After losing $60 billion in the last decade — and billions more recently when a cloud of volcanic ash grounded flights across Europe — airlines are looking to consolidate as a way to return to profitability amid continued struggles with high fuel prices, competition from low-cost carriers, and a limited customer pool that shriveled even more during the recession.
But experts are skeptical about the “bigger is better” strategy.
Many observers say the carriers have proved downright flighty at following through on making changes that improve operations and put the customer first.
So what did they know and when did they know? When it comes to the mortgage meltdown at Citigroup (NYSE: C), the former chief underwriter for Citigroup’s consumer-lending group has testified before the Financial Crisis Inquiry Commission that he warned Robert Rubin (Robert Rubin news) and others at the bank that the majority of mortgages (mortgage news) it was buying to repackage were defective.
Richard Bowen says he started issuing warning all the way back in 2006. He gave one 2007 email back a memorable subject line: “URGENT-READ IMMEDIATELY-FINANCIAL ISSUES.” He warned of the risks that these mortgages represented.
The email was sent to Robert Rubin, the CFO Gary Crittenden (Gary Crittenden news) and the chief risk officer David Bushnell. The bank said Bowen’s warning was taken seriously; by then, the bank was already suffering. In some cases, his warning seems to have been discounted.
“We continued to purchase and sell to investors even larger volumes of mortgages through 2007. And defective mortgages increased during 2007 to over 80 percent of production.” He says he saw up close how risk management practices changed.
The Journal of Environmental Investing (JEI), an on-line inter-disciplinary scholarly journal that presents original research in all areas at the intersection of the environment and investing is pleased to announce the publication of its first issue, “Beyond Copenhagen.” Now available at http://thejei.com , the issue includes thought pieces from 29 leaders in science, economics, policy, technology, business, and investing. Access to the JEI is free of charge and open to all.
The JEI was created to facilitate capital flow to fund solutions for the most pressing environmental challenges, as unfolding research in natural resource depletion, pollution, demographics, sustainability, and climate reveals new investment risks and opportunities. By appealing to a multi-sectoral audience of contributors and readers, the JEI aims to challenge experts, practitioners, and decision-makers to enlarge their understanding of these issues, and to rewrite the common knowledge base upon which investment decisions are made.
“My goal in founding the Journal was to advance the scholarly discourse between environmental stakeholders and investors. Our mission is to fill the growing need for robust research and thoughtful, informed reviews and opinions on the critical issues of creating, deploying, financing, and managing successful market-based solutions to global environmental and natural resource challenges,” said Dr. Angelo Calvello, Editor-in-Chief.
“Especially now, post-Copenhagen, as more and more investors focus on the risks and opportunities associated with climate change, access to unbiased and objective information from asset owners, investment professionals, scientists, policy makers, and academics is going to be vital as the arena evolves. Our outstanding Editorial and Advisory Boards, which include representatives from all of these areas, are a key component of this collective effort,” added Dr. Calvello.
Paul Clements-Hunt, Head of the United Nations Environment Programme Finance Initiative (UNEP FI), the 18-year-old a partnership between the environmental arm of the United Nations system and more than 180 banks, insurers and investment institutions, commented, “The launch of the JEI comes at a critical juncture as investors strive to understand the complicated interplay between emerging policy frameworks and the new markets associated with climate change, resource scarcity, the industries of the future, and other opportunities driven by fundamental demographic changes.”
“Within the policy-making world and along the investment chain, from institutional investors through the analysts and broking communities to investee corporations, there is a distinct need for neutral, insightful, and informed comment from thought leaders as the investment community deepens its understanding of new markets and emerging asset classes,” added Clements-Hunt. “Dr. Calvello is to be congratulated for bringing the right product to market at the right time. In the Post- Copenhagen era, and just over two years ahead of the Rio +20 Summit, the JEI will be an invaluable resource for those wishing to understand what is fast becoming the investment reality of the twenty-first century.”
Is Elevation Partners “the worst run institutional fund of any size in the United States?” That was the assertion of a Wall Street 24/7 post earlier this week, and a bunch of readers emailed Dan Primack of PEHUB for his reaction.
