XM-Sirius: We could almost hear Mel Karmazin cracking the champagne from here. The 520 day wait is finally over. The FCC this week reached an agreement to approve the merger of the two satellite radio companies. Now, the hard part begins — integrating the two firms and competing in a environment that is quickly changing.

Ken Wilson: When the President calls and offers you a job saving the country, it is hard to say no. And Goldman Sachs’s most senior financial-institutions banker didn’t. Wilson is temporarily leaving the firm to advise Treasury Secretary Henry Paulson on how to resolve the country’s banking crisis. Few seem better prepared. After all, he has already advised on most of the big deals that have saved financial institutions this past year.

Swiss M&A: From Roche-Genentech to Novartis-Alcon and the spinoff of Philip Morris International (based in Switzerland), one thing is clear — Swiss firms have become deal making enthusiasts in 2008. Mergers and acquisitions involving a Swiss company account for 22.5% of all European deals this year, compared with 4% for all of last year.

Wachovia: Can the Charlotte-based bank’s $25.5 billion acquisition of Golden West Financial officially be called a deal from hell? Wachovia/Golden West now seems to qualify, if only because of the destruction of market value. At the time of the deal, Wachovia had a market cap of $90.2 billion and predicted that with Golden West its combined market cap would be $117 billion. Wachovia’s market cap hit $25.87 billion this week and is hovering just above $30 billion today, or not much more than Wachovia paid to acquire Golden West.

Cleveland-Cliffs: By not consulting its largest shareholder, Harbinger Capital, before unveiling its $10 billion deal for Alpha Natural Resources, Cleveland-Cliffs faces the likelihood that its deal for Alpha won’t be approved and may have inadvertently put itself in play.

Roche: The Swiss drug maker’s offer to acquire the roughly 44% of Genentech it didn’t already own fell flat. At $89 a share, the offer marked just an 8% premium. Now, Genentech is standing up for itself, shares closed at $96 and a shareholder lawsuit has been filed. And as this Deal Journal post explains, negotiations already were fraught with plenty of issues. Perhaps biggest among them is keeping Genentech’s talent.

Microsoft-Yahoo: Now that Yahoo and Carl Icahn have made peace and Microsoft has washed its hands of the deal, it is time to ask this question: Has any takeover battle left the two firms involved looking so bad. See this Deal Journal post and this one for more.

Look at a list of stock tickers. You’ll find a pretty decent group of companies that were once heroes and now are, according to the cliche, zeroes. (General Motors, anyone?) Don Keough, the former president of Coca-Cola and current chairman of investment bank Allen & Co., just wrote a handy book about how other companies can achieve such feats of disappointment. Keough’s book, The Ten Commandments for Business Failure, takes a slightly opposite tack from most business books, which provide prescriptions for success. Keough, instead, decided to dramatize the alternative: how to screw up. (Remember: he saw New Coke.)

His commandments: Quit taking risks; be inflexible; isolate yourself; assume infallibility; play the game close to the foul line; don’t take time to think; put all your faith in experts and outside consultants; love your bureaucracy; send mixed messages; be afraid of the future; and lose your passion for work–for life.

Deal Journal talked to Keough to find out more (or in the Keoughian world, does that actually mean less?). An edited version of our interview is below.

Deal Journal: “The 10 Commandments” that has the threat of biblical wrath around it. Why did you decide on a title like that?
Don Keough: I’ve always hated the word success because it contains the twin viruses of arrogance and complacency. I think that these two viruses are linked to individuals, to companies and to countries. A few years ago I was giving a talk to the food industry and the issue was how to be a winner. I said ‘I don’t know how to be a winner but I know how to be a loser.” I gave a talk about the 10 commandments for losing. And that led to my convenient list of 10 ways to fail.

