Post-Fed calm: Don't expect yesterday's good times to continue, though Morgan Stanley did report a 42 percent drop in net income, which is better than expected. Also, the government is reducing the capital that Fannie Mae and Freddie Mac are required to hold, an effort to revive the housing market. (DealBook, AP)
SEC looks at Bear CEO: Regulators are especially interested in the mostly positive comments made by Alan Schwartz in the days leading up to the bank's collapse (he said on CNBC that the firm's liquidity position was strong). The agency's enforcement division has notified J.P. Morgan, which supposedly will acquire the bank, about "investigations and potential future inquiries into conduct and statements by Bear Stearns" before the announced takeover. The SEC has sometimes shown leniency toward companies in circumstances like these. (DealBook)
Seems like old times: Occidental CEO Ray Irani received compensation last year valued at $63.5 million - plus nearly $47 million from shares granted in previous years. Irani's core compensation (salary, bonus, stock awards, options and participation in incentive programs) was up 20 percent from the previous year. From the WSJ:
Occidental spokesman Richard Kline said Dr. Irani's compensation was appropriate, and pointed to the higher share price and also to Occidental's record $5.4 billion in net income in 2007, up 29% from the previous year -- a faster growth rate than most other energy companies. Dr. Irani wasn't available to comment. "This is superior pay for superior performance," Mr. Kline said. Critics argue that much of Occidental's success has been because of surging oil prices, which have been driven by rising demand in Asia, security concerns in oil-producing nations and a flood of money from investors seeking refuge from the weak dollar -- all factors beyond Dr. Irani's control.
Trouble with Hilton sale?: Well, at least the financing of the sale, which was completed last year. Bear Stearns led a consortium of banks seeking to sell off $8.4 billion of loans as part of the acquisition by Blackstone. That deal is now in the lap of J.P. Morgan (if its purchase of Bear goes through). The question is whether JPM will try to dump some or all of that Hilton debt. From the WSJ:
The deal also comes at a bad time for the hotel industry. Hotels are the first commercial sector of the real-estate industry to feel an economic slowdown, and the pain could be made worse by a big jump recently in hotel construction, which has raised the supply of rooms. Hotel construction starts are expected to stay strong this year and next, potentially leading to a glut of rooms, according to a study by PricewaterhouseCoopers. The immediate fear in the commercial mortgage-backed securities market is that J.P. Morgan will sell the Bear Stearns bonds it inherits on the cheap, further depressing the already weak market.
Snapshot for commercial real estate: A PricewaterhouseCoopers Korpacz survey shows some vulnerabilities around the country, but Socal seems to be holding up. For retail, "regions with significant population growth report relatively strong results, including West Coast markets such as Orange County, Los Angeles, Seattle, San Francisco and San Diego, as well as certain infill areas such as Suburban Maryland and Northern Virginia.” Industrial markets also look good. (OC Register)
Port plan proposed: The idea is to persuade shippers to burn cleaner fuel when vessels are near the California coast (cargo ships are responsible for much of the region’s air pollution). Under the plan, financial incentives would be used to encourage most of the 5,000 ships that berth at local ports each year to use much cleaner low-sulfur diesel fuels. The ports would pay the difference between the costs of the dirty and the clean fuel for as long as a year (the money would come from revenues collected from terminal operators). The move could slash local air pollution by 11 percent. (LAT)
Pellicano update: Lily LeMasters, the Hollywood gumshoe's former executive assistant, testified that a former cop provided confidential police records for years. Earlier, another Pellicano employee testified that the indicted private eye paid off cops and a onetime phone company employee to wiretap and intimidate targets of his investigations. Both are testifying under grants of immunity. (I'm not sure how the trial is going, but what a treat to write like Mickey Spillane!) (LAT)
Predatory lenders sought: State prosecutors shut down seven mortgage companies and filed suit seeking penalties and restitution of more than $20 million in an alleged bait-and-switch scam. The illegal sales practices outlined in the lawsuit included psychological pressure, forgery and outright lies. "This is among the worst we've ever seen," said state AG Jerry Brown. Authorities in San Bernardino County arrested five people in connection with the scheme. Bail was set at $2 million for most of the suspects. From AP:
Authorities identified one victim as 76-year-old Luis Garcia, who agreed to a 50-year loan with a monthly payment of $1,000. Garcia, who only speaks Spanish, said the mortgage documents were in English. He told prosecutors he later received a letter stating his loan rate was 7.95 percent and his initial monthly payment would be $2,254. Reached by phone, Garcia said he was initially promised a rate of 4.5 percent fixed around the end of 2006 and couldn't pay the bills he was sent. He said his house was in the foreclosure process.