// the question of who took the money away is still an unknown secret.

Before the bust, these CEOs reaped big gains

The credit bubble has burst. The economy is tanking. Investors in the U.S. stock market have lost more than $9 trillion since its peak a year ago.

But in industries at the center of the crisis, plenty of top officials managed to emerge with substantial fortunes.

Fifteen corporate chieftains of large home-building and financial-services firms each reaped more than $100 million in cash compensation and proceeds from stock sales during the past five years, according to a Wall Street Journal analysis. Four of those executives, including the heads of Lehman Brothers Holdings Inc. and Bear Stearns Cos., ran companies that have filed for bankruptcy protection or seen their share prices fall more than 90% from their peak.

The study, which examined filings at 120 public companies in such sectors as banking, mortgage finance, student lending, stock brokerage and home building, showed that top executives and directors of the firms cashed out a total of more than $21 billion during the period.

The issue of compensation and other rewards for corporate executives is front-and-center in the wake of the financial meltdown. Congress has held several hearings attacking Wall Street chieftains and others for perceived excesses given the state of their companies and the economy. America's boardrooms also are wrestling with the issue, trying to formulate pay plans that give proper long-term incentives.

Some experts say huge paydays inevitably coincide with economic booms. In the tech bubble of the late 1990s, more than 50 individuals each made more than $100 million from selling shares just prior to the crash. Many had just founded companies that had never turned a profit.

"The system tends to reward people for participating in bubbles," says Roy C. Smith, a finance professor at New York University's business school. Mr. Smith, a former partner of Goldman Sachs Group Inc., says that almost nobody anticipated the recent collapse.

Still, some firms are taking action to change their compensation systems. This week, Goldman Sachs, which recently received government funds, said its top brass would forgo bonuses for this year. Swiss banking giant UBS AG said it would hold some future compensation for executives in escrow, and pay it out only for strong long-term performance.

Many executives highlighted in the Wall Street Journal study defended their compensation, noting that the cash they took out was tied to strong financial results and that shareholders flourished along with them. Some officials executed regularly scheduled sales of stock. Others exhibited good timing in stock sales, cashing out shares months or years before the market's steep decline.

Most of those at the top of the list retained far more shares than they sold, meaning that their paper losses exceed the amount they took out of their companies. Some are founders or longtime executives who had built up equity over decades. Others on the list left their companies long before the crisis hit.

In a surprising finding, home-building executives often made more money than better-known Wall Street titans. One is Dwight Schar, chairman of NVR Inc., a Reston, Va., home builder best known as the parent of Ryan Homes. He made more than $625 million in the five years, nearly all of it from selling stock. NVR's stock, though down 64% from its 2005 peak, has held up better than that of many rivals, in part because the company didn't buy vacant land on which to build its mostly midpriced homes.

Mr. Schar's own home these days is an 11-acre oceanfront compound in Palm Beach, Fla., with a tennis court, and two pools, purchased in 2004 and 2005 for $85.6 million from billionaire investor Ronald O. Perelman, according to county officials. Through a spokesman, Mr. Schar declined to comment.

In its study, the Journal analyzed the compensation and stock sales of insiders at financial and housing-related companies over a five year period. The study used compensation data from Standard & Poor's ExecuComp and stock-trading information from InsiderScore.com.

The goal was to determine how much cash insiders actually collected, including salary, bonus, and cash realized from stock-option exercises and open-market sales of stock. The tally doesn't include paper profits from vesting of restricted stock or exercising options, unless the executive sold the resulting shares.

By surveying entire industry groups, the Journal's study includes some companies that are under intense regulatory and law enforcement scrutiny because of their actions during the bubble. It also includes firms merely swept up in the crisis, as well as those performing well considering the economy.

For example, Charles Schwab, chairman and founder of the brokerage company that bears his name, realized $817 million over the five years, almost all through stock sales. A spokesman says Mr. Schwab, 72, regularly sells stock to diversify his holdings and pursue charitable activities, and still holds a 17% stake. Schwab shares are up over the past five years and have held up well in the downturn. Mr. Schwab and his wife have established a charitable foundation that gives millions annually to help children with learning disabilities, among other causes.

Six of those who made more than $100 million headed home builders, the Journal analysis found. One is Robert Toll, CEO of Toll Brothers Inc., a Horsham, Pa., firm known for building deluxe suburban homes. Mr. Toll and brother Bruce Toll, a company director, together garnered $773 million in compensation and stock proceeds over the five-year period.

A big chunk of Robert Toll's stock sales were in a one-month period just as Toll Brothers' stock roared to its all-time peak in mid-2005. It's off 73% since then. A Toll Brothers spokeswoman declined to discuss the timing of stock sales. She said the CEO's compensation is based on performance and that his stock gains resulted from equity he built up as a founder of the company.

The list includes some familiar names, such as Angelo Mozilo, who realized $471 million during the five-year period as he piloted Countrywide Financial Corp. into a leading subprime lender. Amid huge losses, Countrywide was sold earlier this year to Bank of America Corp. Mr. Mozilo defended his pay before Congress earlier this year, saying his compensation was tied to performance and he had built up equity over decades as a founder.

Some who made large sums before the recent crisis don't appear on the list because their wealth isn't detailed in securities filings. These include hedge fund chiefs, Wall Street traders, and executives who sold their companies outright.

In 2006, Herbert and Marion Sandler reaped more than $2 billion selling their mortgage lender, Golden West Financial Corp., to Wachovia Corp. Analysts have said losses in Golden West's loan portfolio contributed to Wachovia's subsequent downfall. Wells Fargo & Co. has agreed to buy Wachovia.

