Wall Street bracing for a volatile week

 
By Ben Rooney for CNNMoney, December 21, 2009

Wall Street is in for a quiet three and a half days of trading this week with many market participants on vacation and traders mostly focused on defending this year's gains.

"There are a lot of lights out in investment management offices," said Lawrence Creatura, a portfolio manager with Federated Clover Investment Advisors. "It's likely to be a quiet week."

The stock exchange will close early Thursday and will remain dark Friday for the Christmas Holiday. Many traders will take the entire week off.

And with the major indexes on track to post double-digit percentage gains for the year, those money managers who are on the clock next week will probably not be making any aggressive plays.

"Investors will have a very limited focus," said Doug Roberts, chief investment strategist for Channel Capital Research. "For the most part, people are trying to protect gains."

Still, traders will have to contend with a number of economic reports this week, including the final revision to third-quarter gross domestic product, data on personal income and spending, as well as weekly jobless claims numbers.

What's more, the lack of participation means trading volumes could be low, which tends to amplify small moves and cause market volatility.

Meanwhile, investors continue to focus on the economic outlook for next year.

The Federal Reserve said last week that economic conditions continue to pick up, even as the central bank held interest rates at historic lows. It also noted that conditions in the financial markets have improved, and that it will allow most of its asset purchase programs, launched during the height of the financial crisis, to wind down on schedule.

"The consensus is for stepwise improvement in the economy in 2010," Creatura said. "Any deviation from that script will have pronounced effect on the market."

The market may also look to the dollar for direction. The greenback regained ground against the euro last week as concerns about the economic health of some major European economies weighed on the shared currency.

Greece's credit rating was downgraded by Standard & Poors last week, and investors will be on the lookout for red flags from other euro zone economies.

"If we see further talk that S&P and Moody's are going to look closer at Spain, another major economy, stocks here could take a hit," said Charlie Smith, an analyst at Fort Pitt Capital Group.

On the docket

Monday: Nothing scheduled

Tuesday: The Commerce Department will release its final revision of third-quarter Gross Domestic Product before the opening bell.

Economists surveyed by Briefing.com expect GDP, the broadest measure of economic activity, to have risen at an annual rate of 2.7% in the three months ending in September.

While that would be below the 3.5% growth rate the government projected in October, it still marks a substantial improvement over the previous four quarters, in which economic activity shrank.

Shortly after the market opens, the National Association of Realtors will release a report on existing home sales in November.

Wednesday: Government figures on personal income and spending in November come out in the morning.

Economists forecast a 0.5% increase in personal incomes, while spending is expected to be unchanged from the month before.

Reports on consumer confidence and new home sales are due out shortly after the opening bell.

The weekly crude oil inventories report is also due in the morning.

Thursday: A report on durable goods orders comes out before the start of trading.

Economists believe new orders for long-lasting manufactured goods rose 0.4% in November after a decline of 0.6% the month before. Excluding transportation, durable goods orders are expected to rise 1.0%.

Senate OKs filing extension for jobless

The government's weekly jobless claims report is also due in the morning, but no estimates were available yet.

The stock exchange will close at 1 p.m. ET and will remain dark Friday.

Wall Street pay changes ‘glacial’ amid year of outrage

Goldman, others, shift top bonuses to stock to head off tougher limits

By Alistair Barr & Matt Andrejczak for MarketWatch, December 21, 2009

It's a typical December on Wall Street. Bankers are paying out big fat bonuses.

And they're on course to pay out almost as much as they did in 2007, at the peak of the credit boom, when the financial sector wasn't propped up with hundreds of billions of dollars in government money.

The six largest U.S. banks, Citigroup Inc. /quotes/comstock/13*!c/quotes/nls/c (C 3.39, -0.01, -0.29%) , Bank of America /quotes/comstock/13*!bac/quotes/nls/bac (BAC 15.30, +0.27, +1.80%) , J.P. Morgan Chase /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 41.93, +0.98, +2.39%) , Goldman Sachs /quotes/comstock/13*!gs/quotes/nls/gs (GS 166.08, +2.89, +1.77%) , Wells Fargo /quotes/comstock/13*!wfc/quotes/nls/wfc (WFC 27.28, +0.50, +1.86%) and Morgan Stanley /quotes/comstock/13*!ms/quotes/nls/ms (MS 29.58, +0.37, +1.27%) , are on track to hand out as much as $149 billion for bonuses, all benefits and other compensation for 2009, according to the run rate projected by the New York State Comptroller's Office.

