Tag Archives: Lehman Brothers

Financial • Check out the story of America’s recovery, the mind of Obama

By Gary Triplett The White House, Washington
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Hello, everyone —

In the early hours of September 15, 2008, five years ago last Sunday, Lehman Brothers announced it would file for Chapter 11 bankruptcy protection. Lehman was a giant of the financial system — the fourth-largest investment bank in the US, a firm that employed thousands of brokers and analysts, with billions in assets that were suddenly worthless — and its collapse sent shock waves through the global economy.

Suddenly, it was obvious that the next president of the United States would inherit a staggering economic crisis. But the challenge that President Obama was forced to confront didn’t just begin in 2008. Even before Lehman Brothers, middle-class security had been slowly eroding for decades as jobs became obsolete or were shipped overseas.

So as we mark this anniversary, we’ve asked senior staff from across the Obama administration to sit down and talk about the moment when key decisions were made — the factors they weighed, the results of the actions that President Obama took. What we’ve put together is a behind-the-scenes look of the decision-making process that you won’t find anywhere else.

Check out the story of America’s recovery, then share it with your friends.

By the end of 2008, the economy was shrinking by an annual rate of more than 8 percent, our businesses were shedding 800,000 jobs a month, and credit was frozen for families and small businesses. We were in the midst of the worst economic crisis since the Great Depression. On the day that I first began working in the White House in 2009, the auto industry was on the brink of collapse and the President was wrestling with how to help the millions of families in thousands of communities who would have been devastated if the motor companies died.

That’s the lens through which President Obama saw his responsibilities, and it’s a consistent theme in all the stories we’ve collected. Every decision he made was meant to stop the economy from spiraling out of control, put people back to work, and reverse the trends that had buffeted middle class for decades. The task was nothing short of monumental — to clear away the rubble of the crisis and lay down a new foundation for sustained economic growth in the United States.

There’s no diminishing the severity of the challenge we’ve overcome together, and we’ve got a lot more work to do to rebuild an economy where everyone who works hard has a chance to get ahead. But five years after Lehman Brothers bankruptcy, we want to help everyone get the context and see the full picture.

Take a minute to learn more about where we are five years after the start of the financial crisis:

http://www.whitehouse.gov/five-years-later

Thanks!

David

David Simas
Deputy Senior Advisor
The White House
@Simas44
Visit WhiteHouse.gov

The White House • 1600 Pennsylvania Ave NW • Washington, DC 20500 • 202-456-1111

Statistics: Posted by Gary Triplett — Tue Sep 17, 2013 5:05 pm


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Via: gov.summit.net

Year Of The Snake Investment Guide: Bain Capital Casts A Wide Net In China

By Russell Flannery, Forbes Staff China once again this year can boast one of the world’s best-performing economies, yet a weak stock market has made it difficult for investors to make money.  To learn about where investors should look for relatively good returns,  I recently talked to seasoned Asia hand Danny L. Lee, a managing director at Bain Capital Asia.  The Guangzhou native moved to the U.S. as a teenager and graduated from Columbia before later finding his way back to Asia in 1997.  After working at Lehman Brothers and AB, he has settled down since 2006 at Bain, where he’s helped to make some of the company’s $1 billion of investments in Asia. Greater China-related companies in its portfolio include Hong Kong-listed GA Pac, a rival of Tetra Pak, media firm Sinomedia, and Gome Electrical Appliances, one of China’s biggest electrical appliance retailers.  Excerpts from the conversation follow.

From: http://www.forbes.com/sites/russellflannery/2013/04/22/year-of-the-snake-investment-guide-bain-capital-casts-a-wide-net-in-china/

