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2. A look back at SEC's Lehman Brothers probe

When Bank of America announced it would sell its remaining stake in China Construction Bank, the initial conclusion by many was that more western banks were bailing out of China, driven by disappointment.

We certainly fell in line with that reasoning. Goldman Sachs after all exited its investment in ICBC in May, and Citigroup recently sold its stake in Shanghai Pudong Development Bank. But the rush to judgment may have been a bit off base. The Financial Times suggests that that what appears to be a massive retreat may simply be a shift in tactics.

"In most cases there are good reasons to believe that hitting a relationship dead-end was not grounds for divorce. Firstly, banks have mostly been selling their stakes as soon as the very long lock-ups have expired. Secondly, they are all still getting into bed with new Chinese partners."

To be sure, the payoff in some cases has indeed been disappointing. Whole new pathways to the country's lucrative retail market never quite opened up. At home, balance sheet pressures continued to mount. But there are some industry niches that still appear potential-rich.

"The main area banks are persisting in, despite continued poor returns and shrinking market share, is securities dealing and investment banking. Citigroup formed a JV with Orient Securities only last year, joining Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and UBS, some of whom have operated such businesses in China for more than a decade.

"Banks like JPMorgan have also been busily building Trust Companies with partners. These businesses are non-bank institutions that manage investment funds and private equity and make loans to companies."

The hope of course is that all this leads to big revenue gains. If not, banks may not have the consolation prize of a massive principal gain this time around.

For more:
- here's the article

Read more about: banks, China
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By Jim Kim

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3. Are things really better for women and minorities on Wall Street?

If there's one thing that rankles critics of Wall Street's biggest banks, it's the fact that no one from Lehman Brothers, the collapse of which set a lot in motion, was ever charged with a crime.

The government's deadline for filing most charges expires this month, the anniversary of Lehman's collapse, "providing a reminder of the case and its unpopular outcome," according to DealBook. The article takes takes a lengthy look at the SEC's decision not to charge the likes of former CEO Richard Fuld, who remains something of an outcast in the industry.

In the end, it was George Canellos, who supervised the Lehman investigation as head of the SEC's New York office, to make the case within the SEC that no crimes were committed.

"Canellos's team argued that Mr. Fuld did not know that Lehman was using questionable accounting practices despite testimony from another Lehman executive that suggested otherwise. Ms. Schapiro did not override his judgment after S.E.C. officials cautioned her that it could be unethical for a political appointee like herself to do so. Mr. Canellos also had the backing of Robert S. Khuzami, who ran the S.E.C.'s enforcement unit at the time."

The danger for a public servant like Canellos is that they come to be seen as a defender of the company they should be prosecuting. That said, you have to admire his willingness to seek the facts, even if those facts were not what his supervisors or the public were expecting. This story would have ended on a sardonic note, if he had move into the private sector in a high-paying job.

Instead, he's still in public service. In fact, he is now co-head of the SEC's enforcement office.

For more:
- here's the article

Read more about: Enforcement Action
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By Jim Kim

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4. The fall of a biotech financier

Bank of America has recently settled two long-running discrimination complaints. The most recent settlement calls for the bank to pay $39 million to women who worked in its Merrill Lynch brokerage unit. That follows another that came to light a week earlier, calling on Merrill Lynch to pay $160 million to settle an eight-year-old racial discrimination suit filed on behalf of 700 African-American brokers.

The proceeds from the gender case will be divided up among about 4,800 current and former employees. The bank also agreed to some changes to make the bank more hospitable to women. The firm has agreed to bring in an organizational psychologist to review its policies.

To be sure, these settlements, which stemmed from suit filed many years ago, raise a basic issue: is the industry now a place where women and minorities can get a fair shake?

All banks are moved to the point that they cannot afford to be seen as anything less than progressive and welcoming. They all have certain policies and programs in place toward these goals. But whether this is seen by insiders as mere fluff is unclear. Some will no doubt find it a cosmetic application that continues to mask severe problems.

In this vein, it's worth mentioning an arresting New York Times article addressing gender issues in no less than Harvard Business School's MBA program, the program of choice for many in the industry. Who knew it was this tough as woman there?

As of now, it's hard to make a case that the state of affairs has improved markedly for women, which is truly lamentable. The long-term fear is that more women will simply decide that the industry is simply not for them, that the rewards are not worth the workplace risks.

For more:
- here's an article from Bloomberg Businessweek

Read more about: Gender, discrimination
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By Jim Kim

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5. Carl Icahn gives up on Dell; did he make any money?

Wall Street is one long, never-ending saga, chock full of strivers that reach the top only to end up in jail. Such characters have become almost a stereotype. But they are no less riveting. The New York Times offers a nice retrospective on the life and times of David Blech, a man who was once considered the king of the biotechnology industry, back when the industry infused the public with a dot.com-like fascination.

"In the early 1990s, Mr. Blech was worth about $300 million and made the Forbes list of 400 wealthiest Americans," the article notes.

"Now, however, he is about to begin a four-year prison term, about $11 million in debt and mainly an afterthought to the industry he helped foster.

"He squandered his fortune with reckless borrowing and stock trading in a quest for even greater riches. His Wall Street firm, D. Blech & Company, collapsed — dragging biotech share prices down with it — in 1994, on a day some called 'Blech Thursday.' Comeback attempts have only gotten him deeper into trouble."

As part of that comeback attempt, Blech pleaded guilty to stock manipulation involving two biotech companies. It was a long and twisting road to the bottom, but that's where he is now. "I didn't know how to say no to a deal," he told the Times.

Some think he was always merely lucky, betting big on a few companies that just happened to make it. But you could say that about all early-stage biotech investors of his ilk.

There's a fine line between the winners and losers. It's what you do once you lose that really matters.

For more:
- here's his story

Read more about: Hedge Funds, biotech
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By Jim Kim

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