Risk Moment RES

People & Players: Blackstone Opens West Coast Technology Effort

In May, Ivan Brockman had just been promoted to run Citigroup’s West Coast technology investment-banking effort. It was to be a chance to settle into a new leadership position after co-heading Citigroup’s global software banking for more than three years and co-heading the global software advisory effort at Goldman Sachs Group before that.

But the ink had barely dried when Blackstone Group’s Chris Pasko called with a job offer: would Brockman consider joining the private-equity firm to help start its West Coast technology advisory business?

Brockman started at Blackstone this month. Joining him were banker Eric McAlpine and analysts Matt Breen and Sid Tiwary from his team at Citi. When Deal Journal talked to him, he said he already had his pitch to clients down: Blackstone touts not only its merger advice, but the availability of its private-equity investors who focus on various industries, and that industry research and contacts flow freely at the firm, where bankers often pitch in on private-equity deals.

Brockman will be working closely with investor John Hodge, the only other West Coaster working for Blackstone. He invests in technology companies and made his name in Silicon Valley as a close associate of one-time star banker Frank Quattrone. Blackstone investor Chip Schorr in New York is also well-known among tech industry types for his investments in companies including Travelocity, and banker Chris Pasko, an old Morgan Stanley hand based in Boston, advises clients in IT services, communications equipment and other tech sectors.

For Brockman, the move to private equity is “less about leading with capital and more about trying to be creative,” he said. It also is a return to a simpler, smaller bank after years at giant Citigroup. In 2004, as capital was flowing and clients were demanding that their bankers finance mergers as well as advising on them, Brockman left his job as a vice president at Goldman to take a managing director title at Citigroup. He made the switch partly because technology companies were demanding that their bankers also provide capital. “I believe we were disadvantaged at Goldman in some of our technology businesses by not being providers of capital,” Brockman told the Daily Deal in explaining the move at the time.

As for Citigroup, a person at the company said Goldstein would remain at the head of the 45-person West Coast tech effort. The tech group recently named a new head in Ben Druskin, which Deal Journal wrote about back in May.

Brockman’s clients have included Flextronics, International Business Machines, and Kohlberg Kravis Roberts. Given that KKR is Blackstone’s biggest rival, we asked how his old clients there took the news of his move. “They were very cordial,” Brockman said.

Comments: http://blogs.wsj.com/deals/2008/09/05/people-players-blackstone-opens-west-coast-technology-effort?mod=djemWDB&reflink=djemWDB&reflink=djemWDB

September 4, 2008,  8:41 pm

The Mirrored Ceiling

Tags: Politics, sarah palin, women

It turns out there was something more nauseating than the nomination of Sarah Palin as John McCain’s running mate this past week. It was the tone of the acclaim that followed her acceptance speech.

“Drill, baby, drill,” clapped John Dickerson, marveling at Palin’s ability to speak and smile at the same time as an indication of her unexpected depths and unsuspected strengths. “It was clear Palin was having fun, and it’s hard to have fun if you’re scared or a lightweight,” he wrote in Slate.

The Politico praised her charm and polish as antidotes to her lack of foreign policy experience: “Palin’s poised and flawless performance evoked roars of applause from delegates who earlier this week might have worried that the surprise pick and newcomer to the national stage may not be up to the job.”

“She had a great night. I thought she had a very skillfully written, and very skillfully delivered speech,” Joe Biden said, shades of “articulate and bright and clean” threatening a reappearance. (For a full roundup of these comments go here.)

Thus began the official public launch of our country’s now most-prominent female politician. The condescension – damning with faint praise – was reminiscent of the more overt misogyny of Samuel Johnson.

“A woman’s preaching is like a dog’s walking on his hinder legs,” the wit once observed. “It is not done well; but you are surprized to find it done at all.”

Palin sounded, at times, like she was speaking a foreign language as she gave voice to the beautifully crafted words that had been prepared for her on Wednesday night.

But that wasn’t held against her. Thanks to the level of general esteem that greeted her ascent to the podium, it seems we’ve all got to celebrate the fact that America’s Hottest Governor (Princess of the Fur Rendezvous 1983, Miss Wasilla 1984) could speak at all.

