Weil on Finance, P.M.: Sell, Sell, Sell
Greetings, View fans. The Federal Reserve is keeping its monthly bond purchases steady, just like everyone predicted. The Boston Red Sox can win it all tonight in Game 6 against the St. Louis Cardinals. And right on schedule, here are your afternoon links.
PricewaterhouseCoopers buying Booz
More than a decade ago, PricewaterhouseCoopers and most other large accounting firms were doing all they could to shed their consulting arms, in response to pressure from securities regulators concerned about auditor independence. The firms have spent much of the past decade building their consulting operations back. Now Pricewaterhouse plans to buy Booz & Co. for an undisclosed sum. Arthur Levitt, the former Securities and Exchange Commission chairman, isn’t happy about it: “We are slipping back,” said Levitt, who is member of the board of Bloomberg LP, the parent of Bloomberg News. “As the accounting profession becomes more committed to consulting, their audit activities have got to be questioned.” It’s a tone-at-the-top issue. What do these firms consider to be their primary mission? Is it to serve the public interest as trusted professionals? (That’s what Congress had in mind when it wrote the laws requiring public companies to have their financial statements audited by independent public accounting firms.) Or is it to sell, sell, sell? Deals like this one point to the latter.
Banks’ rising settlement bills
Here’s a handy stat from SNL Financial that I hadn’t seen before today: “The biggest banks have agreed to more than $65 billion in credit crisis and mortgage-related settlements over the past 3.5 years, according to an analysis by SNL Financial of the six largest bank holding companies by assets.” That doesn’t include any amounts that JPMorgan Chase & Co. ends up paying to the Justice Department. The article has lots of fact-filled charts and timelines, showing how much each of the big U.S. banks has paid in legal fees, what reserves they’ve disclosed, and when each major settlement was reached.
Janet Yellen and the housing bubble
Reuters had a good piece today on Janet Yellen’s record as president of the Federal Reserve Bank of San Francisco. She took office in June 2004, just as a massive real-estate bubble was forming in her region. Her staff was warning her of big problems ahead: “But as chief regulator in the Federal Reserve's largest district, Yellen conveyed two starkly different messages. In public remarks across the Western region's nine states, she downplayed risks that were building in the financial sector, reporting positive economic signs even as warning signals began to emerge. Behind the scenes at the Fed, she contends that she and her staff were `pleading with Washington’ to issue supervisory guidance that would enable bank examiners to take a tougher line on risky real estate lending.” In other words, she acted like a typical bank regulator, who dared not tell the public what she knew. I wish I could say I was surprised.
Another brutal review for Alan Greenspan
This one comes from John Cassidy at the New Yorker, after reading the former Fed chairman’s new book and watching him on Charlie Rose’s show. Cassidy asks how much Greenspan has changed views since 2008 (when he famously said he had “found a flaw” in his neoclassical ideology) and decides not much: “Hitherto, Greenspan explained, he had been thinking and acting on the premise that people (and financial institutions) act in their own long-run self-interest, and that the rest of their behavior is random. But actually people’s actions are often driven by `so-called animal spirits … they are deep-seated aspects of human behavior. People act in predictable ways.’ Rather than behaving like omnipotent calculating machines, they respond to things like fear, greed, euphoria, and impatience, Greenspan said. Really? Yes, really.”
Cost of a ticket to Fenway Park tonight?
The average is $2,056, comparable to the Super Bowl. Makes sense:
The Red Sox haven’t won a World Series title at home in 95 years.
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)