There Could Still Be Runs on the Money Market Funds

By Robert Lenzner, Forbes Staff The President of the Federal Reserve Bank of Boston, Erick Rosengren, suggested this week that there could still be runs on money market mutual funds, as took place at the peak of the 2008 financial crisis, since these funds have “no capital” and invest in uninsured short term securities of banks and other financial service firms. While debate over potential regulatory solutions for money market funds continues on, the Boston Fed chief, emphasized that the safety of the money market mutual funds are a “significant unresolved issue.” As of April 13 there was $903.56 billion in retail money market funds sponsored by Fidelity, T. Rowe Price, Dreyfus, Invesco and others, The total amount of all kinds of money market funds, some owned by institutional investors, was $2.6 trillion. The average weekly yield was a record low of only 0.02%. He also singled out the issue of capital for the broker-dealer fraternity, where he raised the problem of “virtually no change for broker-dealers since the collapse of Lehman Brothers in September, 2008 and the shotgun marriage of Merrill Lynch into BankAmerica. The solution Rosengren recommended was that the “larger(these investment firms) get the higher the capital ratio”: should be imposed on them. The Boston Fed chief executive, speaking at Bard College’s Levy Institute conference on the economy and financial markets, seemed to be suggesting that the cause for this vacuum in policy is that “Regulatory bodies haven’t evolved as much as the financial markets.” In other words, 5 years after the 2008 meltdown we still have a major challenge in trying to make the global financial system secure against runs and speculative bubbles. There is still further to go in the structural reorganization of the danger from derivatives, but he believes clearing derivatives contracts on exchanges and the decline in bilateral transactions has reduced an element of risk. Nevertheless, Rosengren made crystal clear in conversation after his talk that he “sees no bubbles anywhere, not even in real estate where prices are still below their 2006 peak.” He believes prices of residential real estate in Boston and New York are still 15-20% under their peak– and prices in Miami, Phoenix, Las Vegas, California– are still priced at a steeper discount to the peak in 2006. As for the economy in general, Rosengren sees “traction” picking up momentum, in which case he would support the “prudent” position of gradually reducing the QE stimulus program. However, he is troubled by the fact that monetary policy(quantitative easing and record low interest rates) are in conflict with fiscal policy, the restraint of sequester and reduction of federal, state and local government spending, ie “the Obama cuts.”

From: http://www.forbes.com/sites/robertlenzner/2013/04/20/there-could-still-be-runs-on-the-money-market-funds/

Lehman's Europe arm creditors may be repaid

The administrators of the European arm of Lehman Brothers have told creditors that they may be repaid in full.

The repayment news, announced Monday, comes after settlements with other Lehman affiliates in the United States, Switzerland and Luxembourg — ending lengthy legal actions. PwC says the settlements have resulted in higher-than-expected future recoveries and a reduction in the reserve for claims.

Tony Lomas, lead administrator at PwC, says the assessment marks a significant milestone. The administrators told creditors there was a reasonable chance of full repayment in a progress report sent out on April 12.

Lehman Brothers IE had around 23 billion pounds in client assets on Sept. 15. 2008, the day its U.S. parent filed for bankruptcy protection. The bank’s failure helped spark the global economic crisis.

From: http://feeds.foxnews.com/~r/foxnews/world/~3/5zYmFXWYfgQ/

Don't Play a Bit-Part In This Bubble

By Alex Dumortier, CFA, The Motley Fool

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This morning’s disappointing jobs data ostensibly fueled stock losses today, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average losing 0.4% and 0.3%, respectively. On the week, the S&P 500 lost 1%, its worst weekly performance this year. Small-cap stocks were hit even harder, as the Russell 2000 Index fell 3%, its worst weekly loss since June.

Despite the losses, the VIX Index , Wall Street‘s fear gauge, closed virtually unchanged, at 13.22, although it did hit 15.65 intraday, the highest level it has achieved since March 4. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming thirty days.)

Things are getting a bit bubbly
As an observer and student of the financial markets, I’m fascinated by bubbles. I’m not alone: Since the credit crisis, the financial media has bent over backwards trying to label new ones. I’ll admit that ‘ve participated in this “bubble in bubbles.” Nonetheless, whether you see them everywhere, or you’re a Greenspan-style “bubble ostrich,” the reality lies somewhere in between. Bubbles do occur, and it’s worth keeping an eye out for them, because if you get swept along in one, it can gravely damage your financial well-being.

The reality is that, since the failure of Lehman Brothers in Sep. 2008, we have likely witnessed a number of manias. I believe history will ultimately show that $1,900 gold was a bubble (even if it doesn’t deflate in a dramatic manner), and that the same is broadly true of the spate of recent social networking IPOs, including Groupon and Zynga, that mirrored the dot.com bubble of the late 1990s.

My preliminary assessment of the digital currency bitcoin, is that it looks dangerously frothy. Bitcoin reached a new all-time high of $147 this week, nearly a two-thirds rise in the space of roughly a week.

On paper, bitcoin certainly has some attractive qualities, including limited supply and low-to-zero transaction costs. However, its extraordinary volatility means it is categorically ill-suited as a store of wealth. Don’t take my word for it; instead, read the warnings on the bitcoin website, which include the following [my emphasis]:

The price of a bitcoin can unpredictably increase or decrease over a short period of time due to its young economy, novel nature, and sometimes illiquid markets. Consequently, keeping your savings in bitcoin is not recommended. Bitcoin should be considered as a high risk asset, and you should never store money that you cannot afford to lose with Bitcoin.

Furthermore, its popularity is bound to attract increasing attention from governments, which are rarely fond of competitors when it comes to currency. Call me the boy who cried wolf, if you wish, but I think this digital currency could do more than a bit of harm to unknowing speculators.

