The mortgage mess: Investigations heat up
Federal prosecutors in New York are examining whether Switzerland’s UBS misled investors about the price of mortgage bonds, said Kara Scannell in The Wall Street Journal. The UBS investigation reportedly centers on a trader at Dillon Read, UBS’ now-defunct hedge fund unit. The trader was ousted “after he valued mortgage securities at prices below the value assigned to the same securities elsewhere at UBS.” Investigators are looking into whether the firm was trying to hide the true extent of the losses incurred on the securities.
Other firms are also coming under close scrutiny, said Jane Sasseen in BusinessWeek. The SEC, the FBI, and federal prosecutors are examining every link in the mortgage-securitization chain, “from the brokers and banks that generated the loans to the firms that packaged them together and securitized them to the banks that have them stuffed in their portfolios.” Authorities want to know if executives sold stock based on inside information that the mortgage market was tanking. The FBI’s participation is especially troubling to executives, since it suggests they may be held criminally liable for their actions.
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The economy: Jolted by the jobs number
Payrolls in the U.S. shrank for the first time in four years, the U.S. Labor Department announced last week, said Kelly Evans in The Wall Street Journal. The news ratcheted up fears that a recession has arrived. Nonfarm employment in January fell by 17,000 jobs, with the manufacturing and construction sectors taking the biggest hit. State and local government payrolls also fell, “perhaps due to budget shortfalls in areas most affected by the housing crisis.” One such area, Florida’s Palm Beach County, has instituted a hiring freeze, “with only public-safety jobs like firefighters exempt.”
Energy: Exxon’s record haul
In 2007, Exxon Mobil “made more money than any publicly traded company, any time, ever,” said Elizabeth Souder in The Dallas Morning News. The oil giant announced last week that its annual profit for 2007 totaled $40.6 billion, topping the previous record of $39.5 billion, which Exxon posted just last year. “Exxon didn’t produce as much oil as last year, but the company’s product fetched a much higher price, boosting earnings.”
Telecom: How bad off is Motorola?
Motorola CEO Greg Brown decided last week to take personal charge of the company’s faltering mobile-phone division, said Jeffry Bartash in Marketwatch.com. The move “suggests the problems with that business are even worse than the company has acknowledged.” Brown announced that the company might unload its wireless phone business, surprising analysts who “believed the company would focus primarily on restoring its handset business to profitability.” The slowing U.S. economy, though, “could make it hard to find a buyer.”
International finance: France mulls new rules
As Société Générale reels under $7.2 billion in losses racked up by rogue stock trader Jérôme Kerviel, France is considering tighter financial industry regulation, said Katrin Bennhold and James Kanter in The New York Times. Finance Minister Christine Lagarde has proposed several changes that would make it more difficult to hide unauthorized trading. Among other reforms, she wants to prevent “employees from being assigned to the trading floor after spending time working in the back office.” Authorities say Kerviel used information gleaned from his stint in Société Générale’s back office to evade the bank’s risk controls.
