Nowhere are the rights of shareholders more disrespected than at publicly traded investment banks. Wall Street amply demonstrates that the interests of mutual funds and other institutional investors are hardly at the top of their list of concerns. These banks still think of themselves as private partnerships, and they see the public's role as providing liquidity to those partners.

This comes to mind in evaluating the complaints of Goldman Sachs Group's (GS) biggest shareholders who want it to pay out more in dividends and less in bonuses. The Wall Street Journal reports that these whiners include AllianceBernstein, a division of State Street (STT); Wellington Management; and Vanguard Group. These shareholders are concerned that Goldman shouldn't be paying 47% of its revenues to its people.

Continue reading Keep this in mind if you're a Goldman shareholder

Keep this in mind if you're a Goldman shareholder originally appeared on DailyFinance on Fri, 20 Nov 2009 10:20:00 EST. Please see our terms for use of feeds.

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U.S. Rep. Barney Frank's (D-Mass.) House Financial Services Committee has voted in favor of a proposal to have the Government Accountability Office audit the Federal Reserve, according to the Associated Press. But in my view, auditing the Fed is a thinly veiled first step toward wiping out the Fed, or at least diminishing it through political meddling. And since going back to a world without a properly functioning U.S. central bank is not a realistic option, Fed critics need to think carefully about how we can best regulate the financial markets before they start interfering with one of our most important regulatory institutions.

Before getting into why we shouldn't audit the Fed, a brief word on Rep. Frank. Last year, I appeared on a Boston-area TV program right after Frank. As I was sitting in the green room waiting to go on to the set, I was told I had to evacuate immediately. The reason? Frank wanted the green room for himself -- alone. When Frank slowly made his way onto the set, where I was sitting, he completely ignored me and made it clear he did not want to interact with anyone but the fellow interviewing him. Frank ended up taking up all but five minutes of my allotted time. To be fair, he had many interesting things to say.

Continue reading Why we shouldn't audit the Federal Reserve

Why we shouldn't audit the Federal Reserve originally appeared on DailyFinance on Fri, 20 Nov 2009 09:30:00 EST. Please see our terms for use of feeds.

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But Case has moved on since 2000. And Wednesday, he scored a smaller financial victory when he sold Revolution Money to American Express (AXP) for $300 million, according to the The New York Times. Revolution Money lets users pay for things online using a Personal Identification Number with cards that lack names or account numbers. Compared to American Express, it's a lower cost, more secure way to pay.

Continue reading AmEx pays $300 million for Steve Case's Revolution

AmEx pays $300 million for Steve Case's Revolution originally appeared on DailyFinance on Thu, 19 Nov 2009 11:00:00 EST. Please see our terms for use of feeds.

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Are you angry at Goldman Sachs Group (GS) for potentially paying itself $23 billion in bonuses a year after you rescued it from oblivion? If so, would you be willing to let go of that anger in exchange for a vague apology and a $500 million fund to help small businesses? That's the latest Goldman trade on the table.

Before getting into the details of Goldman's offer, let me disclose that two years ago on CNBC I supported what Goldman CEO Lloyd Blankfein did back in 2007 when he helped hedge Goldman's exposure to subprime mortgages. And a few weeks ago, I told Directorship that Blankfein deserves credit for saving Goldman and for fending off a torrent of ill will directed against it. However, he was tone deaf when he joked about Goldman doing God's work -- most people didn't get the joke.

Continue reading Goldman's $500 million small-business offer is no great deal

Goldman's $500 million small-business offer is no great deal originally appeared on DailyFinance on Wed, 18 Nov 2009 12:45:00 EST. Please see our terms for use of feeds.

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Warren Buffett is doubling up on Wal-Mart Stores Inc. (WMT) stock. Why does Warren want Walmart? Obviously, he thinks the price will go up from the $49.81 at which I estimate he bought the shares. But the stock is not cheap -- unless Warren has a better yardstick for measuring Walmart's future earnings growth.

How much Walmart stock does Buffett own? CNNMoney reports that his investing company, Berkshire Hathaway (BRK.A), boosted its stake by 90% from 19.9 million in the second quarter to 37.8 million shares in the third quarter. I don't know precisely what price he paid for the 17.9 million additional shares he bought , but Walmart's stock ranged between $47.73 and $51.88 in the third quarter, so let's guess his average cost was halfway in between: $49.81.

Continue reading Why Warren wants Walmart

Why Warren wants Walmart originally appeared on DailyFinance on Tue, 17 Nov 2009 12:00:00 EST. Please see our terms for use of feeds.

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A UCLA professor has come up with a wild idea to help prevent the next financial meltdown. He doesn't propose expensive regulations and mechanisms of enforcement on financial actors. Instead, he suggests that swift and decisive punishment of the biggest instigators of financial mayhem could scare the industry straight.

