A-train railing against free-market realities. Okay, so it’s not truly a free market, but there are limits to what banks receiving funds under TARP can do; limits designed to protect the American taxpayer as a senior investor (the investments are in preferred securities after all), whilst not placing excessive limits on free-market flexibility for the banks to make money.

Making direct investments by buying preferred securities which must pay an annual 5% dividend for the first 3 years, and then an annual 9% dividend thereafter, and effectively leaving the rest of the program to the free-market is a bad thing? Preventing golden parachutes for the top-5 executives is a bad thing? Paying performance-based bonuses to the bankers that actually bring business IN to the firm, generating revenue and profit to enable the firm to continue is a bad thing?

Would people prefer that the bankers leave and start hedge-funds instead, thus ensuring that TARP fails and the American taxpayer does not get paid back?

I love how the important paragraphs in the story that retreat from the headline and indicate that things aren’t quite as extreme the headline makes them sound are buried deep within the story, which most people won’t read from start to finish.

Bush under fire for giving billions from rescue fund to banks - Salt Lake Tribune

The rescue legislation included some limits on executive compensation. And it does not allow institutions receiving the money to increase dividends. Lazear said that Treasury officials will make sure those requirements are met.

But he also suggested that the government would go no further in placing conditions on banks in the program. Lazear said that to do so may hamper their voluntary participation, and may also dampen the kind of free-market flexibility the administration believes will work best to get credit moving again. The first checks moved out to big banks this week.

Instead, he said that incentives in the program as well as free-market realities will result in the program’s success. For instance, the law requires that banks pay “quite significant dividends” to the government, meaning they have every reason to start lending again to make the kind of money necessary to both make a profit and to pay back Washington. The law requires a quarterly 5 percent dividend to the government that increases to 9 percent after three years.

On executive pay, she said that participating banks are complying with the law’s requirements. Under the law, an executive who receives a bonus based on false financial statements must repay it. The law also says that “golden parachutes” are not available for the top five executives of a company.

At least the Wall Street Journal puts the important information front and center:

Securities Firms Tackle Pay Issue - WSJ.com

Wall Street is waking up to the political tempest over billions of dollars in year-end bonuses likely to be paid out at securities firms lining up for government infusions, top executives are in discussions to possibly cap their own compensation, according to people familiar with the situation.

While the discussions remain fluid and many details still must be agreed to, the talks underscore an emerging consensus among some of the securities industry’s most powerful executives that the escalating pay controversy is creating yet another public-relations mess for Wall Street.

“There are going to be some people in the financial-services industry who will show real leadership here and recognize the reality of the situation,” one senior Wall Street official said.

And as Wall Street firms examine their pay and bonuses, distinctions are being made between the highest-ranking executives and lower-level traders and investment bankers who aren’t widely known beyond Wall Street but could get plucked away by rival firms if compensation practices are significantly altered.

As a result, the most likely scenario in the firm-by-firm discussions is a sharp decline in compensation for chief executive officers, but fewer changes in how bonuses are paid to most employees, according to a person familiar with the matter.

This week was totally unreal. Over the course of the past 6 weeks, since the beginning of September, I have lost over 50% of my net-worth; almost all of which is in my retirement plan.

On the other hand, I have been averaging my cost-basis down in Morgan Stanley, picking up another 150 shares yesterday, and I think about 350 shares today … so I now hold about 1050 shares altogether. A year ago, my 500-ish shares was worth about $33,000.00 … my now 1050-ish shares is worth about $10,000.00.

I still find it hard to believe that Morgan Sanley has lost about 85% of its value per share in that time … and our share price is now about 41% of our book value. Yep, we’re selling for 41-cents on the dollar of our actual value.

Wild Day Caps Worst Week Ever for Stocks - WSJ.com

The Dow Jones Industrial Average capped the worst week in its 112-year history with its most volatile day ever, as hopes for a major international bank-rescue plan were overwhelmed at day’s end by another wave of selling.

Some investors who normally would be jumping to buy beaten-down stocks after a 22% decline over eight trading days said the relentless declines have left them shell-shocked and unwilling to take new risks. Some spent the day trying to protect themselves from further declines.

The Dow fell 697 points shortly after the opening bell, and remained down most of the day. It surged to a 322-point advance less than half an hour before the close. Investors stampeded into bank stocks as reports circulated that the Group of Seven leading industrial countries were going to agree on a plan to rescue major banks, and that Morgan Stanley had been assured that it would receive funding from a Japanese bank. Hopes briefly blossomed that the worst might finally be over.

And then thing started plowing their way back down again. On the other hand:

Can Morgan Stanley Outrun ‘The Fear Virus’? - WSJ.com

Morgan Stanley’s stock has dropped 20% after falling as much as 35%. It is trading at around $9.50 each share. Moody’s is threatening a downgrade. People are nervous.

Should they be?

Deal Journal set out to find out. Morgan Stanley filed its third-quarter 10-K last night. The highlights of the filing show that the bank is not in trouble — or at least, it certainly was not at the end of the third quarter. Deal Journal took a look at some measures of Morgan Stanley’s health, and whether they improved or became sickly.