So he decided to take a dive into the media/tech-focused firm’s portfolio, from a financial perspective. What he found was hardly cause for celebration, particularly for a shop whose high-profile partners include Bono, Roger McNamee and Fred Anderson. At the same time, however, calling Elevation “the worst” is to give hyperbole a bad name.
Merrill Lynch (Merrill Lynch news) executives smelled something fishy back in 2008, when Lehman Brothers (Lehman Brothers news) was bragging to counterparties that it had the strongest liquidity position on the Street. A former Merrill Lynch official tells the Financial Times: “We started getting calls from our counterparties and investors in our debt. Since we didn’t believe the Lehman numbers and thought their calculations were aggressive, we called the regulators.”
That of course raises the question: What did the SEC and Federal Reserve Bank of New York do with this tip? The SEC told the paper that the senior people overseeing Lehman Brothers had left the agency. We may not find out anytime soon how seriously these calls were taken, but this certainly adds to the fallout from Anton Valukas’s posthumous report on Lehman Brothers.
And let’s not forget the Lehman executive who warned about misleading shareholders, and was fired for it. There is a chance that regulators may be feeling their hand forced on this. Increasingly, it’s looking less palatable to sit back and say the episode is over.
The United States is becoming a broken society. The public has contempt for the political class. Public debt is piling up at an astonishing and unrelenting pace. Middle-class wages have lagged. Unemployment will remain high. It will take years to fully recover from the financial crisis.
In the UK alternatives have been explored most fully by the British writer Phillip Blond.
The effort to liberate individuals from repressive social constraints didn’t produce a flowering of freedom; it weakened families, increased out-of-wedlock births and turned neighbors into strangers. In Britain, you get a country with rising crime, and, as a result, four million security cameras.
In a much-discussed essay in Prospect magazine in February 2009, Blond wrote, “Look at the society we have become: We are a bi-polar nation, a bureaucratic, centralized state that presides dysfunctionally over an increasingly fragmented, disempowered and isolated citizenry.” In a separate essay, he added, “The welfare state and the market state are now two defunct and mutually supporting failures.”
Economically, Blond lays out three big areas of reform: remoralize the market, relocalize the economy and recapitalize the poor. This would mean passing zoning legislation to give small shopkeepers a shot against the retail giants, reducing barriers to entry for new businesses, revitalizing local banks, encouraging employee share ownership, setting up local capital funds so community associations could invest in local enterprises, rewarding savings, cutting regulations that socialize risk and privatize profit, and reducing the subsidies that flow from big government and big business.
Essentially, Blond would take a political culture that has been oriented around individual choice and replace it with one oriented around relationships and associations. His ideas have made a big splash in Britain over the past year. His think tank, ResPublica, is influential with the Conservative Party. His book, “Red Tory,” is coming out soon. He’s on a small U.S. speaking tour, appearing at Georgetown’s Tocqueville Forum Friday and at Villanova on Monday.
Britain is always going to be more hospitable to communitarian politics than the more libertarian U.S. But people are social creatures here, too. American society has been atomized by the twin revolutions here, too. This country, too, needs a fresh political wind. America, too, is suffering a devastating crisis of authority. The only way to restore trust is from the local community on up.
The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service.
The governments of the two economies must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, Pierre Cailleteau, managing director of sovereign risk at Moody’s in London, said in a telephone interview.
Under the ratings company’s so-called baseline scenario, the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, Moody’s said today in a report.
“We expect the situation to further deteriorate in terms of the key ratings metrics before they start stabilizing,” Cailleteau said. “This story is not going to stop at the end of the year. There is inertia in the deterioration of credit metrics.”
Bank of America forecloses on a home it doesn’t own
Incidents like this are not winning the likes of Bank of America (BAC) any points with the public. Charlie and Maria Cardoso paid for a retirement home in Spring Hill , Fla. with cash in 2005. They owed no money on the house, but Bank of America “foreclosed” anyway. They removed belongings and changed the locks on the doors. This despite the fact that a Realtor employed by the bank informed it that the foreclosure was erroneous, reports the St. Petersburg Times.
