April 27th, 2010
05:38 PM GMT
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I am sitting here watching the much anticipated Goldman Sachs hearing and four of the executives who were in charge of running the mortgage unit during 2006-2008 have just given their opening statements.

They were smooth, confident and proved why Goldman employees are known as the best on Wall Street. They explained complex mortgage products, their role in them and said that any short positions taken at that time was at the request of the firm’s risk management team. It was all very impressive.

That is until the Q&A started. At that point the polished bankers quickly deteriorated into witnesses bumbling through the massive tome of evidence and emails.

As expected the U.S. senators asked pointed, aggressive questions about why Goldman peddled these crummy deals, if they disclosed information properly to clients, about the conflicts of interest.

The Goldman guys were vague, confused and kept asking, “What page was that?” “What email are you referring to?” At one point Senator Collins said she was beginning to suspect the confusion was a strategy the bankers were using to eat up time!

It is shocking to think these superstars of banking seemed so ambushed by what was clearly going to be a hostile audience. Maybe they did decide on a "Forrest Gump"-type strategy ahead of time. Or maybe they naively thought they were actually going to be talking about structured finance and their area of expertise and that the ethical questions about Goldman’s role in the crisis were going to be reserved for CEO Lloyd Blankfein. Not so.

Goldman executives seem to think that if they can just explain these markets well enough they will be vindicated. Everyone will understand that they did exactly what they were supposed to: recognized risk and acted on that when no one else did. Their job is to make money and they did that well.

What Goldman executives have failed to understand to date is the moral question that people want answered: Did Goldman Sachs sell matches to passengers getting on a wooden boat? Did the firm have a moral obligation to sound the alarm bell when they saw the housing fire eventually break out? Instead of rallying regulators or industry leaders they focused on self-preservation, found a life boat and then drifted along and watched as competitors, clients and eventually the economy sank. Not only did they watch, they may have even profited from it.

Lloyd Blankfein needs to deal with those larger issues of responsibility and ethics if he hopes to try and quell the anger and repair Goldman’s reputation.

Some in financial circles feel they are unfairly being made a scapegoat. Others insist they are a villain in this tale. What do you think?



March 1st, 2010
09:14 PM GMT
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David Karp, the 22-year-old founder of social blogging site Tumblr, is shockingly young in appearance. I knew he was only 22, but when he sat down with me in his office, a pen and pad stacked neatly beside him, he seemed like a student.

The impression lasted only a moment. Karp has the focus of a seasoned CEO.

He is one of a handful of young entrepreneurs who are changing the way we interact with and share information.

I sat down with Karp recently to talk about the blossoming tech scene in New York City and the phenomenal growth of Tumblr. Here are a couple of the highlights:

NYC vs. Silicon Valley

A native New Yorker, Karp says he couldn't imagine launching his company anywhere else. Karp dropped out of Bronx School of Science at 14 to be home schooled and almost immediately started working and consulting.

He credited his parents for being very supportive of his unconventional path and joked they didn't let his brother off as easy - he had to finish high school.

He talked about the camaraderie among the tech community in New York, saying it feels less cut-throat and more creative.

Managing expectations

One of the hardest things about being an entrepreneur has been managing the growth. Only three-years-old Tumblr boosts 27 million users and has grown from 2 to 10 employees.

Karp is treading carefully, noting that even small changes can make a big difference to users - and they are quick to let him know that.

He says it has been a little hard getting used to the fact that he has such a high profile in the tech world. (I teased him that it was rock star status … after all he did go to the Grammys!!)

The future

Small is better. Whereas traditional media tried to reach as broad a group as possible, social media/networking sites are all about targeting small communities.

True re-tweets or re-posting blogs gives the potential to reach mass audience, but Karp and others are looking at the fact that many users are motivated by local events or niche interests.

It is clear Karp and his team are thinking a lot about the way people interact with social networking sites.

Toward the end of our chat he switched gears and started questioning me about how I felt when I blogged or tweeted, what motivated me. The interviewer became the interviewee. I could see his wheels spinning. Watch how New York is inspiring teckies

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February 16th, 2010
06:56 PM GMT
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NEW YORK CITY – Let's face it: the news these days is pretty depressing. High unemployment, spiraling deficits, lawmakers quitting because the mood is so poisoned in Washington. So, it was a breath of fresh air when I sat down with Jack Dorsey, co-founder of Twitter (@jack) to talk about his new company Square.

