“Today’s Business Press” will be a daily feature of The Big Money, Slate’s business site, launching in September.
Treasury secretaries typically like to operate away from the media glare, which is why Henry Paulson’s choice to make the rounds of the Sunday TV talk shows, reassuring us that the American banking system is sound, seems unintentionally ominous. In the wake of the IndyMac failure (the third-largest bank collapse in U.S. history) and the Freddie Mac and Fannie Mae bailout, Paulson went on TV to “tell people that deposits up to $100,000 are fully insured,” CNN Money reports.
Still, he didn’t try to sugarcoat just how bleak the immediate future looks. “Of course, the list [of bank failures] is going to grow longer given the stresses we have in the marketplace, given the housing correction,” the Los Angeles Times quotes him as saying.
Last week’s Freddie/Fannie intervention will see the “creation of a new regulatory agency to control the companies … and to limit the risk they pose to the country’s financial system,” reports the New York Times. Let’s hope this new agency does a better job than the Federal Deposit Insurance Corp., the long-standing net beneath America’s consumer-banking sector. The Wall Street Journal reports that the FDIC was itself guilty of “giving out high-interest, subprime mortgages, some of them predatory.” The Journal also reports this morning that Paulson will be getting help in sorting out the banking mess from Goldman Sach’s most senior financial-institutions banker, Ken Wilson.
And speaking of banks: The morning media note that Asian markets were basking in the continued afterglow of Citigroup’s not-quite-so-bad results and that Hong Kong’s blue-chip Hang Seng Index climbed 714.18 points (3.3 percent) to 22,591.79 on a combination of banking-sector and lower-crude-oil-prices relief.
Now back to reality: European shares tanked at the start of trading on the news that the major U.K. bank HBOS made a mess of its $8 billion rights issue. The Financial Times reports that lead underwriters Morgan Stanley and Dresdner Kleinwort have been left holding more than $7 billion of the shares that existing HBOS shareholders had refused to buy. As the BBC’s business editor acidicly wrote this morning, “The deal will probably enter the City lexicon as the phrase ‘doing an HBOS’ to mean how not to raise money.”
Evidently, the weak dollar makes trans-Atlantic purchases all the more attractive. Fresh on the heels of the InBev deal for Anheuser-Busch comes news, this morning, that Swiss Big Pharma giant Roche intends to buy the 44 percent of its U.S. arm Genentech that it doesn’t already own. The buyout will cost $43.7 billion and represents a premium of 8.8 percent on Friday’s closing share price. It also marks a radical change of strategy for Roche, “overturning its long-standing commitment to stimulating innovation by keeping subsidiaries at arms’ length,” writes the Financial Times. Company culture aside, the deal could help Roche save “millions of dollars a year in an industry that is facing pressure on profits from generic drugs and development costs,” writes the New York Times. Genentech, an industry leader in cancer drugs, has long been a crucial moneymaker for Roche notes the Journal, and the biotech sector in general is “considered more successful in churning out new products.”
The cheesiest opening line of any business story today comes from the Los Angeles Times. “Holy opening weekend, Batman!” is how it describes the record $155.3 million three-day haul for The Dark Knight, ignoring the fact that Robin’s chipper interjections have not been part of the Batman story for years now. The Warner Brothers film surpassed the previous blockbuster performance of Spiderman 3 and shocked a movie industry that was caught in the midst of slumping sales, a topic the Journal found worthy of Page One treatment. Audience intrigue about Heath Ledger’s final performance as the Joker seems to be the best explanation, although the Journal uses the surprisingly strong ticket sales as one more historic piece of evidence that the movie business is recession-proof.
Finally, the New York Times tells us that comic Jimmy Fallon, Conan O’Brien’s Late Night replacement, will get his first tryouts not on network TV but via the Web. The idea is to “work out as many of the rough spots in his presentation as possible” before Fallon takes over from O’Brien in February, producer Lorne Michaels explains. Maybe Michaels remembers O’Brien’s notoriously slow learning curve when he was thrust into the spotlight. Or perhaps he thinks the Web-only spots could become a hit all on their own. The way ads are migrating online, Fallon may never make it to TV.