds to help finance the Freedom Tower and five other office towers planned for ground zero.
Ms. Patterson said the city corporation had a hand in reviewing the Goldman Sachs application through a joint city-state committee, but the bonds will be issued from the state's bond allocation. The EDC president, Andrew Alper, recused himself from this deal because he is a former executive of Goldman.
Government officials' negotiations with the banking giant over the same office tower unraveled last April due to elements that included security concerns about a nearby underground tunnel. At the time, the terms contained only $1 billion in Liberty Bonds and less money in tax incentives.
A Goldman Sachs spokeswoman, Andrea Raphael, declined to comment yesterday. A spokesman for Governor Pataki, Joanna Rose, issued a statement last night that said: "This project would exemplify why Congress created the Liberty Bond program by spurring development of an anchor tenant immediately adjacent to the World Trade Center site and maintaining and creating thousands of jobs."
The executive director of a development accountability think tank, Good Jobs First, Greg LeRoy, said in a telephone interview that the additional tax breaks included in the real estate deal were unlikely to have influenced Goldman Sachs as significantly as other factors, including the Manhattan work force, the downtown infrastructure, and the proximity to other financial institutions.
A spokeswoman for the Empire State Development Corporation, which controls the Liberty agency, said several other approvals are necessary before the bonds are issued, and a public hearing will be scheduled for September. The spokeswoman, Deborah Wetzel, said yesterday's vote approved the bond issue unanimously.
Some mayoral candidates and some civic groups have criticized the Goldman deal, on the ground that the four month delay in completing negotiations with the banking giant cost the city and the state better terms.
Other incentives planned for Goldman include at least $150 million in tax breaks. Yesterday, the Empire State Development Corporation approved about $23 million in job retention grants as part of the larger deal. Other tax incentives will proceed through the Battery Park City Authority, a state agency, according to a spokeswoman for the city's Economic Development Corporation, Janel Patterson.
Following the terrorist attacks of September 11, 2001, Congress authorized the city and the state each to issue $4 billion in tax-exempt Liberty Bonds, with a total of $6.4 billion allotted for commercial projects and $1.6 billion for residential. The Goldman Sachs deal represents 25% of the city's and state's total commercial allotment, and more than twice the second-highest allocation, the $650 million authorized through the city's Economic Development Corporation for a Bank of America building near Bryant Park in Midtown.
The developer who has a lease for the former site of the World Trade Center, Larry Silverstein, has said he is seeking the remaining $3.4 billion in commercial bonds to help finance the Freedom Tower and five other office towers planned for ground zero.
Ms. Patterson said the city corporation had a hand in reviewing the Goldman Sachs application through a joint city-state committee, but the bonds will be issued from the state's bond allocation. The EDC president, Andrew Alper, recused himself from this deal because he is a former executive of Goldman.
Government officials' negotiations with the banking giant over the same office tower unraveled last April due to elements that included security concerns about a nearby underground tunnel. At the time, the terms contained only $1 billion in Liberty Bonds and less money in tax incentives.
A Goldman Sachs spokeswoman, Andrea Raphael, declined to comment yesterday. A spokesman for Governor Pataki, Joanna Rose, issued a statement last night that said: "This project would exemplify why Congress created the Liberty Bond program by spurring development of an anchor tenant immediately adjacent to the World Trade Center site and maintaining and creating thousands of jobs."
The executive director of a development accountability think tank, Good Jobs First, Greg LeRoy, said in a telephone interview that the additional tax breaks included in the real estate deal were unlikely to have influenced Goldman Sachs as significantly as other factors, including the Manhattan work force, the downtown infrastructure, and the proximity to other financial institutions.
Monday, November 26, 2007
Baron Cohen comes out of character to defend Borat
He is a comedian whose alter ego - a racist, sexist homophobe - has delighted many, appalled some and is selling out cinemas across Britain and America.
Now, after staying resolutely in boorish persona during previous interviews, Sacha Baron Cohen has spoken in depth about his motives in creating his comical anti-hero Borat. The journalist from Kazakhstan who sings anti-Semitic songs and refers to women as prostitutes was created "as a tool" to expose people's prejudices, he said.
The 35-year-old Jewish comedian from London has maintained a long silence over the controversy raised by Borat, whose extreme anti-Semitic remarks have earned censure both from the Kazakh government and from the Jewish community.
In one sketch from Baron Cohen's film Borat: Cultural Learnings of America For Make Benefit Glorious Nation of Kazakhstan, which premiered this month in London, Borat performs a song called "Throw the Jew Down the Well" in a country and western bar in Arizona.
In an interview with Rolling Stone, the comedian revealed he was a devout Jew, observing Sabbath and eating kosher foods, and he referred to the singing scene to defend his inflammatory comedy.
