2009 October 04 » New Jersey CFO

At the height of the financial panic last fall Goldman Sachs became a bank holding company, which enabled it to borrow directly from the Federal Reserve. It also became subject to supervision by the Federal Reserve Board (with the NY Fed on point) – hence the brouhaha over Steven Friedman’s shareholdings.

Goldman is also currently engaged in private equity investments in nonfinancial firms around the world, as seen for example in its recent deal with Geely Automotive Holdings in China (People’s Daily; CNBC). US banks or bank holding companies would not generally be allowed to undertake such transactions - in fact, it is annoyed bankers who have asked me to take this up.

Would someone from the NY Fed kindly explain the precise nature of the waiver that has been granted to Goldman so that it can operate in this fashion? If this is temporary, is it envisaged that Goldman will cease being a bank holding company, or that it will divest itself shortly of activities not usually allowed (and with good reason) by banks? Or will all bank holding companies be allowed to expand on the same basis. (The relevant rules appear to be here in general and here specifically; do tell me what I am missing.)

Increasingly, the issue of “too big to regulate” in the public interest is being brought up – an issue that has historically attracted the interest of the Department of Justice’s Antitrust Division in sectors other than finance. Should Goldman Sachs now be placed in this category?

Given that the Fed has slipped up so many times and in so many ways with regard to regulation over the past decade, and given the current debate on Capitol Hill, now might be a good time to get ahead of this issue.

In addition, there is the obvious carry trade (borrow cheaply; lend at higher rates) developing from cheap Fed dollar funding to the growing speculative frenzy in emerging markets, particularly China. Are we heading for another speculative bubble that will end up damaging US bank balance sheets and all American taxpayers?

By Simon Johnson

A Short Question For Senior Officials Of The New York Fed Baseline Scenario

The Whole Foods founder talks about his Journal health-care op-ed that spawned a boycott, how he deals with unions, and why he thinks CEOs are overpaid.

John Mackey: Conscience of a Capitalist – Steve Moore, Wall Street Journal

The Supreme Court opens its new term Monday, marking what will likely prove a big year for business conflicts. Many cases with broad implications for companies and investors are on the docket, from suits dealing with fraud and antitrust allegations to questions of securities law. One of the most anticipated cases scheduled — a challenge to the patenting of a financial tool — could set a precedent for all patents of business methods.

In recent years, the Court has been very sympathetic toward business, and experts say the economic meltdown and the surge in public hostility toward corporate dealings aren’t likely to change that. But that doesn’t mean business always wins.

Here’s a look at six key cases coming before the court.

Supreme Court Cases Investors Should Watch – Jen Itzenson, SmartMoney

Cramer said there are three phases to most market declines. In the first phase, everything goes down. But in the second phase, he said, a few stand outs begin to emerge, like the defensive stocks, which include anything you can eat, drink, smoke or medicate with, he said. This is also the phase when the strong secular growers stand out. Then finally in the thirds phase, the rest of the markets rebound.

Cramer On How To Play Next Week’s Market – Scott Rutt, TheStreet.com

Thomas K. Brown, an independent bank analyst who for years has been Mr. Lewis’s loudest critic, called him “aloof and arrogant.” Certainly, many shareholders felt that way. It often seemed as if he cared more about creating a big bank than a profitable one. Although the stock returned negative 13 percent on his watch (Wells Fargo, by contrast, returned 53 percent between 2001 and 2009), he took home $60 million over the last three years. “He has been hideously overpaid for hideously bad performance,” said Nell Minow, co-founder of the Corporate Library, which monitors corporate executives and boards.

And at a time when many companies were dividing the jobs of chairman of the board and chief executive, Mr. Lewis declined to go along, keeping both titles. Last year, however, shareholders voted to strip him of his chairmanship, a humiliating blow.

Even when the financial crisis hit, his response was to fall back on the only strategy he had ever known: buy more companies. Thus it was that in 2008, he bought Countrywide and Merrill Lynch — moves that eventually caused Bank of America to need both government assistance and guarantees against loan losses. The latter purchase, in particular, was his downfall.

Ken Lewis Was Competent, But Not a Leader – Joe Nocera, New York Times

New Jersey CFO

A Short Question For Senior Officials Of The New York Fed

The Conscience of a Capitalist

The Whole Foods founder talks about his Journal health-care op-ed that spawned a boycott, how he deals with unions, and why he thinks CEOs are overpaid.

6 Supreme Court Cases Investors Should Watch

Cramer’s ‘Mad Money’ Recap: How to Play Next Week’s Market (Final)

Incompetent? No, Just Not a Leader

Analysis & Commentary