If you’re ready to invest based on fundamentals and long-term value creation, The Motley Fool’s chief investment officer has selected …read more

Source: FULL ARTICLE at DailyFinance

Americans More Financially Savvy Post-Recession, Survey Shows

By The Associated Press

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By MARK JEWELL

BOSTON — The frugality and investing discipline that the 2008 financial crisis imposed on Americans appear to have led to permanent changes in behavior on money matters, according to a survey by the nation’s second largest mutual fund company.

Spendthrift ways are unlikely to again become as pervasive as they were before the crisis, Fidelity Investments concluded Wednesday in releasing results of its “Five Years After” survey of nearly 1,200 investors.

Positive behaviors that appear to be now entrenched include saving more in 401(k) plans, paying down debt and taking greater care to invest wisely.

“These tend to be very sticky decisions, because you begin to budget and spend around a higher savings rate,” said John Sweeney, an executive vice president on retirement and investing with Boston-based Fidelity. “People are taking control of their financial lives, and control breeds confidence.”

Survey participants were interviewed over two weeks in February, nearly five years after the government-brokered rescue sale of Wall Street firm Bear Stearns to JPMorgan Chase & Co. (JPM). That event, in March 2008, is regarded as a tipping point for more the tumultuous upheavals that followed, including the September 2008 collapse of Lehman Brothers, which the government allowed to fail.

Housing prices plunged, unemployment spiked and stocks tumbled more than 50 percent from the market’s October 2007 high to its March 2009 low. It wasn’t until last month that the Dow Jones industrial average (^DJI) returned to its pre-crisis high.

Key survey findings include:

  • Fifty-six percent reported their financial outlooks changed from feeling scared or confused at the beginning of the crisis to confident or prepared five years later.
  • Survey participants estimated their household had lost 34 percent of the value of their total assets, on average, at the low point of the crisis. Thirty-five percent experienced what they considered to be a large drop in income, and 17 percent said at least one head of their household lost a job.
  • Forty-two percent increased the amounts of regular contributions to workplace savings plans such as 401(k)s, or to individual retirement accounts or health-savings accounts.
  • Fifty-five percent said they feel better prepared for retirement than they were before the crisis. However, among the group of survey participants who reported they continue to feel scared, just 34 percent said they’re better prepared for retirement.
  • Forty-nine percent have decreased their amount of personal debt, with 72 percent having less debt now than they did pre-crisis. Just 31 percent of those who indicated they’re still scared reported that they have reduced debt.
  • Forty-two percent have increased the size of the emergency fund they’ve established to meet large unexpected expenses. Among those self-reporting as scared, only 24 percent have a bigger emergency fund than they had pre-crisis.
  • Seventy-eight percent of those saying they’re prepared and confident said the financial actions they’ve taken are permanent …read more
    Source: FULL ARTICLE at DailyFinance

Dow Rebounds on Positive Economic News

By Jessica Alling, The Motley Fool

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The Dow Jones Industrial Average is climbing this morning on the news that Cypriot banks have reopened without incident. Investors’ continued concern over the European country’s economic state held the Dow lower yesterday,  as it closed 33 points down. Currently up 43 points, the index has recovered thanks to some mixed yet overall positive economic news.

Jobless claims unexpectedly rose last week, but remain near five-year lows. The rolling four-week average remains under 350,000 new applicants, so economists believe this still shows a firm hiring market. This is great news to investors who may have thought that the labor market was taking a step backward from its marked improvements so far this year.

GDP rose by 0.4% over the last three months of 2012 thanks to increased business investments and exports of services. The rise was just shy of the 0.5% improvement analysts expected to see, but a notable improvement from the government‘s estimate of 0.1%. This is the third estimate of growth for the final quarter of 2012, with many of the reasons for its slow pace remaining the same — reduced inventories and defense spending.

No big winners
There aren’t any clear winners or losers so far this morning, and the financial sector remains mixed after following the Dow south yesterday. JPMorgan  continues its slide again today, down 0.57% so far, after losing 1.79% Wednesday. Investors may still be wary of the bank following the news that it hid the true losses sustained by the London Whale debacle — a development that may find the bank’s executives in hot water from federal prosecutors. Wednesday also brought other legal trouble for JPM, which lost its fight to have a suit dismissed that claims the bank made risky investments in Lehman Brothers at the expense of a pension fund (the plaintiff). Regardless of the continued legal battles JPMorgan might have, Standard & Poor revised its outlook on the bank back to “stable,” after changing it to “negative” following the London Whale trading fiasco last year.

Bank of America is also trading down this morning, by 0.45%, after closing down by 0.41% yesterday. The bank has been struggling to hold on to the gains it made following the positive outcome of its Fed stress test results. But continued negative investor sentiment keeps the highly traded, highly volatile stock from staying high for too long. Recent news regarding executive shares may help with that — CEO Brian Moynihan has to hold on to at least 500,000 shares until one year after his retirement, while other executives have to hold on to 300,000 shares until they retire from BAC. This new move helps further align the executive suite with shareholders, and may have a positive impact on the share price in the long run.

