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Wall Street’s bonus baby steps

 
By Colin Barr for CNN Money, December 30, 2009

So much for Wall Street sobering up.

Under pressure to prevent another meltdown, Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500) have been cutting back on cash bonuses and insisting on so-called clawbacks — arrangements that allow companies to reclaim past bonuses when there is employee misconduct.

Yet for all their supposed reform-mindedness, the banks show no sign of pulling the emergency brake on the great compensation escalator.

A year after taxpayers saved the finance industry from collapse, the big banks will hand out billions of dollars in bonuses in the coming weeks — at a time where unemployment tops 10% and many people are still losing their homes to foreclosures. To say this rankles in some quarters is an understatement.

"There is a need to show restraint considering the unusual circumstances of the past year or so," said Tim Smith, a senior vice president at socially responsible investment firm Walden Asset Management in Boston. "That's what you're not seeing right now."

Take Goldman Sachs. After losing more than $3 billion in the last four months of 2008, the securities firm is on track to lavish some $21 billion on its workers for 2009, now that the firm has returned to profitability. That's in line with the amount Goldman paid in its record profit year of 2007.

Goldman won't be the only one dispensing a lot of loot. Compensation expense at JPMorgan Chase's (JPM, Fortune 500) investment banking arm was up 20% in the first three quarters of 2009, the New York state comptroller's office estimates. Even Morgan Stanley, which only recently broke an embarrassing streak of quarterly losses, could pay workers $14 billion.

To be fair, Goldman and Morgan Stanley are reforming how they compensate top execs, doling out less cash and issuing more stock that must be held for several years.

But while some banks have been willing to engage critics of their compensation-setting processes, they haven't been inclined to limit the size of paychecks.

When times are good, those can be rather large. In 2007, for instance, Goldman's top five executives — CEO Lloyd Blankfein, co-presidents Gary Cohn and Jon Winkelried, finance chief David Viniar and chief administrative officer Edward Forst — combined to make $322 million, according to Securities and Exchange Commission filings

Though none of the firm's top five leaders received more than $5.3 million in 2008, this year's giant trading profits could mean a return to the eye-popping paychecks of yore.

That's inappropriate considering the risks taxpayers took on in financing the resuscitation of the banking sector last year, said Laura Shaffer, director of shareholder activities at the Nathan Cummings Foundation in New York, which owns a stake in Goldman Sachs.

She notes the billions of dollars in Troubled Asset Relief Program loans that the big banks took and then repaid, as well as the benefits they reaped via the bailout of troubled insurer AIG (AIG, Fortune 500) and the expanded federal backstops of bank deposits, bank bonds and money market funds.

All these stand as asterisks to the $51 billion in profits that the six biggest bank holding companies — Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and Wells Fargo (WFC, Fortune 500) along with Goldman, Morgan Stanley and JPMorgan Chase — posted in the first nine months of 2009. Goldman alone is responsible for almost a quarter of that.

"There's a sense on our part that the performance we've seen at Goldman isn't true performance," said Shaffer.

Accordingly, the Cummings foundation has sponsored a resolution calling on the Goldman board to report back to shareholders on whether senior executives' compensation is "excessive," judging by the gap between top execs' pay and that of other workers.

The so-called pay disparity resolution isn't the only one of its kind. A group of institutional investors belonging to the Interfaith Center on Corporate Responsibility (ICCR) this month filed shareholder resolutions along the same lines at 21 big health industry companies, including insurer Aetna, drugmaker Eli Lilly and mail order pharmacy Medco.

Those resolutions will go up for shareholder votes when the companies hold their annual meetings. Though it can take years to build enough stockholder support to give a proposal even a shot at passage, would-be reformers are hopeful that the disconnect between massive job losses and soaring CEO pay will win over some skeptics.

"There is a lot of discontent right now among shareholders," said Julie Tanner, assistant director of socially responsible investing at Christian Brothers Investment Services, which like Nathan Cummings is a member of ICCR.