Deal Journal: That’s interesting that you say that you don’t like sucess. In other countries, including England, they think the American focus on success is obnoxious.
Keough: If you look at human activity, like Wimbledon, it’s the unforced errors that decide who will be the winner. If you look at CEOs, for instance, it’s hard to have bad news filter through your staff. A lot of people don’t want to upset the boss. If you look at Hitler in his final days, he was in his bunker.

Deal Journal: With the success of advice books, why did you want to write one with a focus on failure?
Keough: There are more failure traps. Once good things happen to a person, you get to a stage where you think, ‘I’ve sort of made it, I’ve had my neck out on the line, I’m going to stop taking risks.’ It’s easy when you think things are going well and you’re a bit of success. But once you quit taking risks, things happen and failure is not far behind. There are a few examples. Coca-Cola had built its entire business on the fountains. In 1939, a guy came out with a package that twice as big as their regular bottle for the same price. They were inflexible about it and wouldn’t change, and that was a mistake.

There’s also a tendency in the business hierarchy for the top officer to be isolated. They live in a very narrow world, they go to lunch with their close staff, and they rarely go on a commercial airplane and see people tough it through a travel environment. It’s easy to isolate yourself, get no bad news, and have good PR to see to it that you get all the credit. That leads to failure.

If you look at all the annual letters written, the reason why Warren Buffett’s annual report is such a bestseller is that he will point out the mistakes that he made. Usually the way it works in American business is that he will say ‘we had a challenging year’ or ‘mistakes were made.’ the way these things work is sort of assuming infallibility. I remember when I was involved in Coca-Cola, the East Germans were about to open. They wanted a huge amount of money. I didn’t think we should do it. The guy spearheading the move into East Germany was getting ready to leave the company because, he said, I never listened to the opportunity. He said, ‘You’ve never been to East Germany.’ We made a $1 billion investment because we saw his courage.”

The age we live in now is that we’re surrounded by data. it isn’t information. It’s data, a series of bits and pieces that flow into us. paper is increasing by the carload. We’re surrounded by data. some of us are almost wedded to the BlackBerry. We put ourselves into situations where we are so flooded with little pieces of information that we dont’ have time to think, and then bad things can happen.

Deal Journal: Which are the most important commandments for failure?
Keough: One is to be afraid of the future. There is almost a malaise in the country right now about the future. All through the years we’re confronted by things that will destroy our future. It’s the killer bees one year, and the bird flu the next year. If you look at Malthus, he had us all drowning in a sea of flesh. Right now there are going to be fortunes made and there are those who see the future as a tough time but an opportunity.

Another is to love your bureaucracy, because it has a way of preserving itself. If you put male and female animals into a pasture, there will be more animals. If you put middle managers together, they will create more bureaucracy. Don’t put your faith in experts and outside bureaucracy.

Deal Journal: But aren’t you the chairman of an investment bank? They provide outside expertise.
Keough: Unless we have something important to add, people are damn fools to use it.

Deal Journal: What comes next?
Keough: If you look at the next 12 to 24 months, there’s going to be a lot of interesting activity, and I’m an absolute optimist. Everything will be okay.

Deal Journal: That’s in marked counterpoint to the message of your book, but it’s comforting to hear.

If nothing else, the fiasco surrounding Cleveland-Cliffs $10 billion deal to buy Alpha Natural Resources offers a reminder of the importance of investor relations.

If Cleveland-Cliffs had spent more time trying to understand the views and priorities of its largest shareholder, it likely would have avoided the humiliation of have the market reject its deal before the ink on the press release dried. It may have also saved shareholders the expense of up to a $350 million breakup fee.

Cleveland-Cliffs’ predicament illustrates the difficulty companies can face in trying to solicit shareholder views on important strategic decisions without violating disclosure rules. That said, most companies navigate these issues before hand, by keeping a regular dialogue with key shareholders.

Here’s how Cleveland-Cliffs reached out to its largest shareholder, Harbinger Capital Partners, about the deal:

Cleveland-Cliffs called Harbinger the night before the announcement to say a major transaction was coming. It didn’t offer any details, according to people in both camps.