Could there be a more thoroughgoing humiliation for America’s women?

You are not, I think, supposed now to say this. Just as, I am sure, you are certainly not supposed to feel that having Sarah Palin put forth as the Republicans’ first female vice presidential candidate is just about as respectful a gesture toward women as was John McCain’s suggestion, last month, that his wife participate in a topless beauty contest.

Such thoughts, we are told, are sexist. And elitist. After all, via Palin, we now hear without cease, the People are speaking. The “real” “authentic,” small-town “Everyday People,” of Hockey Moms and Blue Collar Dads whom even Rudolph Giuliani now invokes as an antidote to the cosmopolite Obamas and their backers in the liberal media. (Remind me please, once again, what was the name of the small town where Rudy grew up?)

Why does this woman – who to some of us seems as fake as they can come, with her delicate infant son hauled out night after night under the klieg lights and her pregnant teenage daughter shamelessly instrumentalized for political purposes — deserve, to a unique extent among political women, to rank as so “real”?

Because the Republicans, very clearly, believe that real people are idiots. This disdain for their smarts shows up in the whole way they’ve cast this race now, turning a contest over economic and foreign policy into a culture war of the Real vs. the Elites. It’s a smoke and mirrors game aimed at diverting attention from the fact that the party’s tax policies have helped create an elite that’s more distant from “the people” than ever before. And from the fact that the party’s dogged allegiance to up-by-your-bootstraps individualism — an individualism exemplified by Palin, the frontierswoman who somehow has managed to “balance” five children and her political career with no need for support — is leading to a culture-wide crack-up.

Real people, the kind of people who will like and identify with Palin, they clearly believe, are smart, but not too smart, and don’t talk too well, dropping their “g”s, for example, and putting tough concepts like “vice president” in quotation marks.

“As for that ‘V.P.’ talk all the time … I tell ya, I still can’t answer that question until somebody answers for me, What is it exactly that the ‘VP’ does every day?” Palin asked host Lawrence Kudlow on CNBC sometime before her nomination. “I’m used to bein’ very productive and workin’ real hard in an administration and we want to make sure that that ‘V.P.’ slot would be a fruitful type of position.”

And, I think, they find her acceptably “real,” because Palin’s not intimidating, and makes it clear that she’s subordinate to a great man.

That’s the worst thing a woman can be in this world, isn’t it? Intimidating, which appears to be synonymous with competent. It’s the kiss of death, personally and politically.

But shouldn’t a woman who is prepared to be commander in chief be intimidating? Because of the intelligence, experience, talent and drive that got her there? If she isn’t, at least on some level, off-putting, if her presence inspires national commentary on breast-pumping and babysitting rather than health care reform and social security, then something is seriously wrong. If she doesn’t elicit at least some degree of awe, then something is missing.

One of the worst poisons of the American political climate right now, the thing that time and again in recent years has led us to disaster, is the need people feel for leaders they can “relate” to. This need isn’t limited to women; it brought us after all, two terms of George W. Bush. And it isn’t new; Americans have always needed to feel that their leaders were, on some level, people like them.

But in the past, it was possible to fill that need through empathetic connection. Few Depression-era voters could “relate” to Franklin Roosevelt’s patrician background, notes historian Doris Kearns Goodwin. “It was his ability to connect to them that made them feel they could connect to him,” she told me in a phone interview.

The age of television, Goodwin believes, has made the demand for connection more immediate and intense. But never before George W. Bush did it quite reach the beer-drinking level of familiarity. “Now it’s all about being able to see your life story in the candidate, rather than the candidate, with empathy, being able to relate to you.”

There’s a fine line between likability and demagoguery. Both thrive upon manipulation and least-common-denominator politics. These days, I fear, this need for direct mirroring — and thus this susceptibility to all sorts of low-level tripe — is particularly acute among women, who are perhaps reaching historic lows in their comfort levels with themselves and their choices.

Just look at how quickly the reaction to Palin devolved into what The Times this week called the “Mommy Wars: Special Campaign Edition.” Much of the talk about Palin (like the emoting about Hillary Clinton before her) ultimately came down to this: is she like me or not like me? If she’s not like me, can I like her? And what kind of child care does she have?