Putting the details of giant pay packages before shareholders can shame board members into getting a stronger grip on the compensation process, Tanner said. This is the logic of the say-on-pay movement, whose advocates have enlisted more than three dozen companies — including Goldman — to hold advisory votes next year on compensation practices.

Investors aren't the only possible source of friction on giant paychecks. The Federal Reserve said this fall it will examine bank pay practices, in a review some experts expect to result in some "pushback" for big banks.

But it's not clear how aggressive the Fed will be. And while greater disclosure and transparency are surely welcome, they will do little now to bring down egregious pay on Wall Street.

"Putting pressure on boards is a long process," said David DeBoskey, a finance professor at San Diego State. "In the meantime, every day is Christmas for these guys." 

http://i.cdn.turner.com/money/.element/apps/cvp/4.0/swf/cnn_money_384x216_embed.swf?context=embed&videoId=/video/fortune/2009/12/30/sl_barr_bonuses.fortune

AP Source: Gov’t Moves Closer on Fresh Aid to GMAC

By The Associated Press for The New York Times, December 30, 2009

The government was moving ahead Wednesday on a fresh multibillion dollar cash infusion to stabilize auto financing company GMAC Financial Services, according to a person with knowledge of the matter.

The person, who spoke on condition of anonymity because discussions weren't complete, says the government aid would range around $3 billion. That would be less than the roughly $6 billion the government had earlier thought GMAC would need to stabilize the company.

Shoring up GMAC has been a major component of the Obama administration's massive effort to rescue ailing automakers General Motors and Chrysler. The lender provides critical wholesale financing to thousands of GM and Chrysler auto dealers, allowing them to stock their showroom floors with vehicles. GMAC has already received $12.5 billion in taxpayer money and is 35 percent owned by the federal government.

But GMAC also operates a large residential mortgage business, ResCap, which was battered by the recent housing collapse. GMAC was obligated by the Treasury Department to raise $11.5 billion in additional capital earlier this year after failing the government's stress test for banks, largely because of ResCap's big losses. However, GMAC had difficulty raising money because of its financial woes, making an extra government infusion necessary.

An announcement of the latest injection of aid could come late Wednesday or on Thursday.

Treasury spokesman Andrew Williams declined to offer details, but said: ''Treasury is in discussions with GMAC to ensure its capital needs as determined … by the stress tests are met.''

GMAC spokeswoman Gina Proia on Tuesday night declined comment on reports of the new aid but said the company ''has been conducting a strategic review of its business and evaluating options to address the challenges in its mortgage operation.''

Proia said GMAC was trying to position itself to improve its financial performance and repay the U.S. government.

Michael Carpenter, who succeeded Alvaro De Molina as the company's CEO in November, has said the company would need no more than $5.6 billion in aid. Lawmakers estimated the company would receive between $2 billion and $5 billion in additional aid.

Despite the government support, GMAC still remains on shaky financial ground. Last month, it reported a quarterly loss of $767 million, though the results were an improvement over a giant loss a year ago. ResCap lost $747 million during the third quarter as homeowners continued to default on their mortgages in large numbers.

GMAC has also been hurt by the rapid decline of the U.S. auto industry after sales crumbled due to the recession and financial woes of the big automakers. Sales of cars and trucks were down 24 percent through November compared with the same part of last year.

Despite the drop in auto sales, GMAC's auto lending business has shown some signs of revival. The auto financing division earned a profit of $395 million during the third quarter. The company's online consumer banking unit, Ally Bank, has also been a bright spot by bringing in billions of dollars in new deposits by offering relatively high interest rates.

 

U.S. debt ‘serious’ concern for Canada, Flaherty warns

 
Canada's Finance Minister Jim Flaherty. Reuters

By Paul Vieira for Financial Post, December 22, 2009

Canada could face "serious" economic consequences should the United States fail to address its bulging budget deficit, warns Finance Minister Jim Flaherty.

