I tend to be a free-market/laissez-faire type of person, and yet the Fed’s proposal to govern banker pay is viscerally very appealing. Until last year’s financial cataclysm, I saw banks – commercial, investment and otherwise – as no different, really, from makers of cars or cereal. Of course, intellectually I knew banks were a key component of a nation’s financial plumbing, so to speak. But I assumed their regulatory and governance safeguards and safety nets were just as robust as, say, P&G and IBM’s – in other words, good enough. But they weren’t, and that’s largely because key bank employees were incentivized to make investments that would maximize their bonuses, and these investments were often ill-conceived and irresponsible. As heavy-handed and meddling as the Fed’s proposal might be, it will be beneficial if it ensures that bankers are incentivized to protect and improve shareholder value. Protect and improve – not try to improve via daring bets. Without closer scrutiny, oversight or interference, bankers will look out for No. 1 before they look out for you and me. I genuinely believe the Federal Reserve will find a way to keep banker pay appropriately linked to bank performance without unduly stifling bankers’ creativity. Some bankers will migrate to un- or less-regulated financial firms. But plenty of fine bankers will still be eager to work for banks under the Fed’s eagle eye; the savvy ones will help their employers grow, and they will personally prosper.
Archive for September 18th, 2009
Bank Rescue Plan, Banks, Federal Reserve / Comments Off
Consumer Finance, Credit Markets, Tomorrow's News Today Video / Comments Off
Madeleine Lim and Paul Vigna talk about funding issues facing two federal agencies. And they discuss a refinancing problem facing Japan’s third-largest consumer finance company.
Corporate Finance, Corporate Restructuring, Credit Markets / Comments Off
After the market closed on Sept. 16 (this past Wednesday), Eastman Kodak Co. announced a plan to refinance $575 million of its 3 3/8% convertible notes through two separate private placements. Good news for the holders of these bonds because they would get paid par, or the full $1,000 for each bond they held. But somebody may have known something about this deal before others.
The plan to retire these bonds would be especially good news for holders because these bonds were what are called broken convertibles. Convertible bonds do just what the name sounds like – they convert into a company’s common stock at some point in the future if the holder elects to do so. They become broken when the conversion price is significantly higher than the common stock price, making it very unlikely to convert. So, the bonds then trade more like a bond rather than the equity.
Business Of Leisure/Life, California, Consumer electronics, Economy, Energy, Environment, Luxury Goods, Technology, Television / Comments Off
California is continuing its trend-setter ways. You’ll recall the giant state was out front in trying to tame auto emissions, among other things. Now it’s after big-screen televisions.
Marc Lifsher reports in The Los Angeles Times the California Energy Commission is scheduled to release new proposed energy use standards today for public comment, with a final vote in November. Maxium energy use rules for televisions would start in 2011.
The article reports mixed views from the affected industry. It will be interesting to see if other states follow suit. With the booming consumer desire for ever-larger televisions, this could be an emerging energy issue.
Lifsher reports: “The average plasma screen uses more than three times as much energy as a bulky, old-fashioned cathode-ray tube TV.”