You might think that someone who has achieved so much so young might be… well… a little self-important. But I found the exact opposite. When I met Dorsey, he was passionate about his work, polite and generous with his knowledge – basically a really really NICE guy. Maybe it is his mid-western background that keeps him grounded, I don’t know. But it was refreshing.

Square, Dorsey’s new project is looking to take mobile banking to a new level. They have developed software and a small hardware device that will allow anyone will a portable computer or smart phone to accept credit-card payments. If you meet a friend for dinner and have no cash, you can whip out your card and pay them right there on the spot.

In the demo we did, Dorsey charged me $4 for the interview (well $3 and I gave him a $1 dollar tip!).

Banking through mobile phones is not new in Africa, but those of us in Europe and the U.S. are a bit behind. This payment system hopes to change that. Square is beta testing with iPhones now, but plans to expand to Blackberries, Android and laptops and officially launch this summer.

The day I interviewed Dorsey, we met at one of his local haunts, Third Rail coffee shop on Sullivan Street. The two proprietors are guys who left their former jobs in the pursuit of perfect cup of java (and they’ve come pretty close!).

Dorsey and I then talked about Square, the competition (a handful of other companies are also working on mobile payments systems) and tech start-ups and I left feeling… well… hopeful.

Despite all the gloom and despair, New York City is humming with entrepreneurs. Some are chasing their own dream, some working on new ideas that have the potential to radically change the way we live/do business. And there isn’t any economic data that captures that. No monthly government reading that measures innovation. It is important to remember that when you read yet another headline about sub-par growth and lost jobs (even if I am the one writing, or saying, it!).



February 5th, 2010
06:42 PM GMT
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New York - The latest jobs report provided more confusion than clarity about just where the U.S. economy is headed.

Twenty thousand more Americans found themselves out of a job in January. Over the course of this recession 8.4 million jobs have been lost - much more than originally thought. And it's a gigantic hole to climb out of.

But buried in the report were some rays of light. While overall payrolls dropped again, the number of temporary workers jumped and hours worked increased; two things that typically happen right before companies start hiring permanent workers.

Another reason for hope - the unemployment rate dropped to 9.7 percent.

Sure, some of that may be due to the fact that discouraged workers, people who have been out of work for an extended period of time, simply stopped looking.

But some economists say the household survey, which is used to calculate the unemployment rate, is better at picking up small business hiring and may be better at signaling a turn in the economy.

That is encouraging. But I can't help but worry that it is going to take a long time for the consumer to feel confident about jobs.

The severity and speed with which companies slashed workers in this last recession was a clear indication that employees are viewed as little more than a commodity.

I heard someone call it the evolution from just-in-time inventories to just-in-time firing.

Companies may be start to hire, but workers know they won’t think twice about letting them go the minute business dips or profit margins come under pressure.

This isn't completely new. Anyone who has worked in construction knows that when the project is completed it is time to look for work again.

But the approach seems to be spreading to the white collar world. Job security, to the extent it existed at all, seems to be dead.

And the unemployment rate will have to get a whole lot lower before managers worry that staff isn’t easily replaceable.

That worry is bound to weigh on consumers and impact their spending decisions. I guess it is what people mean when they talk about the new normal.

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June 29th, 2009
08:04 PM GMT
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NEW YORK – Disgraced financier Bernie Madoff stood up in court in New York on Monday and told some of his victims that "I live in a tormented state for all the pain and suffering I created."

Miriam Siegman’s life has been turned upside down by Madoff’s crimes.
Miriam Siegman’s life has been turned upside down by Madoff’s crimes.

Facing them head on, he said he was sorry - but his words rang hollow.

Speaking to us just after the sentence was handed down, many victims said if Madoff was truly sorry he would have stopped years ago and owned up to his mistakes instead of living a life of luxury.

Others felt bitter that Madoff has not told prosecutors who else was involved and where any remaining money might be hidden.

Victims, who attended a rally after the hearing, are vowing to fight on.

But many acknowledge they will never recoup their life's savings.

One woman, Miriam Siegman teared up as she told how she now lives on food stamps.

She admitted she turned and walked out of the court room when Madoff gave his statement. It was simply too little, too late.

The 150 year sentence Madoff received was the maximum allowed and was based on several factors including the number of victims, the amount of money involved and the damage caused by his acts.

In delivering the sentence the judge said he understood the ruling was largely symbolic since, at age 71, anything over 15 years would likely mean life in jail for Madoff.

But Judge Denny Chin said he wanted to send a strong message to those who would think about perpetrating similar crimes.

