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One of the most enigmatic figures in the financial crisis of 2008 was Erin Callan, the golden girl CFO of Lehman Brothers. She was essentially fired by her mentor, CEO Richard Fuld, in a desperate, ultimately futile, attempt to stave off financial collapse. Until then, she was pilloried in the press by David Einhorn and others, who were shorting Lehman with glee. She was seen as a fighter, and after she was let go, many fully expected her to return to Wall Street and regain her place among the elite (Not unlike Zoe Cruz, who wasted no time in starting a hedge fund, once was let go from Morgan Stanley.). Callan did have a short stint at Credit Suisse after she left Lehman, but that hardly counts. As of now, Callan appears to be truly done with Wall Street. According to DealBook, "She is looking to sell her East Hampton house for $3.95 million, according to a listing with the real estate broker Saunders. The gambrel-roof house, where Ms. Callan has lived with her husband, Anthony Montella, has been a de facto hideaway since the former executive all but disappeared from view after the financial crisis. She now plans to live in Florida, where she recently bought a modest house." She actually got on the phone with a reporter to say that, "This is a big house to have when it's not a full-time house. We really wanted to think about down-sizing." Part of me wonders if she missed an opportunity by not writing a memoir about her time at Lehman and being in the public eye. It would have been fascinating. In any case, it seems she has found her peace, and that counts for everything. For more:
Read more about: Lehman Brothers, Erin Callan
2. Bank of America faces novel discrimination suit
Banks have been burdened with a crush of housing inventory in areas that unfortunately have become blighted. In several cities -- LA is a great example -- banks have all but been accused of being slumlords. The huge surge in foreclosed properties left banks in over their heads. There was simply no way that they could maintain the properties adequately. In some cases, they even tried to essentially give properties away, and you can demolish them only so fast. This criticism is nothing new to banks. What is new is a recent suit by the National Fair Housing Alliance and five affiliated organizations, which has charged Bank of America with discrimination over the way it maintains and markets bank-owned houses in minority neighborhoods compared with other neighborhoods in eight metro areas. The metro areas studied were: Atlanta, Dallas, Dayton, Grand Rapids, Miami-Fort Lauderdale, Oakland-Richmond-Concord, Phoenix, Philadelphia and Washington, D.C. The gist of the accusation is that the banks take better care of foreclosed properties in non-minority areas. The plaintiffs are seeking a federal investigation into Bank of America's practices. In a statement, Bank of America said "it shared the group's concern about the neighborhoods but strongly denies the allegations and stand behind their property maintenance and marketing practices." For more: Related articles: Read more about: mortgages, discrimination 3. More students launch hedge funds
Ambitious students have long sought to stand out, either to nail that plum job upon graduation or to get into the professional school of their choice. For three 20-something college students in North Carolina, that route to the next step in their budding careers is start a hedge fund. Elliot Carol, Marcus Varsano and Ryan Mahoney formed Lumina Investments in 2011, but recently announced they were open for business. Carol (chairman and principal) and Varsano (director of investor relations) are students at the University of North Carolina Wilmington's Cameron School of Business. Mahoney, the firm's specialist in global securities and derivative structures, is a student at East Carolina University. "The entire frame of reference for us, all in our early twenties, has been a post-financial crisis world," Varsano said. "Today, you must have sophisticated investment strategies and a willingness to embrace reasonable risk. Fast-paced change is a constant. You must account for dynamic computer programming that is a signature of the new generation. There is no returning to the 'good old days' of investing in companies based solely on their balance sheets." They intend to manage a macro hedge fund, it would appear, as they say they will profit from "international political and economic volatility using equities, commodities, fixed-income and currency trading." The group didn't disclose any information about investors and how much assets they manage. I doubt it is much, but you have to admire their pluck. In this vein, I also recently noted the group of students at Harvard, who launched Black Diamond Capital Investors, which might be more of a club than an actual hedge fund. They are equally ambitious in that they are seeking 30 percent annualized returns. For more: Read more about: Hedge Funds, jobs 4. GSEs, housing policy fade as a political issue
Not too long ago, the mortgage crisis loomed as a front-burner political issue, sure to figure prominently in the on-going elections. The futures of Fannie Mae and Freddie Mac, which remain essentially wards of the federal government after massive bailouts, were primed to become a hot topic for all candidates, but it hasn't worked out that way. In fact, the thorny issue of what to do with the big-two housing GSEs has faded as a priority for the Republican and Democrats. It's not that the issue isn't incredibly important. It's just that solutions are tricky, and certainly not mediagenic enough for anyone to really run on how they would solve the problem. As of now, both sides have pushed the issue to the back burner. For the Democrats, the same three solution proposals that were put on the table last year remain with little development or action. For the Republicans, the goal is wind the GSEs down sanely, but there have been no specific put forth, even in their recent housing white paper, as noted by Deal Journal. My sense is that the housing market has improved enough that the urgency has passed. There's not a great story to tell from either side. GSE issue just do not make for good public discussion, except at the broad rhetorical level, where the two sides actually agree on a good amount. For more: Related articles: Read more about: mortgages, Foreclosures 5. Merger pace anemic but pockets of strength emerge
We're in the midst of a nasty season of discontent when it comes to mergers and acquisitions. The environment seemed so promising at the beginning of the year, but the economy just wouldn't cooperate. The result is that merger activity has slumped to a level "not seen since the aftermath of the financial crisis," according to Bloomberg. It says mergers and acquisitions are on pace to fall 15 percent in 2012, which would be the lowest level in three years. One pocket of strength is cross-border activity. Notable examples are Cnooc's deal for Canada's Nexen and Belgium-based Anheuser-Busch Inbev NV's $20.1 billion deal for the rest of Mexico's Grupo Modelo. EADS, of France, and BAE, of London, said this month they negotiating a deal to create a massive European defense company. Another bright spot is divestitures. According to DealLogic, divestitures have accounted for nearly 60 percent of U.S. mergers and acquisitions so far this year. That compares with 42 percent last year, and 26 percent in 2005. That owes to the smaller volume of deals in general. But there's something to be said for the idea that companies are moving back to basics and shedding non-core units to raise cash. In any case, this is more of a minor silver lining than anything to get realty excited about. As always, deal advisors remain upbeat. You would have to think there is pent up demand for M&A services building right now, and some have discerned bubbling private equity activity beyond the secondary market. For more: Read more about: mergers, deals Also Noted
SPOTLIGHT ON... Bank of America settles class action suit Are Bank of America's Merrill Lynch's legal woes finally behind it? It settled yet another suit, this one a private class-action suit that trod the familiar terrains as what Bank of America was legally required to disclose regarding some of the big losses building at Merrill Lynch and about the legality of various statements from executives. The $2.43 billion settlement will result in about a $1.6 billion hit to earnings. Article Company News:
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Monday, October 1, 2012
| 10.01.12 | Erin Callan's next move
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