"The situation in the United States is serious in terms of the size of their deficit," Mr. Flaherty said in an interview. "That is a persisting concern" for the Canadian economy, as the United States is by far Canada's largest trading partner.

In the interview, Mr. Flaherty talked about the big issues that Canada faces in the next decade. His short-term focus remains on implementing the federal government's $47-billion stimulus package, which was meant to mitigate the impact of the global financial crisis. The stimulus scheme and record-low interest rates appear to have worked in turning around the Canadian economy, with meagre growth last quarter – bringing an end to the recession – and more robust expansion expected this quarter.

Mr. Flaherty reiterated his pledge to bring the budget back to balance by the middle of the coming decade, without tax increases or cuts to transfers to provinces and individuals. He suggested the next budget, now expected in March, would contain new "guideposts" that would show the way to budget balance.

While Mr. Flaherty expressed confidence about Canada's economic prospects this coming decade as the country taps new emerging markets, he also acknowledged one of the big threats – namely, the U.S. fiscal situation, which analysts describe as "horrendous."

The U.S. deficit this year, estimated at US$1.4-trillion, will be at its highest level as measured as a percentage of GDP since the Second World War. Furthermore, the debt-to-GDP ratio in the United States is expected to surpass the 100% threshold in 2012. (In contrast, debt-to-GDP in Canada is expected to peak next year, at 79%.)

To address this, U.S. legislators must opt to either control spending growth or raise taxes – both of which could crimp U.S. demand, which is a key component of Canadian economic growth. Unless addressed, there is also the risk that long-term borrowing costs will surge upward, throwing the North American economy into another tailspin.

"This is a concern," the Finance Minister said. "We want the U.S. economy to return to health [because] it is good for our economy. We need to see that once American governments, including U.S. states, are through the crisis that there be indications as to how they will manage this huge deficit – because it has consequences both within and [outside of] the United States."

Mr. Flaherty added he has spoken with his U.S. counterpart, Treasury Secretary Timothy Geithner, and is of the opinion the White House will try to address its budget shortfall.

Mr. Flaherty isn't the only person warning of Washington's need to restore fiscal order. Last week, former U.S. Federal Reserve chairman, Alan Greenspan, said the country was on the path toward a "formidable" fiscal crisis unless tackled shortly.

Furthermore, a recent paper prepared for the U.S. National Bureau of Economic Research suggested Washington might try to deal with its monster debt by allowing inflation to rise, thereby eroding the real value of the debt held by creditors – of which China is at the top of the list. Inflating away debt was a tactic tried following the Vietnam War, but kicked off a nasty inflationary spiral that saw inflation surge in the United States from 1.4% in the early 1960s to 13% by the time the 1980s rolled around.

Perhaps knowing U.S. demand is set to be tepid as households repair balance sheets and fiscal measures hold back growth, the federal Conservative government has been aggressive in recent months, with Prime Minister Stephen Harper visiting India and China for the first time.

"We have tremendous opportunities" in foreign markets, Mr. Flaherty said, noting Ottawa is in free-trade talks with the European Union and South American nations.

Lehman Creditors Endorse Plan to Return Assets

By Svea Herbst-Bayliss (Reuters) for The New York Times, December 29, 2009

The administrator for Lehman Brothers International said on Tuesday that nearly all clients whose assets have been frozen since the investment bank's collapse support a plan to return the money early next year.

PricewaterhouseCoopers <PWC.UL>, which is overseeing the liquidation of Lehman's London-based unit, in November

sketched out a plan to return about $11 billion held in custody by March 2010. The scheme required that 90 percent of Lehman's clients approve the plan by December 29.

"I am delighted that we have received overwhelming support for this arrangement to return assets to clients," Steven Pearson, a partner at PricewaterhouseCoopers and one of the administrators, said in a statement.

Hundreds of hedge funds could not access their money last September when New York-based Lehman filed for bankruptcy. The plan would return assets to funds and close out positions without the need to post further collateral.

Several prominent hedge funds, including Ramius Capital, have had their assets frozen.