“This election is not about issues,” Rick Davis, John McCain’s campaign manager said this week. “This election is about a composite view of what people take away from these candidates.” That’s a scary thought. For the takeaway is so often base, a reflection more of people’s fears and insecurities than of our hopes and dreams.

We’re not likely to get a worthy female president anytime soon.

http://warner.blogs.nytimes.com/2008/09/04/the-mirrored-ceiling/index.html

U.S. Spied on Iraqi Leaders, Book Says
Woodward Also Reveals That Political Fears Kept War Strategy Review ‘Under the Radar’

By Steve Luxenberg
Washington Post Staff Writer
Friday, September 5, 2008; A01

The Bush administration has conducted an extensive spying operation on Prime Minister Nouri al-Maliki, his staff and others in the Iraqi government, according to a new book by Washington Post associate editor Bob Woodward.

“We know everything he says,” according to one of multiple sources Woodward cites about the practice in “The War Within: A Secret White House History, 2006-2008,” scheduled for release Monday.

The book also says that the U.S. troop “surge” of 2007, in which President Bush sent nearly 30,000 additional U.S. combat forces and support troops to Iraq, was not the primary factor behind the steep drop in violence there during the past 16 months.

Rather, Woodward reports, “groundbreaking” new covert techniques enabled U.S. military and intelligence officials to locate, target and kill insurgent leaders and key individuals in extremist groups such as al-Qaeda in Iraq.

Woodward does not disclose the code names of these covert programs or provide much detail about them, saying in the book that White House and other officials cited national security concerns in asking him to withhold specifics.

Overall, Woodward writes, four factors combined to reduce the violence: the covert operations; the influx of troops; the decision by militant cleric Moqtada al-Sadr to rein in his powerful Mahdi Army; and the so-called Anbar Awakening, in which tens of thousands of Sunnis turned against al-Qaeda in Iraq and allied with U.S. forces.

The book is Woodward’s fourth to examine the inner debates of the Bush administration and its handling of the Iraq and Afghanistan wars. The Washington Post will run a four-part series based on the book beginning Sunday. Fox News published a report about the book on its Web site last night after obtaining a copy ahead of the release date.

The 487-page book concentrates on Bush’s leadership and governing style, based on more than 150 interviews with the president’s national security team, senior deputies and other key intelligence, diplomatic and military players. Woodward also conducted two on-the-record interviews with Bush in May.

The book portrays an administration riven by dissension, either unwilling or slow to confront the deterioration of its strategy in Iraq during the summer and early fall of 2006. Publicly, Bush maintained that U.S. forces were “winning”; privately, he came to believe that the military’s long-term strategy of training Iraq security forces and handing over responsibility to the new Iraqi government was failing. Eventually, Woodward writes, the president lost confidence in the two military commanders overseeing the war at the time: Gen. George W. Casey Jr., then commander of coalition forces in Iraq, and Gen. John P. Abizaid, then head of U.S. Central Command.

In October 2006, the book says, Bush asked Stephen J. Hadley, his national security adviser, to lead a closely guarded review of the Iraq war. That first assessment did not include military participants and proceeded secretly because of White House fears that news coverage of a review might damage Republican chances in the midterm congressional elections.

“We’ve got to do it under the radar screen because the electoral season is so hot,” Hadley is quoted as telling Secretary of State Condoleezza Rice, who is described as challenging the president on the wisdom of sending additional troops to Iraq. “You’re not getting a clear picture of what’s going on on the ground,” she told the president, the book says.

The quality and credibility of information about the war’s progress became a source of ongoing tension within the administration, according to the book. Rice complained about the Defense Department’s “overconfident” briefings during the tenure of Secretary Donald H. Rumsfeld. Rather than receiving options on the war, Bush would get “a fable, a story . . . that skirted the real problems,” Rice is quoted as saying.

According to Woodward, the president maintained an odd detachment from the reviews of war policy during this period, turning much of the process over to Hadley. “Let’s cut to the chase,” Bush told Woodward, “Hadley drove a lot of this.”

