Wagoner never saw the ax coming in Washington
Mon Mar 30, 2009 8:24pm EDT
By John Crawley
WASHINGTON (Reuters) – Rick Wagoner, late of General Motors, never saw the ax coming.
When he arrived at the Treasury Department for a meeting last Friday with Obama administration’s autos task force, he was a 32-year GM veteran and a chief executive carrying the weight of the company’s wrenching restructuring on his 6-foot-4 frame. Pressure for him to quit last fall when he first approached Washington for a bailout had faded.
But Wagoner’s plan for a GM turnaround and a $16 billion bailout was rejected in the meeting and the company where he spent his entire professional life fell off his shoulders.
[ . . . ]
“We are left to look back and say that Wagoner’s appointment as both chairman and CEO in 2003 was little more than an act to ensure the dynasty of GM boardroom arrogance and failure continued,” said Howard Wheeldon, senior strategist at brokerage BGC Partners.
Obama last week cited years of corporate mismanagement as a factor for the U.S. auto industry’s decline. Wagoner presided over GM’s rapid deterioration in the past five years.
Wagoner has become the most-recognizable casualty of a once vaunted industry brought to its knees by a confluence of disastrous circumstances that coincided with the later years of his tenure. Some of the wreckage was out of Detroit’s control, but some of it — as President Barack Obama has said — was self inflicted.
“Yes, we were surprised,” Fritz Henderson, Wagoner’s former top deputy and now his replacement, said of the task force rejection of the company’s plan that he helped construct.
Wheeldon said Wagoner’s departure had been all but inevitable since the automaker sought government funds. At the time of the company’s $13.4 billion bailout last fall, Sen Christopher Dodd, chairman of a committee overseeing corporate rescue funds, had publicly called for Wagoner to step down.
(Reporting by John Crawley; Editing Bernard Orr)
http://www.reuters.com/article/topNews/idUSTRE52U03I20090331?sp=true
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My note – what is it about the environments where these executives live and work that make it impossible to understand reality? How can they be so completely out of touch as to be surprised that their plans were off, and unable to understand that their actions and decisions have driven these companies into the ground?
The same is true with the bankers and financial industries, Wall Street firms and other large corporate structures. Its as if there is something about the way in which their “world” operates that prevents them from bringing the critical elements of reality to bear on their decisions even when their choices mean the difference between survival of the firm or its destruction.
How is that possible? If that were fixed – that one thing could go a long way to helping correct the damage that has been done over years of mismanaging these companies and their assets.
- cricketdiane, 03-30-09
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Mr. Mario Draghi, Chairman
Financial Stability Forum
Bank for International Settlements
Centralbahnplatz 2
CH-4002 Basel
Switzerland
Dear Mr. Draghi:
I am pleased to send you the report of the Senior Supervisors Group, Leading-Practice Disclosures for Selected Exposures. This report responds to the Financial Stability Forum’s request that the Senior Supervisors Group undertake a review of disclosure practices regarding exposures to certain instruments that the marketplace now considers to be high-risk or to involve more risk than previously thought, including collateralized debt obligations, residential mortgage-backed securities, commercial mortgage-backed securities, other special purpose entities, and leveraged finance. Notwithstanding our focus on these particular exposures, we expect specific areas of interest to evolve with market developments.
The report highlights examples of leading-practice disclosures taken from a
nonscientific sample of documents posted to the public websites of twenty large, internationally oriented financial firms as of March 7, 2008. As such, the report does not address enhanced disclosures that the firms may have made through other means or after the review date. We also recognize that because firms have adopted different business strategies, not all of the examples will be relevant to every firm. Nonetheless, we expect that financial firms will find this review useful in assessing and enhancing their own disclosures.
