Archive for: Finance


The Crisis In Entrepreneurial Finance: The Death of ‘Liquidity Event’ IPOs

Managing director Clark S. Judge outlined recent IPO developments and the death of ‘liquidity event’ IPOs.

Why are the American economy and the number of American jobs growing so slowly?  A few days ago, I stumbled on one answer.  And for once, it didn’t have to do – or, at least, much to do — with economy’s mismanagement by the current administration.

As part of a swing through California, I spent a morning with one of Silicon Valley’s most experienced and impressive serial entrepreneurs.  I’ve lost track of all the ventures he has started or captained.  But from twenty years in the tech community, he has gained unparalleled insight into the entrepreneurial ecosystem in our time.

Read the full piece here.

What is going on with the Fed? No, not anything like what it seems.

6.5% unemployment or bust; until then, the money spigot is open wide. This was the gist of the Fed’s world-headline-grabbing announcement this week.

Less noticed was that, as the FT reported on the same day, “The US Federal Reserve is carrying out its first ever system-wide stress test of bank liquidity…”  Translation: The Fed will be pushing bank reserve requirements significantly higher.

In other words, in the past week the Fed hurled, in succession, loose-money and tight-money hardballs — the first with a big public windup, the other almost slipped by — at the batter that is our economy. But, then, it’s a combination this pitcher has been throwing for four years now.

Not long ago I highlighted at Ricochet economist Steve Hanke’s contrarian analysis of U.S. monetary policy. Hanke points out that even as the volume of “state” money (as he calls high-powered money or, roughly, M1) has ballooned the last four years, “bank” money (his term for lending in various forms) has stagnated under pressure from national and international regulators.  With bank money making up 85% of today’s money supply (down from 93.5% in 2008), total monetary growth has languished at 7.5% below trend.


FOX BUSINESS: The Treasury Department and the bond market

After writing this column on the Treasury Department for, I was invited to appear on Fox Business to discuss the future of the bond market.

Britain Tries Fiscal Austerity – Wall Street Journal

Keynesians howled last week when Britain’s chancellor of the exchequer, George Osborne, announced his intention to shrink the budget deficit by more than the previous Labour government. The fiscal squeeze would plunge Britain into a 1930s-style depression. Where would demand come from with the rest of the world limping out of recession? Mr. Osborne’s Labour predecessor joined the chorus, suggesting that for all his plans to cut public spending if Labour had won the election, Alistair Darling would always have found excuses for delay.

To read the full article, click here.

The New Assault on American Corporations

In March 2010, the White House Writers Group along with Bloomberg, The Torrenzano Group, and CED held a Bloomberg Boards & Risk Briefing in New York City on changes to proxy rules that will have a tremendous impact on American corporations.

It was a half-day briefing on these new developments and what information, strategies, and techniques executives need to address them. There were discussions and presentations with leading experts in corporate governance, law, public policy, strategic communications, and investor relations.

Issue Overview

The regulatory reach of Washington is pulling together a qualitatively different kind of economy for America. The alphabet agencies – from the FCC to the FTC – are fighting with gusto and attacking with new and complex regulatory issues.

The SEC is preparing new access-to-the-proxy rules while legislators propose rules on “say-on-pay,” additional powers for financial regulators, as well as new legislative proposals on corporate governance and non-shareholder rights. The EPA is reversing judgments, thereby initiating sweeping reviews of scientific issues believed long settled.

At the individual company level, activists, unions, and special interest groups are skillfully using new technologies to drive their narrow agendas, affect board voting, and disrupt annual meetings.


Behind Washington’s Closed Doors: What Will Happen Next?

Clark S. Judge, Managing Director, White House Writers Group

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Wall Street: Banking on Steroids

Two years after the fall of Lehman Brothers, Oliver Stone has a new film about the world of high finance. Wall Street: Money Never Sleeps opens in theaters next week.  It’s a sequel to his 1987 hit Wall Street – intended as portrait of the greed and ruthlessness of 1980s excess.