Cleveland-Cliffs CEO Joe Carrabba told the Journal in an interview that his company had been sharing its views of consolidation in the mining sector with shareholders, including Harbinger, for the past two years. Harbinger increased its stake over that same period.

“Most folks would have taken that as an endorsement of our strategy,” Mr. Carrabba said.

But a person close to Harbinger says that during that period, Cleveland-Cliffs never discussed making a major acquisition. The hedge fund isn’t opposed to a transaction in the metallurgical coal area per se, but thinks this deal is just too big and overpriced. Most important, Harbinger doesn’t think now is the time to pursue a transformative deal.

Cleveland-Cliffs called Harbinger on Thursday to try to convince the hedge fund of the merits of the deal. Harbinger reiterated that it thinks the company should be a seller, not a buyer. Why didn’t Cleveland-Cliffs management know this already?

–Matthew Karnitschnig and Jenny Strasburg

Photo courtesy of Unbathed via Flickr. Click here for licensing terms.

So what will Roche end up paying for Genentech?

It increasing seems unlikely that Roche’s $89-a-share offer will get the deal done.

When announced, the deal had a certain feeling of inevitability, given that Roche held a 56% stake in Genentech. But not so fast. Genentech said late Thursday that neither it nor the special committee has “any obligation” to agree to a transaction with Roche, nor to agree to any specific process or price based on the assessment of investment banks.

Throw in the inevitable lawsuit, saying that Roche’s $89-a-share offer is unfair and inadequate and the fact that Genentech’s shares are trading at $95.51 this morning, and it would seem Roche needs to sweeten its offer, according to Reuters’s DealZone.

Some analysts speculate the deal will get done at a price north of $100. But with 56% stake in Genentech, Roche seems “ready to play a long game.”

Finally, Derek Lowe over at Corante answers why Roche decided to make its move now:

Tidbits:

Is J.P. Morgan Chase the Grim Reaper? Yves Smith at Naked Capitalism takes a look at the speculation about the break up of HBOS and J.P. Morgan’s role…A little New England bank has forced TD to do what it should have done when it acquired Banknorth three years ago: unify its branding around TD and get rid of the special American name, writes Dealscape. (Click here to see the original Boston Globe story.)…The bloodbath in financial stocks has walloped funds run by Legg Mason’s Bill Miller and other top money managers, reports Fortune…Rogue trader Jerome Kerviel’s new legal team has a new defense strategy to put more pressure on Kerviel’s former employer, Societe Generale, reports Reuters.

Can China afford to expand its production of big cars?

It certainly is trying. Chinese carmaker Zhongxing, which makes pickup trucks and sports utility vehicles, is in talks with General Motors about a joint venture or equity stake, Reuters reported earlier this week. Earlier, speculation held that a Chinese buyer would appear for GM’s Hummer brand of fuel-glutton SUVs.

Associated Press

But it’s not easy to expand into the business of building big cars. For one thing, China has to consider its production limits. The country is importing so much steel that big iron-ore producers including Vale are actually raising prices to limit the country’s demand. The iron-ore industry is already stretched to its limit by demands from China’s steelmaking industry. “The world’s mineral resources are becoming more difficult to get to market,” said one investment banker familiar with the sector. “The supply side is becoming very scarce and concentrated. Between BHP, Rio and CVRD, your supplier base has tremendous leverage over you.”

In fact, it was those concerns that helped fuel Cleveland Cliffs’ now-challenged $8.3 billion acquisition of metallurgical coal miner Alpha last week. Metcoal, as it is known, is used primarily to make coke, a key component in steelmaking. Iron ore producers are mining more than they can handle, and steelmakers are producing more steel than they can handle, largely because the demand from China is insatiable. In fact, China was the largest offshore supplier of finished steel imports, with 4.58 million net tons, according to the American Iron and Steel Institute. In fact, two prominent mining executives told Deal Journal that they are raising prices on iron ore most to try to slow down China’s demand for its steelmaking industry. At the same time, metcoal prices have been rising along with demand for steel.

