Start of a Trend? Signature Bank Returns $120MM TARP Money

Crain’s New York Business just reported that publicly held Signature Bank (disclaimer: my bank) has just returned $120 million that it received from the Troubled Asset Relief Program (TARP) back in December. One other bank, Old National Bancorp of Indiana, also returned $100 million to the Treasury. There have also been reports that Goldman Sachs and several other leading banks are looking to return money soon.

But Signature didn’t just quietly return the money. It added a blistering rebuke of the Obama Administration’s limit on executive compensation for banks who take TARP money. Signature’s CEO, Joe DePaolo, said these restrictions made it much more difficult to recruit talented executives, and to incentivize its best and top employees.

Signature also paid about a $1.5 million to the Government, not a bad return for roughly 90 days that it had the money.

This is great if in fact these banks really can’t benefit from the use of the money. If it was given to help enhance lending, and giving it back affects that negatively, this could be problematic. If it was given to a “strong” bank with the expectation that it would be returned, maybe it is no harm and no foul. But if banks that would have kept and used the money to ease the credit crunch are returning the money solely because of the restrictions on executive compensation, then the whole point of TARP starts going down the drain.

India Keeps Hiring

Almost 10% of SMBs (small and medium businesses with up to 999 employees) in India are planning to hire additional staff, according to a recent study by New York-based Access Markets International (AMI) Partners. “The hiring growth of 10% is substantially less than the previous year’s 50%,” says Kalyan Banga, Research Analyst at AMI-Partners. “However, it is still quite significant considering the global market’s current slowdown.”

In some areas of technology adoption, “Concerned MBs” are likely to show fewer adoption plans in this time period as they are adopting a “wait & see” attitude regarding future market conditions. However, it is interesting to note that in usage of some technologies (such as hosted CRM and SaaS adoption) these “Concerned MBs” show higher adoption levels than other SMBs.

“In the era of global recession SMBs feel that they need to maintain better customer relationship management to increase customer loyalty,” Mr. Banga says. “SaaS adoption also comes to the forefront since many SMBs are gradually awakening to the intrinsic advantages of SaaS – viz. lower upfront cost and TCO, less maintenance hassles, the ability to reduce IT staff, etc.” 20% of India SMBs indicate using hosted software applications to supplement internal IT resources will be a key strategic focus area for them in the next 12 months.

The impact of the current economic downturn on local/regional economies is of greater concern to small businesses than to their MB counterparts. Conversely these same SBs are not being as greatly affected by changes in the national and global economy as the mid-market firms. “A major reason for this is that most SBs (84%) have only a single location, earn almost three fourths of their revenues from local areas, and operations are mainly confined to local territories,” says Mr. Banga.

In addition to the economy, there are several major business challenges facing India SMBs today. More than two thirds of firms state that local competition is their greatest hurdle to overcome, followed closely by increasing customer satisfaction and loyalty, and improving employee productivity. India SMBs are looking for IT solutions to help address the current shortfalls. These findings are also corroborated in AMI’s latest quarterly tracking study, Impacts of a Game-Changing Economic Downturn: How to Market Effectively & Stay Competitive – India Small and Medium Businesses. According to this, 40% of IN SMBs are seeking to leverage technology to reduce costs/make processes more efficient and improve employee productivity. As a specific example, over half of IN SMBs are planning to improve processes or invest in training to increase employee productivity. Another key technology for India SMBs is CRM software – over one-third of SMBs are considering CRM usage to help them manage customer relationships and retain customers as a key strategic IT issue in the next 12 months.

News Gets More International

The International Herald Tribune, the global edition of The New York Times, today launched two major product innovations for its worldwide audience of digital and newspaper readers.  A new online Global Edition at global.nytimes.com combines the international voice of the IHT with the worldwide breadth of reporting of The Times and the digital expertise of NYTimes.com. It is edited in New York, Paris and Hong Kong to provide users with a 24/7 flow of geopolitical, business (with Reuters), sports and style, news and commentary from a distinctly global perspective.

Starting today, IHT.com users are automatically redirected to global.nytimes.com and users of NYTimes.com can choose to set the Global Edition as their home page. They can also sign up for a new email service: Today’s Headlines Global Edition, published twice daily for European and Asian morning delivery.