As the most controversial year for compensation on Wall Street comes to a close, progress on executive pay issues seems to be moving at a glacial pace despite the underlying fever for reform.

"It's shocking how little change there's been," said William Cohan, a former investment banker and author of "House of Cards: A Tale of Hubris and Wretched Excess on Wall Street," which chronicles the collapse and bailout of Bear Stearns.

"We had an opportunity to realign incentives and get real skin in the game," he added. "But that has not happened."

However, there are early signs of a shift in pay policies at some financial institutions like Goldman as they try to quell public outrage and head off more draconian government restrictions on the sector's main tool for recruiting and retaining talent.

"Some decisions are being made one step ahead of the posse, but that's how positive change is made in many cases," said Michael Oxley, former Republican chairman of the House Financial Services Committee who helped create the Sarbanes-Oxley Act to crack down on corporate fraud earlier this decade. "This is a glacial kind of movement but clearly movement has been made."

A national furor erupted earlier this year after American International Group /quotes/comstock/13*!aig/quotes/nls/aig (AIG 28.07, -0.12, -0.43%) paid more than $160 million to retain employees of a derivatives unit that pushed the giant insurer and the financial system to the brink of collapse. Some recipients agreed to pay the money back, but the episode sparked a debate about compensation across corporate America.

The government pumped more than $200 billion of taxpayer money into AIG and the nation's largest banks through the Troubled Asset Relief Program, or TARP. But strict limits on compensation came with that support.

The Treasury Department appointed Kenneth Feinberg as Pay Czar, giving him authority over the pay of top employees at the seven institutions that got the most government support, including AIG, Citi and Bank of America.

As executives realized the extent of government control over their compensation, there was a stampede to raise new capital and repay the government, led by Goldman which exited TARP in June.

However, the Federal Reserve has weighed in with permanent guidelines on how banks must stop incentives that encourage employees to take too much risk. And the threat of legislation limiting compensation further still hangs over the sector.

Earlier this month, the U.K. imposed a 50% tax on bank bonuses over 25,000 pounds and France has followed with a similar tax.

'Significant'

Soon after the British bonus tax was announced, Goldman said its 30-person management committee will be getting bonuses for 2009 in the form of "shares at risk" instead of cash. The shares cannot be sold for five years.

The five-year holding period includes a bulked-up provision that lets Goldman take the shares back if employees conduct "materially improper risk analysis" or fail to sufficiently voice concerns about risks, the firm said.

Shareholders will also get an advisory vote on Goldman's compensation principals and the pay of its top executive officers at future annual meetings, the firm added.

"This is very significant," said Bob McCormick, chief policy officer at corporate governance advisory firm Glass Lewis. "The big concern is that these firms pay big cash bonuses based on unsustainable returns and investments. Goldman's solution is the most progressive."

"Goldman tends to be a leader, so this will encourage others to follow suit," he added.

The shift to more share-based compensation is already happening elsewhere. Citi, Bank of America and Wells Fargo said recently they plan to issue almost $5 billion in new shares to pay some year-end bonuses in stock rather than cash.

'Vigilantes'

However, some critics say Goldman's changes don't amount to much and won't be enough to change risky behavior in the industry to prevent it threatening the financial system again.

Former Goldman partner Roy Smith called the bonus plan "a concession to public outrage," while noting top executives at the firm were already paid 50% to 60% of their annual bonus in stock.

"The current goal of the compensation vigilantes — more equity, less cash, long vesting and potential claw back of losses — is not a threat to most of the business franchises of the investment banks," said Brad Hintz, a Bernstein Research analyst who used to be treasurer at Morgan Stanley and chief financial officer at Lehman Brothers /quotes/comstock/11i!lehmq (LEHMQ 0.08, -0.01, -5.68%) .