"Borat essentially works as a tool. By himself being anti-Semitic, he lets people lower their guard and expose their own prejudices, whether it's anti-Semitism or an acceptance of anti-Semitism. 'Throw the Jew Down the Well' was a very controversial sketch, and some members of the Jewish community thought it was actually going to encourage anti-Semitism.
"But to me it revealed something about that bar in Tuscon. And the question is: did it reveal that they were anti-Semitic? Perhaps. But maybe it just revealed that they were indifferent to anti-Semitism," he said.
Baron Cohen said the concept of "indifference towards anti-Semitism" had been informed by his study of the Holocaust while at Cambridge University, where he read history. "I remember, when I was in university, and there was this one major historian of the Third Reich, Ian Kershaw. And his quote was, 'The path to Auschwitz was paved with indifference.'
"I know it's not very funny being a comedian talking about the Holocaust, but I think it's an interesting idea that not everyone in Germany had to be a raving anti-Semite. They just had to be apathetic," he said.
He also talked of his astonishment at hearing that the Kazakh government was thinking of suing him over the offence caused by his comic alter ego, and stressed that the "joke is not on Kazakhstan".
"I was surprised, because I always had faith in the audience that they would realise that this was a fictitious country and the mere purpose of it was to allow people to bring out their own prejudices. And the reason we chose Kazakhstan was because it was a country that no one had heard anything about, so we could essentially play on stereotypes they might have about this ex-Soviet backwater. The joke is not on Kazakhstan. I think the joke is on people who can believe that the Kazakhstan that I describe can exist - who believe that there's a country where homosexuals wear blue hats and the women live in cages and they drink fermented horse urine and the age of consent has been raised to nine years old...
"I've been in a bizarre situation, where a country has declared me as its number one enemy. It's inherently a comic situation," he said.
While Borat has drawn much criticism from Kazakh ministers - the government took out a full page ad in The New York Times to promote their country at one stage - Erlan Idrissov, the Kazakhstan ambassador to Britain, admitted to finding some humour in the film.
Baron Cohen, who was born in Hammersmith to an affluent Orthodox Jewish family, is the second of three sons. He went to an independent school in Elstree, and Christ's College, Cambridge, and worked for the investment bank Goldman Sachs before starting his career in television.
Now, after staying resolutely in boorish persona during previous interviews, Sacha Baron Cohen has spoken in depth about his motives in creating his comical anti-hero Borat. The journalist from Kazakhstan who sings anti-Semitic songs and refers to women as prostitutes was created "as a tool" to expose people's prejudices, he said.
The 35-year-old Jewish comedian from London has maintained a long silence over the controversy raised by Borat, whose extreme anti-Semitic remarks have earned censure both from the Kazakh government and from the Jewish community.
In one sketch from Baron Cohen's film Borat: Cultural Learnings of America For Make Benefit Glorious Nation of Kazakhstan, which premiered this month in London, Borat performs a song called "Throw the Jew Down the Well" in a country and western bar in Arizona.
In an interview with Rolling Stone, the comedian revealed he was a devout Jew, observing Sabbath and eating kosher foods, and he referred to the singing scene to defend his inflammatory comedy.
"Borat essentially works as a tool. By himself being anti-Semitic, he lets people lower their guard and expose their own prejudices, whether it's anti-Semitism or an acceptance of anti-Semitism. 'Throw the Jew Down the Well' was a very controversial sketch, and some members of the Jewish community thought it was actually going to encourage anti-Semitism.
"But to me it revealed something about that bar in Tuscon. And the question is: did it reveal that they were anti-Semitic? Perhaps. But maybe it just revealed that they were indifferent to anti-Semitism," he said.
Baron Cohen said the concept of "indifference towards anti-Semitism" had been informed by his study of the Holocaust while at Cambridge University, where he read history. "I remember, when I was in university, and there was this one major historian of the Third Reich, Ian Kershaw. And his quote was, 'The path to Auschwitz was paved with indifference.'
"I know it's not very funny being a comedian talking about the Holocaust, but I think it's an interesting idea that not everyone in Germany had to be a raving anti-Semite. They just had to be apathetic," he said.
He also talked of his astonishment at hearing that the Kazakh government was thinking of suing him over the offence caused by his comic alter ego, and stressed that the "joke is not on Kazakhstan".
"I was surprised, because I always had faith in the audience that they would realise that this was a fictitious country and the mere purpose of it was to allow people to bring out their own prejudices. And the reason we chose Kazakhstan was because it was a country that no one had heard anything about, so we could essentially play on stereotypes they might have about this ex-Soviet backwater. The joke is not on Kazakhstan. I think the joke is on people who can believe that the Kazakhstan that I describe can exist - who believe that there's a country where homosexuals wear blue hats and the women live in cages and they drink fermented horse urine and the age of consent has been raised to nine years old...
