The Wall Street Journal leads its business coverage with candid insight from former Federal Reserve Chairman Alan Greenspan. He foresees better news for the housing market: Home prices "are likely to start to stabilize or touch bottom sometime in the first half of 2009." But he is scathing in his view of how the Bush administration has handled the Fannie Mae/Freddie Mac mortgage mess. While bristling at criticism that he contributed to the nation's woes (he points out that world markets pushed interest rates down), Greenspan directs most of his ire at the "Here's the keys to the bank" mortgage rescue plan brokered by Treasury Secretary Henry Paulson.
"They should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted—with necessary taxpayer support to make them financially viable—as five or 10 individual privately held units" that could then be auctioned off, Greenspan tells the Journal. His sharp words come as CNN Money reports nearly 25 percent of all homes sold nationwide during the last 12 months fetched less than the sellers originally paid for them and as the New York Times documents the continued decline in retail sales, "despite the booster shot of billions of dollars from the government's tax stimulus program."
The NYT keeps its focus on the failing SUV beat this morning with news that Chrysler will spend $1.8 billion to convert a Detroit plant from producing Jeep Grand Cherokees to "more fuel-efficient, car-based crossovers." Speaking of off-loading underperforming models, could the Russians be about to grab control of Hummer? Reuters reports that GM has had "preliminary contact with Russian oligarch Oleg Deripaska" on a possible sale of its muscular SUV range. That surely would dent the Hummer's patriotic purchasing power. Fortune says GM (which has lost $51 billion over the last three years) might not be in the mess it is now if CEO Rick Wagoner hadn't scuttled an alliance with Renault-Nissan back in 2006. It writes that according to a "confidential analysis prepared for the deal that was obtained by Fortune, the tie-up could have produced as much as $10 billion in operating earnings per year for GM by 2011."
Both the Financial Times and NYT give ink to Genentech's initial rejection of the unsolicited $43.7 billion takeover bid by Swiss majority owner Roche while noting that the California biotechnology wiz is playing hard to get. "Genentech said that a special committee of directors had found that Roche's offer of $89 a share 'substantially undervalues the company,' " writes the NYT. Roche's three biggest-selling drugs—the cancer medicines Rituxan, Herceptin, and Avastin—are produced by Genentech, and while the two connected companies once had been seen to complement each other, their businesses "have started to overlap—and at points, compete—more significantly in recent years," writes the FT. With Roche expected to sweeten the deal, a merger could open the floodgates for consolidation in the Big Pharma world between other major players like Eli Lily, Bayer, and Johnson & Johnson and their smaller, cooler biotech partners.
So far today only the FT reports that JP Morgan and Morgan Stanley are close to a settlement with U.S. regulators that would involve buying back "billions of dollars worth of auction rate securities [ARS] from investors." JP Morgan's clients hold about $5 billion in ARS, while Morgan Stanley has intimated that it is willing to buy back about $4.5 billion. With Citigroup and UBS recently agreeing to buy back more than $26 billion in ARS and pay fines of $250 million, based on the general accusations that banks misrepresented these securities as liquid assets, these latest pending settlements underscore the banking industry's "desire to draw a line under a controversy that has sparked dozens of state and federal investigations and numerous lawsuits by regulators and investors," writes the FT.
Finally, with both the WSJ and NYT reporting that Paula Wagner could be about to quit as chief executive of United Artists, perhaps she might consider a career in a new growth entertainment industry for women—the Internet? A NYT advertising story cites statistics showing that "sites aimed primarily at women, from 'mommy blogs' to makeup and fashion sites, grew 35 percent last year—faster than every other category on the Web except politics." Funding, acquisitions, and ad revenue is following the female online crowd. And with Comcast recently coughing up $125 million to purchase Daily Candy, what might a Hollywood mogul achieve?