Mr. Sandler, 77, defends Golden West's underwriting and says its loan losses weren't big enough to bring down Wachovia. Mr. Sandler, who pledges to give the proceeds of the sale to charity, adds that he held on to an "extremely material" amount of Wachovia stock, which lost 90% of its value since early 2007. "If we had foreseen what was going to happen, we would have sold all our stock," he says.

The Sandlers' sale of their company has been well publicized. Others who profited have kept a low profile, including the executives below:

R. Chad Dreier, 61, chairman and chief executive of Ryland Group Inc., a Calabasas, Calif., home builder, made $181 million over the five-year period. Specializing in mid-range homes, Ryland did well in the boom, entering into hot markets, such as Las Vegas and Ft. Myers, Fla. Most of its buyers financed homes through Ryland's in-house mortgage unit, some through controversial interest-only mortgages.

Mr. Dreier's bonuses, many tied to short-term profits, totaled $31.2 million in 2005 and 2006 alone. Ryland paid him another $20.5 million over the five years to cover some of his tax bills. He made another $85 million from stock sales, most of them regularly scheduled.

Next door to his 4,900-square-foot hilltop house in Santa Barbara, Calif., a Dreier private company owns an office building that houses Mr. Dreier's collection of baseball cards, sports memorabilia, gems, minerals and other items. State records say he owns several cars, including a 2004 Porsche coupe worth $448,000. Mr. Dreier has donated at least $6.5 million to Loyola Marymount University.

After posting huge profits during the bubble years, Ryland has reported hefty losses since last year amid plunging home sales. Its stock price is down 85% from its 2005 closing high.

Through a spokesman, Mr. Dreier declined comment. The spokesman says Mr. Dreier's pay was "very closely tied to performance." He adds that the housing business is cyclical, and the Ryland chief's pay has sharply declined with the market.

Daniel Meyers, First Marblehead

Wall Street once had a voracious appetite for student-loan debt. Ten insiders at First Marblehead Corp. seized the opening, receiving a total of about $660 million, mostly through stock sales over five years.

Based in Boston, First Marblehead specializes in "private student loans." Students take out the loans if they've exhausted the cheaper government-backed variety. As with subprime mortgages, those with poor credit histories must pay higher interest rates.

First Marblehead helped big banks, such as Bank of America and J.P. Morgan Chase & Co., put together student-loan programs. First Marblehead earned rich fees assembling and servicing packages of the debt sold to investors.

Chief Executive Daniel Meyers, a 46-year-old former arbitrage and derivatives trader, received almost $96 million in cash compensation and proceeds from stock sales over five years. Lee Jacobson, a First Marblehead spokesman, notes that Mr. Meyers co-founded the company in 1991 and didn't sell any shares until First Marblehead's October 2003 initial public offering.

In 2004, Mr. Meyers bought a Spanish-style villa in Newport, R.I., the summer retreat of industrialists a century ago. He paid $10.3 million for the estate, on 45 acres with sweeping views of the Atlantic. Mr. Meyers tore down the villa and is constructing a five-building, 38,000-square-foot compound called Seaward with a carriage house, a guest house and a caretaker's cottage. Mr. Meyers also owns a 66-foot sailing yacht, which he recently raced to a win at the famed Newport Regatta. In 2004, Mr. Meyers made a $22 million gift to the University of Virginia's Curry School of Education.

Leslie Alexander, the 65-year-old owner of the Houston Rockets and until recently a First Marblehead director, cashed out $288 million in stock over the five-year period.

In the credit crunch, First Marblehead's business ground to a halt after investors abandoned private student loans, which are experiencing rising defaults. Shares recently sold for about 75 cents apiece, down 99% from their January 2007 peak. The company's stock-market value is now roughly $75 million, about one-ninth of the amount that insiders cashed out of the company.

Mr. Jacobson notes that Mr. Alexander still owns 18.5% of First Marblehead, and Mr. Meyers retains 7%. He adds: "Both men have suffered significant losses alongside other long-term holders of the stock."

New Century Financial

Robert K. Cole, Edward Gotschall and Brad Morrice, three mortgage industry veterans, founded New Century Financial Corp. in 1995. By the peak of the boom, it was the nation's second-largest subprime lender.

The Irvine, Calif.-based company promoted mortgages that customers could apply for by merely stating their income with no documentation.

Over four years, the three executives received cash compensation and stock proceeds totaling $74 million, including estimates of their 2006 pay cited in a report by a court-appointed investigator after the company filed for bankruptcy protection. Mr. Cole, who was CEO for some of the period, lives in a 9,200-square-foot oceanfront home in Laguna Beach, Calif., that has a tax value of $30 million.

New Century Financial executives have been known as generous philanthropists in California. Mr. Gotschall's foundation gave $3 million in 2005 to a local hospital, which is naming a trauma center after his family.

In 2007, New Century filed for bankruptcy protection. New Century has said its accounting is under investigation by the Securities and Exchange Commission and the Justice Department.

In March, the court-appointed investigator filed a report in U.S. Bankruptcy Court in Delaware, alleging the company engaged in imprudent business practices and improper accounting, though he found insufficient evidence to determine earnings manipulation. Calling New Century's mortgage business "a ticking time bomb," he faulted the company for tying pay to loan volume and disregarding mortgage quality. The examiner said creditors had grounds to try to recover millions of dollars of bonuses paid in 2005 and 2006.

Manny Abascal, an attorney for Mr. Cole, said the founders' compensation was approved by outside directors and was "fully disclosed to investors." Mr. Abascal said the founders "held onto the vast majority of their stock, and collectively lost approximately $200 million" when the company failed.

Bert H. Deixler, an attorney for Mr. Morrice, said his client was "among the biggest victims of the collapse" of New Century, which he said was due to an "unforseen worldwide debt and liquidity crisis." An attorney for Mr. Gotschall declined comment.