"I've been in a bizarre situation, where a country has declared me as its number one enemy. It's inherently a comic situation," he said.
While Borat has drawn much criticism from Kazakh ministers - the government took out a full page ad in The New York Times to promote their country at one stage - Erlan Idrissov, the Kazakhstan ambassador to Britain, admitted to finding some humour in the film.
Baron Cohen, who was born in Hammersmith to an affluent Orthodox Jewish family, is the second of three sons. He went to an independent school in Elstree, and Christ's College, Cambridge, and worked for the investment bank Goldman Sachs before starting his career in television.
Sunday, November 25, 2007
Hedge Funds Ditch Japan for Asia, Goldman Sachs Says (Update2)
By Tomoko Yamazaki and Takahiko Hyuga
Nov. 26 (Bloomberg) -- Hedge funds are shifting Asian investments out of Japan because of lower returns and poor corporate governance in the region's biggest economy, said Kathy Matsui, Goldman Sachs Group Inc. chief strategist in Tokyo.
Japan's average return on equity will be about 10.2 percent this fiscal year, compared with 20 percent in the U.S. and 15.7 percent in Asia, according to Matsui. Return on equity is a measure of how well a company uses its cash to generate profit.
Meanwhile, Japanese companies are fending off purchases by foreign firms seeking to boost share prices, by buying stakes in each other or taking so-called poison pill measures. Some 400 Japanese companies, or 10 percent of all publicly traded firms, have taken steps to ward off hostile takeovers, according to a Nikkei newspaper survey published in October.
``I meet foreigners all the time; there has been disappointment with the Japanese market,'' Matsui said in a telephone interview. ``So Japan has been the favorite short, and that's been the price action.''
Hedge funds investing in Japan have seen outflows of about $7 billion, while Asia ex-Japan has seen inflows of about $17 billion through October this year, according to data provided by Eurekahedge, a Singapore-based hedge-fund research company.
Asia Investing
The Nikkei 225 Stock Average is down 4.3 percent this year in dollar terms and may be headed for its worst year since 2002. The Eurekahedge Asia Ex-Japan Hedge Funds Index has returned 35 percent this year, compared with a 1.9 percent advance in the Eurekahedge index that tracks hedge funds that invest in Japan.
The majority of about 700 international investors attending a Goldman Sachs two-day conference in Tokyo earlier this month were interested in investments in Asia, according to three attendants including Hiromichi Tsuyukubo at Myojo Asset Management Japan Co.
``Interest in Japan was on average lower than last year,'' said Tsuyukubo, who helps manage about $800 million at Myojo Asset, a Tokyo-based hedge fund. ``But the good thing was that the conference attracted a lot of long-term investors such as college foundations and family offices.''
Investors in Japan including Warren Lichtenstein's Steel Partners and Harbinger Capital Partners have had hostile takeovers rebuffed as Japanese companies resort to poison-pill defenses and cross-shareholdings.
Different Standards
Bull-Dog Sauce Co., a condiments maker, in June rejected a takeover approach from Steel Partners and allowed all investors except the fund to convert warrants it issued into common shares. The Tokyo High Court termed Steel Partners an ``abusive acquirer'' in striking down the fund's legal challenge to the move. Japan's Supreme Court later sided with Bull-Dog.
Companies are also reverting to an old practice of cross- shareholding to fend off any possible takeovers. Toyota Motor Corp. and Matsushita Electric Industrial Co., the country's biggest and 10th-largest companies by market value, said in annual filings that they hold stakes in each other. Toyota, located in Toyota City, Japan, said it bought the shares in Osaka-based Matsushita Electric to strengthen business ties.
``Governance standards in Japan on average, relative to the rest of Asia, are actually quite low,'' Matsui said. ``And you have a lot of Asian people wondering, why is Japan so different, why does Japan have different standards?''
The Goldman Sachs Foundation
The Goldman Sachs Foundation is a global philanthropic organization funded by The Goldman Sachs Group, Inc. The Foundation's mission is to promote excellence and innovation in education and to improve the academic performance and lifelong productivity of young people worldwide. It achieves this mission through a combination of strategic partnerships, grants, loans, private sector investments, and the deployment of professional talent from Goldman Sachs. Funded in 1999, the Foundation has awarded grants of $94 million since its inception, providing opportunities for young people in more than 20 countries.
The Foundation supplements its financial support with social and intellectual capital from Goldman Sachs. By drawing upon the firm's leadership development expertise and commitment to education, the Foundation is able to maximize the impact of its investments.
