Friday, April 16, 2010

Great Week for Cynics

Posted By on Fri, Apr 16, 2010 at 1:43 PM

Reporters are often accused of being cynics and naysayers, and sometimes some of us are. But we are strictly bushleaguers when compared to the cynicism of some bond traders and investment bankers, who would happily find a way to profit from Armageddon if they could.

It would be called a "Doomsday Short" or some such thing — short being the term for taking a position that the price of something is going down. And the technical term would be "collateralized doomsday debt product." The hedge would be a private spaceship to Mars.

If this sounds far fetched, see the New York Times story on Goldman Sachs and the housing bubble and investments in subprime mortgages. The customers got one story, the big guys knew it was crap, and made billions. The Securities Exchange Commission is on the case.

The last time we heard from the SEC it was a few days ago in connection with Morgan Keegan and a fraud allegation against mutual funds run by James Kelsoe Jr. Who says Memphis ain't big league?

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Wednesday, April 14, 2010

A Gateway Exam for Kriner Cash

Posted By on Wed, Apr 14, 2010 at 11:56 AM

Public school students are about to take “the Gateway,” those make-or-break standardized tests that purport to measure their academic progress and fitness for advancement.

In the next few weeks, The Memphis City Council should give its own Gateway exam to Superintendent Kriner Cash, who is asking the council to give Memphis City Schools an additional $120-$130 million or so over the next two years plus $50 million to cover “shortage” from last year.

All of that will likely mean a property tax increase for Memphis residents who already pay by far the highest property tax rate in Tennessee.

Memphis is already losing population and becoming increasingly isolated politically from the rest of Shelby County and Tennessee. A tax-increase of a few hundred dollars a year isn’t going to break many people, but it will send a message about how the city and the school system respond to a real budget crisis.

MCS has a billion-dollar-a-year budget. Before adding to it, which might or might not be the right call, city council members should ask Cash some questions:

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Friday, April 9, 2010

"Tiger Way" . . . or whatever

Posted By on Fri, Apr 9, 2010 at 6:44 PM

What's in a name? A lot if you're a member of the committee working on cleaning, greening, and redeveloping the old Mid-South Fairgrounds.

The committee, including representatives of the City Council, University of Memphis, AutoZone Liberty Bowl, Southern Heritage Classic, city administration, and the division of Parks and Recreation, spent 45 minutes Friday discussing what some members hoped would take only a minute or so — naming the green, grassy entranceway to the stadium from East Parkway.

Here's how "Tiger Way" turned into No Way.

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Thursday, April 8, 2010

UPDATED: The Morgan Keegan Emails: A Smoking Gun?

Posted By on Thu, Apr 8, 2010 at 2:02 PM

If there's a smoking gun in the fraud complaints filed this week against Morgan Keegan, it could be an email trail in which a key employee admits to "worries about this bond fund" and "the potential risks associated with all that asset-backed exposure."

The May, 2007 email from Gary Stringer to Roderick Hennek is one of the exhibits in an administrative complaint filed by several states Wednesday against the Memphis-based brokerage firm. Regulators say investors lost approximately $2 billion in Morgan Keegan bond funds that collapsed in 2008.

"Mr. and Mrs. Jones don't expect that kind of risk from their bond funds," wrote Stringer, a director of investments who was responsible for overseeing the due diligence performed on products including Morgan Keegan's "select list" of investment products that passed the company's screening tests. "The bond exposure is not supposed to be where you take risks. I'd bet that most of the people who hold that fund have no idea what it's actually invested in. I'm just as sure that most of our FAs (financial advisers) have no idea what's in that fund either."

What was in the fund were risky subprime mortgages that helped to cause the financial crisis that unfolded in 2008 and continues today.

Hennek responds in part, "I really think you have a big sell job on your hands, an uphill battle! Note I copied no one on this email."

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Wednesday, April 7, 2010

SEC Going After Morgan Keegan and James Kelsoe

Posted By on Wed, Apr 7, 2010 at 1:56 PM

The U.S. Securities and Exchange Commission on Wednesday charged Morgan Keegan and two top employees with fraud related to funds that invested in subprime mortgages.

Named in the complaint are fund manager James C. Kelsoe, Jr, and Joseph Thompson Weller, a CPA who was head of the Fund Accounting Department.

The SEC — the agency that started the downfall of Stanford Financial last year — said Morgan Keegan and the two employees "recklessly published" inaccurate information about funds and sold shares to investors based on the inflated prices.

The company's Memphis office building has been the centerpiece of the downtown skyline for 25 years.

"This misconduct masked from investors the true impact of the subprime mortgage meltdown on these funds," said William Hicks, associate director in the SEC's Atlanta Regional Office.

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My Harrison Moving to New FBI Post

Posted By on Wed, Apr 7, 2010 at 9:39 AM

My Harrison, the public face of the FBI during the Tennessee Waltz investigation and trials, is leaving Memphis for a new job with the FBI in Washington.

FBI Director Robert Mueller III named Harrison, special agent in charge of the Memphis division since 2005, the deputy assistant director for the FBI's Security Division. FBI spokesman Joel Siskovic said she would be moving in approximately two months.

Harrison, the third African-American female to enter the ranks of the FBI's Senior Executive Schedule, was known for her "tap tap tap" warning to corrupt politicians, which she made during a press conference during her Memphis tenure.

Harrison began her career with the FBI in 1985 after working as a deputy sheriff in Tampa, Florida.

She blended toughness and compassion. She was stone-faced in front of television cameras but genial off camera and even embraced some members of the news media while attending Tennessee Waltz trials. One of her hobbies was power-lifting, and she once held an FBI record in the leg press.

Tuesday, April 6, 2010

Baseball: Suburbia's National Pastime

Posted By on Tue, Apr 6, 2010 at 11:44 AM

I'd take Barack Obama in a pickup basketball game, based on his shoot-around with Clark Kellogg to hype the Final Four. But I'd pass on him if choosing sides in a pickup baseball game, based on his high-and-wide ceremonial first pitch at the Washington Nationals' opener Monday. At least he got it to the plate.

More evidence that basketball and football have better claims than baseball on being the national pastime. Unless you are white and live in the suburbs or small towns, that is.

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Monday, April 5, 2010

The Zoo's "Free" Problem

Posted By on Mon, Apr 5, 2010 at 10:23 AM

The Memphis Zoo got a hard lesson last week in the cost of "free day."

So many people showed up that the zoo and Overton Park had to be closed for a while. There were traffic jams, fights, and gunshots.

The zoo administration has come up with some possible remedies including no free days during March (and spring break for city schools) and a requirement that kids up to 16 years old have an adult chaperon. But this will put a burden on the zoo staff ("let me see your IDs, all five of you, and which one is the chaperon, and who came with who?") and it ignores the problem of zoo overcrowding and neighborhood encroachment the other 11 months of the year.

There's another idea that might work. Make free day dollar day.

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