Both American Express and Travelers  are up today, by 0.30% and 0.38%, respectively. AmEx continues to ride the positive news from its Bluebird joint venture with …read more
Source: FULL ARTICLE at DailyFinance

What Buffett and Munger Have Said About Big Banks

By Morgan Housel, The Motley Fool

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Warren Buffett famously called derivatives “financial weapons of mass destruction.” Now he’s a major shareholder in a bank that is one of the top dealers in those derivatives.

Berkshire Hathaway has owned banks for decades and recently converted warrants into a large block of Goldman Sachs common stock.

But Buffett and Charlie Munger have made comments about banks and the financial system that are at times hard to square with their holdings. 

Here’s Munger in 2011:

We would be better off if we downsized the whole financial sector by about 80%. I don’t think the rest of us have anything to gain having massive trading between computers which try to outwit one another with their algorithms to the extent that when one succeeds, the rest of us are all paying for it. And why should we want to encourage our brightest minds to do what amounts to code-breaking and electronic trading? I think the whole system is stark-raving mad. Why should we want 25% of our graduating engineers going into finance? … I don’t see any social contribution.

How does that fit in with Berkshire’s investments in big banks? He explained:

We buy the investments in the public market that are available. We don’t tell the people running them what to do, and we don’t allow our thoughts about what the law should be to change our investments. We invest in the world as it is. But if you ask me what the world should be, I would say that the finance sector of the world should be downsized by at least 80%.

Hmm. So, if shareholders aren’t to keep an eye out after management, who should? Here’s Munger in 2010:

Take soccer as an example. It’s a tremendously competitive sport, and often times one team tries to work mayhem on the other team’s best player. The referee’s job is to limit this mayhem and rein in extreme forms of competition.

Regulation is similar. Most ambitious young men will be more aggressive than they should. That’s what happened with investment banking. I mean, look at Lehman Brothers. Everyone did what they damn well wanted until the whole place was pathological about its extremeness.

When Hitler was in his bunker before he shot himself, he said, “This isn’t my fault. The German people just don’t appreciate me enough.” That’s the attitude of a lot of bankers. They think their silliness is necessary. Banks will not rein themselves in voluntarily. You need adult supervision.

The smart way to regulate is to act like a referee. You have to curtail the activities that are permitted. There should be less trying to fix things and more trying to prevent bad outcomes. There’s an old saying, “an ounce of prevention is worth a pound of cure.” That’s wrong. An ounce of prevention can be worth an entire ton of cure.

Goldman, of course, isn’t exempt from this culture. But Munger appears to have sympathy. Again, from 2010:

Goldman has the best …read more
Source: FULL ARTICLE at DailyFinance

Dow Jittery Ahead of Cypriot Banks Reopening

By Jeremy Bowman, The Motley Fool

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After opening the day down 100 points on concerns about Cyprus, the Dow Jones Industrial Average battled back to finish down just 33 points, or 0.2%. The S&P 500 and Nasdaq closed with even narrower margins.

Cypriot banks will open tomorrow for the first day since early last week, when they were closed as bailout negotiations began and depositors’ savings were put on the table. Investors fear a run on the banks could create a renewed sense of panic and hamper the bailout, which has promised to tax uninsured deposits. Eurozone finance ministers have also said that the Cyprus bailout could serve as a template for future financial rescues. Even as the banks reopen, withdrawals will be limited to 300 euros a day, checks will be forbidden, and there will be additional limits on credit card spending and taking money out of the country.

Only one relevant economic report came out today. February pending home sales surprisingly fell 0.4%, down from a 4.5% increase in January and below the 2% gain economists had expected. Still, the decline seemed to be a result of low housing inventories, which should lead to new construction, an overall positive for the housing market.

On the Dow today, JPMorgan Chase led the blue chips’ decline, falling 1.8% as the big bank again came under federal scrutiny. After hours yesterday, prosecutors revealed they were looking into whether JPMorgan had failed to properly alert authorities about Bernie Madoff‘s activities while he was carrying out his Ponzi scheme. JPMorgan’s failure to act could be in violation of a federal law requiring banks to report suspicious activities. After hours today, a judge ruled that the No. 1 bank by assets must face a lawsuit by a pension fund accusing it of mismanagement by investing the pension fund’s money in Lehman Brothers in the run-up to the financial crisis.

On the other end of the big board, UnitedHealth jumped 1.7% after congressional staffers said Medicare could raise payments to insurers, a potential reversal from the market‘s belief that payments would be lowered. Investors had expected a 2.2% payment cut in Medicare Advantage, but that would be negated if Congress blocks a 25% drop in doctors’ pay for next year.