Nor, Woodward reports, did Bush express much urgency for change during the months when sectarian killings and violent attacks against U.S. forces in Iraq began rising, reaching more than 1,400 incidents a week by October 2006 — an average of more than eight an hour. “This is nothing that you hurry,” he told Woodward in one of the interviews, when asked whether he had given his advisers a firm deadline for recommending a revised war strategy.

In response to a question about how the White House settled on a troop surge of five brigades after the military leadership in Washington had reluctantly said it could provide two, Bush said: “Okay, I don’t know this. I’m not in these meetings, you’ll be happy to hear, because I got other things to do.”

The book presents an evolving portrait of the president’s decision-making. On the one hand, the book portrays Bush as tentative and slow to react to the escalating violence in Iraq; on the other, once he decides that a surge is required, he is shown acting with focus and determination to move ahead with his plan in the face of strong resistance from his top military advisers at the Joint Chiefs of Staff.

Woodward also depicts the development of a close working relationship between Bush and Maliki, with the president leaning on the Iraqi leader to govern evenhandedly and to take decisive action against sectarianism. “I’ve worked hard to get in a position where we can relate human being to human being, and where I try to understand his frustrations and his concerns, but also in a place where I am capable of getting him to listen to me,” Bush told Woodward.

Given Bush’s efforts to earn Maliki’s trust, the surveillance of the Iraqi prime minister caused some consternation among several senior U.S. officials, who questioned whether it was worth the risk, Woodward reports. One official knowledgeable about the surveillance “recognized the sensitivity of the issue and then asked, ‘Would it be better if we didn’t?’ ”

Meanwhile, Woodward reports that Casey, the president’s commanding general in Iraq from 2004 to 2007, came to believe that Bush did not understand the nature of the Iraq war, that the president focused too much on body counts as a measure of progress.

“Casey had long concluded that one big problem with the war was the president himself,” Woodward writes. “He later told a colleague in private that he had the impression that Bush reflected the ‘radical wing of the Republican Party that kept saying, “Kill the bastards! Kill the bastards! And you’ll succeed.” ‘ ”

Asked about his interest in body counts, Bush told Woodward: “I asked that on occasion to find out whether or not we’re fighting back. Because the perception is that our guys are dying and they’re not. Because we don’t put out numbers. We don’t have a tally. On the other hand, if I’m sitting here watching the casualties come in, I’d at least like to know whether or not our soldiers are fighting.”

The discord between Bush and Casey is one manifestation of the often-debilitating rift that Woodward portrays between the U.S. military and its civilian leadership. The book describes a “near revolt” in late 2006 by the Joint Chiefs of Staff, who felt that their advice was not reaching the president. Adm. Michael Mullen, then serving as chief of naval operations, expressed fear that the military would “take the fall” for a failure in Iraq. According to the book, Casey and Abizaid resolutely opposed the large surge that the president ultimately ordered, as did Rumsfeld. Casey went so far as to refer to Baghdad as a “troop sump.” Within the administration, only the National Security Council staff strongly supported the surge plan.

In the midst of the surge debate, Bush decided to replace Rumsfeld, who had served as defense secretary throughout the war and had long argued that the United States should “take the training wheels off the Iraqi government.” Bush chose Rumsfeld’s replacement, Robert M. Gates, without consulting Vice President Cheney, Rumsfeld’s chief patron, the book reports. Bush informed Cheney of his decision on Nov. 6, 2006, the day before the mid-term elections. “Well, Mr. President, I disagree,” Cheney is quoted as saying, “but obviously it’s your call.”

Woodward’s account also includes a portrait of Gen. David H. Petraeus, who replaced Casey in Iraq. In one scene in the Oval Office in January 2007, Bush tells his new commander in Iraq that the surge is his attempt to “double down.” According to Woodward, Petraeus replies, “Mr. President, this is not double down. This is all in.”

“The War Within” also tells the story of retired Gen. Jack Keane, a former Army vice chief of staff who used his high-level contacts in the White House and the Pentagon to influence war policy and major military personnel moves. A friend and mentor of Petraeus, Keane made regular visits to Iraq to advise the new commanding general and then briefed Cheney about each trip. In turn, Woodward reports, Bush sent a back-channel message to Petraeus through Keane, circumventing the chain of command.

