The fact that Merrill’s risk committee did not function shows that this company was governed by a board that failed utterly in its duty to investors.
The magnitude of the losses was staggering on its own: nearly $10 billion for the final quarter of 2007. That was on top of the $2.3 billion loss for the previous quarter. Write-downs have exceeded more than $20 billion. Never in the storied history of Merrill Lynch have such figures been recorded. But the admission today of John Thain, the new CEO of the world’s biggest broker, takes all the oxygen out of the room:
“Merrill had a risk committee. It just didn’t function,” he told the Wall Street Journal.
His candid statement begs the question: Where was the board? (more…)
What does it say when an America that once saved the world is now turning cap-in- hand to a collection of anti-democratic regimes from Dubai to China?
Already, foreign funds, mainly controlled by nations and regimes that hold democracy suspect, to say the least, have pumped nearly $20 billion into Citigroup and Merrill Lynch as a result of the credit debacle that has them floating in a self-created sea of write-downs and losses. Billions more are being funneled into Morgan Stanley and Bear Stearns from the same offshore sources. So it is that American capitalism has lost its primacy to such an extent that it must now turn to lands far away for its salvation. The distance is more than geographical. It is deeply ideological. (more…)
When the misguided decisions of Wall Street can so radically alter the life and fate of every Main Street in America, it is time for Washington to weigh in, big-time.
Our comments about the Great American Boardroom Bailout Sweepstakes caught the attention of the ever-watchful Marketbeat column at the Wall Street Journal yesterday. We get the impression that there is some much deserved second-guessing going on about the wisdom of the solutions Wall Street –and the Fed, for that matter– have come up with to repair the damage their folly and misguided thinking have caused. The fire sale of Citigroup stock to offshore sovereign funds controlled by non-democratic regimes, for a chunk of the company at prices that would have been unthinkable just a few months ago, is finally prompting some questions among investors. And this was before today’s stunning report of a larger-than-expected fourth quarter loss, more write-downs, a dividend cut and job layoffs that are just the beginning of that sorry process. (more…)
Main Street always pays for the wild parties Wall Street throws and the cleanup required afterwards.
Do you have your ticket for the Great American Boardroom Bailout Sweepstakes? Probably not. You need a special pass to get to the front of the line. Angelo Mozilo, CEO of Countrywide Financial, once the largest mortgage lender in the United States and now the poster child for financial ruin for itself and millions of homeowners, has one. And it’s a beaut. While steering his company into a Titanic-like credit collision and foisting loans on the most vulnerable and least able to handle them, the king of subprime mortgages has pulled in hundreds of millions in salary, bonuses and stock options since 2000 alone. (more…)
Declining bonuses this year? How about boards showing a little spine and demanding that executives give back a chunk of the oversized paychecks that were awarded in the years when these ill-fated decisions were being made.
It’s dangerous to be walking around Wall Street these days. You never quite know when another company will hit the ground with a walloping loss or some CEO will tumble out of his job. Is it not astonishing that when chief executives are elevated to god-like status, with a commensurate compensation package, sometimes they are a little light in the miracle production department? Many are appearing a bit too human in the wake of the subprime fiasco. It is not a role to which they have been accustomed.
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We have been saying for a while now that the U.S. Federal Reserve needs a better pair of glasses. Its ability to see even the obvious seems to have been severely challenged, beginning with Alan Greenspan’s era and carrying on with his successor, Ben S. Bernanke. Over a period of several years, the Fed failed to understand the destructive dimensions of the subprime trend or the need to regulate these faulty investment instruments. The New York Times details some of the background to this troubling performance in a major piece today. It paints an unsettling picture during a time of growing economic uncertainty and one that should prompt many observers to ask what else might the Fed be missing.
Here is an excerpt from the piece. (more…)