That means that steelmakers are rushing to buy up metcoal companies before they get a replay of the pricing on iron ore. “Owning both the iron and metcoal is important. If the prices run up so much that it really runs up your steel margin, it’s a problem,” said this investment banker, who predicted a “feeding frenzy.” The problem is, there aren’t too many. Many of them are also privately owned, which means their earnings and profitability are not common knowledge. Last year, Cleveland Cliffs bought up metcoal miner PinnOaks for $450 million in cash. There’s more to come. Bankers say it is logical to look at other major metcoal producers like Alabama-based Walter Industries Inc., West Va.-based Bluestone Industries, Massey Energy Company, There are also metallurgical coal miners in Canada, including Toronto Stock Exchange-listed Grand Cache.

Who could buy these companies? A banker campaigns for the usual suspects: ArcelorMittal, Xstrata and CVRD to start.

But, unless China jumps into the game, the country risks being left out and its steel industry will suffer from rising prices in both iron ore and metcoal. The industry already needs to improve its reputation: In 2007, some U.S. steelmakers were concerned about the quality of Chinese steel. Given that China is potentially facing another crunch for the elements of steel, Chinese carmakers may want to tread carefully before investing in big American cars.

Are America’s cities becoming irrelevant?

Yesterday, the NASDAQ OMX Group officially took over the Philadelphia Stock Exchange, which was founded in 1790. At the time, George Washington was president, Rhode Island became the last of the original 13 states to ratify the Constitution, and Alexander Hamilton introduced the first Federal budget. Now the new exchange will be named the NASDAQ OMX PHLX, a bewildering phalanx of capital letters.

Associated Press

But the Philly’s sale reminded us of the fading prominence of America’s cities as, in the business world, they become subsumed to New York and Los Angeles.

As the Philly grew, it took over smaller exchanges. It rolled up the old Baltimore, the Washington and the Pittsburgh stock exchanges. Where are those cities now? Baltimore is best known for being the city in The Wire. Washington became all about politics. Pittsburgh housed U.S. Steel and was technically the birthplace of Standard Oil, a company more closely associated with Cleveland; but last year, one of Pittsburgh’s biggest remaining financial companies, Mellon Financial, was sold to the Bank of New York.

You can see the same echoes of a fading middle America in the recent sale of St. Louis-based Anheuser-Busch companies — the last major American-owned brewer — to Belgian-Brazilian brewer InBev. Anheuser-Busch’s sale came because of the company’s own lagging growth and stock price. Local politicians opposed the deal because the loss of a large St. Louis-heaquartered company represented a reality that was awkward at best.

The nation’s airlines, of course, had long realized that reality. St. Louis used to be a major hub for airlines; it is no longer. Have you tried getting a flight to Memphis? Sometimes it seems harder than booking a jaunt to Malaysia. In fact, given the rising cost of flying big airplanes, it is barely profitable for big airlines to make most domestic flights; that’s why giants like Delta, Northwest, Continental and American have increasingly set their sights overseas. (American, for instance, maintains a close relationship with British Airways.)

On the lighter side, we looked at Outside Magazine this month. It features a list of the “2008 Dream Towns.” It is startling how many of them were old industrial or railroad towns that fell on hard times. Chattanooga, Tenn.; Ogden, Utah, which was once a major railroad junction; Portsmouth, New Hampshire, a former 18th century shipbuilding center; Tacoma, Wash. — once called “the city of destiny” because it was the terminus for the Northern Pacific Railroad — saw trains stop running to its Union Station in the 1980s and has now made itself over as a major college town.

There are a very few cities that can actually turn the tide, although they try. Native Midwesterner Matt Miller wrote in The Deal magazine earlier this year about Milwaukee’s attempts to rebuild its Rust Belt glory. Chicago is still thriving, because it correctly pinpointed the death of manufacturing and transform itself into a town of investment bankers, traders, consultants and wealth advisers.