For now, the deal with Mitsubishi UFJ is still on:

Morgan Stanley shares fall 36% today - CNN Money

Spokesmen for both Morgan Stanley and Mitsubishi UFJ reiterated on Friday that the deal is set to be completed by Tuesday. There has been speculation in recent days that the transaction could fall apart as the deepening credit crisis makes financial companies even more vulnerable.

Mitsubishi UFJ agreed to pay $6 billion for preferred stock and $3 billion for common stock at a value of $25.25 apiece. That’s 50% more than Thursday’s closing price.

Pressure on Friday also stemmed from concerns that Morgan Stanley’s counter-parties and trading partners could lose confidence and pull their business. That’s one of the reasons Lehman and Bear Stearns were unable to survive, but Morgan Stanley might be in a bit better shape.

The investment bank has about $900 billion of assets and an equity market value of about $8 billion, and is still considered to be one of the world’s most well-capitalized investment banks. A research report from Barclays Capital said Morgan Stanley has between $100 billion and $115 billion of liquid reserves.

And, rumor does have it that Morgan Stanley will be one of the first beneficiaries of the Treasury’s program to purchase equity stakes in banks to help inject more capital into the system.

U.S. Proceeds With Plan for Equity Stakes in Banks - NYTimes.com

Treasury Secretary Henry M. Paulson Jr. said Friday that the government would move ahead with a plan to buy stock in financial institutions in an effort to unfreeze the credit markets and resuscitate the economy, and it came at the end of the worst week that Wall Street had ever seen.

“We can solve this crisis,” President Bush said in an address at the Rose Garden on Friday.
Mr. Paulson made his comment shortly after he and the chairman of the Federal Reserve Bank, Ben Bernanke, met with the finance heads of the world’s major economies in Washington and promised to work together to try to ease the financial crisis that roiled the markets for the last week.

Although the Wall Street Journal is still raising some doubts.

Morgan Stanley Enters Weekend Beset by Doubts on MUFG Deal - WSJ.com

Morgan Stanley is valued at about $10.3 billion, after its shares plunged 22% on Friday. Japanese bank Mitsubishi UFJ Financial Group has agreed to pay $9 billion for what was a 21% stake when the deal was announced last month.

The stock’s freefall during the past four weeks leaves Morgan Stanley facing what it is likely to be the most fateful weekend in the investment bank’s 73-year-history. Doubts that the MUFG deal will be completed by Tuesday are haunting Morgan Stanley, despite repeated assertions from both sides that it will go through.

A person familiar with the matter said Friday that Morgan Stanley isn’t renegotiating the terms of its deal. But that could change as MUFG officials pore over Morgan Stanley’s books in New York this weekend and government officials meet in Washington about finding a way out of the global financial crisis.

All in all, it’s going to be interesting to see what happens over the weekend, and how we start off the week on Monday.

Hopefully, it’s not just blind faith on my part, but I actually think that Morgan Stanley will make it through this crisis okay … bloody and bruised, but not out of the game … obviously, our business model is going to be different than it has been for the past 73 years; but change can be a really good thing.

From this morning’s Wall Street Journal:

‘No’ Votes Came From All Directions

The fatal “no” votes to the financial rescue package came from a strange-bedfellows coalition of lawmakers, from the most conservative to the most liberal members of the House, with a large number of representatives from low-income districts angry that Wall Street seems to be getting handouts while people getting tossed out of homes would get minimal aid.

One common strand that tied some of the diverse opponents together: a tough re-election fight. Eighteen of the 21 most vulnerable Republicans up for re-election, and 10 of the 15 Democrats in the closest races voted against the $700 billion financial rescue, illustrating the political hazards of bailing out Wall Street without offering an equally generous hand to taxpayers.

To me, this illustrates that the members of the House aren’t really thinking about doing what’s best for the country, even if it’s unpopular, but just care about protecting their jobs. It does make me wonder how many of those “no” votes would have been “yes” votes if we weren’t only 5 weeks from Election Day?

As Juvenal said in Roman times, “Two things only the people anxiously desire — bread and circuses.”

If everything was left solely to the people, do you think we’d be paying any taxes? But without tax revenue, how would vital government programs, such as say … Defense … be funded? Taxes are not popular, but are vitally important to ensure that our government can continue to function.

Putting together a plan, even an initially flawed plan that can be revised down the road, is vital to getting our economy back on track. The current ad hoc approach causes more uncertainty, more panic, more consolidation, less competition, and certainly doesn’t seem to be working.

What is going to happen if the Citigroup, Bank of America, and JP Morgan Chase acquisitions of WaMu, Wachovia, Bear Stearns and Merrill Lynch lead to their own financial troubles?

McCain’s Scapegoat - WSJ.com.

John McCain has made it clear this week he doesn’t understand what’s happening on Wall Street any better than Barack Obama does. But on Thursday, he took his populist riffing up a notch and found his scapegoat for financial panic — Christopher Cox, the chairman of the Securities and Exchange Commission.

