Saturday, February 07, 2009

Temasek CEO Ho Ching to quit after rocky ride

From Reuters

Ho Ching will step down as chief executive of Singapore state investor Temasek after a five-year stint, following a period of turmoil in global markets that has slashed the value of its investments.

Chip Goodyear, the former chief executive of BHP Billiton, will replace Ho, the wife of Singapore Prime Minister Lee Hsien Loong, on Oct. 1 as the sovereign wealth fund tries to build a more international image and move more aggressively into resources.

Goodyear will be the first foreigner to run Temasek, the smaller of Singapore's two sovereign wealth funds.

Wall Street Bonuses

Wednesday, January 28, 2009

Global crisis ‘could cost 50m jobs’

Projections by the International Labour Organization, a UN agency, on global employment trends predict that on a worst-case scenario, recorded unemployment could rise by more than 50m from baseline 2007 levels to 230m or 7.1 per cent of the world’s labour force by the end of 2009.

In the same scenario the number of people in “working poverty”, earning less than $2 a day, could rise to 1.4bn or 45 per cent of all workers, from 1.2bn in 2007.

This would leave as many people below the poverty line as there were in 1997, wiping out all the gains over the past decade and marking “a return to a situation in which more than half of the global labour force would be unemployed or counted as working poor.”

Juan Somavia, ILO director-general, said its message was “realistic, not alarmist”. “We are now facing a global jobs crisis…Progress in poverty reduction is unravelling and middle classes worldwide are weakening. The political and security implications are daunting.”

Saturday, January 24, 2009

The Renminbi controversy

The US and China have embarked on a public row over foreign exchange policy only three days after Barack Obama’s inauguration, with China denying on Friday night it was “manipulating” its currency and saying the allegation would only fan protectionist sentiment in the US.

The Chinese government was responding to claims by Tim Geithner, President Obama’s choice for Treasury secretary, who told a Senate nomination hearing on Thursday that China was “manipulating” the renmnbi.

In a statement on Friday night, China’s commerce ministry said Beijing “has never used so-called currency manipulation to gain benefits in its international trade”, AFP, the news agency, reported. “Directing unsubstantiated criticism at China on the exchange-rate issue will only help US protectionism and will not help towards a real solution to the issue.”

China’s currency has appreciated 19 per cent since Beijing abandoned a dollar peg in 2005, but record trade surpluses over the past three months give ammunition to those who argue the renminbi is still undervalued.

White House Philosophy Stoked Mortgage Bonfire


“We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home.” — President Bush, Oct. 15, 2002

Seven most horrible things about Bush presidency
7. Bush politicized parts of the government that should be nonpartisan.
6. Bush squandered the budget surplus.
5. Bush comforted the comfortable and afflicted the afflicted.
4. Bush rewarded incompetence. Because politics and personal loyalty were all that counted.
3. Bush lied us into war.
2. Bush has exposed himself to war crime charges.
1. Bush weakened our democracy. Bush has embraced a theory of dictatorship.

The Rise and Fall of RBS

On Seeking Alpha
On Monday, RBS announced the biggest loss in British corporate history. It comprised £7 to £8 billion from trading ($10-$12 billion) plus a further £20 billion ($30 billion) write-down in goodwill following the acquisition of ABN AMRO. Total loss, therefore: $40 billion, and possibly more. Full results will be announced in February.

It is a dramatic comedown for an institution with a long and respectable history. Originally a very conservative Scottish bank, established in 1727, RBS pottered along for a few centuries without raising its head too far above the parapets. Then Fred Goodwin arrived in 1998 from National Australia Bank, where he had gained a reputation for being “Fred the Shred” for his singular and significant cost cutting focus during the bank’s acquisition of Clydesdale Bank.

By 2004, RBS commanded a global market value of $70 billion, more than JPMorgan Chase, Deutsche Bank, Barclays, and UBS. Just to put this in context, in 1999, the top 25 banks in the world based upon market capitalisation included ABN AMRO in 15th place and NatWest in 22nd, while RBS didn’t even make the Top 40. By 2004, RBS had moved up to become the 8th largest bank in the world.

The acquisitions and growth trail did not stop there, though, as Sir Fred’s ambitions continued unabated. First, there was a $1.6 billion investment in Bank of China in 2005 and then, in the most audacious move of all, a bidding war against Barclays, with Fortis and Banco Santander as RBS’s partners, to win ABN AMRO in a $101 billion all-cash offering in November 2007--right at the peak of the market. This was the biggest bank takeover in history and, at three times book value, very richly priced.

A new leadership is now in place to sort out the mess, with Stephen Hester at the helm. Mr. Hester came from Abbey, where he started his tenure with the bad news and some major mark-downs on the bank's position. He did the same Monday at RBS, with the news that a trading loss of over $40 billion is likely for 2008.

This, on the same day that the UK government announced a $300 billion secondary bank bailout plan, much of which is going to RBS as the government’s 57.8% preference share stake in the bank is converted to a 70% ordinary shares stake. This is being done in order to reduce the interest payments by around $1 billion a year, as the preference shares warrant a 12% payback versus 5% on the ordinary shares.

John Thain, Then and Now

On DealJournal
Update: Obama on Thain - “the reports that we’ve seen over the last couple of days about companies that have received taxpayer assistance, then going out and renovating bathrooms or offices or in other ways not managing those dollars appropriately”.

January 2008: Thain slashes costs at Merrill, ridding the firm of the helicopter frequented by predecessor Stan O’Neal and replacing $20,000 worth of cut fresh flowers with silk ones.
January 2009: Revelations emerge that, at the same time Thain was cutting costs, he also spent $1.2 million decorating his own office, including an $87,000 rug and $35,000 “commode with legs.”

February 2008: “I don’t think it’s an accident that the firms that seem to have avoided these problems the best have CEOs who get very actively involved in the business,” Thain told Bloomberg. “You look at Goldman and you look at Lehman.”
January 20, 2009: “Senior executives at Bank of America sensed that Mr. Thain didn’t appear to be fully engaged in issues surrounding the deal just when the scope of Merrill’s losses was becoming apparent. In mid-December, Mr. Thain left on a vacation to Vail, Colo., and was pretty much out of touch after that, says this person,” the Journal wrote.

January 17, 2008: Thain: “We were very comfortable with our liquidity position, both at the end of the year and going forward.” — Fourth quarter 2007 earnings call interview with France’s Le Figaro newspaper
March 16, 2008: Thain said, “We have more capital than we need, so we can say to the market that we don’t need more injections. We can confirm that we have tackled the problem.” –to Spain’s El Pais newspaper

February 2008: “When you’re the smartest guy in the room, which [Thain] typically is, you come at things from a different altitude,” CFO Nelson Chai told Bloomberg.
January 22, 2009: The Journal wrote, “When Mr. Lewis asked Mr. Thain what happened, the Bank of America CEO didn’t get a ‘good explanation for what was happening and why,’ this person said. Not only did Mr. Thain not appear concerned about the losses, but he ‘didn’t really have a good grasp of what was going on,’ this person added.