Outside the Dow, J.C. Penney waved a white flag of sorts, ditching CEO Ron Johnson’s Everyday Low Prices model for its former discount-intensive strategy. Penney’s refusal to use markdowns had cost it many of its once-loyal customers as sales tumbled last year. Still, the Street shrugged at the move as shares finished down 0.7%.

With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal or whether finance stocks are a screaming buy today. The answer depends on the company, so to help figure out whether JPMorgan is a buy today, I invite you to read our premium research report on the company today. Click …read more
Source: FULL ARTICLE at DailyFinance

Will Cyprus Become Europe's Lehman? On Containing Contagion And Moral Hazard

By Agustino Fontevecchia, Forbes Staff

Eurozone policymakers turned up the heat on Cyprus, showing their willingness to impose losses on creditors and possibly setting up a new, dangerous precedent in the few years since the European sovereign debt crisis erupted.  Their shift in risk-tolerance increases the possibility of high-severity tail risks, according to Moody’s, which explains the recent hard-line taken by Eurozone governments as a reflection of domestic pressures, particularly for Germany’s Angela Merkel who faces elections later this year.  Even if the latest crisis is averted, Cyprus remains at risk of default and of exiting the Eurozone as the core of its economy, its financial system, will end up decimated. The Eurozone has decided to minimize moral hazard and has chosen Cyprus as its sacrificial lamb.  If things don’t work out correctly, the Troika may have found its own Lehman Brothers. …read more
Source: FULL ARTICLE at Forbes Latest

J.P. Morgan Did Not Learn Any Lessons From 2008

By Robert Lenzner, Forbes Staff It thought “Fortress Capital” meant it was top of the mark on Wall Street— the ticket to expanding in mortgages and investment banking while Citigroup and BankAmerica and Morgan Stanley and Lehman Brothers and Merrill Lynch were bleeding and either insolvent or close to it. Maybe, that’s the reason JPM learned no humility from the near collapse of finance in America. Maybe, that’s why its senior management did not tremble before the regulators– but scoffed at them and fought them with every lobbyist and influence it could muster in the corridors of Washington. Watching Citigroup shares collapse to 97 cents a share had to be a matter of the most enjoyable schadenfreude. Only JPM had the “Fortress Capital” to grow while others suffered. Maybe the House of Morgan understood that Washington did not care to have the whip hand over Wall Street. That there would be no limit on leverage in the Dodd-Frank bill. That no new fraud charges could be brought after 2013– when the 5 year statute of limitations ran out. That the Attorney General would never bring a criminal case against a financial behemoth with the “clout” to inhibit any sort of prosecution. That you could get away with settling SEC actions for a fraction of the dollar harm done without admitting any sort of guilt. So, maybe I shouldn’t be too shocked about the revelations brought out in the Senate hearings last week by Sen. Levin, who, at 78, showed the fine hand of a prosecuting attorney handing the media a ready-made piece of investigative journalism. Levin investigated and we wrote it. Still, that 5 years after the meltdown almost wrecked our financial system– to learn that there were deficiencies in the risk operations, that there was misleading of shareholders, high-handed behavior toward the regulators– is to learn that Morgan did not learn from the carelessness that brought its competitors to their knees. That arrogance squashed humility. That huge positions in illiquid derivatives contracts called credit default swaps– the device that required AIG to be given a $185 billion bailout– were once again the cause for despair and a loss of $6.2 billion. Finance played in the big leagues is a dangerous game, and stirs the cops to focus their scrutiny on the games people play- in a business that’s far too serious for games. …read more
Source: FULL ARTICLE at Forbes Latest

JPMorgan Reaches $546M Settlement with MF Global Trustee

By The Associated Press

jpmorgan mf global settlement

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Mark Lennihan/AP

NEW YORK — JPMorgan Chase has agreed to a deal that will return $546 million to former customers of trading firm MF Global Holdings Ltd., which collapsed in 2011 with $1.6 billion missing from its accounts.

MF Global failed in October after a calamitous bet on European debt spooked its investors, partners and clients. The bankruptcy was the eighth-largest in the U.S. and the largest on Wall Street since the 2008 collapse of Lehman Brothers.

Much of the missing money belonged to farmers, ranchers and other business owners who used MF Global to reduce their risks from fluctuating prices of commodities such as corn and wheat. A House panel has said credit rating agencies and federal regulators contributed to MF Global’s collapse. But it pinned most of the blame on risky strategies by ex-CEO Jon Corzine, the former New Jersey governor.

JPMorgan Chase & Co. (JPM) held MF Global funds in several accounts and also processed the firm’s securities trades. The trustee tasked with getting customers’ money back, James W. Giddens, threatened to sue the New York bank if it didn’t return money that was transferred to the bank from MF Global. By June 2012, JPMorgan had returned $608 million to the firm.