Sincerely,
William L. Rutledge
Chairman
SENIOR SUPERVISORS GROUP
FRANCE
Banking Commission
GERMANY
Federal Financial
Supervisory Authority
SWITZERLAND
Federal Banking Commission
UNITED KINGDOM
Financial Services Authority
UNITED STATES
Board of Governors of the
Federal Reserve System
Federal Reserve Bank
of New York
Office of the Comptroller
of the Currency
Securities and Exchange
Commission
SENIOR SUPERVISORS GROUP
Transmittal letter
http://www.newyorkfed.org/newsevents/news/banking/2008/SSG_Leading_Practice_Disclosures.pdf
***
**
INTRODUCTION
The recent market turmoil has heightened the desirability for
financial firms to publicly disclose their exposures to certain
instruments that the marketplace now considers to be highrisk
or to involve more risk than previously thought, including
collateralized debt obligations (CDOs), residential mortgagebacked
securities (RMBS), commercial mortgage-backed
securities (CMBS), other special purpose entities (SPEs), and
leveraged finance.1 In response, many financial firms have
recently enhanced their disclosures of these exposures.2
In this context, this paper highlights some leading3
disclosure practices among twenty large, internationally
oriented financial firms – fifteen banks and five securities
firms – whose disclosure data we recently surveyed.4 Also
discussed briefly are the disclosure requirements for SPEs
imposed by accounting standards.
The results of the survey indicate that disclosure practices
can be enhanced without necessarily amending existing
disclosure requirements, as disclosure requirements allow firms
considerable discretion in how they convey information.
Moreover, we viewed disclosure broadly to include not only
information presented in public securities filings but also
information contained in earnings press releases and
accompanying presentation slides posted on the firms’ public
websites. Indeed, some of the leading disclosure practices
referenced in this paper were contained in advance or
supplementary material, which provides market participants
with more timely information on exposures of current
concern.
SUMMARY OF LEADING-PRACTICE
DISCLOSURES
The leading practices discussed here were observed in our
survey of the latest disclosures of twenty financial firms. Each
disclosure is presently made by at least one firm, although few
firms come close to making all of the disclosures. As such, the
disclosures represent leading practices across a variety of risks
and exposures, and some disclosures may not be relevant for
firms that do not have significant exposure to the activity.
Appendix B provides a general sense of the frequency of such
disclosures in our sample.
The disclosures are presented in the box on page 2 and are
described more fully in this section. In addition, for each
category of exposure, many of the surveyed firms provide the
following details:
• total exposure, including on- and off-balance-sheet
analysis, as well as funded and committed lines, if
applicable,
• exposure before and after hedging, and
• exposure before and after write-downs.
**
1 Effective public disclosures are central to market discipline. See, for example, Basel Committee on Banking Supervision, Enhancing Bank Transparency (September 1998), and Group of Thirty, Enhancing Public Confidence in Financial Reporting (2003).
2 In December 2007, the U.S. Securities and Exchange Commission sought to promote more effective disclosure of some of the exposures behind the recent market turmoil through a letter to selected financial firms asking them to consider disclosing a list of items associated with off-balance-sheet entities.
3 We use the term “leading” to mean most informative, with regard to both
quantity and quality of information (for example, the data should be
particularly useful to market participants in assessing the risks and returns
associated with investments in or exposures to the firm). See the papers by the Basel Committee and the Group of Thirty, cited in footnote 1, for discussions of the characteristics of effective disclosures.
4 See Appendix A for a list of the twenty firms. Data reviewed include annual
reports, quarterly reports, press releases, and slides that were publicly available
as of March 7, 2008.
http://www.newyorkfed.org/newsevents/news/banking/2008/SSG_Leading_Practice_Disclosures.pdf
***
Former AIG exec draws scrutiny
WASHINGTON, March 30 (UPI) — U.S. investigators are looking into possible criminal fraud by a former American International Group Inc. (NYSE:AFF) executive, ABC News reported Monday.
Federal prosecutors and FBI agents are investigating Joseph Cassano, 54, who ran AIG’s Financial Products Division, the U.S. network reported. The department lost hundreds of billions of dollars and Rep. Jackie Speier, D-Calif., told ABC Cassano “almost single-handedly is responsible for bringing AIG down and by reference the economy of this country.”
ABC said its own investigation determined Cassano set up dozens of companies — some off-shore — to keep transactions off AIG books and hidden from U.S. and British regulators.
Cassano was paid more than $300 million to run the AIG Financial Products Division, through which AIG insured junk quality loans valued at more than $1 trillion, ABC said. He was fired in 2008 after the losses were reported, but he continued to draw $1 million a month until Congress took up a bailout of AIG, using $180 billion in public funds.
[Etc.]
http://www.upi.com/Business_News/2009/03/30/Former_AIG_exec_draws_scrutiny/UPI-16961238458364/
***
****
U.S. pension agency lost big in market
WASHINGTON, March 30 (UPI) — The U.S. agency that insures pensions for 44 million Americans says it lost billions on investments made as the market headed down in 2008.