This is by far one of the harshest sentences ever handed down for white collar crime in the U.S., but Madoff's crime was unprecedented and has badly damaged investor confidence.

What do you think? Did Madoff get what he deserved or is 150 years overkill? Did he act alone or will the government be successful in charging any accomplices? And will the harsh punishment deter others?



June 23rd, 2009
12:34 PM GMT
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NEW YORK - “I’m at a point in my life where I was not opening envelopes ... I was not looking at stuff and I need to make a decision to be active in my life.”

Sound familiar? It did to me. The quote is from a woman attending a seminar I sat in on as part of our Road to Recovery coverage.

Each week about 30 women gather to participate in a class that is designed to help them regain control of their financial lives. It is a bit like weight watchers, but in this case they are counting coins, not calories.

As I listened to their stories, I felt an immediate connection. I also have a pile of statements about my retirement funds that I have been too busy – and secretly too stressed – to look at!

It turns out that many of us are carrying around the dirty secret that we are not nearly as informed about our finances as we should ... or certainly could be.

Gallia Icon is out to change that. A personal finance advisor, she and her co-instructor M.P. Dunleavy started these weekly money classes to help give women a basic education in personal finance.

The courses, which last for 12 weeks, are set-up like a support group – complete with weekly check-ins. The women set concrete goals at the start of the course and then give updates each week on the progress they are making.

The dozen or so ladies we visited came from very different backgrounds but they had one thing in common: For too long they had let other people make decisions about their money.

"Women, in particular, do not make money a priority and tend to let partners handle much of the responsibility. If they are taking care of the household finances it is usually rushed at 10 p.m. at night after they are done working and have put the kids down for the night," says Gichon.

The classes cover everything from understanding mutual funds to saving strategies to wills and life insurance. In the sessions no question is off limits. Participants say the female-only format helps keep the conversation free and open.

I went in not knowing what to expect, but I left inspired. After putting up pretenses for years, these women were ready to bare all. They asked detailed questions and offered each other support and information.

After just a couple of classes, many had already made big changes. One woman had started reviewing her retirement program at work and making changes to her fund allocation. Another had paid down debt and was ready to invest for the first time.

And – my favorite – had moved all her information online and was getting ready to sack her current adviser whom she felt had always talked down to her!

In this tough economy it is easy to ignore this part of life and hope the problems just go away, but they rarely do. These women show that with a little instruction and the support of your peers you can regain control and banish that nagging voice that has been telling you could do better when it comes to your money.

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May 27th, 2009
06:58 PM GMT
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NEW YORK - General Motors announced Wednesday that investors who had lent the company money over the years, through purchases of bonds, overwhelmingly rejected the company's offer to swap out that debt for stock.

It now seems certain the company is headed toward a bankruptcy filing.

Whatever the outcome, this event will surely be a critical turning point for the U.S. economy.

Analysts say if the bankruptcy is quick and surgical it could help give another boost to fragile confidence.

But, if the long list of creditors engage in a drawn out legal battle it raises the risk that GM may not survive at all.

It reminds me of a scene from a racing movie where there is a horrendous crash on the track and all the drivers in the back are racing for this big cloud of smoke. Most hit the brakes. But the leading man grips the wheel and hits the gas.

The driver is either going to crash into another vehicle in that smoke or avoid the crowd and come out in the lead. In Hollywood the hero comes out in the lead, having conquered both the competition and his fear.

But this is real life and things tend to be messier in real life.

The automotive industry is not as central as it once was, but its economic footprint extends to suppliers, dealers, restaurants and entire towns. Industry experts say GM only has about 3 or 4 weeks to prove it can emerge from bankruptcy quickly.

Many believe GM is too big and too complicated to achieve that.

But Chrysler’s journey through bankruptcy has defied the skeptics. The troubled company looks set to emerge from Chapter 11 next week. With the government’s heavy hand in the game, GM could also surprise.

What do you think? Will GM be able to come out stronger or is this the end of the road? Any optimists buying a GM car right now?

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April 21st, 2009
05:41 PM GMT
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NEW YORK - It was too good to be true and in our hearts we knew it.

A slew of U.S. earnings reveal the extent of the economic gloom.
A slew of U.S. earnings reveal the extent of the economic gloom.

In early March stocks embarked on an explosive six week rally that seemed to signal the global crisis was ending.

Oh, there were plenty who warned that it was just a bear market bounce. But it was much more comforting to think the aggressive action taken by policymakers around the world laid the seeds for a speedy recovery.