The main problem is that Goldman's new bonus plan only applies to the firm's top 30 executives. The firm has yet to decide on bonuses for the rest of its 31,000 or so employees. Many will still get some of their annual bonus in cash, although the awards will probably be more skewed towards stock than in previous years.

"The rank and file, who actually do the trading and design the products, are still getting paid in cash and getting big bonuses to take short-term risks with shareholder and creditor money," Cohan said.

It's wrong to just focus on Goldman, because this is an industry-wide problem, he added.

"There's one unifying theme to all of the crises that have occurred in financial markets over the past 25 years," Cohan explained. "It's the compensation system where bankers and traders are rewarded for taking short-term risks with other people's money. That hasn't changed one iota."

Entire net worth

Despite trying to take the lead on Wall Street compensation, Goldman could still run into a perception problem with the American public.

"I think they are trying to do what is right," said Jeff Vistithpanich, principal at Johnson & Associates, a financial services consulting firm. But, "If you say [Goldman Chief Executive] Lloyd Blankfein is getting $50 million in stock, all people are going to do is focus on the $50 million."

One problem with the all-stock bonus approach is that some top Wall Street executives have already amassed vast wealth from previous boom years. Blankfein got a $68 million bonus for 2007 and $26.8 million of that was in cash.

"The top guys have probably already pulled out more cash than they could ever use in their lifetime," leaving them with little "skin in the game," Cohan said.

Cohan reckons investment banks should be run more like private partnerships again, with the entire net worth of top partners on the line each year. Read about the history of Wall Street bonuses.

Cohan suggested a new class of security be added to investment banks' capital structure that equals the entire net worth of the top 100 people at the firms. If big losses hit, this security would be completely wiped out before shareholders and creditors, he explained.

Executives would be much more attentive to risk if they knew they might lose everything if big bets go sour, Cohan said.

Government approach

Regulators and the government in the U.S. have taken a far gentler approach, unveiling guidelines and hoping that companies adopt the suggestions.

Now that most large banks have exited TARP, they're free from government compensation restrictions and oversight by the Pay Czar. However, Treasury hopes Feinberg's decisions on pay at companies still in the program, like AIG, will influence other companies.

"The Special Master has said that we believe his determinations have served as a constructive model for companies that are looking to reduce risky bonuses," a Treasury spokeswoman wrote in an email to MarketWatch.

But Mark Borges, a principal at consulting firm Compensia who used to work on compensation issues at the Securities and Exchange Commission, reckons Feinberg's toughest rulings will be shunned by other companies.

"Anything that smacks of a limit is probably not going to spread beyond the group of companies that have to comply with the government's guidance," he said. "Institutions are reluctant to do things in this area unless they're forced to."

The Pay Czar limited cash salaries of executives at companies that got lots of government support through TARP to $500,000 a year, except in "exceptional circumstances."

"There's no way other companies are going to do that," Borges said. "They don't want any limit on the amount that an executive can be paid."

Feinberg also froze "gold-plated" retirement and severance payments for executives of major TARP recipients. Other companies will keep offering these benefits "because they feel that they need to have these things to remain competitive," Borges said.

Feinberg also completely rejected guaranteed cash bonuses because they separate pay from performance.

"I don't think you'll see companies give those up either," Borges predicted. These controversial benefits are useful for trying to attract talented executives or stop them from leaving, he explained.

Still, other compensation standards imposed by TARP legislation and the Pay Czar may spread across the broader corporate community over time, Borges said.

All companies are already required to look at compensation policies to see whether they increase risk. They've also been adopting clawbacks and this should accelerate, Borges said.

Longer holding periods for stock compensation are also catching on and more use of stock rather than cash to pay executives will also spread, he added.

The Pay Czar also limited the value of annual perquisites to $25,000.

"Companies have been trying to rein in perks for some time," Borges said. "The Pay Czar's limit could provide the cover companies need to control these."

 

US and European stocks advance as dollar stabilises

By Jamie Chisholm for The Financial Times, December 21, 2009

US and European bourses burst higher on Monday, damping demand for haven assets, after the dollar stabilised and Asian markets put in a mixed performance.

Those traders from Frankfurt to London and across to New York that were able to overcome the chilly weather challenge and make it to their terminals seemed flushed with festive cheer and determined to end the year on a positive note.