 

Goldman Takes Biggest Share of $923 Million IPO Fees

 
By Michael Tsang for Bloomberg, December 29, 2009

Goldman Sachs Group Inc. won the biggest share of the $923 million in fees from U.S. initial public offerings this year, while Citigroup Inc. fell out of the top five after its revenue plummeted more than 50 percent.

Goldman Sachs made $191.6 million helping take 16 companies from Hyatt Hotels Corp. to Cobalt International Energy Inc. public this year, an increase of more than 60 percent from 2008, preliminary data compiled by Bloomberg show. Citigroup’s share of fees dropped to $68.3 million, making the New York-based lender the only underwriter that participated in at least $1 billion worth of sales to suffer a decline in revenue.

Banks increased fees for initial share sales by 62 percent to 5.63 percent from the lowest level on record, even as the amount that U.S. companies raised from IPOs decreased by almost half to $16.4 billion this year, according to Bloomberg data. While the biggest surge in stocks since the Great Depression revived the IPO market and helped enrich bankers, almost 40 percent of offerings sold by underwriters in the second half of 2009 have left buyers with losses, the data show.

“It was sort of like a feeding frenzy, whatever deal came people wanted to buy it,” said Joe Castle, New York-based head of the equities syndicate for the Americas at Barclays Plc, which climbed into the top 10 among underwriters for U.S. IPOs after doubling its share of offerings this year. In the second half, “there were some aggressive valuations that people have pushed back on” as the performance of IPOs suffered, he said.

Most Lucrative

IPOs are among the most lucrative advisory businesses on Wall Street, with bankers extracting fees from companies that seek initial offerings that are more than 10 times higher than those from mergers and acquisitions or corporate-bond sales.

During the five-year bull market for stock prices that ended in 2007, underwriters on average kept 5.93 percent of the money raised from IPOs by U.S. companies, Bloomberg data show.

This year, fees averaged about 5.63 percent of proceeds, up from a record low of 3.48 percent in 2008, when the worst financial crisis since the 1930s sparked the collapse of New York-based Lehman Brothers Holdings Inc. in September and forced the government to give nine of the largest U.S. banks $125 billion in bailout money, fee data compiled by Bloomberg since 1999 show.

The higher fees helped to limit the decline in revenue from U.S. IPOs in 2009 to about 10 percent from $1.03 billion last year. The amount raised by U.S. companies going public slumped 45 percent from $29.6 billion, as sales evaporated in the fourth quarter of 2008 after Lehman’s failure froze credit markets.

IPO Revival

The drought lasted until September as an average of two U.S. companies a month went public, the slowest pace since at least 1995, according to data compiled by Bloomberg.

The IPO market then rebounded as companies took advantage of a 67 percent advance in the Standard & Poor’s 500 Index from its 12-year low in March. Thirty-two companies completed offerings since the start of September, equal to 68 percent of the 47 initial sales in 2009, Bloomberg data show.

Goldman Sachs, which became a bank holding company last year and took $10 billion in taxpayer bailout money, earned the most from underwriting U.S. IPOs in 2009, after getting shut out of the top three in the prior two years, Bloomberg data show. The firm’s fees rose 62 percent from $118.2 million last year.

The bank’s biggest payday came from managing Hyatt’s $1.09 billion offer last month, for which New York-based Goldman Sachs received about $56 million, data compiled by Bloomberg show.

Biggest Payday

The Pritzker family, which controls the Chicago-based hotelier, sold 38 million Class A shares at $25 each, while its underwriters bought an additional 5.7 million shares on behalf of their clients. Hyatt has advanced 20 percent since its IPO, almost three times the S&P 500’s gain over the same span.

Goldman Sachs also helped manage the sale of 63 million shares in Cobalt, the oil explorer with no revenue or profits that is also controlled by Washington-based Carlyle Group and three other private-equity funds.

Cobalt sold shares at $13.50 each this month after buyers rejected the Houston-based company’s offer of $15 to $17. The price represented a discount of as much as 21 percent.

