The financial turkeys of the year
This week, Scott Jagow and Fortune Magazine's Allan Sloan nominate the biggest turkeys in the fallout from the financial crisis. Topping the list is the government allowing Lehman Brothers to fail, and Allan tells us why.
Allan Sloan is a senior editor-at-large at Fortune (APM)
More on America's Financial Crisis
TEXT OF INTERVIEW
Scott Jagow: Today, Mr. Sloan gives out his turkeys of the year awards. And man, there've been a lot of turkeys this year. Topping the list is the government letting Lehman Brothers fail. Allan, why is that the biggest turkey?
Allan Sloan: Because letting Lehman fail set off a whole batch of problems that nobody, I have to say including me, anticipated. It messed up the markets, it led to a money market fund breaking the buck. It started runs of hedge funds moving their money. At it set off this horrible mess that is still continuing. That's why I have given it not only the turkey of the year award, but very likely the turkey of the decade, since there are only two years left of the decade.
Jagow: All right, so another one on your list is this very recent Treasury flip-flop and the fact that the troubled asset relief fund is no longer about troubled assets.
Sloan: Even though it might have been the right thing to do, the Treasury yelled and the Fed yelled and screamed and said "We have to do this or Western civilization is at stake." So then they start to do it and then they say "never mind." So that sort of undermines faith in the people running the system, and that's a very bad thing. And we're seeing fallout from that now, because when Hank Paulson -- who I think is a reasonably formidable guy, the Treasury Secretary, he gets up, no one seems to pay any attention anymore. And Ben Bernanke at the Fed -- people worshipped the defeat of Alan Greenspan, I'm not sure why, but Bernanke says stuff and it's ignored.
Jagow: But bottom line, Allan, do you think that switching course was actually the right decision?
Sloan: Yes. And the problem there was they should have thought things out before they announced their plan. It's clear they didn't.
Jagow: Beyond the financial crisis, you have a couple of other turkeys on your list, one of them being Yahoo spurning Microsoft. Should Yahoo have taken the first offer from Microsoft?
Sloan: So it would appear. Before Microsoft made the offer, the stock was something like $19. Then it ran up to $30 or $31 or something like that. And now, it's something like $10. And you might say, well that's happened to the whole market. The thing is, if they had said yes, they'd have $31 of cash and they wouldn't have to worry about the whole market. But as they say, that's life in the big city.
Jagow: All right, Allan Sloan from Fortune Magazine. Happy Thanksgiving!
Sloan: And may the turkeys in your portfolio be smaller next year.
Comments
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From NY, 11/24/2008
Turkey of the decade...which never made it big in the media! That would be half of the Auto Industry bailout!
Here is the Story:
The US flew nearly $12bn in shrink-wrapped $100 bills into Iraq, then distributed the cash with no proper control over who was receiving it and how it was being spent.
To oversee the expenditure the CPA was supposed to appoint an independent certified public accounting firm. "Instead the CPA hired an obscure consulting firm called North Star Consultants Inc. The firm was so small that it reportedly operates out of a private home in San Diego." Mr Bowen found that the company "did not perform a review of internal controls as required by the contract".
http://www.guardian.co.uk/world/2007/feb/08/usa.iraq1
From Tucson, AZ, 11/24/2008
I would like to vote for the Detroit Gang of Three, Wagoner, Mulally and Nardelli as Turkeys of the Year. In their congressional plea for taxpayer money to rectify decades of mismanagement and poor product design, they somehow maintained an imperial arrogance before Congress that defied logic and sensibility. I must also say that they were using a variation of the infamous "Clueless CEO" defense that we have heard so often in the past few years. It goes something like, "How could we have possibly foreseen these circumstances?" Mr. Wagoner, I'll tell you how. GM, as a major international corporation, employs a building full of PhD ecomomists. I guarantee that they ran forecasts based on various scenarios INCLUDING having the price of oil shoot up, thus drying up your only profitable market segment (trucks and large SUVs). The fact that you managed to ignore these scenarios (probably due their extremely dire consequences as we are now seeing) is not the problem of the American public, it is a problem for you and your shareholders.