Michael Gooch, GFI Group

Michael Gooch made a fortune from the booming trade in credit-default swaps and other complex financial instruments now being blamed for fueling the financial crisis.

Mr. Gooch, 50, is chief executive of GFI Group Inc., a leading broker of credit-default swaps. An immigrant from England, Mr. Gooch founded New York-based GFI two decades ago. It went public in 2005, and its stock nearly quintupled by late 2007.

Credit-default swaps are private contracts, similar to insurance, that pay investors when a bond or company defaults. While boosters say swaps are a valuable hedging tool, critics call them a toxic invention that fanned the flames of the mortgage meltdown. With the swaps market contracting and Congress calling for regulation, GFI's stock price has tumbled, recently closing nearly 90% below its high of last November.

Mr. Gooch, through a holding company, sold about $77 million in stock, most of it in May 2006. He says the aim was to diversify his personal investments. "In May 2006, nobody could have predicted the credit bust," he says. He also notes that his holding company still owns 43% of GFI's stock, and that trading credit derivatives is only a part of GFI's business.

Not long after GFI went public, Mr. Gooch bought a 152-foot sailing yacht that had been listed for sale at $12.9 million.

Mr. Gooch lives in a 10,000-square-foot, seven-bedroom house on the water in Rumson, N.J, with an elevator, pool and tennis court. He also owns a waterfront home in Delray Beach, Fla., and a Colorado ski condo.

Unlike some executives, who used shares in their companies as collateral to borrow money and then were forced to sell in the downturn, Mr. Gooch says his only major debt is a $1 million mortgage. "It could be paid off with the spare change in my bank account," he says.

Write to Mark Maremont at mark.maremont@wsj.com, John Hechinger at john.hechinger@wsj.com and Maurice Tamman at maurice.tamman@wsj.com

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// the critical thing is to reform the business model to complete the auto industry

Congress insists on business plan from automakers that want aid

WASHINGTON – Democratic leaders in Congress sidetracked legislation to bail out the auto industry Thursday and demanded the Big Three develop a plan assuring the money would make them economically viable. "Until they show us the plan, we cannot show them the money," Speaker Nancy Pelosi, D-Calif., said at a hastily called news conference in the Capitol.

She and Senate Majority Leader Harry Reid, D-Nev., said Congress would return to work in early December to vote on legislation if General Motors Corp., Ford Motor Co. and Chrysler LLC produce an acceptable plan.

The decision averted a likely defeat of legislation providing $25 billion loans for the industry. Reid and Pelosi said there was no plan in circulation that could pass both houses of Congress and win President George W. Bush's approval.

While the decision headed off the defeat of one bill, it did not necessarily translate into passage of a different one.

As a result, the fate of hundreds of thousands of auto workers and even of an iconic American industry hang in the balance.

The chief executives of the Big Three automakers appealed personally to lawmakers for the loans this week, and warned that their industry might collapse without them. In testimony, they said their problem was that credit was unavailable, and not that they were manufacturing products that consumers had turned their backs on.

But whatever support they found sagged when it became known that each of them had flown into Washington aboard multimillion dollar corporate jets. Reid observed that was "difficult to explain" to taxpayers in his hometown of Searchlight, Nev.

The automakers are on a tight timeline. Reid and Pelosi said their plan must be turned over to key lawmakers by Dec. 2 They said hearings were possible the first week of December, and Congress may return to session the following week to consider legislation.

Pelosi stressed that whatever the Big Three provided to Congress, it must show they had a plan for "viability and accountability," meaning that the were transforming their industry in a way that it would become competitive, and that they were clear about how the federal loan money was used.

Even if lawmakers return to vote, they are likely to insist on numerous conditions on any loans. One possibility is to seek a partial ownership of the companies. Another is to limit salaries of top executives. A third is to prohibit use of the funds for any lobbying.

Until Democratic leaders reached their agreement, the bailout had appeared headed for defeat in Congress, with the fate of hundreds of thousands of workers and Detroit's once-venerable car companies in the balance.

Reid canceled plans for a vote on a bill to carve $25 billion in new loans out of the $700 billion Wall Street rescue fund. The Bush administration and congressional Republicans oppose that plan. They prefer tapping a different source of funds that is earmarked to help the industry produce vehicles that burn less gasoline. But using those funds drew opposition from Pelosi, as well as environmentalists.

Efforts on a compromise unfolded earlier in the day, and a small group of legislators circulated a proposal that would divert the fuel-efficiency money to cover the industry's short-term financial needs, while guaranteeing that account would ultimately be replenished.

With all sides sensing doom for a Big Three automaker rescue, the finger-pointing proceeded.

White House press secretary Dana Perino on Thursday blamed Reid for not allowing the Republicans' separate auto-aid plan to come up for a vote.

"Unfortunately it looks like Sen. Reid just wants to pick up his ball and go home for the next two weeks — two months — for vacation," she said.

Pressed on what the White House would do if Congress can't agree on a plan to rescue the automakers this week, Perino said she thought lawmakers would return after the Thanksgiving holiday for an emergency legislative session if an auto company was in imminent danger of collapsing.

"I can't imagine a scenario where they wouldn't come back, unless the answer is that they just don't care. And if that's the case, then the American people ought to know that."

Congressional Democrats countered that the Treasury Department already had the power to grant emergency funds to the automakers, but the Bush administration opposed the approach.

The leaders of the Big Three automakers painted a grim picture of their financial position during two days of congressional hearings, warning that the collapse of the auto industry could lead to the loss of 3 million jobs. Detroit's automakers, hurt by a sharp drop in sales and a nearly frozen credit market, burned through nearly $18 billion in cash reserves during the last quarter — about $7 billion at GM, almost $8 billion at Ford and $3 billion at Chrysler. GM and Chrysler said they could collapse in weeks.