The Boston Globe reported Monday that the Pension Benefit Guaranty Corp. switched much of its $64 billion insurance fund into speculative investments, including real estate, private equity funds and stocks in emerging foreign markets.
The PBGC would not describe the extent to which its new investment strategy has been implemented or how the fund has performed since the financial downturn, the newspaper said.
However, the agency said its fund was down 6.5 percent — and stock-related investments were down 23 percent — as of Sept. 30, 2008, the end of its fiscal year. The Globe noted much of the current stock market decline has occurred since that date and the new investment strategy was scheduled to begin after Sept. 30.
[Etc.]
Charles E.F. Millard, who ran the agency under the administration of former President George W. Bush, told the Globe the new investment strategy “is not riskier than the old one.”
http://www.upi.com/Business_News/2009/03/30/US_pension_agency_lost_big_in_market/UPI-76351238456438/
***
Buffett’s favorite banker to leave Goldman Sachs
Mon Mar 30, 2009 5:47pm EDT
Trott’s departure comes as a parade of bankers leave big Wall Street firms to join boutique firms or companies that are not subject to compensation limits set by the U.S. government. Big banks have also shed thousands of jobs in the past year as the prolonged credit crisis puts the brakes on deal activity.
Goldman in particular has seen several senior bankers decamp, including media banker Joseph Ravitch, who earlier this month announced plans to leave. Energy banker William Wicker last month said he would jump to Morgan Stanley.
Also in February, Suzanne Donohoe, who ran Goldman’s asset management international unit, left to join Kohlberg Kravis Roberts & Co.
(Editing by Maureen Bavdek)
http://www.reuters.com/article/ousiv/idUSTRE52T6AM20090330
***
Sara Lee may divest household business
Mon Mar 30, 2009 6:15pm EDT
By Brad Dorfman
CHICAGO (Reuters) – Sara Lee (SLE.N) is considering the sale of its international household and personal care business after receiving some expressions of interest from potential suitors.
The business, which includes a mix of brands like Sanex body wash and Ambi Pur air fresheners, has about $2.3 billion in annual sales, or about 17 percent of the company’s total.
[ . . ]
Analysts have said the company could have to break up the business to sell it because it has such a wide range of products, which also include Kiwi shoe polish and Vapona insecticides.
Analysts have mentioned a host of possible buyers, including Reckitt Benckiser (RB.L) and Unilever (ULVR.L) (UNc.AS) in Europe, as well as Colgate-Palmolive Co (CL.N), S.C. Johnson & Son Inc and Procter & Gamble Co (PG.N) in the United States. All have declined or not been available for comment.
[ Etc. ]
http://www.reuters.com/article/innovationNews/idUSTRE52T3LK20090330
***
NEW YORK, March 28 (UPI) — The California public pension Calpers is demanding that the hedge funds in which it invests give it better terms, such as lower prices, a memo indicates.
The move by the giant pension fund, which has $5.9 billion in hedge fund investments, shows how financial backers of the formerly high-flying investment vehicles are unhappy because they have failed to live up to their promises of making handsome returns in good times or bad, The Wall Street Journal reported Saturday.
Calpers’ demands, contained in a March 11 memo obtained by the newspaper, were sent to the 26 hedge funds and nine funds of hedge funds. Some of the hedge funds on the list include Tremblant Capital, Atticus Capital and Och-Ziff Capital Management, the Journal said.
http://www.upi.com/Business_News/2009/03/28/Calpers_seeks_hedge_fund_concessions/UPI-14811238266679/
***
DETROIT, March 1 (UPI) — A drastic decline in General Motors Corp. (NYSE:GM)’s U.S. pension funds during a year-long period was due, in part, to questionable spending practices, experts say.
Pension Research Council Executive Director Olivia Mitchell said spending on employee buyout programs and benefit increases dropped the company’s pension funds from $20 billion in late 2007 to a $12.4 billion deficit a year later, the Detroit Free Press reported Sunday.
http://www.upi.com/Business_News/2009/03/01/GM_pension_spending_under_scrutiny/UPI-77701235938098/
***
Excellent article, bookmarked for future referrence
What blog script do you use on your site ?