From Detroit, MI, 11/24/2008
Biggest turkey ever, Henry Paulson. Why reward incompetent wall st. criminals w/ $700,000,000,000 in welfare bone-US-es, plus $150,000,000,000 for AIG. If you loan someone your car and they steal it, you don't give them the keys to the store. Has it helped, no, there's no consumer credit, no purchase of toxic assets, just banks buying banks & giving out huge dividends & bone-US-es. Stop the insanity, these people who are getting the money only help themselves. Wall st. needs to be regulated to the point where they have to ask permission to go to the bathroom, so we can stop this defecation on the American people by wall st. Let failures fail, give them what they deserve, time in jail, not hundreds of billions of dollars of pocket money.
From jacksonville, FL, 11/24/2008
I agree with Sloan's comments, but also would like to nominate a joint award for The Reserve funds, TD Ameritrade & the SEC, whose incompetence and sleaze has over $1.0 billion in retail investors tied up in The Reserve's Yield Plus Fund. This fund was sold by TD Ameritrade as a money market fund with one-day redemptions. After the Lehman collapse there were massive redemptions because Yield Plus included some Lehman paper in its portfolio. The Reserve appealed to the SEC which issued a temporary order freezing redemptions. Meanwhile, half of the fund's holdings have matured or been liquidated and turned into cash. However; the SEC temporary freeze remains in place and no funds have been returned to investors.
TD Ameritrade led many people to believe Yield Plus was a safe place to park money. Some victims have all of their money locked up in Yield Plus. Another is an astronaut who would love to have access to his nest egg before he leaves this planet in the spring.
These investors want access to their money -- even if it is only 97 cents on the dollar (estimated value minus Lehman paper)-- but the turkeys at The Reserve, TD Ameritrade and the SEC are all stalling.
Send these turkeys to Wasilla, Alaska, so they can be props for Sarah Palin's next interview!
From Keokuk, IA, 11/24/2008
The 3 prime turkeys are Barney Frank, Chuck Schumer and Chris Dodd. They masterminded the plan to give mortgage money to millions of people who could not afford the mortgage payments that finally collapsed the markets. Had this not been done none of the greedy corp guys would have been caught and none of the greedy stock buyers been caught. It is all at the feet of Frank, Dodd and Schumer.
From Wyomissing, PA, 11/24/2008
My nominee are the CEO's of major companies, epitomized by banking and securities execs, who at a time of financial shutdown that has put many families at risk, whined about a salary cap of $400,000.00 in exchange for getting public money. Runner up would be the automobile executives who pull down 10million dollars plus while flying in private aircraft to Congress to ask for a public handout with a "give us money or the puppy gets it" threat. Classy? No. Self Sacrificing? No way. Gives a good name to capitalism? No. Nominees would be a press that has failed to call on CEO's and their boards to excercise self restraint in salaries--can't people survive on a million dollars a year? Many have to raise families on less than
2% of that. The problem with this nomination is that theses executives aren't turkeys as much as pigs. Shameless pigs, at that. Swine of the year, anyone?
From Athens, GA, 11/24/2008
Turkey of they year? SEC Chairman Cox.
He sat on the sideline and didn't use any of the regulatory authority he had. And, he turned down more authority and money when asked by Sen. Richard Shelby - Richard Shelby! - what more he needed to do his work.
From Columbia, MD, 11/24/2008
I have to completely disagree with Allan Sloan's comments and the selection of the Lehman Brothers failure as a "turkey". It was the one instance where the government made the right decision. For the past year we've been watching homeowners, mortgage lenders, banks, investment houses and myriad other entities being let off of the hook and bailed out. Now, we're probably going to see the same with the auto companies and credit card companies! It's shameful that the average working American is essentially getting nothing and being foreced to struggle while all of these corporate executives still have their jobs, AFTER they've run their companies (and country) into the ground. The REAL turkey is how we've completely turned our back on free-market fundamentals in order to save a bunch of well-heeled executives.
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