"I don't believe we have the luxury of a lot of time," GM CEO Rick Wagoner told a House hearing.

Alan Mulally, the CEO of Ford Motor Co., said the company had enough cash reserves to make it through 2009. But United Auto Workers union president Ron Gettelfinger said a bankruptcy could spawn others.

"If there's a Chapter 11 (for) one of the companies, it will drag at least one other with them, if not all of them. And I do not believe Chapter 11 is where it will end. It will go to liquidation," Gettelfinger said.

Automakers ran into more resistance from House lawmakers, who chastised the executives for fighting tougher fuel-efficiency standards in the past and questioned their use of private jets while at the same time seeking government handouts.

"My fear is that you're going to take this money and continue the same stupid decisions you've made for 25 years," said Rep. Michael Capuano, D-Mass.

The stakes are high. The Detroit automakers employ nearly a quarter-million workers, and more than 730,000 other workers produce materials and parts that go into cars. About 1 million more people work in dealerships nationwide. If just one of the automakers declared bankruptcy, some estimates put U.S. job losses next year as high as 2.5 million.

___

// not yet at the bottom, unless the housing price is properly adjusted the to level it should be.

If Stocks Are So 'Cheap,' Why Are They Still Going Down?

After recovering from their initial decline, stocks were struggling midday, with the Dow threatening to violate its October low of 7882.

With the S&P and Nasdaq having failed their "retest" yesterday, the Dow is almost certain to follow suit sooner vs. later. Many market watchers believe a retest of the October 2002 closing lows of Dow 7286, S&P 777 and Nasdaq 1114 are likely before this brutal bear market ends.

"I think it's pretty reasonable to look to the '02 lows as the next support area," says John Roque, managing director and technical analyst at Natixis Bleichroeder. "But ultimately, the market will find support at a lower level than that."

Roque predicts the S&P will hit 680 and the Dow the high 6000s before this downturn is over.

As to the claim stocks are "cheap" and long-term investors should be buying, Roque has a simple response: "Have they stopped going down? If they haven't stopped going down, they're not cheap. If people have no confidence to own [stocks], they're likely to go lower."

In other words, the habitual bottom-pickers are going to get burned yet again.

// the critical thing is to reform the business model to complete the auto industry

Buffett says U.S. automakers need either bailout or bankruptcy

OMAHA, Neb. – Billionaire investor Warren Buffett says U.S. automakers need a new business model to better compete, whether it takes bankruptcy or a government bailout to achieve.

Buffett also says he would never serve as U.S. Treasury Secretary. The Berkshire Hathaway Inc. CEO is a member of President-elect Obama's Transition Economic Advisory Board.

Buffett says any automaker bailout package should include a business solution, and be negotiated by the president, not Congress. Buffett spoke to Fox Business News in an interview scheduled to air Friday afternoon.

// this is an example of wide-spread corruption that leads to the business falling

GM returning two leased jets amid spending criticism

DETROIT (Reuters) – General Motors Corp(GM.N) will return two of its leased corporate jets amid intense criticism in Washington this week on the luxury travel arrangements of its chief executive even as the company pleads for federal aid.

CEO Rick Wagoner was in the capital to testify on the company's dire financial situation but his testimony was overshadowed by irate lawmakers who blasted him for flying on a private jet to ask for public funds and failing to make personal sacrifices in exchange for federal assistance.

Chief executives from Ford Motor Co(F.N), and Chrysler LLC, who were also there to plead for $25 billion in federal aid, came under fire too for flying to Washington in private jets.

GM spokesman Tom Wilkinson said on Friday GM decided to return the aircraft because of a "really aggressive cutback in travel."

The company, which is in a cost-cutting mode, is scrutinizing every trip, he said, but declined to disclose the name of the company it leases the airplanes from.

Wilkinson said the decision to return the leased corporate jets was made before this week's hearings and that the company in September returned two other of the seven jets it had at the beginning of the year.

"There is a perception issue," Wilkinson said of Wagoner's travel to Washington on a private jet. "We need to be very sensitive to that going forward."

He, however, said the company has not decided on what mode of transportation Wagoner would take if had to travel to Washington again.

Wagoner and Ford CEO Alan Mulally are required by their companies to fly by private aircraft for security reasons, according to company documents filed with the U.S. Securities and Exchange Commission.

The policy for Chrysler CEO Robert Nardelli is not required to be disclosed because the company is not publicly traded.

Skeptical lawmakers took to task the three CEOs for their luxurious travel arrangements at congressional committee hearings.

"Couldn't you have downgraded to first class or something, or jet-pooled or something to get here?" Rep. Gary Ackerman, a New York Democrat, asked the executives at a hearing held by the U.S. House Financial Services Committee.

Even Democrats who said they were sympathetic to the automakers' plight expressed frustration that the executives used private jets while professing ruthless cost-cutting measures.

A Chrysler spokesman said the automaker also leases or charters jets. He, however, declined to comment on whether the company was rethinking the use of private jets for executive travel, saying it was a "private matter."

Ford did not have an immediate comment on its corporate jet policy.

According to Ford's proxy, CEO Mulally's compensation included $752,203 in 2007 for personal use of company aircraft.

About two years ago, the head of Ford's North American operations, Mark Fields, gave up use of a corporate jet for personal travel to his home in Florida after the arrangement came under criticism at a time when the automaker was losing billions and slashing jobs.

He now flies first class on commercial planes.

Former Regulator: Clear Fraud in Financial Crisis -- Why Isn't Anyone in Jail?-

In the aftermath of the corporate scandals earlier this decade, investor confidence was (partially) restored by a parade of "perp walks" of fallen chieftains like Ken Lay, Bernie Ebbers, and Dennis Kozlowski.