Simultaneously, the IHT unveiled a fresh new look for its newspaper. The result of a year-long collaboration with the award-winning newspaper design team at The New York Times, the front-to-back redesign gives more definition to the 122-year-old paper’s journalistic strengths and emphasizes its international personality.

Stephen Dunbar-Johnson, publisher of the IHT, said: “Together with The Times, we are creating a powerhouse for high quality global news – it is thanks to closer integration with New York that has made the dynamic new Global Edition online a round-the-clock reality, and it is thanks to this that we have such a clear and sparkling new design for our newspaper. Today the IHT is demonstrating its steadfast commitment to steering its international readers through the momentous events of a fast-changing world, serving readers and advertisers with creativity and vision.”

Clearer headings, improved page navigation, more anchored positions, better designed briefs columns and pointers to Web articles, as well as greater emphasis on photography all serve to make the new-look IHT newspaper easier to navigate, more visually arresting and helpful in directing readers to additional content at global.nytimes.com. Typographically, the IHT has also introduced a cleaner nameplate that gives “international” more prominence and a new Cheltenham typeface to lend contrast and openness throughout.

Martin Gottlieb, editor, global edition said ”Redesigning the newspaper and reconfiguring our global online presence at the same time created significant opportunities for us journalistically: Working together with The New York Times, we have been able to look at the overall balance and direction of our coverage afresh. By consolidating Web operations and improving design processes, we are freeing up editorial energies to focus on delivering the accurate reporting, thought-provoking writing and sharp analysis that our international readers need now more than ever.”

Video Advertising Networks to Hit $493 Million in ’09 Revenue

Online video advertising networks are forecast to make $493 million in participation revenue, hosting and insertion fees against gross CPM billings of $2.2 billion in 2009, according to a published report by AccuStream iMedia Research.

The report, Online Video Advertising Networks 2007 – 2010: Emerging and Surging, details video inventory and gross media spend for both up-and-coming and established avail executions, including in-banner video, remnant/3^rd party pre-roll sales, video overlays, video search and podcasting.

Each video advertising network vertical is analyzed by total inventory (exclusive, non-exclusive, monthly and annually), business models, sell-out percentages, CPMs for each avail format, media spend and total revenues by network.

In-banner video networks led by Eyewonder, Pointroll, Eyeblaster and Google’s DoubleClick are inventory, media spend and revenue generating juggernauts of the video advertising group, combining for over $1.5 billion in 2008 gross billings (video units only), forecast at $1.8 billion in ’09.

3^rd party video networks representing premium pre-roll inventory aligned with major branded content include BBE, Brightroll, Tremor Media, YuMe Networks, Internet Broadcasting and Worldnow are forecast to contribute another $223 million to gross media spend during 2009, over 39% of all pre-roll media buys across an extremely competitive and rapidly-evolving sales landscape.

Overlay network inventory reached 19.8 billion total units in 2008, forecast to increase 70% in 2009. Participation revenue flowing back to networks like VideoEgg, Adapt.TV and ScanScout is expected to climb 100% in aggregate.

Major video search networks Blinkx, Truveo and Magnify.net handled a combined 420 million average monthly search requests in 2008, and forecast to generate $30 million in corresponding revenue 2009.

Podcast inventory averaged some 84 million units per month in 2008, taking in gross billings estimated at $25.9 million, equaling approximately 55% of total paid media spend made against branded premium and semi-professional content categories.

“Video advertising networks are a vital economic engine of online video monetization,” commented research director Paul A. Palumbo.

“These tenacious, entrepreneurial networks are endemic to the broadband publishing medium, propelling video advertising inevitably onward toward greater accountability, higher ROI and wider adoption by agencies and marketers.”

GM and Chrysler’s New Non-Executive Chairman? B. Obama Takes Action

Granted in part it was George Bush who punted just a bit. When he gave the first TARP money to GM and Chrysler (Ford didn’t ask for and has not received any bailout funds), Bush gave them until the end of March to submit a viable plan for reorganization as a condition to future funding, knowing it would be Pres. Obama who would have to deal with it.