The Philly Exchange, of course, isn’t dead; if anything, it will have a new and stronger future under the tutelage of the more experienced and efficient Nasdaq. But its sale does show that a bet on American cities isn’t always a winning one: back in 2005, investment banks started putting bets on regional exchanges including the Philly, giving them money in order to make them stronger competitors to the much bigger Nasdaq and NYSE. All that money did, however, was make the investment banks rich on the sale and regional exchanges a much tastier meal for the giants. Writ large, is that now the story of America?

Updated: We updated this to give a nod to Cleveland and Chicago. See comments below.

By Stephen Grocer and Heidi Moore

Mergers & Acquisitions

Lehman Brothers: The firm is considering a sale of all or part of its Neuberger Berman asset management unit. Warning: this has been hinted at before and details are thin. [Reuters]
Related: Why Lehman shouldn’t sell Neuberger: it needs the stable revenues. [WSJ Deal Journal]

Harbinger Capital: The hedge fund and Cleveland-Cliffs’ largest shareholder is pushing the iron-ore producer to put itself up for sale and forgo its $10 billion deal for Alpha. The hedge fund effectively has enough power to block any transaction. [WSJ]

It’s a bird, it’s a plane, it’s…Jamie Dimon: J.P. Morgan Chase has held talks with several interested parties about forming a consortium to break up HBOS. [Daily Telegraph]

We don’t need no stinkin’ Yahoo: Steve Ballmer tried to put a good face on Microsoft’s failed attempt to buy Yahoo, saying the company can now be more flexible in competing with Google. Separately, Microsoft announced plans to bring its Web search and search ads to social-networking site Facebook. [WSJ]
Related: Microsoft’s failed Yahoo strategery. [WSJ Deal Journal]

XM-Sirius: The FCC finally removed the two satellite operators from a long state of limbo, but challenges still persist. [WSJ]

Hellman & Friedman: The private equity firm’s recent acquisition of SSP consists of nearly two-thirds of equity, reports Paul Hodkinson of Financial News’ Private Equity News publication. [eFinancialNews.com; Private Equity News, registration required]

Pernod Ricard: The French company is in a celebratory mood after sealing the acquisition of Absolut Vodka. [Daily Telegraph]

Centro: The Australian firm has had strong interest from potential buyers for four Australian shopping centers worth more than A$1 billion. [Sydney Morning Herald]

Fool me twice, shame on me: You would think that merger agreements would be a lot stronger now because of all the busted deals that showed up previous weaknesses. You would be wrong. [TheDeal.com]

Financial Institutions

Credit Suisse: The Swiss bank posted a 62% fall in second-quarter net, but the results improved from a first-quarter loss. [WSJ]

On firm ground: National City posted its fourth straight quarterly loss, plunging $1.76 billion into the red amid deepening loan woes, but the Cleveland bank’s CEO said it has enough capital to withstand the turmoil. [WSJ]

What Financials Rally? Details on the Countrywide deal show big losses could still lurk in banks’ closets. [WSJ]

Buyside

I will survive: Hedge funds are cutting their ties to prime brokers, which are the firms that lend them securities and introduce them to investors. [eFinancialNews.com]

Lone Star: The private equity firm raised two funds worth $10 billion, well above the $6.5 billion target. [Reuters]

Scouting banks: At least two private-equity firms are considering investments in BankUnited, which has a large portfolio of adjustable-rate mortgages. Regulators might ease up on restrictions that limit how much private-equity firms can invest in banks. [WSJ]

Malcolm Calvert: The former trader who retired from Cazenove in 2000 is accused of exploiting inside information about planned takeovers in which Cazenove was involved. [Times of London]

People & Players

Thomas J. Wurtz: Wachovia’s finance chief plans to leave the troubled bank after a successor is named. The announcement comes two weeks after the company named Robert K. Steel as CEO. [WSJ]

Hank Paulson: Master politician. [Bloomberg]
Related: See earlier item from Deal Journal about Paulson’s regulatory coup. [WSJ Deal Journal]
Related: Christopher Cox pleads to keep the SEC alive. [WSJ Deal Journal]

Microsoft — a company that deserves its own news cycle — is washing its hands of Yahoo. Is it also washing its hands of reality in the process?