Wall Street’s equity benchmark, the S&P 500, jumped 1.1 per cent to 1,115 – close to its intraday high for 2009 of almost 1,119 – while London’s FTSE 100 gained 1.9 per cent to 5,294 and the FTSE Eurofirst 300 climbed 1.4 per cent to 1,027.

The Vix index, a gauge of expected US equity volatility, dipped 4.9 per cent to 20.61, signalling investors were becoming more relaxed about the market’s advance.

Financial and resource stocks helped lead exchanges higher, but analysts cautioned about reading too much into the next few days’ moves because trading would be very thin at the start of the Christmas/new year fortnight.

A lack of significant economic reports added to the markets’ near-hibernatory feel. But traders also had to keep an eye on any developments from discussions between Dubai World and its creditors regarding the restructuring of its $22bn debt.

The FTSE World index was up 0.9 per cent, while the FTSE Asia-Pacific index lost 0.3 per cent as China-facing exchanges struggled to make headway.

The Shanghai Composite rose 0.3 per cent to 3,123 per cent, though Hong Kong’s Hang Seng was off 1.1 per cent to 20,948, with investors yet again selling real estate and banking shares on fears of Beijing’s clampdown on property speculation.

The Nikkei 225 in Tokyo, however, trundled in the other direction, rising 0.4 per cent to hit an eight-week high of 10,183. Tech stocks were in good form after the Nasdaq Composite index in the US added 1.5 per cent on Friday. Better-than-expected news on exports also helped sentiment.

Trading in the forex markets was generally quiet, with the dollar stabilising following the previous week’s rush to three-and-a-half-month highs, and this helped underpin stocks. Against the euro the greenback was flat at $1.4306, but it was up 0.7 per cent at Y90.91 versus a broadly weaker yen.

On a trade-weighted basis the dollar was up just 0.2 per cent at 77.94.

There was a flurry of excitement surrounding the Swiss franc, however, after it suddenly fell sharply from a nine-month high versus the euro. Traders thought the Swiss National Bank may have been using the thin market conditions to stem the Swissie’s rise. The SNB declined to comment and the Swissie traded down 0.5 per cent to SFr1.4947 versus the single currency.

The weaker dollar leant support to commodities. Oil rose 0.2 per cent to $73.52 a barrel, no doubt helped by the snow that fell over the weekend on the US east coast.

Gold gave up early gains, however, and was later trading off 1 per cent to $1,101 an ounce.

The positive tone to US and European equities reduced the haven demand for government bonds. The benchmark US 10-year Treasury yield rose 9 basis points to 3.64 per cent. This further steepened the US yield curve, and pushed the spread between two-year and 10-year yields to a record of 280 basis points at one stage – a positive development for banking stocks.

Concerns about the fiscal position of Greece showed no sign of abating, however. The yield spread between 10-year German Bunds and Greek 10-year debt widened to more than 280 basis points before tightening a fraction.

 

Stocks rally as health care reform bill moves forward

From Biz Times, December 21, 2009

The stock market rose today, with the Dow Jones Industrial Average posting triple-digit gains, after the U.S. Senate agreed overnight to cloture and is on schedule to approve a health care reform bill on Christmas Eve.
President Barack Obama praised Senate Democrats for brokering a compromise bill, calling the action a "major step forward" in making health care more accessible to Americans.
"After a nearly century-long struggle, we are on the cusp of making health care reform a reality in the United States of America," Obama said, calling the bill "the largest deficit reduction program in a decade.”
Obama said late amendments proposed by Senate Majority Leader Harry Reid (D-Nev.) made the bill "stronger."
On Saturday, the Congressional Budget Office (CBO) estimated that the amended bill would reduce the federal deficit by $132 billion over the next 10 years at a total cost of $871 billion.
However, Senate Minority Leader Mitch McConnell (R-Ky.) accused Senate Democrats of pushing the bill through while Americans were preoccupied with Christmas and not paying attention.
"Make no mistake, this bill will reshape our nation and our lives," McConnell said in a press conference. "This bill is a legislative train wreck of historic proportions."
The vote for cloture was split along party lines, with Democrats in favor of the reforms and Republicans opposed.
Some progressives in the House criticized the compromised bill as too diluted because it did not include a robust public option to compete with private insurers.
The Wall Street Journal has compiled a summary of the provisions in the Senate health care reform bill.
The stock market reacted favorably to the news. The largest local gainers in the BizTimes Stock Index this morning were Bucyrus International Inc. (up $4.95 to $55.90) and Rockwell Automation Inc. (up $1.25 to $46.68). Only a handful of local stocks posted meager declines. The largest local decliners were Harley-Davidson Inc. (down 15 cents to $25.82) and Twin Disc Inc. (down 5 cents to $9.60).