Goldman Sachs earned $12.2 million from the IPO, while Cobalt’s shares have fallen 0.6 percent since the Dec. 15 sale.

By the total value of U.S. IPOs, Goldman Sachs also led all other lead underwriters. The most profitable securities firm in Wall Street history participated in 21.2 percent of the offerings, or about $3.48 billion, Bloomberg data show. Andrea Rachman, a spokeswoman at Goldman Sachs, declined to comment.

Citigroup’s Fall

Citigroup, which ranked among the top three fee earners from 2005 to 2008, made $68.3 million arranging initial sales, a drop of 52 percent from a year ago and less than half the amount that each of the top three underwriters earned in 2009.

The last of the four largest U.S. banks to raise money to exit a taxpayer bailout, Citigroup relinquished its position as the top underwriter for U.S. IPOs, a title it held in three of the past four years. The lender helped arrange $1.19 billion worth of initial offers, ranking sixth among banks. Citigroup fell out of the top five for the first time since 2004.

“The franchise is strong,” said John Chirico, Citigroup’s New York-based co-head of capital markets origination for the Americas. “We’re very bullish on 2010 from an IPO perspective.”

He declined to comment on why Citigroup’s share of IPOs shrank by more than half in 2009.

‘Voting With Their Fees’

Citigroup was a lead underwriter in the IPO of Glenview, Illinois-based Mead Johnson Nutrition Co., the maker of Enfamil infant formula, in February. The company raised $828 million selling shares at the $24 maximum price that it sought in the first U.S. initial offering of 2009. The stock has since added 85 percent, beating the 36 percent gain in the S&P 500.

Among the other IPOs that Citigroup helped arrange, three are trading below their offer prices, while five of the nine have underperformed the S&P 500 since their sales.

“When people look at underwriters, they look at the whole package,” said Michael Holland, chairman of Holland & Co., a New York-based investment firm that oversees more than $4 billion. “With Goldman, people have no problem whatsoever with their franchise. With Citi, they’ve faced some very challenging times, so which one do you go with? People are voting with their fees in this case.”

Bank of America Corp., the largest U.S. lender by assets, was second in both fees and market share, as it charged companies less on average than any other bank in the industry.

Biggest U.S. IPO

The company that agreed to acquire New York-based Merrill Lynch & Co. last year collected $158.2 million in fee income, data compiled by Bloomberg show. That equals about 5.28 percent of proceeds from IPOs for which the Charlotte, North Carolina- based lender was a lead underwriter.

Bank of America’s fees were depressed by its offering of Jersey City, New Jersey-based Verisk Analytics Inc. in the biggest U.S. IPO of 2009, according to Lisa Carnoy, the bank’s New York-based global head of equity capital markets.

Bank of America and Morgan Stanley each received $43.1 million after charging the supplier of actuarial data to insurers 4 percent to underwrite Verisk’s $2.16 billion IPO in October, the lowest percentage of any U.S. offering this year, data compiled by Bloomberg show.

Carnoy and JD Moriarty of Bank of America’s equity capital markets group, and William Egan, who runs corporate and investment banking for financial companies, led the bank’s team on the Verisk IPO. The stock has climbed 41 percent since the offering, beating the 6.9 percent gain in the S&P 500.

Private-Equity IPOs

Bank of America also helped arrange the largest number of U.S. initial sales this year, which gave the lender an 18.3 percent share of the value of all deals. That’s less than the combined total of 25.8 percent last year, when Bank of America and Merrill Lynch were counted separately, data compiled by Bloomberg show.

Among the 22 deals for which the bank served as a lead underwriter was New York-based Blackstone Group LP’s $160 million offering of Team Health Holdings Inc., which supplies doctors to hospitals and emergency rooms.

The Knoxville, Tennessee-based company, which was almost 90 percent owned by Stephen Schwarzman’s Blackstone, sold 13.3 million shares at $12 each this month after investors refused to pay the $14 to $16 originally sought, Bloomberg data show. Team Health has added 14 percent, while the S&P 500 rose 1.8 percent.