Consider. The software giant said it would be saying goodbye to Kevin Johnson, the executive who spearheaded the Yahoo merger idea and is jumping to Juniper Networks. In the wake of Johnson’s departure, Microsoft started a spin cycle the likes of which had rarely been seen. Microsoft CEO Steve Ballmer maintained that his company’s pursuit of Yahoo was not a strategy but a “tactic,” and cemented Microsoft’s reputation as the world’s worst poker player.

Below, Deal Journal provides some perspective on Microsoft’s statements today.

Tactic vs. strategy: When Microsoft talks about “the need to change our position revenue per search curve, Yahoo is a tactic to accelerate that,” Ballmer said.
Microsoft has made a similar point before, when it drew a distinction between the pursuit of Yahoo as an actual strategy or just an acceleration of a strategy. (We still don’t get it.) But separating the seven-month Yahoo ordeal into a tactic makes you wonder just what the end game was. Was Microsoft trying to drive down its stock price by 24% in seven months? Send Yahoo into the arms of Google, its most feared enemy? Ruin its own reputation as a strategist?

By dropping its bid for Yahoo, Microsoft can be “more flexible” in competing with Google: This appears to be circular logic. Microsoft pursued Yahoo specifically so it could better compete with Google, as Ballmer said repeatedly. And yet dropping the bid would allow Microsoft to better compete with Google? If Microsoft didn’t need Yahoo to compete with Google, it could have saved everyone a lot of time and frustration by realizing that in January.

Microsoft is done with Yahoo. Finished. Finis. Ended. Again: “There’s nothing under discussion between the two of us,” Ballmer said. “It didn’t work out; we’re done.” We’ve heard this before.

Therefore, we’ll never post on this subject again. It’s our strategic plan. Or, is it just a tactic?

Strawberry Shortcake isn’t often thought of as a femme fatale. Yet for the past month, powerful men have been fighting over her.

Wednesday, Michael Hirsh won.

Hirsh is CEO of Cookie Jar Entertainment, which just acquired DIC Holdings. (Pronounce it “deek”). DIC licenses and merchandises the brands for Strawberry Shortcake, the Care Bears, Inspector Gadget, Sabrina the Teenage Witch, Madeline and Sonic the Hedgehog. Strawberry Shortcake and the Care Bears alone brought in $5 billion of retail sales in the past six years, which boiled down, after royalty charges, to $300 million in revenue for DIC.

Cookie Jar announced a deal to buy DIC on June 20; the next day, cardmaker American Greetings slapped the companies with a lawsuit over the licensing rights to Strawberry Shortcake. American Greetings maintained that a 2001 agreement it had with DIC prevented the rights from being sold without the card maker’s consent. The lawsuit was something of a surprise to Hirsh because he had worked for decades with American Greetings, Strawberry Shortcake’s first home. After weeks of negotiations, Cookie Jar agreed to buy the rights for $195 million, along with the right to the Care Bears licenses. “It was a great happy ending to something that might have gone sour,” Hirsh told Deal Journal.

Happily ever after is something Hirsh knows something about. The agreement with American Greetings means that Hirsh is reunited with Strawberry Shortcake in a culmination of his 20-year-plus relationship with the character. “It was like coming home,” said Hirsh.

