Is the most powerful and controversial firm on Wall Street about to get the comeuppance that so many think it deserves? Goldman Sachs, the Wall Street powerhouse, has been accused of defrauding investors by America’s financial regulator [Source].
The Securities and Exchange Commission (SEC) alleges that Goldman failed to disclose conflicts of interest. The claims concern Goldman’s marketing of sub-prime mortgage investments just as the US housing market faltered [Source].
Goldman’s shares tumbled, dragging down stockmarkets worldwide [Source]. The charges against Goldman could have far wider consequences.
Stock markets around the world staged a recovery in 2009 since March, when most of them hit their lows for the year. It was a year in which governments and central banks around the world took extraordinary measures to get their economies growing.
US share prices also performed well. Despite a drop of about 1% of all Wall Street indexes during the last trading hour on New Year’s Eve, the broad-based S&P 500 index was up nearly 25%, the strongest performance since 2003, while the Dow Jones gained 20%. The technology-driven Nasdaq index doubled those gains, rallying 45%. [Source 1] [Source 2]
Former Merrill Lynch CEO John Thain offers his opinions as to what caused the crisis, what can be done to prevent it from happening again, and when it will be over — not just for the financial industry but also for Main Street. This lecture consist out of three videos, which include Thain’s remarks to the audience, questions from the three-member panel and, finally, questions from the audience.
The global credit crunch has cost governments more than $10 trillion, the International Monetary Fund (IMF) says. The IMF says that rich countries have provided $9.2tn in government support for the financial sector, while emerging economies spent $1.6 tn. Read more.
From the ruins of the credit crunch, a new financial order will emerge. Its shape is not yet known, but is already hotly debated. Will there be a new model for investment banking? The socialisation of risk? A return to Keynesianism? What role will hedge funds and private equity play? And government and regulators?
In this series of exclusive video interviews, Lionel Barber, editor of the Financial Times, talks to some of the chief protagonists – bankers, policymakers, financiers – and asks them to explain not just what happened, but also how they think finance will adapt to the post-crash world.
The impact of the recession calls for a decisive approach to operational change. Companies must identify operational improvements to reduce variable costs, generate cash, and generally strengthen the balance sheet – and understand the strategic initiatives necessary to make change happen.
Imports to China plunged in January, signalling that demand is shrinking alarmingly: they fell by 43.1% compared with a year earlier, worse than forecast and double the decline in December. But China’s trade surplus, at $39.1 billion, is one of the biggest on record because a huge tumble in exports of 17.5% was dwarfed by falling imports.
“TOO big to fail, too shit to buy” is the way some Citigroup insiders describe their employer. Not for much longer. On January 13th Citigroup announced that it had reached a deal to spin out Smith Barney, its broking arm, into a joint venture with Morgan Stanley’s broker. The agreement presages even more dramatic changes. The bank has brought forward its fourth-quarter results to January 16th and expectations are high that Vikram Pandit, Citi’s chief executive, will unveil plans to slim the bank further and faster.
Full coverage of Citi’s transformation can be found here “DealBook”
What lesson can be learned from Citi’s faillure:
“Universal banking need not fail. But smaller, focused organisations are easier to run than large, sprawling ones—Citigroup has more employees than the American navy and, apparently, greater destructive power. Mr Weill’s creation, backed by a host of executives, directors and investors ever since, has proved horribly flawed. Unlike HSBC, another giant, Citi has been built through deal making and it shows. Acquisitions were poorly integrated. Cultures overlapped rather than melded (the resilience of the Smith Barney name is one telling indicator). Risk management was dismal. The big balance-sheet was deployed recklessly. It may be inevitable that some banks are too big to fail; but the lesson of Citi is that they can also be too big to manage.”
“The second shift in thinking signalled by Citi’s manoeuvres concerns policy. November’s dramatic government intervention may have quelled fears that the bank would go under. But it has not stopped the bleeding at Citi, which remains focused on survival rather than on ramping up credit. Red ink laps around a host of other banks too. Full-year earnings at American banks are likely to be awful. Many eyes are on Bank of America, whose levels of tangible equity are also thin and, with Merrill Lynch and Countrywide to digest, is seeking billions of dollars in additional capital from the government. In Europe Deutsche Bank revealed a fourth-quarter loss of €4.8 billion ($6.3 billion) on January 14th, thanks in part to misplaced trading bets.”
Is the most powerful and controversial firm on Wall Street about to get the comeuppance that so many think it deserves? Goldman Sachs, the Wall Street powerhouse, has been accused of defrauding investors by America’s financial regulator [Source].
The global credit crunch has cost governments more than $10 trillion, the International Monetary Fund 
The impact of the recession calls for a decisive approach to operational change. Companies must identify operational improvements to reduce variable costs, generate cash, and generally strengthen the balance sheet – and understand the strategic initiatives necessary to make change happen.
“TOO big to fail, too shit to buy” is the way some Citigroup insiders describe their employer. Not for much longer. On January 13th Citigroup announced that it had reached a deal to spin out Smith Barney, its broking arm, into a joint venture with Morgan Stanley’s broker. The agreement presages even more dramatic changes. The bank has brought forward its fourth-quarter results to January 16th and expectations are high that Vikram Pandit, Citi’s chief executive, will unveil plans to slim the bank further and faster.
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