In a critical epilogue assessing the president’s performance as commander-in-chief, Woodward concludes that Bush “rarely was the voice of realism on the Iraq war” and “too often failed to lead.”

During the interviews with Woodward, the president spoke of the war as part of a recentering of American power in the Middle East. “And it should be,” Bush said. “And the reason it should be: It is the place from which a deadly attack emanated. And it is the place where further deadly attacks could emanate.”

The president also conceded: “This war has created a lot of really harsh emotion, out of which comes a lot of harsh rhetoric. One of my failures has been to change the tone in Washington.”

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/04/

AR2008090403160_pf.html

ECB Officials Signal Inflation Still Biggest Concern (Update3)

By Simone Meier

Sept. 5 (Bloomberg) — European Central Bank President Jean- Claude Trichet and Executive Board members Juergen Stark and Jose Manuel Gonzalez-Paramo signaled they’re still concerned about inflation even with the euro-region economy on the brink of a recession.

The ECB will do “whatever needed to deliver price stability,” Trichet said at a conference in Frankfurt today. At the same event, Stark said inflation is at “worrying levels,” while Gonzalez-Paramo said in a speech in Spain that the inflation outlook is “a source of major concern.”

While the euro-region economy is struggling to recover from a second-quarter contraction, the ECB yesterday kept interest rates at a seven-year high to push down inflation, which is running at 3.8 percent. ECB council member Axel Weber has said he sees no room to lower the key rate from 4.25 percent.

“This hawkishness that they’re still coming out with about monetary policy, when you’ve had oil prices 40 percent off the highs and very weak indicators in Germany, for me and I’m sure for many others that is a bit scary,” Jim O’Neill, chief economist at Goldman Sachs Group Inc., said in an interview in Cernobbio, Italy, today.

The Frankfurt-based ECB yesterday cut its growth forecasts for this year and next to about 1.4 percent and 1.2 percent respectively. It also raised its inflation projections to around 3.5 percent for 2008 and 2.6 percent for 2009. The ECB aims to keep inflation below 2 percent.

`Still Too High’

“Even though yesterday’s inflation forecasts show a deceleration of inflation in 2009, it will still be too high and clearly above our definition of price stability,” Ewald Nowotny, who joined the ECB’s Governing Council this month, said in Vienna today. It’s too soon to sound the all-clear, he said.

The ECB is concerned that faster inflation will spark so- called second-round effects as companies pass on higher costs and workers demand more pay. Gonzalez-Paramo told reporters in San Sebastian, Spain, that the bank will have “failed” if broad- based second-round effects materialize.

“The bank can’t fight against oil prices but it can do what is possible to avoid widespread second-round effects in the economy, and we will do that with the instruments we have,” he said. The risk of second-round effects represents “a source of acute concern.”

`Critical Challenge’

While crude oil prices have retreated 26 percent from a July 11 record of $147.27 a barrel, they’re still up 42 percent from a year ago. ECB council member Athanasios Orphanides said in Frankfurt today that the decline in inflation from its 4 percent peak “does not suggest a rapid improvement.”

Inflation still poses a “critical challenge,” he said. “We shall always remember that focusing on price stability is the best contribution to stable growth and job creation over time.”

Policy makers expressed confidence that the euro-region economy will start to emerge from its trough from the fourth quarter. Gonzalez-Paramo said the bank expects “the current episode of weakness to be followed by a period of gradual recovery.”

Stark said while third-quarter economic growth “will be weak,” he expects a “gradual recovery in the course of 2009.” At the same time, commodity-price increases “threaten to unhinge inflation expectations,” he said.

Trichet said it’s “precisely during such difficult times that the benefits of a solid monetary framework oriented to price stability become apparent.”