Unlike the original film, however, which hit theaters during a bear market, the sequel comes at a time of economic vulnerability and near-double digit unemployment.  Columnist Andrew Sorkin of the New York Times describes the film as a “populist” view of Wall Street.  And it’s clear Stone sees himself as an advocate for Main Street. In his conversation with Sorkin he says, “Wall Street’s gone crazy. It’s banking on steroids.” Read

Access to proxy and the integrity of corporate boards

On August 25, the Securities and Exchange Commission, in a partisan three-to-two vote, approved its long-awaited access-to-the-proxy rule. The rule will allow any shareholder or group of shareholders representing three percent of outstanding shares and having held them for three years to nominate directors in board elections.

As a practical matter, this means that labor unions as well as major environmental organizations and other political activists will soon be organizing to win seats. At stake will be whether boards reflect the interests of shareholders as a whole or those political interests. Many corporate managements will feel compelled to run the equivalent of internal political campaigns in order to protect the integrity of their boards.

Last November I co-authored an article on this topic in The Wall Street Journal. You can find it here.

In Japan Playboys are NO Good!

Gender roles may be more fluid today, but in Japan women still want men who are penny-wise.   At least that’s what a new ad run by the Japanese Ministry of Finance is telling young bachelors.

Japan is in a bit of financial trouble these days.  The country holds one of the largest government debt loads in the world, yet Japanese households are buying fewer government bonds than in the past.

That’s why the government is trying to appeal to young, single men and encourage them to buy bonds because, as they promise in one of their ads, “men who hold JGBs are popular with women!”

Another ad flaunts a young woman asserting, “I want my future husband to be diligent about money…Playboys are no good.”

It’s hard to know if their ad campaign will get them out of the red, but it sure is good communications!

Glass Pockets, Goldman Sachs, and the Imperative of Clarity

In 1909, as the federal government was first moving towards regulation of the financial industry, J.P. Morgan is said to have told friends, “The time is coming when all business will have to be done in glass pockets.”  Goldman Sachs is about to find that, for the financial world today, glass pockets are no longer good enough.

The SEC’s civil suit against Goldman charges that, through a partner company, the investment bankers packaged particularly troubled mortgages into collateralized debt obligations, the now notorious CDOs.  After Goldman sold the allegedly designed-to-fail instruments, the partner shorted them.  Goldman collected fees for assembling and marketing the package (later offset, the firm contends, by larger losses).  The partner reportedly netted a billion dollars on its short positions.

The Wall Street Journal front page story characterized the SEC’s charges as the biggest Wall Street-Washington confrontation since the Michael Milken-Drexel case at the end of the 1980s.  The Journal might have added that Milken’s was the most prominent of a larger package of investigations targeting the investment community.  Despite a parade of so-called perp-walks, when financiers were led into custody as cameras clicked, almost none of those actions produced convictions.  The Milken case led to a fine and prison time but remains controversial to this day.  Many, myself included, believe justice was miscarried.

The public perception point here is that major financial players face a formidable communications obstacle when they become the targets of such sweeping legal actions. Most attorneys — both prosecutors and their own defense attorneys — and journalists don’t actually understand what investment bankers and securities traders do.  The complexity of modern finance bewilders them.  And they are predisposed to assume that complexity equals opacity and opacity equals fraud of one stripe or another.

As I write, the weekend after the SEC’s charges hit the papers, I am not offering a judgment on the  case against Goldman, though the purchasers of the CDO were among the most experienced and sophisticated players in the financial world.  If any buyers were capable of being intelligently beware, it was they.  But I am saying that Goldman must learn to explain its business with unprecedented clarity, otherwise, the legal, political, and journalistic worlds will judge the company guilty and exact huge penalties long before any trial.

Morgan’s term “glass pockets” suggested passive transparency.  Pull back the fabric; let in the light.  Goldman will need actively to project the light outward, making the complex both simple and comprehensible.  For an institution unaccustomed to talking to non-experts, the task is sure to prove formidable.

Three Steps to Boost a Bank’s Image

With the holiday party season in full swing, bankers across America are faced with a dilemma: Do I tell people what I do for a living?

Bankers today fall just below lawyers and persnickety salespeople in the public’s esteem. Even President Obama pulled out the old pejorative “fat cats” to describe Wall Street types – and remind the public that these portly felines were at the root of the financial crisis we’ve endured.

Bankers aren’t used to this kind of scrutiny. No longer answerable only to shareholders or directors, bank leaders now have to consider how their institutions are being viewed in Washington and in communities across America.

So how can bankers burnish their image at a time like this? Here are three ideas: Read