‘Loud and Clear’

“What investors told us loud and clear based on the pricing performance of these December deals was that the valuation concession they would need to establish a significant position in IPOs was wider than the collective capital markets and banking community thought,” said Bank of America’s Carnoy.

Morgan Stanley more than quadrupled the amount it made from underwriting IPOs to $156.1 million, the biggest increase from 2008 for a bank that took part in at least $1 billion in deals, Bloomberg data indicate. Morgan Stanley spokeswoman Alyson Barnes declined to comment.

JPMorgan Chase & Co., the second-largest U.S. bank, made $105.4 million charging the industry’s highest fees. The New York-based lender received 5.8 percent in fees from the $1.82 billion in IPOs that it helped underwrite, the highest percentage of those credited with $1 billion or more in IPOs.

The 17 companies that JPMorgan helped take public through IPOs have also posted the biggest stock-market gains. Their shares have advanced 26 percent since going public, the highest average among the top eight underwriters, Bloomberg data show.

IPO Performance

Three IPOs that JPMorgan helped underwrite are trading below the offer price. Joseph Evangelisti, JPMorgan’s spokesman, declined to comment today.

U.S. companies that paid Frankfurt-based Deutsche Bank AG $53.7 million in IPO fees this year have fared the worst. Six of eight are trading below their offer price, with the average company falling 4.1 percent since its IPO.

Omeros Corp., the Seattle-based biopharmaceutical company, has lost 28 percent of its stock-market value, the biggest decline among 47 U.S. IPOs this year. Deutsche Bank, Germany’s biggest bank, was the sole lead underwriter of the offering.

“It’s been a tougher market than we’ve seen in some time,” said Mark Hantho, Deutsche Bank’s New York-based global co-head of equity capital markets. “Finding a balance between the value at which a company goes public and also have it trade well in the after-market, that’s a tough balance.”

Based on the number of companies that have filed to raise money through IPOs and have yet to do so, Deutsche Bank ranks fifth with a 7.5 percent share, the bank’s own data showed.

“We’re poised to do better,” Hantho said. “We have a real shot” of rising in the rankings next year, he said.

ABN Amro and Deutsche Close the Deal

 

Chris V. Nicholson for The New York Times, December 24, 2009

ABN Amro and Deutsche Bank finally did it. After a year and a half of negations between the nationalized Dutch lender and the largest bank in Germany, they agreed on Wednesday to a deal for Deutsche to buy a commercial banking unit and other parts of the business.

The 700 million euro ($1 billion) transaction allows Deutsche to expand in the Netherlands, long one of its strategic objectives, and lets the Dutch government merge ABN Amro with Fortis Netherlands, after meeting a condition imposed by the European Commission that ABN divest itself of Hollandsche Bank Unie and other assets in order not to lessen competition in the commercial and wholesale banking markets.

The two banks were on the verge of an agreement several times during the talks, but each time they broke down, and the Dutch government had missed a series of deadlines imposed by Brussels before finally coming to terms.

Bernanke Met With 24 Senators After Renomination as Fed Chief

By Craig Torres and Christopher Anstey for BusinessWeek, December 29, 2009

Federal Reserve Chairman Ben S. Bernanke had conversations with 18 of the 23 legislators on the Senate Banking Committee prior to their 16-7 vote this month to recommend that the full Senate confirm him to a second term.

While facing opposition to his renomination, Bernanke also confronts the biggest threats to the Fed’s authority and independence in five decades. Both chambers of Congress are demanding more transparency by the Fed and drafting legislation redefining the central bank’s role in financial stability and consumer protection. The Senate is considering a proposal that would strip the Fed of power to supervise banks.

“In all my years of doing this, and I have been doing this since 1996, I have never seen a Fed chairman put a full court press on Congress, especially on the Senate Banking Committee,” said Ken Thomas, a lecturer in finance at the University of Pennsylvania’s Wharton School who routinely reviews the daybooks of Fed chairmen.