To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net

Last Updated: September 5, 2008 10:02 EDT

http://www.bloomberg.com/apps/news?pid=20601068&sid=aYfQTkTrTDS0&refer=economy 

 http://www.ft.com/cms/s/1/c5b359f4-7b24-11dd-b839-000077b07658.html

CEO obsolescence

Published: September 5 2008 09:30 | Last updated: September 5 2008 12:54

Do chief executives have a sell-by date? Last week, the outgoing head of UK asset manager Henderson said that no CEO of a public company should hang around for more than 10 years. Others reckon that after about five years, despite their best intentions, bosses get complacent, lazy, or simply run out of strategic or operational zeal.

The facts, however, seem to suggest that unlike old fish, CEOs may be more like fine wine – actually improving with time. Research recently commissioned by Manchester Square Partners examined the relationship between CEO tenure and corporate performance for more than 200 listed UK companies. The results show no diminution of returns in earnings per share or share prices for companies with CEOs in charge for at least a decade. This trend also holds true beyond 10 years, although the paucity of long-standing CEOs makes the data unreliable.

Of course there are other caveats, not least the crudity of using earnings per share as a measure of performance. And the tail-end of the time period under consideration – 15 years to the end of 2006 – was a period of rapidly accelerating earnings. From about mid-way through 2003, those CEOs still lucky enough to be in the hot seat could have generated booming profits with their eyes shut. The same goes for rising share prices.

Still, the more practical conclusion from the study is not that CEOs keep their touch, but rather that corporate performance seems to improve most rapidly during their third year in the corner office. Few executives are going to produce the stellar returns that Warren Buffett has after nearly 40 years at the top. But for boards under pressure to fire their CEOs, they would serve their shareholders best by waiting to pull the trigger until at least year four – or perhaps by doing nothing at all.

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Lehman May Shift $32 Billion of Mortgage Assets to `Bad Bank’
By Yalman Onaran

Sept. 4 (Bloomberg) — Lehman Brothers Holdings Inc. may shift about $32 billion of commercial mortgages and real estate to a new company that will be spun off in a move similar to the good-bank-bad-bank model used in the 1980s banking crisis, two people briefed on the discussions said.

The bad bank, nicknamed Spinco for now, would have about $8 billion of equity coming from Lehman, the people said, speaking on condition of anonymity because the plan is one of several under consideration. Spinco would borrow the remaining $24 billion from Lehman or outside investors. The New York-based bank would replace capital put into Spinco, whose shares would be owned by current Lehman shareholders.

Lehman Chief Executive Officer Richard Fuld, 62, is under pressure to strip the firm’s balance sheet of hard-to-sell assets. To raise cash needed to cope with losses from a wholesale disposal, Lehman has been talking with Korea Development Bank about a capital infusion and with private equity firms interested in buying its asset-management unit.

“The model helps banks get on with their real business, focus on their strengths, after they put the bad assets aside,” said Michael Bleier, an attorney at Reed Smith LLP who was the senior counsel to Bank Mellon during its spinoff of bad assets in 1988. “We’ll see it being used again during this crisis.”

Mark Lane, a spokesman for Lehman, declined to comment.

Korea Talks

The Spinco proposal would enable Lehman to dispose of 80 percent of its commercial mortgages, the people said. Under another plan, the firm would establish a company capitalized and managed by outside investors to buy some of its mortgage assets. The Spinco plan would enable Lehman’s shareholders to benefit from a turnaround in the mortgage market.

Korea Development Bank has been in discussions to buy a 25 percent stake in Lehman for $6 billion, according to the people familiar with the talks. That would replace most of the capital Lehman would put into the bad bank.

The deal must be structured to guarantee enough cash flow from the mortgages being put into the spun-off entity to repay outside lenders, Reed Smith’s Bleier said. That would force Lehman or another bank using the model to disclose much more detail about the mortgages and the securities, he said.

Balancing Act

Lehman’s $65 billion mortgage-related portfolio has spooked shareholders, driving the stock price down 77 percent this year on concern that the $2.8 billion loss in the second quarter wouldn’t end the bleeding. The bigger portion of the portfolio, or $40 billion, is tied to commercial real estate.

Even though defaults of commercial mortgages are still below 1 percent, speculation that delinquencies will jump in that market has pushed down the prices of the bonds backed by commercial real estate loans. By spinning off the mortgages to its own shareholders, Lehman can allow them to benefit from a possible recovery in asset prices when investors realize commercial mortgages aren’t going the way of subprime.