Before getting into the details of his proposal, let me introduce the man and his new book, from which this idea springs. Professor Mark A.R. Kleiman heads UCLA's Drug Policy Analysis Program. Years ago, we shared an apartment while I was working at a summer job in Cambridge, Mass., and he was teaching at Harvard's Kennedy School of Government. Kleiman also runs a great blog -- The Reality Based Community. I contacted Kleiman a few weeks ago after seeing his new book, When Brute Force Fails, from Princeton University Press, in the window of the Harvard Book Store. Here are his email responses to my questions.

Continue reading UCLA professor offers wild solution to bad bank behavior: Scare them straight

UCLA professor offers wild solution to bad bank behavior: Scare them straight originally appeared on DailyFinance on Mon, 16 Nov 2009 12:30:00 EST. Please see our terms for use of feeds.

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The Paulson who's been most in the news over the last few years has been former Treasury Secretary Hank. But the Paulson who has made the most money during that time is a fellow you've probably never heard of -- another Harvard Business School graduate in the hedge fund industry -- John. Through his Paulson & Co., John Paulson pulled in a $4 billion pay check in 2007 -- that's more than J.K. Rowling, Oprah Winfrey and Tiger Woods combined.

How did he pull it off? The Wall Street Journal reports that it was Paulson's share of Paulson & Co.'s $20 billion profit from betting on a drop in the subprime mortgage market. He spent $1 billion in 2006 to buy insurance on what he then saw as risky mortgage investments. This was not a surprise to everyone back then -- that December, I had suggested betting against subprime mortgage lender NovaStar Financial (NOVS), and its stock has since fallen more than 99% from $116 to $0.99.

Continue reading Hedge fund genius out-earns J.K. Rowling, Oprah and Tiger combined

Hedge fund genius out-earns J.K. Rowling, Oprah and Tiger combined originally appeared on DailyFinance on Mon, 16 Nov 2009 12:00:00 EST. Please see our terms for use of feeds.

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Continue reading Believe that the weak dollar means strong stocks? If so, it's time to buy

Believe that the weak dollar means strong stocks? If so, it's time to buy originally appeared on DailyFinance on Mon, 16 Nov 2009 11:00:00 EST. Please see our terms for use of feeds.

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Not all the people who donate to presidential campaigns are good. This fact comes to mind as we find out more about one of George W. Bush's big campaign donors -- a pleasant fellow named Scott Rothstein. Of course, he had plenty of company in goosing Bush's campaign coffers -- recall subprime mortgage lender Ameriquest, which contributed a mere $7.8 million.

But that's old news. Bloomberg News reports that Rothstein is a lawyer who persuaded investors to give him $1 billion, in exchange for which they allegedly got a chance to earn a share of what Rothstein promised would be big legal settlements just a few months after those investors' checks cleared. Apparently, it was a yet another Ponzi scheme -- the legal settlements didn't exist. Federal authorities have sued Rothstein, but he hasn't yet been charged with any crime.

Continue reading A George W. Bush fundraiser is now embroiled in an alleged $1 billion scam

A George W. Bush fundraiser is now embroiled in an alleged $1 billion scam originally appeared on DailyFinance on Fri, 13 Nov 2009 14:00:00 EST. Please see our terms for use of feeds.

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We all know that Wall Street's bad bets nearly brought the financial system to its knees last year. Then U.S. taxpayers footed the bill to bail out Wall Street -- taking on obligations potentially as high as $23.7 trillion, leading to a $1.4 trillion federal deficit, and $12 trillion in national debt. To me that's a kind of reverse-Robin-Hood action. Ironically, a New York City charity called the Robin Hood Foundation, which says it supports 200 poverty-fighting programs, is celebrating Wall Street's expected $140 billion 2009 bonus windfall.

The head of Robin Hood's response to the upcoming record Wall Street bonuses is "Hell yeah!" reports Bloomberg News. The reason for David Saltzman's enthusiasm is that Robin Hood claims it gets more than half of its annual $150 million in donations from the employees of investment banks, brokerage firms and hedge funds.

Continue reading Wall Street bonuses are Robin Hood in reverse -- but one Robin Hood approves

Wall Street bonuses are Robin Hood in reverse -- but one Robin Hood approves originally appeared on DailyFinance on Fri, 13 Nov 2009 13:00:00 EST. Please see our terms for use of feeds.

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Boeing (BA) is a big company with many different projects. But one of them, its 787 Dreamliner, has been delayed six times already. This 250- to 330-seat aircraft now has 840 orders (down from 850), which amounts to a $148 billion backlog. While I've reported on conversations with people who claim that the 787 has problems with its environmental control system and its electrical system, The Wall Street Journal on Friday offered another bombshell technical glitch.