This week reality hit.

As hundreds of U.S. companies report earnings, it is clear we are far from being out of the woods.

The American consumer is still in a world of pain.

Monday, Bank of America CEO Ken Lewis warned that credit was bad and getting worse. More and more consumers are falling behind on credit cards and loans.

Tuesday, Delta warned it expects more empty seats in the second quarter as consumers cut back on flying.

And it is not just vacations that are put off. Merck is seeing lower sales on many of its major drugs. Caterpillar, the company that makes the diggers and tractors that build new homes, sees no recovery in profits or sales.

And we aren't even half way through the week!

Trader Yra Harris of Praxis Group in Chicago told me this morning: "I can't listen to this concept anymore of green shoots. It's nonsense.

"You still have to clear out this issue of the solvency or insolvency of financial institutions because that what the real health of the market is dependent upon."

The U.S. government is going to try to do that when it releases the results of its bank stress tests on May 4.

In theory that should clear the air, but I am hearing a huge amount of skepticism already and we don't even know the details of what the tests consist of.

And there is something else I'm worried about. In order to be credible these tests will have to identify losers. What happens when they do, will be unsettling to say the least.

The bears were in hibernation in March, but they are awake now. And they smell a trading opportunity.



March 19th, 2009
07:45 PM GMT
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NEW YORK - This week Ben Bernanke threw out the central bank rule book.

Bernanke has been picking up new nicknames as he battles the financial crisis.
Bernanke has been picking up new nicknames as he battles the financial crisis.

First he did a sit-down interview for a major media outlet that aired just two days before a policy meeting, in violation of the traditional black-out period.

He then shocked markets by announcing the Fed would start buying billions in long-term treasury bonds, as well as billions more in mortgage-backed debt and agency bonds.

The response has been dramatic. Mortgage rates dipped below 5 percent Thursday.

Almost everyone I know is calling to try and refinance. Officials hope new home buyers will also move off the sideline and start to chip away at the inventory of unsold homes.

Bernanke is following through on his promise to use every tool the Fed has to help fight this global crisis.

In cartoons he has gone from being depicted as Helicopter Ben, willing to throw money into the economy, to Bomber Ben ... dropping crates full of cash across the U.S. economy.

Most traders and analysts are applauding Ben's bold action. Some, however, do worry the solution will just spawn new problems, especially rising inflation.

I'm sure Bernanke is worried about that too, but in triage you do what you can to save the patient and worry about everything else later.

I don't know if he has the right answer, but for now I am willing to put my trust in Ben.

What about you? Do you think the Fed chairman is taking the right approach or is he just laying the ground work for another bubble?



March 12th, 2009
08:27 PM GMT
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NEW YORK– Bernard Madoff will likely spend the rest of his life behind bars, but that is little comfort to the thousands of investors who lost their life savings because of his actions.

Madoff arrives at court Thursday.
Madoff arrives at court Thursday.

After he entered his guilty plea, Madoff addressed the court and said he was deeply sorry and ashamed.

Sorry ... Sorry? This was not a one-time mistake, but a multi-billion dollar fraud carried out over decades. He ripped off friends, neighbors, charities and pensioners.

It seems incredible that he asks anyone to believe he has a conscience.

At the end of the hearing Madoff was ordered to go directly to jail while he waits for his official sentencing, scheduled for June 16.

Government prosecutors will no doubt declare victory, but victims are angry there was not a trial.

Richard Friedman, who lost $4 million in savings, told CNN: "It's not enough just to say, 'OK, I'm guilty, put me away.'

"What about all the other people involved? What about his family? I want to know. What about the money? I don't think there's $50 billion out there. I think a lot of it is with the IRS, but whatever money he had, I think that that should come out. Where is that money?"

Legal experts say we may never know where the money went.

Right now investigators have found just under $1 billion, a fraction of the $60 billion that some estimate he swindled.

The other unanswered question that I struggle with is: Why?

When people commit a crime it helps to understand the motive. Why did this respectable and, by all measures, successful man do this?

Why didn't he turn himself in earlier? He said in his opening statement he always knew what he was doing was criminal and that he would be eventually be caught.

How could he have ruined so many lives? One of his victims said simply, "He is evil."

I think it may have more to do with greed. Yes, at the age of 70 he now faces jail time, but for the last 20 years he has lived a life of extreme luxury.

If he is the only one to serve time for this ... has justice really been served?

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