To give readers a flavor of Mr. McCain untethered, we’ll quote at length:

“Mismanagement and greed became the operating standard while regulators were asleep at the switch. The primary regulator of Wall Street, the Securities and Exchange Commission (SEC) kept in place trading rules that let speculators and hedge funds turn our markets into a casino. They allowed naked short selling — which simply means that you can sell stock without ever owning it. They eliminated last year the uptick rule that has protected investors for 70 years. Speculators pounded the shares of even good companies into the ground.

“The chairman of the SEC serves at the appointment of the President and has betrayed the public’s trust. If I were President today, I would fire him.”

Wow. “Betrayed the public’s trust.” Was Mr. Cox dishonest? No. He merely changed some minor rules, and didn’t change others, on short-selling. String him up Mr. McCain clearly wants to distance himself from the Bush Administration. But this assault on Mr. Cox is both false and deeply unfair. It’s also un-Presidential.

And further:

In a crisis, voters want steady, calm leadership, not easy, misleading answers that will do nothing to help. Mr. McCain is sounding like a candidate searching for a political foil rather than a genuine solution. He’ll never beat Mr. Obama by running as an angry populist …

When the Wall Street Journal calls a Republican candidate un-Presidential, maybe it’s time for his supporters to start looking at the other candidate.

InBev to buy Anheuser-Busch for $52B - CNN.com

ST. LOUIS, Missouri (AP) — Belgian brewer InBev has announced it will buy its U.S. rival Anheuser-Busch for $52 billion to create the world’s largest brewer.

The deal would create the world’s largest brewer and put the U.S. beer-maker in the hands of Belgian-based InBev.

The acquisition means control over America’s largest brewer, the No. 2 worldwide, moves overseas. Based in St. Louis, Missouri, Anheuser-Busch has more than 48 percent of American market share with brands that include Bud Light.

InBev confirmed the details of the purchase of Anheuser-Busch early Monday. It first bid for Anheuser-Busch on June 11.

InBev is the world’s second largest beer maker, with brands that include Stella Artois and Becks.

The deal must be approved by shareholders and European and US antitrust regulators. The merger will produce the fourth-largest consumer product company worldwide.

Anheuser-Busch Cos. Inc. did not return messages seeking comment Sunday evening.

The Wall Street Journal said the deal was for $70 a share, a $5 increase over the offer Anheuser-Busch rejected in June.

What did I tell you back in May and in June regarding the proposed InBev acquisition of Anheuser-Busch? I knew that one way or another this deal would happen.

As it turns out, the Busch family’s posturing when they rejected the original offer, and more so through the commercials that have been airing on TV the past few weeks have been more about getting InBev to sweeten the offer … and it worked.

So here’s hoping that everything goes smoothly from here on out, and that some of those fantastic international (especially Belgian) brands that InBev controls get some better distribution in the United States once the deal is completed.

Update (more stories on the InBev / Anheuser-Busch deal):

• Anheuser-Busch accepts $52 billion InBev offer - MarketWatch
• Anheuser to Be Sold for $52 Billion - NYTimes.com

An old friend of mine in San Francisco, Cianna Stewart (one of the Sexiest Geeks Alive), is becoming quite a prolific independent filmmaker … her latest project, just going into production, will be a documentary about Zivity.com, a new online social network for connoisseurs of pin-up photography.

Zivity has been garnering a fair amount of attention in the mainstream (ABC, New York Times, and the San Francisco Chronicle) and financial press (Financial Times, Wall Street Journal and Forbes, amongst others) for its business model.

Cianna’s basic treatment of the film is as follows:

It’s Not Porn: Behind the doors of a modern pin-up company

In the world of erotic photography, sexy women are objects whose pictures garner huge profits for other people. A handful of young entrepreneurs have decided to upset this system, putting control into the hands of the models & photographers, challenging who defines “sexy,” and creating a new revenue model for the next wave of the internet. Will they succeed? And what happens when regular women become known as online pin-up stars?

Now if I can just figure out a way to get an invite to the beta.

Cianna is looking for investors to help finance the film; so if you happen to know anyone willing to buy shares, head over to Thumbnail Productions and get in touch. For those that want to support, but can’t afford to the extent of investing, donations will also be accepted, with a thank you to be determined (I’ve suggested a private premiere screening, or a copy on DVD) …

So what does it mean when one of your supporters accuses you of campaigning like a Republican? With regards to Geraldine Ferraro’s recent comments about Barack Obama’s race (which I think were likely presented somewhat out-of-context originally):

Is a ‘Dump Hillary’ Movement Starting to Crystallize?

In a blistering “special comment” tacked on to his MSNBC show, host Keith Olbermann accused Mrs. Clinton of “now campaigning as if Barack Obama were the Democrat, and you were the Republican.” Mr. Olbermann didn’t mince words — he accused Clinton advisers of sending “Senator Clinton’s campaign back into the vocabulary of David Duke.” He tagged Team Clinton with “slowly killing the chances for any Democrat to become president” with its divisive campaign tactics.

While Ms. Ferraro’s words were certainly inartful, no one in their right mind believes they should be compared with the rhetoric of David Duke. The fact that former Clinton allies such as Mr. Olbermann are becoming so apoplectic is a sure sign that Mrs. Clinton is wearing out her welcome on the primary stage in many quarters.