“Management’s challenge is not that of discarding a troubled portfolio,” said David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia Waller. “Instead, management must find a way to relieve pressure on the stock without destroying shareholder value by succumbing to an unwarranted fire sale of commercial mortgages.”

KKR, Carlyle

Lehman, the largest underwriter of mortgage bonds last year, has been trying to reduce assets linked to that market as demand dried up and prices plummeted, generating more than $8 billion in writedowns and credit losses. BlackRock Inc., the largest publicly traded U.S. money manager, was considering a purchase of some of Lehman’s commercial mortgages, people familiar with those discussions said last month.

If talks with the Korean bank fail, Lehman will turn to the other option for raising capital, the people familiar with the firm’s plans said. Private-equity firms including Kohlberg Kravis Roberts & Co. and Carlyle Group have been negotiating to buy a stake in Lehman’s asset-management business, which includes Neuberger Berman Inc.

Fuld removed his associate of 30 years, President Joseph Gregory, 56, in June and replaced him with Herbert “Bart” McDade, 49, who had run fixed income and equities. Fuld, McDade and other members of the management team are racing to conclude a deal with potential investors before the firm reports earnings this month, people familiar with the situation have said. The company typically announces earnings in mid-September, although last quarter it released preliminary figures a week before schedule.

The mortgage-bond crisis that spread to Lehman escalated in June 2007, when Bear Stearns Cos. began liquidating holdings from one of its hedge funds after losing bets on securities tied to subprime mortgages. Bear Stearns, then the fifth-largest U.S. securities firm, sold itself to JPMorgan Chase & Co. for $10 a share.

To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net.

Last Updated: September 4, 2008 15:14 EDT

http://www.bloomberg.com/apps/news?pid=20601103&sid=aQjsXBJ4uN1Y&refer=news

September 4, 2008, 6:12 pm

Mean Street: What to Do When You Have Nothing to Do on Wall Street

Posted by Deal Journal

How slow are things on Wall Street?

It’s the worst IPO market in five years. M&A activity is at a crawl. The Dow just fell back into a bear market.

And for three days, I‘ve racked my brains to fabricate a connection between Sarah Palin and Wall Street so I won’t have to write another piece about Fannie Mae or Freddie Mac.

Like everyone else on Wall Street, I’m desperately trying to do something when there is precious little to do.

That can be hard work. You need a strategy. Here are four of them for a banker to cope with dull days on Wall Street.

* * *

Strategy #1: The Waterboy: When there is little going on with outside clients, the smart banker turns to inside clients — his boss, his boss’s boss and other powers that be — and volunteers for anything and everything as the Waterboy.

You need someone to draft a memo on cost-cutting initiatives or scrub the revenue pipeline or travel to Michigan for M.B.A. recruiting or join the associate review committee. No problem. No task is too small for the Waterboy. He’s a team player.

Humiliating? Demeaning? Perhaps. But better a busy Waterboy than a second-string banker on the unemployment line.

Strategy #2: The Client Guy: The Client Guy understands that if God gives you lemons, you make lemonade. “I love it when business is slow,” he barks at the Monday morning meeting, “It gives me a chance to spend some quality time with my clients.”

Does he actually believe that? You hope not. But it beats whining like everyone else.

The Client Guy dutifully sets up meetings, gets on planes and takes the same clients through the same pitchbooks he showed them six months ago. But hey — look how much better the earnings dilution on that deal is now!

For the Client Guy, the cup is always half full. It has to be. Otherwise, on a beautiful warm September day, he’d head straight to the golf course and not to JFK for the four-hour trip to Dallas in the back of an MD-80.

Strategy #3: The Street Fighter: The Street Fighter also makes himself very busy. Not with clients, but furiously selling himself to anyone that will listen. He knows modesty has no place on Wall Street, especially when bonus money is scarce.

