Morgan's Chinese Partner

Posted by: Harry Maurer on December 19

First Citigroup. Then UBS. Now, Morgan Stanley becomes the third major financial institution in about a week to accept a large cash infusion from a sovereign fund. Morgan is selling a 9.9% stake to China Investment Corp. for $5 billion.

And why would Morgan do such a thing? For the same reasons the others did: Massive losses in the subprime market, leaving a need to shore up capital. At the same time it announced the CIC deal, Morgan said its subprime write-downs will balloon to $9.4 billion, much more than analysts had expected.

Source: Wall Street Journal

The Fed’s successful auction

Making the first use of its new Term Auction Facility announced last week, the U.S. central bank received 93 bids for the $20 billion in funds it’s auctioning off at low interest rates. The strong response suggests that banks will favor the new system over the Fed’s discount window, both because the rates are a tad lower and because the bidding is anonymous. There has long been a fear of stigma attached to borrowing from the discount window.

Source: New York Times

Microsoft and Viacom team up

The software and media giants announced a five-year deal aimed at reducing Google’s dominance of online advertising. Microsoft’s new online-ad service, Atlas, will replace DoubleClick, which is being acquired by Google, as Viacom’s main online ad provider, and the two will partner in various other advertising and content ventures.

Source: TheStreet.com

Big moves from the FCC

The Federal Communications Commission lifted a 32-year-old ban preventing newspaper owners from also owning a radio or television station in the same city. The three Republicans on the FCC, including Chairman Kevin Martin, voted in favor, while the two Democrats voted against. The FCC also voted to reestablish a rule that blocks any one cable TV provider from reaching more than 30% of the nation’s pay TV market, striking a blow to Comcast, which provides cable to about 27% of all cable households. Both new regulations are likely to be challenged in court.

Source: Atlanta Journal-Constitution

Tribune CEO FitzSimons to Step Down

Tribune Chairman and Chief Executive Dennis FitzSimons, 57, is expected to step down Wednesday. FitzSimons’ resignation would be the first of a top Tribune executive as Chicago businessman Sam Zell completes his takeover of the Chicago-based media company. FitzSimons will walk away with as much as $40 million.

Source: Los Angeles Times

Japan Cuts GDP Forecast to 1.3%

The Japanese government reduced its growth forecast to 1.3% for the fiscal year ending Mar. 31, 2008, from its original estimate of 2.1%, after stricter building codes caused investments in the housing sector to plunge. However, the world’s second-largest economy is expected to pick up and grow 2.0% in the fiscal 2008.

Source: Kyodo News

States Face $2.73 Trillion Bill for Retiree Care

The 50 states have promised to pay a combined $2.73 trillion in pension, health care, and other retirement benefits for public employees over the next 30 years, according to a study by Pew Charitable Trusts’ Center on the States. The states have set aside about $2 trillion to cover their pension obligations. They still need to come up with at least $731 billion to meet retiree health care and other non-pension benefits.

Source: Pew Charitable Trusts

GM Offers Buyouts to 5,200 Workers

General Motors will offer a new round of buyouts to 5,200 hourly workers starting next month, allowing the automaker to hire new workers for less pay. Details of the first phase of the buyout will be unveiled in early January. GM is still working on a deal with the United Auto Workers on the second phase of buyout for the remaining blue-collar workforce.

Source: Detroit News

No Bonuses for Bear Stearns Executives

Bear Stearns Chief Executive Officer James Cayne and other senior executives will not be receiving bonuses this year. The beleaguered investment bank is expected to announce its first quarterly loss in the firm’s 84-year history Thursday after getting hammered by the subprime mortgage crisis.

Source: Wall Street Journal

House Passes Energy Bill

The House of Representatives passed an energy bill requiring higher fuel efficiency standards for cars and the phasing out of incandescent light bulbs. The vote was 314-100. President George W. Bush will sign the Energy Independence and Security Act of 2007 Wednesday.

Source: Houston Chronicle

FutureGen Chooses Illinois for Near-Zero Emission Power Plant

The FutureGen Alliance chose to build a $1.8 billion near-zero emission coal burning power plant in Mattoon, Ill. FutureGen is a consortium of 12 U.S. and foreign energy companies working to turn coal into a gas that can be burned to produce electricity, eliminating much of the pollution that is emitted from traditional coal-fired power plants.

Source: The Southern

Peter Jackson to Make The Hobbit

The Lord of the Rings trilogy director Peter Jackson settled one of Hollywood’s nastiest lawsuits and signed on to produce The Hobbit, for MGM and New Line Cinema. Jackson will split J.R.R. Tolkien’s book into two movies, with the first scheduled to be released at Christmas, 2010.

Source: BusinessWeek

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