Financial Services - Mahony Partners

Jan

2012

The problem with private equity

Financial Services, Taking & Managing Risk

Andrew Ross Sorkin’s DealBook column profiles Paul Levy, a PE manager who makes a good defense of private equity: “We want to build businesses,” Mr. Levy said earnestly. “Nobody wants to fire people. We want to retain all of the value-added, high-quality people that work at these companies. But it’s like any other endeavor. If there are more people there to make the shoes than needed, you can’t keep the people. It’s not about wanting to get rid of people. It’s about wanting to make the company operate on a size and scale that’s commensurate with its opp... Read More

Jan

2012

Does culture matter?

Crisis, Financial Services, Taking & Managing Risk

There’s long been a debate about whether a company’s culture makes any difference in how it performs. Culture often is derided as the “soft stuff” that is nice to have but not really essential to a company’s success. Indeed, Sandy Weill once famously quipped that culture was “something they put in yogurt.” (Of course, we know how things turned out at Citigroup.) Research by Professor Jim Heskett of the Harvard Business School has demonstrated the value of a strong corporate culture. He estimates that companies with effective cultures outperform their peers by as much as 30%. But there’s now evide... Read More

Jan

2012

How bad is it at Bank of America?

Crisis, Financial Services

You know your company is in trouble when the chief marketing officer gets more press than the CEO. And it’s in really, really deep trouble when the CMO is seen distancing herself from the company’s strategic blunders. That’s what we saw over the weekend in the New York Times piece on Anne Finucane, “chief image officer” for Bank of America. According to the Times, Finucane “warned against” Bank of America’s acquisition of Countrywide, whose bad loans and legal troubles remain a continuing source of pain fo... Read More

Jan

2012

Communicating European debt risk

Financial Services, Taking & Managing Risk

As reported today, the US Securities and Exchange Commission has introduced guidance for financial firms related to reporting of their European debt exposure. The SEC issued its recommendations to address the inconsistent approach firms have used to disclose their risk to sovereign and private borrowers: "In response to our comments on their disclosure documents, registrants have provided incremental improvements in disclosures of exposures to so... Read More

Jan

2012

More on Refco and MF Glboal

Crisis, Financial Services

Years after its collapse, Refco continues to make news. Yesterday, an appeals court overturned the conviction of an attorney, Joseph P. Collins, who had been the chief outside counsel for the futures brokerage and was found guilty of aiding the company's scheme to hide millions in debt and mask its true financial condition. When the fraud was discovered, Refco filed for bankruptcy, and its assets later were sold to Man group, which later spun them off as MF Global. Collins was convicted largely on the basis of testimony from a former Refco executive who cooperated with fe... Read More

Jan

2012

The 2011 Risk List: The year’s 5 best risk-takers

Crisis, Financial Services, Friday Risk Reading, Taking & Managing Risk

As 2011 disappears in the rear-view mirror, here’s my list of noteworthy risk-takers over the past year. These are the people and institutions that took risks intelligently and won. The list of risk-bumblers - those who mishandled critical situations - is certainly longer (UBS, Olympus, Yahoo, MF Global, I could go on) but their woes already have been well cataloged, and who wants to start the New Year revisiting disasters? So here are the top risk-takers: 1. Jefferies. Before this year, mid-size investment bank Jefferies happily stayed below the radar, built its business and made a tidy profit. All that changed when MF Global collapsed and investo... Read More

Jan

2012

SEC suit a challenge for life settlements industry

Crisis, Financial Services

The U.S. Securities and Exchange Commission on Tuesday sued Life Partners (NASDAQ: LPHI), a major dealer in the secondary market for life insurance policies. Life Partners and other financial firms have been at the forefront of the “life settlements” industry, which purchases life insurance policies from individuals, usually seniors, for a lump-sum and collects the face amount when they die. (Disclosure: Some years ago, I was an inve... Read More

Dec

2011

Jefferies vindicated

Crisis, Financial Services

Embattled investment bank Jefferies reported stronger-than-expected earnings and a slimmed-down balance sheet, confounding critics and sending the firm's shares on a surge. The news marks a victory for the firm's management and vindicates its strategy of aggressive communication during a crisis, as the firm sought to dispel rumors about its trading exposure and liquidity. Of course, no good deed on Wall Street goes unpunished, with analysts now Read More

Dec

2011

New York Court ruling to add to banks’ woes

Financial Services

New York’s Court of Appeals ruled Tuesday (12/20) that private parties can pursue claims under the Martin Act – New York’s anti-fraud statute that was used by Eliot Spitzer nearly a decade ago to bring Wall Street to heel. News reports were brief, but the ruling is sure to arouse concern at the large banks, which have already seen their shares battered this year because of investor fear over litigation and regulatory risks. Here's the money quote from the ruling by Judge Victoria Graffeo: "Here, the plain text of the Martin Act, while granting the attorney general investigatory and e... Read More

Dec

2011

The Irony of MF Global: The System Worked

Crisis, Financial Services, Taking & Managing Risk

Were it not for the missing customer funds, the collapse of MF Global would be hailed as an example of how well the financial system worked. That’s a very big “if,” of course, and the loss of customer funds is a scandal all its own. But the market worked - and that's an important lesson. The accountants, the regulators and the board of directors did their part - not perfectly and perhaps not quickly – but they asked the right questions, demanded disclosure of the firm’s trades and forced management to defend its strategy. Customers, shareholders and counterparties then concluded MF Global had too much risk and abandoned the firm – exactly the sort of rough justice that’s at the core c... Read More