Before going into detail about this latest problem, it's worth thinking about how Boeing got here. As I wrote in my book about the company, You Can't Order Change, Boeing decided to do two new things with the 787. First, it outsourced 60% of the design and manufacturing. In the past, Boeing had done all its design work itself and only outsourced some of its manufacturing.

Continue reading Boeing's 787 Dreamliner faces another nightmare engineering delay

Boeing's 787 Dreamliner faces another nightmare engineering delay originally appeared on DailyFinance on Fri, 13 Nov 2009 11:30:00 EST. Please see our terms for use of feeds.

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Do you think that your activity on the Web is protected and anonymous? If so, you might be surprised to learn that Google (GOOG) has a new feature that nicely analyzes all your searches for the last few years -- possibly coupled with details about the people in your address book and your online purchases. If you have a Google account, you can access the whole thing at Google Dashboard, according to The Boston Globe.

Since Google is committed to avoiding evil -- which as I posted, means protecting your privacy -- you have nothing to worry about from the Google engineers and advertising specialists who do have access to that information. And what a treasure trove Google Dashboard provides!

Continue reading Google Dashboard knows all: Feature tracks your searches, and much more

Google Dashboard knows all: Feature tracks your searches, and much more originally appeared on DailyFinance on Thu, 12 Nov 2009 13:00:00 EST. Please see our terms for use of feeds.

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These days, it is hard to know what's real and what's not. The U.S. reported 3.5% gross domestic product growth in the third quarter, during which time China says it grew at an 8.9% rate, according to Fortune. That all sounds great. But it doesn't take much digging to realize that both countries are using borrowed money that someone will have to pay back later to create the illusion of growth -- without creating much in the way of jobs.

This bothers me because the current financial crisis was caused by a debt bubble, and now we are trying to crawl out of its wreckage by creating an even bigger debt bubble. It has been said that insanity is doing the same thing over and over and expecting a different result. By that definition, if the world's economic policymakers think that borrowing more money will lead to bubble-free growth, they're insane.

Continue reading Can the economy grow again without Chinese and U.S. debt?

Can the economy grow again without Chinese and U.S. debt? originally appeared on DailyFinance on Thu, 12 Nov 2009 10:30:00 EST. Please see our terms for use of feeds.

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The Glass-Steagall Act -- a law passed in 1933 that separated investment banking from commercial banking with the aim of preventing another Great Depression -- was repealed exactly 10 years ago today at the urging of Sandy Weill so that Citicorp and Travelers (TRV) could merge and from Citigroup (C).

Weill, at the time the CEO of Citicorp, got then-Treasury Secretary Robert Rubin's support for what turned out to be a disastrous regulatory change, one that was finally passed as Rubin passed the baton to his successor -- Larry Summers (now director of President Obama's National Economic Council). That's because the repeal freed Citi to combine commercial, consumer and investment banking into a one-stop shop -- and created a recipe for financial disaster.

Continue reading A decade after Glass-Steagall's repeal, it's time to reverse Sandy Weill's legacy

A decade after Glass-Steagall's repeal, it's time to reverse Sandy Weill's legacy originally appeared on DailyFinance on Thu, 12 Nov 2009 08:40:00 EST. Please see our terms for use of feeds.

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It looks like any Americans eager to pin the blame for the financial crisis on particular Wall Street bankers have just missed a chance. How so? Two financial-crisis scapegoat candidates wriggled out of that role on Tuesday, thanks to the decision of a jury in Federal District Court in Brooklyn, N.Y.

The jurors decided that Ralph R. Cioffi and Matthew M. Tannin, who formerly managed two Bear Stearns hedge funds that imploded back in June 2007, did not lie to investors and that Cioffi did not violate laws against insider trading, according to the New York Times. This seems fine to me because I don't think they should get the blame for the financial crisis.

Continue reading Two Bear Stearns hedge fund managers are off the hook for the financial crisis

Two Bear Stearns hedge fund managers are off the hook for the financial crisis originally appeared on DailyFinance on Tue, 10 Nov 2009 17:45:00 EST. Please see our terms for use of feeds.

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The Securities and Exchange Commission is an unindicted co-conspirator in the Ponzi schemes that have emerged over the last few years. It created the conditions that left huge opportunities for the ambitious and unscrupulous to dupe investors. And it shows no inclination to fix the problems. What I'm talking about -- as I've posted many times before -- is that unlike in school, where teachers write students' report cards, in money management, the managers grade themselves.

