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  Profit Not Satanic, Says Wealthy Banker |
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 | Reported by The Big Money
on Saturday, 7 November 2009
(2 weeks ago) |
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The moment everyone expected but no one was waiting for has arrived: Unemployment is in double digits.
The New York Times says that 10.2 percent is a twenty-six year high in the sixty-year history of government record keeping.
Only 1982, when 10.8 percent of workers were sidelined, was worse.
Dampening the bad news, President Obama signed an extension of unemployment benefits for the jobless, allowing them to spend nearly two full years on the dole.
The article dives into the metrics but also the psychology of long-term unemployment.
It cites one worker who, after a year and a half, continues to drive to his unemployment office, send out job applications, and return home to “his sagging couch and his television, where cheerful news anchors tell him that the economy is looking up.”
But, is unemployment 10.2 percent, or 17.5 percent? The later figure includes underemployment, and that actually beats the high of 17.1 percent set in December of 1982.
The discouraged and the part-timers who want to be full timers are counted in this figure, notes the Times.
“Ten percent is a terribly important number,” a democratic pollster noted in the Wall Street Journal's take on the figures.
No word on his thoughts regarding 17.5 percent.
Citigroup is granting its employees options to convince them to stay, the Times writes.
Options grants, which the article says have long been criticized as creating perverse incentives, are being presented by the bank as a way for employees to rebuild their nest eggs while remaining with the company.
Employee savings were nearly wiped out when Citigroup stock plunged in value during the height of the financial crisis.
Despite the longstanding criticisms of options programs, the construction of this one may make sense: It requires three years of vesting, has a strike price slightly above current share pricing, and preserves capital for the bank.
As such, one critic of options grants told the paper, “They are trying to reward staff that had the guts to hold onto their stock during this turbulent period for the company.”
Hedge funds are on edge after several high profile arrests on insider trading charges were made in recent weeks.
The Times reports that executives are dropping a dime—to their lawyers—to re-examine their compliance with insider information laws.
“Defcon 2” is how one executive described the effort to not run afoul of the rules.
Because the executives fear wiretaps, they're telling staffers to think of phone conversations the way they think of email: as if it could end up on the “front page of The New York Times.” Meanwhile the Journal says SAC Capital may soon be part of the broader and ongoing insider trading investigations.
AIG is profitable again, but executives say the road the company is on won't necessarily remain smooth.
Regulatory filings indicate that its investments are performing well, even as insurance sales are faltering.
Looming over future balance sheets is the massive debt the firm must repay to the United States government, and a $5 billion charge related to its' restructuring.
A topic AIG didn't discuss in its filing was employee retention, but the Times notes several executives have jumped ship to work on a competing venture with Hank Greenberg, who was AIG's CEO for nearly forty years.
Goldman Sachs wanted to buy tax credits from Fannie Mae, which has lost so much money that the credits are useless.
The government said no, reports the Journal, because the deal would be a net loss for taxpayers, and because it didn't want to appear to be favoring the pre-eminent investment bank in such savvy deals.
Meanwhile the Times says Fannie will soon ask for another $15 billion in bailout funds, on top of the $50 billion it's already received.
The Obama Administration wanted the Federal Reserve to be Wall Street's primary regulator, but Congress didn't get a copy of that memo.
In fact, the Washington Post explains that Congress basically doesn't like the Fed, and thinks it's failed one too many times.
So legislators are proposing their own regulatory reform proposals, further dragging out the fight over reform.
The Times catches up to the story of the virtual goods economy, which generated $5 billion in real cash.
Skype's founders reached a settlement with EBay over the auction house's sale of the online call service.
The founders had long railed against the sale, wanting to remove the pressures of short-term profitability from their grander plans for reacquiring the calling firm.
Finally Barclays' CEO, in defense of his industry, recently said, “profit is not satanic.” A Goldman Sachs International advisor seconded the thought, adding, “We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all.”
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