New Form of Activist Investing
Activist investing became very common in the last few years where investors took stakes in sleepy companies, pushed for change to create VALUE, some worked and some didn’t. Of course, some also was just for short term gains without long term benefits. We now have a new form of activist investing created in Washington, invest in companies and then work to wreck them and destroy the investment. $180B of taxpayer money has been invested so far in the 8 banks that have received more than $5B of TARP money and politicians are making sure to do their best that not only will we not see a return on the investment, we may not see a return of the investment and will destroy thousands of jobs in the process. The US Constitution has also been chopped up into pieces. I get into this because of the ramifications it has on investor confidence and the desire of the private sector to help with the programs of the Fed and Treasury to AID the credit markets.
March 20th, 2009 at 9:52 am
This is a joke. Barney Frank is a joke. The TARP is a joke. Everything from the get go has been one mismanaged POS. We don’t want to nationalize but we plow a bunch of money into the banks effectively doing so. We don’t want to run companies but yet we are putting all sorts of conditions on how they are run. We don’t want any to go to bankruptcy yet we are going to destroy the value by ensuring no one gets paid. $250K is absolute chicken feed in NYC, that’s the equivalent of 100K in Des Moines. You aren’t exactly killing it if you are doing a 100K in Des Moines. Put your student loans on top of that and a $2K a month apartment and your money really doesn’t go that far especially with the taxes NYC is levering up for this year.
Come someone push the reset button on the Nintendo so we can start over.
March 20th, 2009 at 10:10 am
Peter, you didn’t actually explain how, so this is kinda just an empty rant. I was interested in reading what mechanisms you were seeing here.
March 20th, 2009 at 10:10 am
Clearly, I bash CNBC all the time, but Michael Steinhardt on Squawk Box this morning was a treat.
Don’t say The Great CNBC Sucks is always a party pooper.
March 20th, 2009 at 10:17 am
Are you serious?
This is just flamebait, right? You woke up from a 20-year coma? The gloved hand of Phil Gramm or Dick Cheney is using you as a puppet?
Ignoring the fact that the companies are already wrecked and millions of jobs (and retirement accounts, etc.) have been destroyed by the actions of the people who were running them, THE TAXPAYERS ARE NOT “INVESTING” IN THESE COMPANIES.
Holy hounds of Hades, you’ve driven me to use CAPS.
Nobody would “invest” in them – that’s why they don’t have enough capital. They spent the past 18 months or so lying about the value and riskiness of their assets after spending the previous decade congratulating themselves on their genius and compensating themselves extremely generously for it. Private investors stopped giving money to insolvent companies run by lying, self-serving management teams in 2008.
The Fed and the Treasury came to the rescue with taxpayer dollars and the credit rating of the US Government to try and stop the total hell unleashed by the lying, self-serving managers and their bonus babies.
Get that? This wasn’t an investment in the companies. We the people wanted to help the banks and brokers avoid the total collapse of the financial system. Without that help, the banks and brokerages were dead, all of their jobs would be gone, and the global economy would see a looong period of darkness. This was a crisis. It was a WW effing III crisis.
The banks and the brokers responded patriotically to this life-saving outpouring of support and to the WW effing III crisis by…CONTINUING TO ACT AS LYING, SELF-SERVING MANAGERS AND BONUS BABIES. Shoveling out bonuses. Buying private jets for executives. Slamming outrageous new fees on credit customers. Hoarding capital. And, whining whenever the government complained that it wasn’t seeing the changes in behavior we needed to see.
And you worry about activism? Wake up. You need to worry about anarchy. You need to worry about buildings burning down. People are Pissed, and every little free-market whine like the one you just made is feeding the anger.
Don’t get me wrong, we are pissed about the ^&$)@*@&! way the Fed and the Treasury are handling our money and our credit reputation. But it isn’t because they are meddling in the management of these companies. It is because they are only meddling.
We need a shakeout. We need bankruptcies. We need jail terms. We need managers who have been doing a terrible job of serving their shareholders to wake up to the crisis and stop whining about needing to be left alone to serve their shareholders.
Serve. Us.
March 20th, 2009 at 11:33 am
I’m no fan of the bailout. I’ve not heard a convincing case of how the economy could be collapsed by the failure of banks that have failed in all but name only. However, Mr. Boockvar has overed the only compelling case I’ve heard as to why the hoopla over the bonuses could be self-defeating. But, (and this is a big BUT) his argument only works if you believe that the folks we are demonizing are actually working to help us get our investment back. A tiger can’t change its stripes. The problem is that the politicians started this in-for-a-dime-in-for-a-dollar process and now it’s become a feedback loop. Like they say, “Owe the fed umpteen million, the fed owns you. Owe the fed umpteen billion, you own the fed.” The money is gone. It’s time to cut our losses. It’s just good money after bad at this point.
March 20th, 2009 at 12:35 pm
Let’s be clear about one thing, there is ample blame to go around on this travesty. The banking industry has been, and remains, one of the most HIGHLY REGULATED industries in America.
Where, precisely, is the outrage for the lack of regulatory enforcement of laws that were in existence? Where’s the outrage for the group of 12-year olds now running amok in Congress? These are the very same people who received money from FNM, FRE, AIG, et al. This is the very same group that CREATED INCENTIVES for FNM, FRE to accept lesser credits (affordable mortgages). So, how do you objectively regulate someone who’s paying you?
Where is the outrage over the same exact sort of CONFLICT OF INTEREST faced by rating agencies?