But nearly two years into the bursting of booms in housing and mortgage securities, scant few related arrests have been made — and most of those have been focused on individual mortgage brokers vs. major industry leaders.

"There is no poster child [for the housing scandal] because you need to investigate, and you need to bring cases and we haven't done either against the major players," says William Black, Associate Professor of Economics and Law at the University of Missouri — Kansas City and a former federal regulator.

Black, who was counsel to the Federal Home Loan Bank Board during the S&L Crisis and blew the whistle on the "Keating Five" in 1989, says investigations have shown fraud incidence of 50% at (once) major subprime lenders like IndyMac and Countrywide.

But even though the FBI warned of an "epidemic" of mortgage fraud in 2004, they subsequently made a "strategic alliance" with the Mortgage Bankers Association, which serves the major industry players.

In this case, the foxes truly were guarding the hen house.

Black notes it was only this year that the total number of FBI agents devoted to mortgage-fraud investigations rose to more than 200. By comparison, during the S&L and Enron investigations in the 1980s and '90s, respectively, multiple task forces totaling hundreds of agents were employed.

// layoff won’t fix the issue while it says how bad the issue is, isn’t it.

Layoffs, Once a Boon to Stock Prices, Now a Burden

Back when things made sense in the stock market, a company announcing layoffs would be greeted as a positive sign that it was getting its act together and shoring up its bottom line.

Not today, though, when job cuts, such as the 53,000 served up this week by Citigroup, are greeted as just another reason to think the sky is falling.

"Anytime where people aren't totally panic-stricken about everything and where the one-offs tend to be more company-specific ... historically many of those companies have rallied on the appearance that they are developing some fiscal responsibility," says Uri Landesman, head of global growth strategies at ING Investment Management. "In this case, however, it is being seen as a sign of deeper panic."

Where one might normally expect the Citi (NYSE:C - News) layoffs to generate some enthusiasm that the banking giant is cleaning up its balance sheet, investors are ditching the stock in droves. Citi shares have lost half their value this week alone as the company's market value fell below that of US Bancorp (NYSE:USB - News), which is one-eighth as large by assets.

But Citi has hardly been alone in terms of losing share price after announcing layoffs. A slew of other companies have experienced the same phenomenon, and the trend is likely to continue.

"For the foreseeable future, until the market stabilizes, you will see a similar reaction," Landesman says. "If CEOs are expecting their stocks to rally on layoffs, I don't think that will happen in the short term. Right now it's being seen as a sign of weakness rather than a sign of strength."

A few cases in point, and they're not limited to the financial sector:

• JPMorgan Chase (NYSE:JPM - News) is cutting about 10 percent of its workforce, sources say, but its stock continues to tumble, down by 15 percent Thursday despite the cost-cutting.

• Mattel (NYSE:MAT - News) is beginning layoffs of 2.9 percent of its global workforce this month, but its stock is off more than 17 percent this week alone.

• Goldman Sachs (NYSE:GS - News) notified 3,200 employees this week that they will be jettisoned, yet the stunning decline of the company's stock continued with a 20 percent loss since Monday.

• Dell (NasdaqGS:DELL - News) is nearing the end of 9,000 job cuts but has seen share price tumble more than 25 percent over the past four weeks.

• Xerox (NYSE:XRX - News) has cut 5 percent of its workforce, or 3,000 positions, and seen shares fall more than 35 percent in the past month.

The takeaway: Much of this new round of layoffs comes from companies with problems far too complicated to be solved simply by cutting personnel costs.

"What we're seeing is the overall market keeps getting pounded and pounded by bad news," says Rick Pendergraft, market analyst at Investors Daily Edge newsletter. "Individuals haven't reached the point where they've become numb to that information."

Worse than that, the job cuts have raised concerns over whether some of Wall Street's most familiar names can survive the current crisis.

"Even a year ago this (layoff news) might be more favorable received," says Owen Malcolm, senior vice president at Sanders Financial Management in Atlanta. "Now, a firm like Citi, hard as it is to believe (the market is wondering) if they're going to survive or survive in their current structure or format."

What Can Investors Do?

The sour mood has presented vexing challenges for investors.

Most pros now are getting as far away from risk as possible and looking to find only the most solid companies in the market. Landesman says ING is "very long" on both Wells Fargo and JPMorgan Chase, two banks that have somewhat weathered the credit crisis and could be good candidates to be among the last big banks standing once the smoke clears.

But even they've seen hard times, with Wells Fargo (NYSE:WFC - News) shares off more than 20 percent and JPMorgan's (NYSE:JPM - News) stock down more than 30 percent since Sept. 1.

"They have some of the same exposures but I just think they're in much better shape than Citi right now," Landesman says. "They're better capitalized, they've just been able to make very valuable acquisitions, which they basically got for a song and are going to be paying dividends."

Using a similar strategy, Pendergraft sees AT&T (NYSE:T - News) perched on solid ground, above the fray of the numerous weaknesses bedeviling the markets. And he reiterated an earlier advocacy of Chattem (NasdaqGS:CHTT - News), maker of Gold Bond foot powder and other consumer health care products, as a company that is positioned to weather the storm.

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Others, though, are avoiding equities and focusing on corporate and municipal bonds.

Malcolm said he's been buying a variety of municipal bonds because of their safety appeal as well as attractive yields, but does not like the risk associated with many corporate bonds.

"The (corporate) yields are definitely attractive and competitive but we feel it's a much safer but still very attractive bet in the municipal bond market, where we still feel spreads are very attractive," he says. "Not to say that there still aren't problems with various markets, but we still have confidence in the risk-reward formula."

The move towards safety is unsurprising considered the volatile nature of stocks, a condition that Citi and others have only exacerbated with the sharp layoffs.