Under a settlement agreement filed Tuesday in Manhattan bankruptcy court, JPMorgan Chase has agreed to pay $100 million to reimburse customers and will relinquish claims on $417 million that it previously returned. JPMorgan also will return over $29 million that it is holding as security on an MF Global credit line. The recovered money will eventually be passed along to customers.

The deal must be approved by Bankruptcy Court Judge Martin Glenn and District Court Judge Victor Marrero.


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Source: FULL ARTICLE at DailyFinance

The Botching of the Cyprus Bailout: Worse Than Lehman Brothers

By Eamonn Fingleton, Contributor

Everyone now agrees that Treasury Secretary Hank Paulson badly botched the Lehman Brothers crisis of 2009. But at least he had an excuse. Panicked by the speed of Lehman’s meltdown, he had no time for second thoughts. By comparison the architects of the Cyprus bank bailout don’t have a leg to stand on. Although they had years to consider their options (Cyprus’s problems are closely related to, and have long been almost as obvious as, those of Greece), they have opted for a “solution” that amounts to the most irresponsible episode in banking supervision in the advanced world since the 1930s. …read more
Source: FULL ARTICLE at Forbes Latest

Will This Wall Street Move Save Your Savings?

By Dan Caplinger, The Motley Fool

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Throughout the financial crisis nearly five years ago, everyone finally realized that major financial institutions have an immense impact on the markets, and when those institutions go awry, markets are in danger. Solving the financial crisis involved protecting those institutions long enough for them to survive, and then seeking to reform them to avoid similar problems in the future.

That lesson was hard-learned, but regulators seem to have forgotten it in their fight to protect money market mutual funds from creating systemic risk that could lead to a new financial crisis. Fortunately, though, the companies that run money market funds have come up with a novel solution that could protect the funds from the threat of collapse by pinning the cost squarely on the big institutional investors that create it. You’ll learn more about that solution later in this article, but first, let’s take a step back and look at the issues facing money market funds as well as some of the regulatory proposals presented to solve those issues.

Why money market funds are risky
For decades, investors have looked at money market funds as substitutes for bank accounts. Usually, they pay higher rates than bank checking accounts, yet they allow daily access to your money on demand. Most money market fund managers even allow their shareholders to write checks against their accounts, offering the same convenience of bank accounts.

Yet beneath the surface, money market funds are very different from bank accounts. Money-market funds typically invest in Treasury bills, commercial paper, or other fixed-income investments with very short maturities. By owning only short-term investments, money market funds can handle outflows without having to sell securities at a substantial gain or loss, helping them preserve their fixed $1 per share price. But for those funds that own commercial paper, issuer default risk creates at least the potential for a catastrophic meltdown of the fund, as happened in 2008 to the Reserve Primary Fund when Lehman Brothers went bankrupt and couldn’t repay its obligations.

Solving the problem
Initial regulatory solutions involved elaborate schemes that would have been unwieldy at best and impractical at worst. One suggestion involved allowing money market fund prices to float up or down from their $1 target, which would have evenly distributed risk across all shareholders. But the solution also would have made money market funds essentially useless, as every purchase and sale would potentially be a taxable event requiring separate documentation.

A somewhat less problematic solution would have required funds to maintain capital reserves. Yet with funds already earning very little interest, forcing them to sit on cash earning absolutely nothing would only have forced them to eat more losses.

The best fix?
But earlier this week, money-fund giant Fidelity suggested imposing a 1% redemption fee under certain circumstances on the large financial institutions that invest in their institutional money market funds. The fee would take effect only during stressful financial periods during …read more
Source: FULL ARTICLE at DailyFinance

Be an Investor, Not a Collector

By Carl Richards, The Motley Fool

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Over- or under-diversifying remains one of the classic investing behavioral mistakes.

Over-diversification happens when we become collectors of investments instead of simply being investors. Think of the people who buy the mutual funds they read about in Smart Money. A year later they buy two or three new international funds because that’s what’s on the home page of Forbes.

Before they know it, they have a smorgasbord of unrelated investments, with no cohesive strategy at work. Then there are all of the taxes and transaction costs — plus the impact on your life of having to keep track of it all.

For anyone with a portfolio that looks like this, consider a relatively simple suggestion: Each individual component of a portfolio should be there for a reason. Think of each investment that you own as a thread in a larger tapestry.

Being under-diversified is an equally troublesome problem. Under-diversification can take the form of owning only a single stock or too much of one. For instance, maybe you work at Apple, and you’re convinced that Apple stock can only go up, so you put your life savings into Apple stock. We’ve seen why this choice can be a bad idea; ask anyone who had a lot of stock in AIG, Enron, Wachovia, or Lehman Brothers.

Many people now know better than to put too much money into a single stock. But I still often meet people who own a number of mutual funds and believe they’re properly diversified. The reality is that fund overlap can leave you heavily invested in a relatively small number of individual stocks.