Upgrades give a lift to US stocks

Samantha Pearson and Courtney Weaver for The Financial Times, December 21, 2009

Upgrades to Alcoa and Intel boosted US stocks on Monday, helping to reverse last week’s losses.

Less than an hour after the opening bell the S&P 500 was up 1 per cent at 1,113.40, the Dow Jones Industrial Average had gained 0.9 per cent to 10,420.87 and the Nasdaq was 0.9 per cent higher at 2,232.29.

Wall Street suffered losses last week as concern grew over the prospect of tighter monetary policy.

Analysts at Morgan Stanley raised Alcoa, the country’s largest aluminium producer, to “overweight” from “equal weight”, saying they expected a rally in aluminium prices to continue in the first half of next year. Shares in the group rose 6.8 per cent to $15.57.

The weaker dollar helped to lift commodity-based stocks. United States Steel gained 2.3 per cent to $50.38.

Intel, the world’s largest computer-chip maker, also benefited from an upgrade by analysts at Barclays, who raised the stock to “overweight” from “equal weight”.

Concerns over gross margins and an investigation into competition issues by the Federal Trade Commission has weighed on the shares, resulting in an attractive valuation, according to Barclays. Intel rose 2.6 per cent to $20.13.

Shares in Seagate Technology climbed 2 per cent to $17.80 after Robert W. Baird upgraded the stock to ”outperform” from “neutral”. Analysts at the brokerage said the company would be likely to benefit from increased spending on hardware.

Walgreen, the retail pharmacy chain, said its first-quarter profit had jumped almost 20 per cent. Higher sales of prescription drugs and flu shots had helped boost earnings. However, after strength in pre-market trading, the shares were later down 2.6 per cent at $35.70.

In deal news, Bucyrus International, the construction company, bought Terex’s mining business for $1.3bn. In October, Terex posted it fourth straight quarterly loss as demand for construction equipment fell during the recession. Shares in Terex jumped 6 per cent to $20.36 while Bucyrus climbed 8.3 per cent to $55.06.

The dollar index, which tracks the US currency’s progress against a basket of the world’s main currencies, was down 0.2 per cent.

Gold was trading 0.4 per cent lower at $1,108.97 per ounce. The price of US crude gained $0.70 to $74.06 a barrel.

 

E*Trade Names Druskin as Interim CEO to Replace Layton

 
A file photo shows Robert Druskin, incoming chairman and interim chief executive officer of E*Trade Financial Corp. an interview in New York, U.S. Photographer: Daniel Barry/Bloomberg

By Whitney Kisling for Bloomberg, December 21, 2009

E*Trade Financial Corp. named Robert Druskin as chairman and interim chief executive officer after failing to find a permanent replacement on time for Donald Layton, who helped save the online brokerage from collapse.

Druskin, 62, is already a director at New York-based E*Trade. Layton, whose employment contract expires on Dec. 31, will serve as an adviser to the company after retiring and resigning from the board, according to a statement. Druskin, who was chief operating officer at Citigroup Inc. in 2007, is not in the running to become permanent CEO, the company said.

E*Trade, the fourth-largest online brokerage by client assets, has lost $3.49 billion since the third quarter of 2007 because of customer defaults on home loans. While Layton, 59, failed to return the company to profitability, he reduced costs by swapping $1.7 billion of debt into zero-coupon convertible bonds. He was asked to serve as CEO through December 2009 in March 2008, three months after E*Trade received a $2.5 billion cash infusion from hedge-fund manager Citadel Investment Group LLC, now its largest shareholder.