"They appear to be using a hatchet rather than a scalpel," Pendergraft says. "If you see a company that's paring back a little bit because demand has fallen off, that's not a bad thing. That's kind of keeping up with the times. When you see 20 percent cuts, now you've got to question the viability of the business."

Until the dust clears with Citi, General Motors (NYSE:GM - News), Ford (NYSE:F - News) and other big companies under fire, advisers are telling their clients to keep their powder dry.

"They could strike a deal tonight or over the weekend that could alter the future course of Citigroup or GM or Ford. There's no way to predict that," Malcolm says. "As an investment adviser we're telling our clients to steer clear and resist the temptation to bottom-fish."

All the Wrong Policies: Paulson Gets 'F-Minus' from Former Regulator

Posted Nov 21, 2008 02:52pm EST by Aaron Task in Newsmakers, Banking

Related: GS, XLF, JPM, BAC, C, WFC

As bad a year as the stock market is having, Treasury Secretary Paulson is having an even worse one, according to William Black, Associate Professor of Economics and Law at the University of Missouri.

The professor, who was counsel to the Federal Home Loan Bank Board during the S&L Crisis and blew the whistle on the "Keating Five" in 1989, says Paulson deserves an "F-minus" for his role in the financial crisis.

"All of his policies made [the crisis] worse," says Black, citing Paulson's:

• Pushing for more deregulation of the securities and mortgage businesses.

• Failure to recognize the liquidity crisis in credit markets sooner.

• Failure to act to stop foreclosures sooner.

• Opposition to the government taking equity stakes in financial institutions, until very late in the crisis.

"And he gets the worst grade because as head of Treasury he's also in charge of banking and thrift regulation," Black continues, noting he "destroyed" rather than beefed up supervision. "I hope you like the consequences."

Black, author of "The Best Way to Rob a Bank Is to Own One," says there's ample reasons why the financial markets have lost confidence in the Secretary.

He also notes Paulson steered Goldman Sachs into subprime and alt-A mortgage securities before becoming Treasury Secretary in 2006. Goldman began shorting those instruments shortly after Paulson's departure, he notes.

GM, Chrysler making deep cuts to hold on for loans

DETROIT (AP) -- When Chrysler was near death and awaiting a government bailout in 1979, then-CEO Lee Iacocca ordered drastic spending cuts and required all checks above $1,000 to be approved by a senior vice president.

Chrysler LLC and General Motors Corp. need to follow the same playbook now, industry analysts and management professors say, as they try to outlast the debate in Washington over whether they will get billions in government loans.

With no hope of getting credit elsewhere and auto sales at a 25-year low, both automakers are perilously close to having only the minimum amount of cash needed to operate.

Today, with GM alone spending $6.9 billion more than it took in last quarter and having operations in 34 countries, Iacocca's $1,000 limit might not be practical. But industry analysts and bankruptcy experts say both companies must take similar measures to ensure their companies live long enough to use any loans they get.

"You turn the electricity off. You do things like shut the proving grounds down," said Jim Hall, managing director of 2953 Analytics of Birmingham, Mich.

Top executives of GM, Chrysler and Ford Motor Co. went to Washington this week seeking roughly $25 billion but ran into so much opposition that Congress delayed voting on the bailout until the automakers prove they can be viable.

They must submit a plan to Congress by Dec. 2, followed by more hearings before any vote is taken. That means money won't be available at least until late December, probably not until early next year.

Meanwhile, the companies face huge expenses and a lack of revenue because car buyers are having trouble getting financing or are delaying big purchases because of uncertainty about their jobs. October was the worst U.S. auto sales month in 25 years, and November is looking only slightly better.

Chrysler CEO Bob Nardelli told the Senate Banking Committee his company had $6.1 billion in cash at the end of the third quarter after burning up $1 billion in cash per month from July through September.

GM fared worse. It burned up $6.9 billion last quarter and about $7 billion in the first half of the year and has warned that it could reach its minimums sometime next month.

Ford, while burning through billions as well, has a big stockpile of borrowed money and says it can last at least through 2009.

But without aid soon, GM and Chrysler will have trouble paying bills and may have to seek bankruptcy protection.

Inside both companies' headquarters, teams likely are looking to cut spending any way they can, including delays in new investments, experts say.

"They have to take really drastic steps in their cost-cutting," said Robert Wiseman, a Michigan State University professor who teaches strategic management. "Stop buying everything except for the most critical things they need for their operation."

GM announced Friday it is canceling its traditional holiday party for the media "due to the very difficult economic situation facing the nation, the state, the industry, and our company." The party will be replaced by a $5,000 donation to a journalism scholarship fund.

At Chrysler, Nardelli testified, there's a cash committee that scrutinizes requests every week.

But what they're doing now may not be enough. Some in Congress criticized the CEOs for flying to Washington on separate corporate jets. GM is reducing its leased fleet from seven planes last year to three, but the stigma remains, and Ford said Friday it was exploring possible sale of its five aircraft.

Lawmakers also rapped the automakers' high labor costs and particularly the jobs bank, in which laid-off workers get 95 percent of their pay plus benefits even though they aren't working.

The United Auto Workers said it has cut the jobs bank and placed time limits on it in new contracts signed with the companies last year. Still, more than 3,500 workers are getting paid for not working, and that number is sure to rise as the companies continue to cut jobs.

On Friday, GM announced it would extend holiday shutdowns and make other production cuts at five North American factories. It also accelerated the closure of a truck plant in Oshawa, Ontario.

Harlan Platt, who teaches corporate turnarounds at Northeastern University in Boston, said GM should turn to the UAW for help.

"The bank right now is the union, and they're going to have to give up something in the near term so they have something very valuable in the long term," Platt said.

Initially the UAW said it already gave up a lot in the new contracts, agreeing to lower wages for new hires and to shift the companies' huge retiree health care costs to a union-administered trust.