This huge flaw in our regulatory system comes to mind with the discovery of this latest little Ponzi scheme. In this one, as Fortune reports, a piece of Georgia trailer trash made his way north to Pennsylvania and wormed his way into the good graces of the old-money, polo-playing set south of Philadelphia. This character -- dubbed Tony Young -- then persuaded his new-found admirers to invest $120 million of their great-great-grandfathers' money with his company, Acorn Capital Management LLC. Of that, Young allegedly stole $23 million.

Continue reading Another Ponzi schemer steals millions by writing his own report card

Another Ponzi schemer steals millions by writing his own report card originally appeared on DailyFinance on Tue, 10 Nov 2009 11:20:00 EST. Please see our terms for use of feeds.

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As I posted, Boeing (BA) is opening a plant in South Carolina to help build its 787 Dreamliner -- the up to 330-passenger aircraft whose scheduled delivery date has been delayed six times. BusinessWeek reports that Boeing is investing $750 million in that plant and expects to pay the workers there $15 an hour, 42% less than its unionized Washington state workers get. With 850 Dreamliner orders worth $110 billion on the books, Boeing can hardly afford more problems with this plane. Is this move by the company short-sighted?

The answer depends on whether Boeing can train those South Carolina workers to do what those in Washington can. Lately, things haven't worked out so well for Boeing in its relationship with those Washington workers. About a year ago, Boeing's 27,000-member machinists union there went on strike for 57 days, which contributed to one of those six 787 delays and cost the company $2 billion.

Continue reading Boeing's move to South Carolina cuts 787's costs, but risks labor turbulence

Boeing's move to South Carolina cuts 787's costs, but risks labor turbulence originally appeared on DailyFinance on Mon, 09 Nov 2009 11:20:00 EST. Please see our terms for use of feeds.

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The weekly blizzard of economic statistics makes it tough to figure out what is really going on. But with a near-record number of people unemployed or underemployed, productivity at very high levels, and pay rising for the people who still have jobs, one conclusion seems to jump out: Companies are getting smarter about who they keep, how they manage the keepers, and who they fire.

Let's look at some of the numbers. The New York Times reports that what I would call wasted workers -- the combination of unemployed who are still looking for work, discouraged workers who have given up looking, and part-time workers seeking full-time jobs -- has hit a record 17.5%. This beats the previous record of 17.1% set in the midst of the Paul Volcker-led recession of 1982. (Then-Fed Chair Volcker's recession resulted from his decision to raise interest rates up to 20% to break the back of inflation.)

Continue reading Broader unemployment rate hits 17.5% as companies get smarter about staff

Broader unemployment rate hits 17.5% as companies get smarter about staff originally appeared on DailyFinance on Sun, 08 Nov 2009 11:00:00 EST. Please see our terms for use of feeds.

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When it comes to allocating scarce public resources, large corporations seem to have the upper hand in the US. We already know that many powerful companies, particularly the Wall Street investment banks, having gotten plenty of Washington cash. Now it looks like they're getting first dibs on the scarce H1N1 vaccine as well.

If I remember correctly, last fall the problems with the financial sector nearly cratered the global economy -- what with the $30 trillion in lost stock market value and over a trillion dollars in bank write-offs. As I've written before, Wall Street accounts for 0.057 percent of our population, but because it has given $5 billion to Washington politicians and lobbyists over the last decade, the government poured trillions of dollars into bailing it out after its little collapse last year.

Continue reading Wall Street gets it all: Bailouts, bonuses, first dibs on H1N1 vaccine

Wall Street gets it all: Bailouts, bonuses, first dibs on H1N1 vaccine originally appeared on DailyFinance on Fri, 06 Nov 2009 15:00:00 EST. Please see our terms for use of feeds.

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I recently delivered a Webinar, Economic Outlook: U.S. and Key Industries, and got asked a very interesting question -- How will we know the recession is over? With Thursday's report that productivity grew 9.5 percent while the number of people added to the unemployment rolls hit 512,000 in the last week, the signals are not exactly clear.

But my answer to the question is that people can follow eight indicators to know whether we're out of a recession. My best guess is that these indicators will not all flash a green light suddenly or at the same time. But if you follow these indicators over the next few months and monitor changes in them closely, you may get some meaningful signs of whether the recession is over.

Before jumping into these indicators, there is one more thing. As I've posted, the National Bureau of Economic Research (NBER) officially decides when recessions begin and end and they dated the current one from December 2007 -- the month that jobs started shrinking. So that is one of the indicators that I am tracking. But without further ado, here are the eight:

Continue reading Eight signs that the recession is over

Eight signs that the recession is over originally appeared on DailyFinance on Fri, 06 Nov 2009 07:30:00 EST. Please see our terms for use of feeds.

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