Now that those plans are in, the Obama Administration apparently decided they are insufficient. They have called for, and received, the resignation of Rick Wagoner, CEO of GM. They have also said that they are giving Chrysler only 30 more days of funding, and believe that Chrysler probably won’t make it as a stand-alone business (they think they should merge with Fiat). They are also suggesting, as I have in the past on our companion blog (www.reversemergerblog.com), that bankruptcy reorganization probably makes the best sense for both of them. Wagoner had previously claimed that if GM went bankrupt it would have to go out of business. It seems that both Pres. Obama and I agree that this would not be the case.

I have very mixed feelings here. The “tough love” approach for the car companies has been something needed and I believe is right. At the same time, the extent of government involvement, oversight and second guessing is scary. The fact that a 47-year old politician with no experience running any business, despite his many masterful skills, is making key management decisions for two of America’s largest companies is totally unprecedented and may be only just the beginning of Obama’s activist approach to dealing with companies that have received TARP or other bailout money. Let’s just hope he brings good sense and gets really good advice. And gets out of the business of business as soon as humanly possible.

The Big Question: Bull Market or Bear Market Rally???

This week may tell us a lot about the longer term direction of the stock markets. The Dow has risen by 21% since March 9. That’s important because people who are more officially prognosticators than your humble blogger say that when a rise exceeds 20% it’s not just a rally it’s a true bull market. But, as was pointed out on CNN Money, the market would have to go another 14% up just to hit the 2009 high it hit on January 2.

The commentator on CNN felt that there is not much to cheer for and that there is not yet a real justification for a bull market. It does appear that we are past the real fear of a collapse of our financial institutions, and that profitability is returning along with the big government bailout. Everyone agrees we could not recover until things turn around for the banks. However, across the board profits are way down in many companies, and forecasts also are very bad indeed. It’s nowhere near over for the auto companies, for example.

But while the commentator (Edward Hadas) suggested that there is too much bad news for this rally to continue much longer, I think maybe he underestimates the power of optimism and expectations. At least that’s what they taught us at Wharton. Just a month or two ago, too many folks in the know were predicting the possibility of a 3-5 year downturn, some even using the “D” word (if you don’t know ask your parents or grandparents). Now most, including Fed Chair Bernanke, are saying the economy will turn next year. Wall Street typically turns before the economy.

Will we shoot through the roof in the next few months? Probably not. Could we start a slow but steady upward trend, maybe with a few bad days or weeks along the way? Why not. It is very possible the bad news yet to come is already built into Wall Street’s thinking. Yes, many companies are trading right now at 20 times earnings, which probably does not make sense right now. But the Atlantic Ocean moved a few inches to the right as the entire nation breathed a rather big sigh of relief that the sky is not, in fact, falling. Maybe that alone is enough to keep this thing going.

Why a New Blog?

Today I am pleased that we are soft launching Crisis Post. Why a new blog? Many of you know me from the Reverse Merger & SPAC Blog (www.reversemergerblog.com), or from my contributions on entrepreneurship to Slate.com’s small business site at bizbox.slate.com. Some of you have read my book, Reverse Mergers: Taking a Company Public Without an IPO (Bloomberg Press), or maybe you are a friend, business contact, fellow Wharton School graduate or law client!

Late last year we started including commentary on the economy, Wall Street, Bernie Madoff and other scammers, the legal industry and the President on the Reverse Merger & SPAC Blog. Many of the thousands who visit that blog each month gave wonderful compliments about the information that went broader than the reverse merger and IPO alternative industry, which is a big part of my day to day law practice. Therefore, with a goal of responding to those who may not be as interested in the discrete world of reverse mergers, Crisis Post seeks to covers all these other topics (and maybe a little on reverse mergers as well). The fancy graphics are also a little nicer. We will also include prominent outside contributors including Doug Roberts of Channel Capital Research (www.channelcapitalresearch.com), who is on CNBC, Fox Business and other cable news shows on a regular basis.

The Reverse Merger & SPAC Blog will continue as always, and I hope you will all continue to visit both sites. The content there will remain focused on PIPEs, reverse mergers, self-filings, SPACs and other alternatives to traditional IPOs. This is a critical time in our industry as we hope for some regulatory relief in certain areas while also waiting for the deal world to wake up again (yes there are signs of life in that regard).

