Acquirer's Remorse

A dealmaker second to none
Out of many firms, brought about one;
When it nearly collapsed,
He allowed that, perhaps,
What he did would be better undone.

Sandy Weill, former chairman of Citigroup, stunned the finance world when he opined during a CNBC interview that commercial and investment banks should be split up. Weill, of course, was the serial dealmaker whose entire career was dedicated to creating a bigger and more diversified "Financial Supermarket," culminating in the $70 billion merger of Travelers and Citicorp to form Citigroup in 1999. Not yet legal at the time it was agreed, this merger required a waiver from the Fed as well as the ultimate overturning of the Glass-Steagall Act through the Gramm-Leach-Bliley Act in order to be consummated. Weill retired before the financial crisis, in which his financial supermarket became the largest of the "too big to fail" banks to require a federal bailout. "I think the earlier model was right for that time," he said on CNBC. "I don't think it's right anymore."

Q&A at the Mortgage Fraud Settlement Negotiations

"Pray tell us: what must we do,
That the Feds and the states will not sue?"
"In dollar terms: 25,200,000,202."

The Obama administration and 49 US state attorneys general have announced a $25 billion settlement of mortgage foreclosure fraud charges with the five biggest mortgage loan origination banks. The five firms - Ally Financial Inc./GMAC Mortgage, Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. - will underwrite benefits to certain mortgage borrowers that are modest in their individual impact but may provide a marginal impetus to the housing and mortgage markets. The benefits include principal reduction for those at imminent risk of default; refinancing eligibility for some "underwater" borrowers; and $2,000 cash payments to some whose homes were foreclosed during the last three years. However, the largest impact of the settlement is not on homeowners but on the banks, from which a significant legal risk has been removed. Banks are not completely out of the woods yet, though; bondholders can still sue to have the mortgage originators buy their bad loans back.

Davos: Private Gain, Public Pain

There's a forum for serious chatter
By the bankers and leaders who matter,
Who will see, when they're done,
That the debts of the one
Are obligingly backed by the latter.

This week, the global business and political elite meet at the World Economic Forum in Davos, Switzerland. Founded in 1971, the WEF describes itself as an international organization of large corporations "committed to improving the state of the world" with "no political, partisan or national interests." But, says Bloomberg columnist Jonathan Weil, "It’s becoming hard not to suspect that the annual gathering in Davos has become a conclave for global elites to promote crony capitalism and state-backed enterprise, ensuring that national coffers remain available to be tapped for private gain." Exhibit A in Weil's case against the Forum is its Co-Chair, Citigroup CEO Vikram Pandit. Angrily detailing the ways in which Pandit has "failed upwards" at his former hedge fund and then at Citi, ultimately taking multiple federal bailouts while declaring his institution to be sound, Weil concludes, sarcastically: "These little rough patches in the financial industry offered just the kind of hands-on experience the forum’s organizers were looking for in a leader, in which case they found their man."