“This is unprecedented political contact for a Fed chairman in such a short period,” Thomas said, “especially considering Bernanke’s vow before his first Senate confirmation hearing that ‘I will be strictly independent of all political influences.’” The banking committee hearing was held on Nov. 15, 2005.

Fed spokeswoman Barbara Hagenbaugh didn’t immediately respond to requests by telephone for comment.

Leaders Day

Bernanke also met with House lawmakers, including Majority Leader Steny Hoyer of Maryland and John Larson of Connecticut, chairman of the House Democratic Caucus. He lunched with Republican members of the House Ways and Means Committee on Sept. 16, and spoke the same day at a Rhode Island Business Leaders Day event sponsored by Senator Jack Reed, a Democrat on the banking committee.

“Bernanke has put a big emphasis on communication,” said Douglas Lee, a former Joint Economic Committee chief economist who is now president of Economics From Washington in Potomac, Maryland.

“Given the highly unusual set of circumstances that prevailed” during the financial crisis, the Fed chairman “would have a larger than usual contact with members of Congress, particularly the Senate Banking Committee,” Lee said. He met with Bernanke on Sept. 1, according to the Fed chairman’s calendar.

Mostly Republicans

While the former Princeton University professor was first picked by Republican ex-President George W. Bush, opposition on the renomination came mostly from Republicans who have criticized the Fed for lax regulation and its role in bailouts of Wall Street.

Richard Shelby, the senior Republican on the banking panel, opposed a second term for Bernanke along with five other Republicans and one Democrat. Christopher Dodd, the Democrat from Connecticut who chairs the committee, said this month the full Senate vote is likely to occur sometime after Jan. 19. He supported a second term for the Fed chief.

Bernanke also met during the period from August through November with private-sector economists, business and financial-company leaders, hedge fund managers, foreign central bankers and other government officials from abroad.

Dealers and Investors

The Fed chairman hosted a session on Aug. 4 with the U.S. Treasury’s Borrowing Advisory Committee, a group of dealers and investors.

Bernanke met with Citigroup Inc. Chairman Richard Parsons on Aug. 10, and eight days later with Chief Executive Officer Vikram Pandit, the records show.

Bernanke held a session on Sept. 2 with chief executives of major airlines, according to the daybook, which didn’t specify the names of the companies. He spoke by telephone on Oct. 9 with Ford Motor Co.’s Alan Mulally and other executives of the Dearborn, Michigan-based automaker.

The Fed chairman met in his office on Sept. 4 with Stan Druckenmiller, chairman of Duquesne Capital Management LLC in New York, and Arminio Fraga, chairman of Gavea Investimentos Ltda in Rio De Janeiro, Brazil.

Goldman Sachs Group Inc. Chairman Lloyd Blankfein met with Bernanke and Fed General Counsel Scott Alvarez on Sept. 30. The Fed became a supervisor of Goldman Sachs after the firm converted to a bank holding company in September 2008 following the collapse of Lehman Brothers Holdings Inc.

Bernanke met in his office on Oct. 21 with Anshu Jain, head of global markets at Deutsche Bank AG, and Peter Hooper, chief economist at Deutsche Bank Securities Inc. in New York. He met with Barclays PLC President Robert Diamond Jr. on Sept. 29.

 

Riskiest US lenders were most active lobbyists -IMF

From Reuters, December 29, 2009

U.S. lenders involved in risky mortgage lending that contributed to the 2007 financial crisis were also some of the fiercest financial lobbyists, according to a report by International Monetary Fund economists.

In the report "A Fistful of Dollars: Lobbying and the Financial Crisis," the economists said their studies showed that lenders taking on the most risk were also the most active in lobbying against laws and regulations related to mortgage lending.

The study did not name any of the lenders but the language in it implied that they were among the biggest banks and mortgage brokerage companies in the nation.

"Lenders that lobby more intensively on these specific issues have (i) more lax lending standards measured by loan-to-income ratio, (ii) greater tendency to securitize, and (iii) faster growing mortgage loan portfolios," the report said.