The Street Fighter is everywhere. He drops by to see the division head every two weeks and sends him a daily “urgent” email. He makes the rounds of all the N.Y. headhunters. He interviews at any bank that will see him. And he books scores of conference rooms in N.Y. for client meetings that strangely never transpire

The Street Fighter’s specialty is fighting for revenues. Every penny of every deal he’s remotely touched is “his.” He labors for days on his own self-evaluation until he has a laundry list of deals and a revenue contribution well north of $20 million.

And then the Street Fighter ties it all together by going from colleague to colleague to make sure they back his claims up. He begs, threatens and makes extravagant promises. All that trading and subterfuge is exhausting. A slow Wall Street? Not for the Street Fighter.

Strategy #4: The Vacationer: This last strategy is perhaps the most radical. Wall Street vacations are traditionally taken in August. But the bold banker who has already booked a year’s worth of revenues can demonstrate his uber-confidence by taking off a leisurely week or two post-Labor Day.

“I’ve been so busy all summer that I just need some time for myself,” the Vacationer will sigh as he heads out the door. He had better be untouchable. His boss and peers will foam at the mouth with envy and plot revenge with all their free time.

And nowadays on Wall Street, there’s plenty of that.

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September 3, 2008, 2:20 pm

Afternoon Reading: Jamie Dimon and Risk Management

Posted by Stephen Grocer

Jamie Dimon’s career has often been the stuff of adoring cover profiles, featuring taglines like “The Toughest CEO on Wall Street.” It is no wonder, then, that J.P. Morgan Chase’s ability to beat back the credit crunch has prompted another hagiography of Saint Jamie.

Fortune Magazine’s Shawn Tully — a serial profiler of Dimon in 2002, 2004, 2005,2006, a brief one in 2007 and a nod to Dimon as one of “Wall Street’s most prudent manager” after the Bear Stearns deal in April — offers insight into how the bank has weathered this latest storm far better than its rivals.

Associated Press

That got Deal Journal combing through various media profiles of Dimon to compile the following: the greatest blunt-spoken hits of man whose wife once said of him, “He loves misbehaving in places where he’s supposed to behave.”

The reason, according to Tully: Back in 2006, near the height of the credit bubble, Dimon and his team decided to mostly exit “the business of securitizing subprime mortgages when it was still booming, shunning now notorious instruments such as SIVs (structured investment vehicles) and CDOs (collateralized debt obligations.)”

Today that decision has helped propel J.P. Morgan from a middle-of-the-pack performer to a leader in nearly every category, argues Tully.

How much credit does Dimon himself deserve? Portfolio.com’s Felix Salmon says quite a bit.

“Much as I’m skeptical of attempts by glossy magazines to lionize the CEO of the moment, I do think it’s reasonable for Dimon personally to take a lot of the credit. As Tully shows, Dimon sets the tone for the risk-conscious management of the bank as a whole: essentially everyone there is a risk manager, and that function isn’t outsourced to some marginalized and powerless group of resented risk officers.”

Of course, this does raise the question: How would Citigroup have fared if Dimon had replaced Sandy Weill? Here’s Salmon’s answer:

“Could Dimon have achieved something similar if he’d succeeded Sandy Weill at Citigroup? Frankly I doubt it: Citi really is too big and unwieldy to manage. But JP Morgan Chemical Chase Manhattan Bank One Bear Stearns Manny Hanny, it seems, isn’t.”

(Those who are fond of nicknames may prefer DealBreaker’s “Bearpont Morgan Chase” moniker.)

Tidbits

• Fortune thinks J.P. Morgan may be ready to go bargain hunting and has compiled a list of possible targets.

• Yahoo shares closed at $18.75, their lowest level in five years, reports Silicon Alley Insider. Guess Microsoft’s $31-a-share is looking pretty good right now.

• From Calculated Risk: The idea that the Fannie Mae and Freddie Mac should merge is “the dumbest thing I’ve ever heard of.”

• Dimon, Lloyd Blankfein and Herb Allen, among others, make Vanity Fair’s New Establishment list. See Dealbreaker’s take here.

• Lesson from the sale of Manchester City FC: “It seems, buying and selling football clubs can be a very nice little earner indeed,” writes Salmon.

• Mergers & Inquisitions unveils a new design.

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