But on Thursday, President Ron Gettelfinger softened his stance, saying that the union is at the bargaining table already.

"We would welcome all the other stakeholders to the table to make some concessions," he said.

In Washington, House Speaker Nancy Pelosi said lawmakers are trying to get reassurances that the companies have a specific plan to survive before the government hands over taxpayer money.

Congressional Democrats called on the automakers to show how they would ensure the government would be reimbursed and share in future profits, eliminate dividends and lavish executive pay packages, meet fuel-efficiency standards, and address their health care and pension obligations to workers if they got the federal help.

But that could be troublesome for the automakers.

GM Chief Executive Rick Wagoner told reporters Thursday that the company already has shared a detailed plan confidentially with the Bush administration and key staffers in Washington. He's concerned that sensitive information could be made public.

"Historically, things like your future product plans, technology plans and financial plans would be competitively sensitive information, and so for a variety of reasons, we wouldn't be sharing that publicly," he said.

Douglas Baird, a professor who specializes in bankruptcy at the University of Chicago Law School, says the automakers were too vague, giving Congress less information than companies normally give lenders when seeking bankruptcy financing.

"That's not the way you approach a lender in a work-out. That's just not the way it's done," he said.

Wagoner, he said, will have the difficult task of showing Congress how GM can be viable with its current structure.

// all money might be wiped out like washington mutual

Pressure on Citigroup builds, shares fall below $4

NEW YORK (AP) -- Pressure intensified on Citigroup to sell part or all of itself as its stock fell below $4 a share on Friday and fears escalated about future loan losses.

CEO Vikram Pandit told managers earlier in the day he opposes breaking up the company, but the bank's board of directors was meeting Friday to discuss whether to do exactly that, the Wall Street Journal reported.

What investors are worried about is that all the risky debt sitting on Citigroup's balance sheet will eventually turn into losses as the economy worsens and the markets stay turbulent -- losses that could be nearly impossible to reverse.

Investors were also fearful that the government might orchestrate a takeover of Citigroup over the weekend that could wipe out common shareholders, said Paul Miller, a Friedman Billings Ramsey banking analyst.

The government was instrumental in JPMorgan Chase & Co.'s buyout of Bear Stearns and Washington Mutual Inc., deals that left shareholders with little or no payouts.

The Treasury Department, the Federal Reserve and other banking regulators are monitoring the situation, government officials said. They spoke on condition of anonymity because of the sensitive nature of the matter.

Concerns about the solvency of financial institutions were starting to ebb after the downfall earlier in the year of Bear Stearns Cos., Lehman Brothers Holdings Inc., and American International Group Inc. But now they are back with a vengeance as the recession deepens, raising the prospects of even more massive loan losses.

Just a couple months ago, Citigroup was the largest bank in the world by assets, stretching into everything from credit cards to consumer banking to high-stakes corporate dealmaking. The company was the result of an idea spawned by the financial deregulation in the late 1990s -- that consumers and corporations alike would be better served by a bank that could meet all of their needs.

Almost from the start, though, investors complained Citigroup was too sprawling and too complex to manage properly. And when the subprime mortgage crisis ripped through Wall Street starting last year, Citigroup was hit especially hard because of its high exposure to bad debt. Now, it has failed to turn a profit during the past four quarters, and its shares are trading for less than the cost of a pint of beer at a Wall Street pub.

As a result, analysts consider Citigroup the most vulnerable among the major U.S. banks -- especially after it failed to nab Wachovia Corp., bought instead by Wells Fargo & Co., a missed opportunity that put Citi behind in the race for U.S. deposits.

Citigroup's shares tumbled as low as $3.05 a share Friday before recovering to close at $3.77 a share, a decline of 20 percent that left them at their lowest level in nearly 16 years. It was a continuation of a sharp, weeklong plunge that could not be stemmed by Saudi investor Prince Alwaleed bin Talal's decision Thursday to raise his stake in the company to 5 percent from less than 4 percent.

The shares have shed 60 percent of their value since last Friday.

Citigroup has already raised $75 billion in capital this year, including a $25 billion cash investment from the government -- and none of it has been enough to muster confidence.

Raising more money on the open market is "pretty much off the table," given the recent plunge in the bank's shares, said William Fitzpatrick, an equity analyst at Optique Capital Management Inc. And raising more cash from outside investors or the government would be "a Band-Aid."

"You're going to have to see more sizable divestitures," Fitzpatrick said. "They're going to have to make changes here, and they don't have time on their side anymore."

People familiar with CEO Pandit's call Friday morning with senior managers, who spoke anonymously because the comments during the call were not made public, said his message was similar to that at his town hall meeting with employees on Monday -- that Citigroup has adequate capital, and that he supports the universal bank model for Citigroup, including arms such as Smith Barney.

On Monday, Pandit said the universal banking model is "the right model," and that Citigroup's strategy is "to be the world's truly global universal bank."

Still, one person said, "it's clear everything is on the table. That wasn't explicit, but I think it's clear."

An outright sale shouldn't be ruled out, but it appears unlikely, said Alois Pirker, an analyst at financial services research firm Aite Group. Not only are there few potential buyers right now, but "firms prefer to cherry pick," he said. "If you don't have a well integrated shop, the benefit of taking over the whole versus pieces diminishes."

Pirker said sale opportunities include Citi's Global Transaction Services business and its brokerage, Smith Barney. Pandit has said that these two businesses are important to Citigroup -- but these two franchises are not core to retail banking and would be attractive to potential buyers, Pirker said, because they have performed well in the recent turbulent environment.

Selling off the businesses in a particular region is another option, Pirker said. Recently, Citigroup sold off its retail banking business in Germany -- it could do the same with Japan, for example, he said.

Citigroup could also consider a merger rather than an outright sale.