"Ex post, delinquency rates are higher in areas in which lobbying lenders' mortgage lending grew faster, and, during key events of the crisis, these lenders experienced negative abnormal stock returns," it added.

The study is the first to document how lobbying may have contributed to excessive risk-taking in the U.S. housing market that led to the 2007 financial crisis, economists Deniz Igan, Prachi Mishra and Thierry Tressel said.

More than two years after the onset of the worst financial crisis since the Great Depression, the Obama administration is pushing to impose tougher regulation on the financial services sector to try to prevent it engaging in the kind of excessively risky behavior that triggered the crisis and severe global recession.

The IMF economists said lenders that spent millions of dollars lobbying also expect preferential treatment.

"Such preferential treatment could be a higher probability of being bailed out, potentially under less stringent conditions, in the event of a financial crisis," they said.

Their studies showed that in the current crisis, 16 of the 20 lenders that spent the most on lobbying between 2000 and 2006 received financial bailouts from the government.

In total, lenders that lobbied on specific issues received almost 60 percent of the funds allocated under the U.S. government's Emergency Economic Stabilization Act set up by the Bush administration to rescue banks from failure.

 

Salaries in financial field are expected to rise

From NewsOK, December 30, 2009

These 10 positions show steady or increasing compensation and are viewed as promising jobs nationwide for 2010, according to the Robert Half 2010 Salary Guides.

→Starting salaries for accounting and finance positions are expected to increase by an average of 0.5 percent in 2010. The best prospects include:

Tax accountant: Companies want people who can achieve bottom-line savings through effective tax management strategies and maintain compliance with tax regulations. Those with one to three years of experience at large companies are expected to see an average national starting salary of $46,500 to $61,500.

Compliance director: Firms need professionals to help them comply with U.S. Securities and Exchange Commission mandates and prepare for the potential transition to International Financial Reporting Standards. New regulations issued as a result of the financial crisis may further generate demand. The starting salary range at a small company is forecast to be $83,750 to $108,500.

Credit manager/supervisor: Companies need professionals who can reduce inefficiencies and enhance profitability. Demand is for credit and collections specialists who can evaluate credit risk, manage delinquent payments and help improve cash flow, with base compensation in small companies projected at $42,500 to $57,500.

Senior financial analyst: Professionals who are able to evaluate financial plans, forecasts and budgets and improve profitability. A senior financial analyst at a midsize company is anticipated to earn $57,750 to $74,000 in starting salary in 2010.

• National starting salaries for Information Technology positions are forecast to decrease by an average of 1.3 percent in 2010. The best prospects in this field include:

Network administrator: Cloud computing, Voice over Internet Protocol and Software as a Service have significantly increased the complexity of and requirements placed on networks. This skilled position has starting salaries in the range of $54,500 to $80,250 in 2010.

Information systems security manager: Protecting the confidentiality, integrity and availability of information from breaches is vital and makes security professionals integral to the IT department. The salary range for an information systems security manager is expected to be $96,500 to $130,750.

Systems engineer: Systems engineers are in demand to help companies develop and maintain technical infrastructure, hardware and system software components in support of a variety of IT projects. Base compensation is projected to range from $64,250 to $93,250.

• Starting salaries for administrative professionals are projected to decrease by an average of 2.2 percent in 2010, but demand is steady for those with broad expertise. The best prospects include:

Medical records clerk: As more hospitals and health care organizations move from paper to electronic records, facilities will seek those who can help supervise the scanning and processing of patient data. Starting salaries of $23,750 to $31,500 are projected for next year.

Customer service representative: In this economy, hiring managers consider customer service the function most critical to success, according to a report from Robert Half and CareerBuilder. The salary range is projected at $22,750 to $30,750.

Executive assistant: Companies with leaner teams are looking for employees to take on a wider range of duties, support multiple managers and adapt readily to change. Starting salaries are in the range of $35,000 to $47,000.