Why are bank CEO’s trotted up for a little “face time” in Washington with the very same people who’ve been on their lobbying doles for years? Why is Vikram Pandit, (who wasn’t around for the creation of the mess) forced to work for $1 until this mess is fixed? Why he, and others who have enough money to comfortably get out of this country, don’t simply quit and tell Washington, “good luck, fix it yourselves,” is beyond me.
Why isn’t Obama working for $1 until our government gets their finances in order? He allegedly had nothing to do with the problem, but he’s here to work it out. I mean, our national debt will grow more this year than in any year in history.
Where is the outrage over punishing with a punitive and retroactive tax law? Where is the outrage over throwing contract law out the window? Why isn’t Congress being forced to return every dollar that AIG and every other TARP recipient gave them in contributions?
Listen, I can go on-and-on. Does the AIG thing look bad? Of course. Are there some people who shouldn’t receive the compensation? Perhaps.
However, many of the bonus recipients are outside of the small group who brought AIG to its knees. Many of them are revenue generators in other completely separate areas of the company. Now, it looks like every broker at every major firm will be looking elsewhere and taking their revenue producing relationships with them. Many, many of these people throughout the industry had never heard of a CDS or CDO before this all started and are equally outraged. Yet the 12-year olds in Washington are punishing them, too.
What am I outraged by you might ask? Well, in all fairness, I’m outraged over the lack of outrage, frankly.
March 20th, 2009 at 1:07 pm
If the knowledge and understanding is beyond the masses (say 60%) to understand and navigate correctly the rules, laws and metrics need to be simplified .. dumbed down for the masses ….. not obfuscated more.
If that leaves paper pushers without a job .. create roadside garbage colletion programs that provide a good living.
Layoffs with pay when the land is to pretty to expend gasoline on a search today.
March 20th, 2009 at 5:00 pm
The Washington idiocracy are now about to so the same thing to the states. Nice to see that the first bailout checks for the nearly bankrupt states are going out. How many weeks till we increase the taxes on Weathly Californians to 90% – after all they are being bailed out by the taxpayers.
This whole Washington debacle is a becoming more and more absurd by the day. I keep pinching my skin every hour to ensure I am not in some crazed drug induced nightmare. Sadly I cannot wake up.
Attempting to cure the cancer with band-aids and heroin doesnt work that and trying to solve the mess that our economy has become by hiding the truth and taking on more debt is likely to be as effective. We need a blast of Chemotherapy – painful and very difficult for a while – however we may have a chance to live.
March 20th, 2009 at 11:29 pm
This is a rambling and incoherent post. I guess you’re mad about something?
March 20th, 2009 at 11:32 pm
hangtime79 Says: “You aren’t exactly killing it if you are doing a 100K in Des Moines. Put your student loans on top of that and a $2K a month apartment and your money really doesn’t go that far especially with the taxes NYC is levering up for this year.”
You could always move somewhere nice, I know, I’ve said this before, New York is unsustainable.
March 21st, 2009 at 5:28 am
Peter, Washington DC is not run by Machiavelli.
Politicos are just plain dumb, and they won’t listen to the right people.
We need less managers and more engineers. There are too many chiefs and not enough Indians.
Otherwise, I’m with Ottnott; everybody is going to have to worry about social unrest before the end of 2010, when a second Chirstmas season comes and goes and we’re still broke despite working our asses off, (for those of us with a job…) while the “rich” wine and dine, albeit less ostentatiously. Class warfare is coming back big time.
March 22nd, 2009 at 5:04 pm
This from David Micheal Green at Counterpunch:
Month after month of headlines detailing the latest scandal, many of them involving not just the theft of people’s savings but crashing the global economy as well, and you begin to wonder if there’s any bottom to the barrel of fiscal depravity and governmental enabling. Obama is now charting new paths in that direction. Just the concept that AIG executives who brought down the roof should get anything besides pink slips and orange jumpsuits is sickening, let alone that they should get bonuses.
But wait, it gets better. Then we’re told that the bonuses are necessary because only these criminals can undo the mess they’ve created. So they’re paid millions to stay. As if those who know how to wreck a global economy also know how to fix it. As if these are the only folks in the world who have these skills.
Okay, well, fine then. At least they have to earn these ‘retention bonuses’, right? Nah. That would so responsible. Turns out that a bunch of them took the money supposedly provided as incentives for them to stay and then split anyhow. One guy grabbed $4.6 million in retention bonus cash from the taxpayers, funneled through AIG, then promptly unretained himself. More than fifty others did the same, eleven of whom took over a million bucks to stay. Except they didn’t.
Then we have Team Obama telling us that these are legal contracts that cannot be violated. As knowledgeable legal commentators have pointed out, however, that seems highly unlikely for a whole slew of reasons. There are all sorts of legitimate mechanisms recognized by the law through which contractual agreements can be bypassed in order to serve higher societal purposes.
But even apart from all that, let’s remember that these are bonuses! Isn’t the very nature of a bonus – as opposed to salary – the idea of contingency on performance? Do the contracts say, “We’ll reduce you bonus down to eight figures if you destroy the company, and a mere several million bucks if you take down the global economy”? If not, why weren’t these people paid 23 cents in order to fulfill a legal obligation and told to go hide in Argentina or something? And count their blessings? Instead, over seventy employees of the AIG London-based unit that brought down the company and the rest of us to boot have become millionaires.
Barry,
Don’t invest with Cassano. I don’t care if he’s Hank Greenberg’s adopted heir and otto’s friend. He’s still a crook.