I do believe the Crisis Post will be unique. I have not found another site that covers all the topics we do. Don’t plan on getting your news here. But plan on getting our views on the news, then feel free to add comments to our thoughts! Then, maybe, at some point, we get renamed when there’s no more crisis! I’ve enjoyed blogging these past three years because I can do so in my spare time and still give my clients 100% on their matters.. Happy reading and I hope to keep it interesting…

David Feldman dfeldman@fwsllp.com

Those Pesky AIG Bonuses

(Reprinted from our companion blog at www.reversemergerblog.com)

Unlike apparently pretty much the whole country, I have really mixed feelings about the $165 million in bonuses recently paid to AIG executives. I totally understand the outrage given that over $100 billion of your tax dollars have gone to save this “too big to fail” giant. And the fact that 11 people that have left the company got over $1 million each. No matter that this is less than 1/10 of 1% of the money we gave them.

But here’s the thing. They had contracts. The company was legally obligated to do this. Could/should they have tried to renegotiate? With what leverage? Refuse to pay and force the employees to sue? I have worked with labor and employment lawyers, it is a really not good thing when an employer is taken to court over failing to pay compensation. Threaten to fire them? Again, I’m pretty sure that has labor law connotations, plus a bunch of them left anyway, so not sure that would have helped. About the only thing that might have permitted a change would be bankruptcy court, but even then employee compensation is usually one of the last things the bankruptcy court looks to change.

The President is angry at this “outrage” I think, in part, because his own Administration knew about it for a number of weeks, could have intervened before the payments were made, and did not. So he is trying “every legal avenue” to get the money back. There is even a bill going through Congress to tax the bonuses 100%! Of course this probably wouldn’t work on the many foreign people who received these bonuses.

I don’t think bankruptcy for some of these big companies necessarily means failing. It means reorganizing. A few weeks ago GM President Wagoner said that GM would liquidate if it filed for bankruptcy. It is not clear at all to me why this would have to be true. I think it may be time to cut our losses with AIG and let it play out without further bailout money.

Stanford’s #2 is Cracking

Most of you have read about the December civil case filed by the SEC against one R. Allen Stanford, Texas financier. He is accused of using his Stanford Financial and Stanford International Bank to perpetrate what the lawsuit called “a massive Ponzi scheme” that allegedly stole about $9 billion from investors. Criminal investigations also are progressing. It now appears, according to the Wall St. Journal, that the number 2 guy at Stamford, James M. Davis, has decided to cooperate after initially refusing. Davis and Stanford were roommates at Baylor University. Davis was both a director and CFO of the Stanford entities.

Apparently, Stanford International Bank convinced people to fork over their money with promises of very high returns on certificates of deposit, but these were not protected by the FDIC. The SEC alleges that the bank lied about what it did with the money, which allegedly was put into real estate and private equity. It appears that much of the fraud was perpetrated against Venezuelans, to the tune of about $3 billion.

Amazingly, Stanford’s websites are still active (http://www.stanfordfinancial.com/sir_allen), suggesting that “Sir Allen” was the first Knight named by the British Commonwealth Islands of Antigua and Barbuda, where he has dual citizenship with the US.

With Davis talking, this one might be a little easier to put together, but even he may not know as much as there is to know. We will follow this and keep you informed.

Banking CEOs: “We’re Sorry, We Messed Up, We’ll Never Do It Again. Really.”

The CEOs of 12 leading banks  headed to Washington on Friday much like the bully dragged by the ear to the principal’s office. I don’t know, but I’m guessing none of them flew private. They emerged promising to cooperate in every way with the Obama Administration’s efforts to get the economy back in the positive end of the world. A number of them also are hoping to start paying back money they got from the Troubled Asset Relief Program (TARP).

I would have loved to be a fly on the wall in that room. Obama has blisteringly criticized these guys as the cause of everything from the economic downturn to why people get sick from bad water in Mexico. They feel they are not the only ones responsible for our mess, and that if certain rules were different, things wouldn’t have looked so bad in the first place. If they were smart, they took the “let’s not waste time on what got us here, let’s just work together to fix it” approach with the President. But Obama cares a lot about what got us here, and he’s going to use his views on that and those of his advisors to rejigger the entire regulatory oversight of banks, non-banks, non-bank bank banks, you name it. Conceptually, it’s needed. The fear is that, much like Sarbanes-Oxley, they go too far.

To celebrate the great success of this meeting, the Dow went down about 150 points.

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