This happens because many mutual fund managers have similar ideas, or they create funds based on what’s popular at the time. If you look carefully at many of the largest mutual funds (the ones people are most likely to buy), they have significant overlap among the top 10 stock holdings.

Whether you’re under- or over-diversified, you are probably only doing what you thought you were supposed to do. You’ve spent a lot of energy, time, and even money trying to pick the right investments. Unfortunately, your efforts may have created the exact opposite of what you wanted to accomplish.

Remember, you’re not a collector. You’re an investor. You want stocks (or funds) that get you closer to the financial goals you’ve set for yourself. You also need to make sure that what you own doesn’t expose you to greater risk than you can handle, again based on your goals.

The end result should be a portfolio that reflects those goals, not the collection of magazines on your coffee table.

A version of this post appeared previously at The New York Times.

Carl Richards is a financial planner and the director of investor education for the BAM ALLIANCE, a community of more than 130 independent wealth management firms throughout the United States. Visit Behavior Gap for more of Carl’s sketches and writings. Carl doesn’t own shares of any companies mentioned.

The …read more
Source: FULL ARTICLE at DailyFinance

Boston Properties Names New CEO

By Tim Brugger, The Motley Fool

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Boston Properties has named Owen D. Thomas, currently chairman of the board of Lehman Brothers Holdings Inc., as its new CEO, effective April 2.

Thomas will replace current CEO and Boston Properties co-founder Mortimer B. Zuckerman, who’s held the CEO post since 2010. After the leadership transition, Zuckerman will retain his role as Boston Properties‘ executive chairman. If Zuckerman remains employed by the company through July 1, 2014, he will be entitled to receive a lump-sum cash payment of $6.7 million and an equity award with a targeted value of $11 million, according to an SEC filing.

Prior to being named Boston Properties CEO, Thomas held several executive management positions with Morgan Stanley. Most recently, Thomas was chairman of the board of Lehman Brothers Holdings, the successor company to Lehman Brothers.

Zuckerman was quoted as saying in the company press release that the selection of Thomas followed a “very thorough” process. “I could not be more pleased that … Owen Thomas will become our new CEO. He is an accomplished executive and well known throughout our industry, and he is the right person to lead the company for the future and to build on our success.”

According to an SEC filing, Thomas’  base salary will be $750,000 with an annual target bonus of 230% of the base salary. The employment agreement mandates that Thomas purchase shares of common stock of the company with a market value of $1 million. Thomas will “devote substantially all of his business time to the Company’s business and affairs, but will be allowed to continue certain outside positions.”

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The article Boston Properties Names New CEO originally appeared on Fool.com.

Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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if (obj.addEventListener){
obj.addEventListener(evType, fn, useCapture);
return true;
} else …read more
Source: FULL ARTICLE at DailyFinance

The Backlash Against Sheryl Sandberg Is Already Starting

By Pam Kruger

Erin Callan Lehman Brothers CFO

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Although Sheryl Sandberg‘s manifesto, Lean In, was just published Monday, it already is generating a torrent of debate — much of it among female professionals who complain they feel left out of Sandberg’s vision of success in the corporate world.

One of the most poignant critiques came from one of Wall Street‘s most successful women, Erin Callan, the former CFO of Lehman Brothers. In a candid essay for The New York Times published Sunday, Callan wrote about her regrets of keeping a “singular focus” on her career, saying it wrecked her marriage and led her to forego having children.

“I am beginning to realize that I sold myself short. I was talented, intelligent and energetic. It didn’t have to be so extreme. Besides, there were diminishing returns to that kind of labor,” she wrote. At 47, she says she and her new husband are trying to conceive through in-vitro fertilization and now says she sees an upside to Lehman’s collapse. “Without the crisis, I may never have been strong enough to step away” from her all-consuming professional life, she wrote.

More: Why Is There No Female Steve Jobs?

Sandberg has two children, however, and what appears to be a fairy tale marriage, with an equally successful husband whom she says shares household responsibilities equally. Mary Louise Kelly, a former Pentagon correspondent for NPR, writes of “hitting the wall” when she got a call that her 4-year-old son was having trouble breathing, and Kelly was in Baghdad, covering a story. Soon after she quit her job. “With sincere and enormous respect for the accomplishment of superwomen like Sheryl Sandberg,” she writes in The Daily Beast, “I wonder if there isn’t room for a more expansive definition of female professional success.” Now that she is a novelist and writes from home a few hours a day, she says she wonders, “should we automatically assume that the woman running the company is doing more with her life than the woman who has negotiated a three-day week?

