In Business This Week: Headliner
Frank Newman: No Miracle Man
In 1996, Frank Newman took over Bankers Trust--and a difficult turnaround. He had to restore BT's reputation after a derivatives scandal, reduce its risk profile, and try to produce the high returns that marked the bank in its go-go days. On June 30, less than a month after completing the sale of BT to Deutsche Bank, Newman stepped down--much of his mission still unaccomplished.
Newman did boost BT's investment banking, buying Alex. Brown. But BT's exposure in emerging markets led to a $488 million loss in last year's third quarter, after which BT agreed to sell out to Deutsche for $9 billion. "Newman came into a situation where he would have had to work miracles," says banking consultant Bert Ely. "Inevitably, BT would have been acquired by somebody."
Newman's position at Deutsche weakened after BT admitted using unclaimed funds to fatten profits. The transfers predated Newman, but Deutsche seemed troubled by BT's guilty plea. Don't cry for Newman, 57. The former Deputy Treasury Secretary leaves with a pay package of at least $69 million.By Gary Silverman; Edited by Mark Frankel & Kelley HollandReturn to top
SBC-Ameritech Gets a Boost
SBC Communications and Ameritech have moved closer to the altar. On June 29, the two Baby Bells agreed to unprecedented conditions to win Federal Communications Commission approval for their $62 billion merger.
To allay regulators' worries that the merger of the two telecom giants would stifle rather than promote local phone competition, the companies agreed to speed up plans to compete in 30 markets outside their home regions within 30 months. If they fail to do so, they face penalties of up to $40 million per market. The companies also agreed to make their home markets more open to competition by committing to lease capacity on their networks at deep discounts. With these conditions in place, the FCC is likely to approve the huge telecom deal this fall.Edited by Mark Frankel & Kelley HollandReturn to top
Want to Bank at Wal-Mart?
Are banks about to get Wal-Marted? In yet another effort to expand its reach among consumers, Wal-Mart Stores, the world's largest retailer, is tip-toeing into financial services. Known for dominating just about any market it enters, Wal-Mart wants to buy Federal BankCentre, a one-office thrift with $26 million in assets located outside Tulsa. Although Wal-Mart already leases space to about 450 banks in 600 supercenters, the company wants the flexibility to offer financial services under its own name in the future, either in stores or online. Wal-Mart expects to open five branches next year in undetermined locations.Edited by Mark Frankel & Kelley HollandReturn to top
A Broken Dream for Dreamworks
Ending a four-year drama, DreamWorks appears ready to abandon plans to build Hollywood's first new studio in 60 years. The film company has been unable to get financing for the $250 million studio complex it wanted to build on 47 acres in Playa Vista, Calif. Los Angeles billionaire Gary Winnick and AFL-CIO pension-backed Union Labor Life Insurance had intended to lend Dreamworks $200 million. But negotiations bogged down over lending covenants. Dreamworks, which is likely to formally pull out in the next month, is already planning to expand its current Glendale, Calif., animation studio to accommodate its administrative staff.Edited by Mark Frankel & Kelley HollandReturn to top