American Financial Crisis: The Pundits

Mergers & Acquisitions Reporter
The New York Times

What Goes Before a Fall? On Wall Street, Reassurance.
“Jim, we have a great future as an independent company,” Robert K. Steel, Wachovia’s chief executive, told James Cramer on CNBC’s “Mad Money.” “We’re also focused on very exciting prospects when we get things right going forward. I didn’t have time today to talk about the good things going on at Wachovia.”

That interview wasn’t last month or last year — it took place, amazingly, two weeks ago. Wachovia’s shares closed at $10.71 that day. On Monday, Citigroup bought the company for $1 a share.

What was Mr. Steel thinking? Did he think he could “spin” his way to survival?

By all accounts, Mr. Steel is a pretty smart guy. He had to know that going on television the same day that Lehman Brothers went bankrupt, Bank of America bought Merrill Lynch and A.I.G. was on the brink of collapse was just asking for trouble. And it’s hard to imagine he didn’t appreciate the precarious state of his own company given the carnage around him. He knew how fast a bank’s fate can turn. Worse, he and all the other happy-talk executives put themselves in legal jeopardy.

Interview on Charlie Rose: youtube.com/watch?v=T5L0BLQRcHs
Sorkin's bio: topics.nytimes.com/top/reference/timestopics/people/s/andrew_ross_sorkin/index.html

American investor, businessman and philanthropist. He is regarded as one of the world's greatest investors, and is the largest shareholder and CEO of Berkshire Hathaway. He was ranked by Forbes as the second richest American with an estimated net worth of $50 billion as of September 17, 2008. (Wikipedia)

"Last week, we were at the brink of something that would have made anything that's happened in financial history pale," Buffett told CNBC television. "I'm not saying the Paulson plan will eliminate the problems but it's absolutely necessary, in my view, to avoid going off the precipice." (guardian.co.uk / Sept.24-2008)

Interview on Charlie Rose (Oct.1-2008):

"You don't want 300 million Americans putting their money under the mattress."

"Everybody goes along & you look silly if you disagree."

"As long as you have markets, you have excesses."

"I'm paying the lowest tax rate that I've paid in my life. Now that's crazy."

Interview excerpt: youtube.com/watch?v=ejIWp5E8_Fo

Mortimer Zuckerman is the editor-in-chief of U.S.News & World Report. He is also chairman and co-publisher of the New York Daily News and has substantial real estate holdings, including properties in Boston, New York, Washington, and San Francisco. (usnews.com)

Fannie Mae & Freddie Mac: Too Fat to Fail (usnews.com / July 25-2008)

(Excerpt) The predicaments have long been predicted. F&F, along with Wall Street and home builders, staved off proper regulations by hiring political elites and lobbyists from both parties. They should have raised more equity but preferred higher profits per share. Their senior officers have made millions of dollars from their shareholdings. They are the winners. Now the losers will be we, the taxpayers, because F&F are too big to fail. The bailout legislation provides for more oversight, but it must be through a regulator with real teeth. It would be unconscionable for Congress to bail them out without making sure that this dangerous aunt and uncle will hereafter be restrained for the public good. usnews.com/articles/opinion/mzuckerman/2008/07/25/fannie-mae-and-freddie-mac-too-fat-to-fail.html

An Economy on the Brink (usnews.com / Aug.11-2008)

(Excerpt) What's more, we don't have confidence in our political leaders—despite the bipartisan passage of the very necessary, if flawed, housing support bill. Polls put the president's approval at about 30 percent and Congress at half that. In one recent survey, only 6 percent viewed the economy positively, while 84 percent of us think we are headed in the wrong direction. usnews.com/articles/opinion/mzuckerman/2008/08/11/an-economy-on-the-brink.html

Wall Street's Day of Reckoning (usnews.com / Sept.19-2008)

(Excerpt) The world was awash not with cash but with credit. The global issuance of credit instruments went from $250 billion to $3 trillion a year. Many of these securities were rated, but last year, the agencies started downgrading billions of dollars of debt they had once deemed safe. Prices tumbled as investors stopped trusting the ratings and stopped buying complex instruments. Financial institutions began to hoard cash and cut back on loans even to other banks. Witness the sharp rise in the London Interbank offered rate—the main measure of banks lending to one another. usnews.com/articles/opinion/mzuckerman/2008/09/19/wall-streets-day-of-reckoning.html

"I think everybody realized something has to be done," Zuckerman told Reuters, speaking after the U.S. House of Representatives rejected the bailout plan.

But Zuckerman, who does not endorse the plan, said its not the right move.

"I think this was the wrong approach," he said. "I believe everybody should take a step back. I think basically they should invest in perpetual preferred (shares), and shareholders will accept the losses. They made money on the way up; they should have to accept the losses." (reuters.com / Sept.29-2008)reuters.com/article/reutersEdge/idUSTRE48S94620080929