Penelope Trunk, the career coach and founder of Brazen Careerist, compared the adulatory profiles of Sheryl Sandberg to women’s magazine’s features on rail-thin Hollywood actresses: They make women feel bad because they can’t possibly measure up. “Sheryl Sandberg gives up her kids like movie stars give up food: She wants a great career more than anything else.” Trunk, who home-schools her children and stepped off the fast track, also argues that “high performers in corporate life are so much more focused than everyone else in the workforce that it’s time we stopped selling a false bill of goods; almost no one can be singularly focused to get to the top of anything.”

More: Ex-Facebook Worker Describes Booze-Filled, Frat-Boy Antics

Of course, Sandberg’s book only was published today, so the question arises: Have any of these …read more
Source: FULL ARTICLE at DailyFinance

Charlie Gasparino Re-signs Multi-Year Contract with FOX Business Network

By Business Wirevia The Motley Fool

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Charlie Gasparino Re-signs Multi-Year Contract with FOX Business Network

NEW YORK–(BUSINESS WIRE)– FOX Business Network (FBN) has re-signed Charlie Gasparino to a multi-year deal where he will continue his role as senior correspondent for both FBN and FOX News Channel (FNC), announced Kevin Magee, Executive Vice President of the network.

In making the announcement, Magee said, “Charlie thrives on holding Wall Street accountable and his tenacious, hard-nosed approach to journalism has made him one of the most respected reporters in the industry. We look forward to his continued success in breaking market-moving news.”

Joining the company in February 2010, Gasparino provides on-air reports for FBN and FNC on the latest news impacting Wall Street and the financial markets. As senior correspondent, he has covered major business stories including the collapse of MF Global and Knight Capital, and has interviewed such financial heavyweights as JPMorgan Chase CEO Jamie Dimon and Morgan Stanley CEO James Gorman. In addition, he is widely recognized for breaking influential news surrounding the Lehman Brothers collapse, the Troubled Asset Relief Program (TARP), and restructure initiatives at Goldman Sachs, Merrill Lynch, and Morgan Stanley. He has also been credited for noteworthy scoops related to the business of sports, namely news of pro-golfer Tiger Woods’ return to golf following his extramarital affairs and the New York City Marathon‘s cancellation in 2012.

Gasparino commented, “Unlike many other financial news outlets, FBN doesn’t play the Wall Street apology game, which gives me the freedom to do my job.”

Prior to FBN, he served as an on-air editor for CNBC and before that, he was senior writer for Newsweek magazine and a reporter at the Wall Street Journal where his work was submitted for a Pulitzer Prize in 2002. A recipient of numerous business journalism awards, he has authored several best-selling financial books including the most recent Bought and Paid For: The Unholy Alliance Between Barack Obama and Wall Street.

FOX Business Network (FBN) is a financial news channel delivering real-time information across all platforms that impact both Main Street and Wall Street. Headquartered in New York—the business capital of the world—FBN launched in October 2007 under the leadership of FOX News Chairman & CEO Roger Ailes and is now available in more than 60 million homes in major markets across the United States. Owned by News Corp, the network has bureaus in Chicago, Los Angeles, Washington, DC and London. On the web at <a target=_blank …read more
Source: FULL ARTICLE at DailyFinance

Macquarie Announces Senior Hires to Sales and Sales Trading Effort in Boston

By Business Wirevia The Motley Fool

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Macquarie Announces Senior Hires to Sales and Sales Trading Effort in Boston

  • Two key senior equities hires in Macquarie’s Boston office
  • Strengthens overall US equity sales and sales trading effort

NEW YORK–(BUSINESS WIRE)– Macquarie Securities, the institutional equities arm of Macquarie Group (“Macquarie”) (ASX: MQG; ADR: MQBKY), today announced two senior equities hires in a further enhancement to its Boston-based US equity sales and sales trading team.

These new hires expand on a range of senior leadership appointments the firm made to its US institutional equities business in July 2012.

Ken Savio, Senior Managing Director and Head of Macquarie Securities USA, said: “Ryan and Steven have a proven track record of excellence in servicing top-tier institutional accounts that are important to our firm. The high caliber of their combined experience demonstrates our continued and deliberate effort to recruit outstanding professionals who are able to contribute immediately to Macquarie and enhance our client-focused offering.”

About Macquarie Group

Macquarie Group (Macquarie) is a global provider of banking, financial, advisory, investment and funds management services. Macquarie’s main business focus is making returns by providing a diversified range of services to clients. Macquarie acts on behalf of institutional, corporate and retail clients and counterparties around the world. Founded in 1969, Macquarie operates in more than 70 office locations in 28 countries. Macquarie employs approximately 13,400 people and has assets under management of over $353 billion (as of September 30, 2012). See www.macquarie.us for more information.

About Macquarie Securities Group

Macquarie Securities Group operates as a global institutional securities house covering sales, research, ECM, execution and …read more
Source: FULL ARTICLE at DailyFinance