“Layton came in to restructure the balance sheet, to basically allow the company to actually live another day,” Roger Freeman, an analyst with Barclays Plc in New York, said before E*Trade’s announcement. “E*Trade is still going to struggle and won’t put up a profit for a while. You’re either looking at selling the company or growing it.”

Layton’s Compensation

Layton’s employment agreement guaranteed a $1 million annual salary and stock options and shares valued at $15.4 million on March 2, 2008, according to a filing with the U.S. Securities and Exchange Commission. It also gave him access to half the unvested portion of his equity grant should E*Trade hire a new CEO before Jan. 1, 2010.

The company reported a smaller loss than analysts estimated in the third quarter as trading increased and it set aside less money for future home-loan defaults. Layton told Bloomberg News on Nov. 17 that E*Trade has almost resolved its mortgage crisis.

E*Trade shares surged the most since August on Nov. 18 after Omaha, Nebraska-based TD Ameritrade Holding Corp.’s chief executive officer told Reuters he would consider buying the rival online brokerage at the right price.

Shares of E*Trade have tripled since sinking to a record low of 59 cents in March. Before today, the stock had climbed 55 percent since the end of 2008, compared with the 46 percent rally by the NYSE Arca Securities Broker/Dealer Index that tracks E*Trade and 10 competitors. Its shares plunged 95 percent in 2008 and 2009. E*Trade fell 3.9 percent to $1.71 at 9:41 a.m. in New York today.

Layton spent 29 years at New York-based JPMorgan Chase & Co. and its predecessors before retiring in 2004. He is a senior adviser to the Securities Industry and Financial Markets Association and a member of the Federal Reserve Bank of New York’s International Advisory Committee along with Goldman Sachs Group Inc. Chairman and Chief Executive Officer Lloyd Blankfein.

 

‘Bigger is not better for banks’

 

From BBC, December 18, 2009

The Bank of England's director for financial stability, Andy Haldane, says if new regulation drives parts of the finance industry from the City of London that may be a "price worth paying".

He fears a "doom loop" where banks know taxpayers will always bail them out so they take riskier decisions.

There is now a titanic struggle going on on both sides of the Atlantic over the regulation of banks. It is not just about bonuses, the bit that gets the headlines and generates the political heat.

It's much more about long-term regulation and real constraints on the way banks behave, perhaps even on how big they should be.

So how might we adapt to this new fast-moving financial environment?

And how might these new ways work? Andy Haldane is right at the heart of efforts in London, and internationally, to reconfigure regulation of banks. He told Business Daliy what he thinks we need to change.

 

"There is not so much as a scintilla of evidence of bigger being better in banking"

Unlike Most on Wall St., Morgan Stanley’s Chief Will Forgo His 2009 Bonus

 Jin Lee/Bloomberg News

From Graham Bowley for The New York Times, December 18, 2009

A week after Goldman Sachs moved to quell the outcry over its resurgent profits and pay, Morgan Stanley said its top executive would forgo his bonus this year.

The move, announced in a memo to employees, was aimed at placating critics of Wall Street, where bonuses have rebounded sharply since the financial crisis while pay and employment elsewhere in the economy remain depressed.

Goldman Sachs said last week that its 30 most senior executives would forgo cash bonuses this year. Instead, the 30 executives will be paid in the form of long-term stock. But Morgan Stanley went one better on Friday by announcing that its chief executive, John J. Mack, would receive no year-end bonus at all.

Mr. Mack is stepping down as chief executive at the end of this month to assume the elder statesman role of chairman of the venerable Wall Street firm, and outsiders saw his decision as a gesture at setting a new tone for the firm in the post-bailout era. The firm, however, said his decision did not mean other top executives at the bank would forgo their bonuses — those will not be decided until next month.

It is the third consecutive year that Mr. Mack has received no bonus. He will, however, still be paid an annual salary of $800,000, and he has been rewarded lavishly since he returned to lead Morgan Stanley in 2005. That year, he received a bonus of $25 million and, in 2006, a further bonus of $40 million, both in three-year restricted stock. That stock has already vested but the bank says Mr. Mack has not sold any of it.