The bank’s agent had the wrong address. The house that was supposed to be seized was across the street and down the block. There are signs that more of this is going on. One lawyer tells the National Law Journal that such incidents are happening across the country. In another case, the owner of a vacation house in Galveston showed up to find the locks changed and a big poster announcing that Bank of America had foreclosed. The owner sued the bank. When they finally got in, they noticed the power had been cut. Again, this was a case of mistaken address. It pays to be really careful.
And
Citibank printed customer Social Security numbers on the outside of
envelopes it mailed to some 600,000 customers in late January.
Ah, another day, another Goldman Sachs (GS) controversy. This one involves the soccer club Manchester United. The Glazer family, which owns the club, is angry over the role that Goldman Sachs’ chief economist Jim O’Neill played in an effort to takeover the club.
O’Neill, a lifelong United fan and one-time board member, is “spearheading” the Red Knights, a group of financiers who met in London this week over a proposal to buy the team, according to the Financial Times. O’Neill also spoke to the press and apparently voiced some criticism of the leverage situation at the company. The trick for O’Neill is that the club is also a client of Goldman Sachs (Goldman Sachs news), which was part of a syndicate that helped with a recent bond sale.
The family has reached out to CEO Lloyd Blankfein to complain, and subsequently let it be known that the bank’s assurances that O’Neill was acting out of his own personal interest were inadequate. This is a tough one. At most companies, personal hobbies would not be allowed to get in the way of business.
The UK’s Directory of Social Change (DSC) and GuideStar International (GSI) have announced that ownership of www.guidestar.org.uk, the free public website, and GuideStar Data Services, a community interest company providing bespoke information, has been transferred from GSI to DSC.
This combines the most detailed repository of information about charities and the voluntary sector with the largest publisher of information for those who work in it.
For more than 35 years, DSC has specialized in providing information and learning to connect those who fund, deliver or influence social change. Its books, training programmes and conferences are well known to the sector, particularly those looking for funding.
GuideStar Data Services operates The GuideStar Third Sector Database, which comprises more than 400 searchable fields of data on 350,000 organizations including charities, social enterprises and not-for-profit organizations. This is the only database for the sector that is compiled by analyzing both the accounts and narrative contained in every annual report, which makes this a unique, comprehensive and searchable database that can be accessed by those wishing to support or collaborate with the sector.
GuideStar International (GSI) previously operated both GDS and GuideStar UK. GSI is a UK-registered charity, working with charity leaders worldwide to develop GuideStar services for their own countries. GSI supports this growing network through the provision of a shared Common Technology Platform as well as advice and support in each country’s development process. Buzz Schmidt the founder of the original GuideStar service in the US in 1994 and GuideStar UK lead GSI in 2003. Visit www.guidestarinternational.org
the free to access GuideStar UK website www.guidestar.org.uk is the most comprehensive online national database of UK charities and DSC is committed to maintaining this resource.
This transfer of ownership seeks to achieve a step change in the quality and accessibility of third sector information and DSC is exploring ways in which the data can be more widely used to inform funders, campaigners, policy makers and those delivering services in the wider voluntary sector.
This development will enable GSI to focus its attention on developing and supporting new GuideStar services around the world. DSC’s GuideStar UK will continue as a core participant in this growing global alliance.
Buzz Schmidt, founder of GuideStar and CEO of GuideStar International, says:
“We have long admired DSC for its commitment to fostering an independent charity sector in the UK and its work as connector, facilitator and cheer leader for the many thousands of small and medium sized charities that are the life blood of the sector throughout the country. We are confident that DSC is the right home for www.guidestar.org.uk and GDS and that it will wholeheartedly advance GuideStar’s mission to promote greater public understanding of the work of charities.”
DSC CEO Debra Tyler said:
“The potential here is immense. Today an entity was created which can refresh and strengthen our vital sector at a crucial time. We are excited about how GDS’ unique service supports our mission of connecting people, and working towards social change. Together we can improve everyone’s understanding of what charities are and do in 2010, including politicians and policy makers, academics and the wider public.
“DSC’s vision is an independent voluntary sector at the heart of social change, and GuideStar provides more tools to make this happen. This unique factual resource will expand and deepen our knowledge. Together we will get more of the right information to the people who need it so that charities can be more effective in achieving their ambitions. There will be a program of new services rolled out in the coming months, starting with one to help funders make more informed grant making decisions.”