We invite you to learn more about the the foundation. Please visit our Programs and Projects, Annual Reports and Publications, and Grant Guidelines.Saturday, November 24, 2007
The Street Turns Green
Goldman Sachs got environmentalists to embrace a utility they loved to hate—and sealed a $45 billion deal.
Believe it or not, Goldman Sachs's interest in green goes beyond its record profits. The firm chauffeurs execs in hybrid cars, and the "Green Tower," its new $2 billion headquarters rising in Manhattan, is so ecofriendly that switching to a meatless diet may be a healthy career move for employees. So you'd expect any deal that reeks of greenhouse gases to set off alarms. Which is what happened when two of Goldman's clients, the private equity firms Kohlberg Kravis Roberts & Co. and Texas Pacific Group, said they wanted to buy TXU Corp., a Texas utility that has become a poster child for global warming.
What to do? Paint the utility green, naturally. Goldman advised its clients to strike a massive compromise with environmentalists: First, nix plans for all but three of 11 coal-fired plants TXU intended to build. And invest $400 million in energy-saving initiatives, like wind power. It won a green thumbs up from environmentalists, who applauded the role of Wall Street's top M&A firm. "Goldman's willingness to make the environment a key component of the deal" helped broker a truce, says Fred Krupp, president of the advocacy group Environmental Defense. With the air cleared, TXU's board last week accepted KKR and Texas Pacific's record $45 billion leveraged-buyout offer.
Wall Street is experiencing a climate change. Elite global investment banks like Citi, J.P. Morgan and Merrill Lynch never used to think twice about filling up the tanks of the nation's biggest polluters looking for cash. But now, many of the same banks that grew rich financing companies' strip mines, oil rigs and SUV plants are advising clients that the way to get the green is to go green. Since the late 1990s, environmentalists have been pressuring bankers to clean up their act, and to make it their business to persuade clients to do the same. "Sometimes we will decline to do a piece of business," says Mark Tercek, Goldman's green czar. "But more frequently, we recommend how we'd like to see the transaction proceed. Usually the client is open to our advice." In an age when Al Gore wins an Oscar for a film on global warming, no one wants to look like they're beating up on Mother Nature.
It looks as though Goldman Sachs is leading the greening of Wall Street. It all started in 2004, when the firm acquired a loan that was secured by 680,000 acres of land in southern Chile near Antarctica, on Tierra del Fuego. Goldman decided to set the land aside as a nature preserve, in collaboration with the Wildlife Conservation Society. "That was the [environmental] epiphany," says Tercek. Since then, Goldman has been on a green jag. In late 2005 it established a formal policy that, among other things, bars the firm from bankrolling projects that "significantly convert or degrade a critical natural habitat." Goldman committed to avoiding business with illegal loggers, and the firm has pledged a 7 percent cut in indirect greenhouse-gas emissions from its offices. Goldman is also fast becoming a developer of renewable energy, following its 2005 purchase of Horizon Wind Energy.
The rest of Wall Street is turning over a new leaf, too. Several major firms have formal green policies. Last week, Lehman Brothers established an internal Global Council on Climate Change, naming as its head none other than Theodore Roosevelt IV, great-grandson of the most formidable environmental president. Firms are cranking out research reports with names like "Climatic Consequences," a 120-page tome from Citi. "We started paying attention back in 2001, long before any other financial institution in the U.S.," says Pamela Flaherty, head of Citi's global community relations. Is that the sound of greenish envy?
True, some of these attempts are, well, pale green at best, but environmentalists are heartened. The investment banks are "very welcome players in what is as much an economic as a science and environmental discussion," says Mindy Lubber, president of Ceres, a network of investors, environmental groups and public-interest advocates that enlists capital markets in the environmental fight. For its part, Goldman says its environmental focus is pivotal to creating "long-term value for our shareholders and serving the best interest of our clients." Or, as Gordon Gekko might say, "Green is good."
Friday, November 23, 2007
100 Best Companies to Work For 2007
100 Best Companies to Work For 2007
| All-stars 18 employers have been on the Best Companies to Work For list every year since it launched in 1998. |
| Company name | 2007 rank |
|---|---|
| Wegmans Food Markets | 3 |
| Whole Foods Market | 5 |
| W. L. Gore & Associates | 10 |
| Cisco Systems | 11 |
| Nordstrom | 24 |
| Recreational Equipment (REI) | 27 |
| Goldman Sachs | 36 |
| J. M. Smucker | 39 |
| First Horizon National | 46 |
| SAS Institute | 48 |
| Microsoft | 50 |
| Four Seasons Hotels | 53 |
| Publix Super Markets | 57 |
| Timberland | 78 |
| TDIndustries | 79 |
| Marriott International | 89 |
| Synovus | 98 |
| A. G. Edwards | 99 |
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