Twelve months after the government saved the financial system with billions of taxpayer dollars, banks are preparing to pay annual bonuses that could rival the eye-popping paydays of the boom years. Morgan Stanley, its executives admit, had a near-death experience from which it is still recovering, although it paid back its $10 billion in bailout money in June.

In the memo to employees, Mr. Mack said he had made the decision “given this unprecedented environment and the extraordinary financial support governments provided to our industry.”

“At Morgan Stanley, we recognize the environment in which we are operating and the economic challenges facing so many countries,” he said.

But as he moves into the chairman’s role, Mr. Mack is also leaving a complicated legacy.

The bank he has spent a career building into a Wall Street powerhouse returned to profitability only in the third quarter, and is likely to post a loss for the year. That would be the first annual loss in Morgan Stanley’s history, although the bank says that its revenue is back to 2007 levels and that its profits are being dragged down by losses it is forced to take on its debt valuation as the company’s health improves.

Mr. Mack is credited internally with saving the firm during the crisis. But it has emerged this year as a more conservative operation, and has lagged its perennial rival Goldman Sachs, which may post a record year in 2009.

Claudia Allen, a corporate governance lawyer at Neal, Gerber & Eisenberg in Chicago, said banks like Morgan Stanley were aware of the populist furor.

“He was sending a message, but you have to remember that Morgan Stanley was in the red this year. They are not Goldman Sachs.”

Citigroup: Wall Street Hate, Cramer Love (NYSE:C)

 
From The Stock Masters, December 19, 2009

Citigroup Inc. (NYSE:C) had a hell of week but it managed to comeback on Friday to the tune of 6%.  Last Friday Dec 11th shares were priced in the $3.90 range and by Thursday they were down to $3.15. 
Wall Street sold off Citi like a bad habit on the word of the Government cashing out its 34% stake and Citigroup's plan to hold a secondary offering.  But Jim Cramer is having a smashing good time with this deal and said he "buy the heck out of them".

Citigroup (C) said Wednesday that it was on the verge of raising $17 billion from investors toward repaying its federal aid, but only at a price of $3.15 per share, 20 percent lower than the price of its shares at the beginning of the week.

That discount was much larger than expected, leading the Treasury Department to postpone its plans to start selling the government's 34% stake in Citigroup. Treasury had expected to reap a substantial profit on the shares, which it acquired at $3.25, but selling now would instead result in a loss of hundreds of millions of dollars. 

(SeekingAlpha.com) Dismissing negativity on The Street about Citigroup's secondary shares, Cramer would "buy the heck out of them…Rarely have I ever seen an option as good as this." He suggested keeping an eye open for potential offerings from Zions Bancorp (ZION), Key Corp (KEY).

While the conclusion from the Yale CEO Summit was that 2010 will be a flat year economically, Cramer disagrees. He expects to see more government spending on rectifying unemployment and finds hope in predictions that the tech sector will be "far stronger than expected" in the first quarter (historically, the sector's weakest time of year). He also notes that "the most GDP-oriented industries" are forecasting rising demand, and pointed to low steel inventories as a sign of hope for that group. Cramer predicts a "tremendous drilling wave in oil and gas."

Concerning the government, Cramer focused on wise moves by Fed Chairman Ben Bernanke and thinks the Republicans will have a stronger voice in countering Obama's proposed reforms that are tough on business.

“I think the negativity will be trumped by…a newfound optimism,” Cramer said, and added, “Washington will not be as interventionist next year.”

Best of luck Citi longs, here's more stats on the stock:

Citigroup Inc. Common Stock	$ 3.40
C	0.20

Short Interest (Shares Short)	215,990,600
Days To Cover (Short Interest Ratio)	0.9
Short Percent of Float	0.96 %
Short Interest – Prior	194,829,600
Short % Increase / Decrease	10.86 %
Short Squeeze Ranking™	-1

% From 52-Wk High ($ 8.05 )	-136.76 %
% From 52-Wk Low ($ 0.97 )	71.47 %
% From 200-Day MA ($ 3.91 )	-15.00 %
% From 50-Day MA ($ 4.03 )	-18.53 %
Price % Change (52-Week)	-59.10 %