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.
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