"A merger is indeed a possibility at this point," Fitzpatrick said. He said there are a number of firms that would be eager to take over some of Citigroup's businesses -- particularly a company like Goldman Sachs Group Inc., an investment bank that recently turned into a bank holding company and is now on the prowl for deposits.

The bank has been rushing to get leaner and wind down its assets backed by risky debt. Monday, Citigroup said it will cut 53,000 jobs, on top of 22,000 cuts previously announced. On Wednesday, the bank said it is acquiring the remaining $17.4 billion in assets held by complex debt products known as structured investment vehicles that it previously ran off its balance sheet.

The subprime residential mortgage crisis has swelled into a full-blown debt crisis for not just Citigroup, but other banks as well, leading to defaults in everything from leveraged loans to credit card debt to commercial real estate loans.

Even JPMorgan Chase, one of the nation's stronger large banks, is shedding about 10 percent of its investment bank staff to better navigate the tough climate.

On Monday, Citigroup's Pandit said the company's consumer portfolio losses could rise between $1 billion and $2 billion each quarter through mid-2009. With Citigroup reporting net credit losses of $4.9 billion during the 2008 third quarter, the forecast means losses could swell to more than $10 billion by the middle of next year.

Pandit also said at the time that Citigroup plans to move $80 billion worth of marked-down assets on its balance sheet into a held for investment, held to maturity or available for sale category -- instead of listing them on their trading portfolio. Pandit said the accounting change "allows us to benefit from the inherent upside from these marked-down assets," but some investors saw the move as a tactic to hide bad assets, Fitzpatrick said.

Citi is "a great franchise, but it's damaged right now," Fitzpatrick said. "No one knows what the ultimate losses are going to be on a $2 trillion balance sheet."

Deutsche Bank's Mike Mayo estimated in a note Thursday that Citi will probably have to take an additional $7 billion to $20 billion in markdowns on its investments in the capital markets.

AP Economics Writer Jeannine Aversa and AP Business Writer Marcy Gordon contributed to this report from Washington.

拥有19处房产! 罪恶是欲望的恶性循环

据“旧金山纪事报”报道：

吴京华拥有的19笔房地产。根据公开纪录，这19笔房地产房地产散布於3个州、8个郡，总价值约240万美元。然而，有官员指出，吴京华告诉公设律师办公室，自己请不起律师。吴京华进入SiPort公司的同年，他与妻子开始大量购入房地产。政府官员从登记的资料中，无法判断吴京华是否也被卷入近期的信贷风暴，导致负债过重。
 
除了目前位於Mountain View的住处。从05年6月到10月，两人以52万6千元，在阿肯色的著名退休胜地Hot Springs Village，买了2栋出租屋以及5块空地。其中，有至少33万来自银行贷款。此外，他们也在华盛顿州Anderson Island，Vancouver，Ocean Shores三郡，至少购入5处住家以及6块建地。在加州Elk Grove及Lake Shastina，则分别有一处住屋及空地。

自从案发隔天被捕，吴京华一直被拘禁在精神病犯监狱。他被指派了两位公设律师。其中，Kenneth Mandel不愿证实，被告是否因有自杀倾向，所以没被关在一般的监狱。“他急躁地要发狂，但又充满悲伤。”“这不是他的选择，一开始警方就决定先送他进精神病犯监狱。记得，任何人都可能在压力下崩溃。”律师说。最后，法官同意律师建议，下次开庭时间订於12月18日。
 
全程低著头，吴京华出现在圣塔克拉拉的法庭上。
 
为了安排或参加丧礼，被害者的家属当天无人出席旁听。吴京华的妻子，以及3个年幼的儿子也没来。但旁听席上，出现了3位吴京华的女性友人。 Karen Cai，矽谷华裔工程师协会成员，同时也是专业桌球选手，两人在10年前相识。他表示，有朋友告诉他，吴京华最近常抱怨，新上司对他不好。然而， Divyesh Shah这位遇害上司的老友，却说此人非常谦虚，是个无与伦比的绅士。
 
吴京华的另一位友人Peiru Shen，表示自己一路从Vallejo开车来出席旁听。两人并不熟识，他认为自己的家庭情况与吴相似。“我想知道为什么他会做出这种事？”他说。
 
就在同一天的上午，遭吴京华射杀的公司执行长Sid Agrawal的葬礼，在离家不远的一处墓园举行。虽然是私人仪式，但仍有数百人到场哀悼。他的两个正在哈佛读书的儿子，也赶回家来。公司人事主管 Marilyn Lewis的葬礼，也在同日举行。他的家人将所有奠仪，捐赠湾区希望基金会。至於副总裁Brian Pugh的葬礼，则决定在两天后举行。

 
旧金山湾区第一大英文报章“圣荷塞水星报(the San Jose Mercury News)”2005年11月
15日的报道: 47岁的吴京华原是SiPort公司的一名软件测试工程师，进入公司
还不足两年。上周五(11月14日) 上午，吴在得知自己“因业绩不佳”而被解雇后，没
有表现出任何敌对或危险情绪。“所以下午3点左右当吴提出面见公司高级主管时，
并没有被拒绝”。
 
报道引述桑塔克拉拉警方的话说，衣著随意、神情毫无反常的吴和三位高级主
管进入一间办公室闭门谈话不久，“吴京华猛然掏出一支9毫米口径手枪开始射杀，
三名谈话对手当场中弹身亡”。据信三名死者分别是公司CEO、副总裁和人事主管，
年龄分别为56岁、47岁和67岁。

该案三死者，67岁女死者Marilyn Lewis是圣荷西居民，47岁男死者Brian Pugh是洛
斯阿多斯市居民，第三名死者58岁的公司共同创办人Sid Agrawal则是菲蒙市居民。