Some background: in the 1980s, Hirsh founded and ran Canadian entertainment company Nelvana, through which he was a producer of Strawberry Shortcake and Care Bears shows and movies. (Nelvana also introduced the Star Wars character Boba Fett.) While there, Hirsh helped the two brands grow into a phenomenon. In 1985, Hirsh produced The Care Bears Movie, production of which took just a few months and it hit theaters just weeks after that. The movie, voiced by Mickey Rooney and other stars, was a hit. Hirsh’s partner called him in wonder after spotting lines 30 to 40 families deep to get to the movie theaters on a Saturday showing at 1 p.m. The movie, which cost $3 million to make, pulled in $14 million in its first 17 days of release and its gross box office receipts to date are$22.9 million.

(Deal Journal trivia: On its opening weekend, The Care Bears Movie opened fourth, behind Police Academy 2, Mask, and Friday the 13 Part V. It also grossed more than Return of the Jedi, which opened the same week.)

In 2000, Hirsh and his partners sold Nelvana to Corus Entertainment and Hirsh stepped down as CEO in 2002. In 2004, Hirsh and his former business partner, Toper Taylor, found investors and bought entertainment company Cinar for $143 million and took it private. They also changed the name to Cookie Jar Entertainment, both for its kid friendly image and because it represented the wealth of brands the company owned. The acquisition of DIC is Cookie Jar’s first deal since 2004. Financing will come from RBC Capital Markets –which has a long relationship with Hirsch — and Bank of America.

Hirsh noted that Care Bears and Strawberry Shortcake have found new popularity in recent years as the little girls of the 1980s grew up and now have their own children. He sounds like a proud papa when he talks of the characters, which he kvells are “among the most successful brands of all time.” He boasts, “These are characters that are immortal. We think that they join the ranks of Barney and Thomas the Tank Engine.”

Deal Journal suggested that the two warm-and-fuzzy brands might also be popular right now because they are among the few that aren’t overtly violent. Hirsh dissuaded us. “Well, you haven’t seen those bears behind the scenes. When they get home after a hard day of work….”

Forget Fannie Mae and Freddie Mac; they have been a headache to Congress for so long that they are kid stuff in the regulatory realm. The Federal Reserve and Securities and Exchange Commission today are battling it out today for what really matters: oversight of investment banks.

Associated Press

In one corner: Timothy Geithner, president of the New York Fed. In the other: Christopher Cox, chairman of the Securities and Exchange Commission. You can read Geithner’s prepared remarks here and Cox’s here. Of course, since the credit crunch occurred on the SEC’s regulatory watch, Congress believes that the agency, like Lucille Ball, has some ’splainin’ to do. So here is a look at what Cox said on Capitol Hill and what he really meant:

Cox: “Because the current credit market crisis began with the deterioration of mortgage origination standards, it could have been contained to banking and real estate were our markets not so interconnected. But in today’s markets these problems quickly spread throughout the capital markets through securitization…This is but one way in which the seamlessness which characterizes today’s markets has confronted our regulatory system with new challenges.”
Translation: My agency is policing trillions of dollars, traders are coming up with derivatives people can’t even spell, and Congress gives us a yearly budget that is still in 1934 dollars. You try putting together a Gucci regulatory system on an H&M budget, Mr. Fed.

Cox: The Commission’s Chief Accountant has asked the Financial Accounting Standards Board to revisit the underlying accounting guidance to determine whether the subprime experience points to the need for changes, and this review by the FASB is underway.
Translation: If I say FASB one more time, will you get the hint that they’re the guys to go after?

Cox: The importance of good information flow among regulators, especially during periods of market stress, is essential if the government is to meet its responsibilities to investors and the marketplace. To this end, the SEC has recently executed memoranda of understanding with the Commodity Futures Trading Commission and the Federal Reserve Board, and we are exploring similar undertakings with the Department of Labor and other agencies.
Translation: Is there anyone else the SEC should go crawling to to save our jobs?

Cox: Given these business, accounting, and regulatory differences, imposing the existing commercial bank regulatory regime on investment banks would be a mistake. It is conceivable that Congress could create a framework for investment banking that would intentionally discourage risk taking, reduce leverage, and restrict lines of business, but this would fundamentally alter the role that investment banks play in the capital formation that has fueled economic growth and innovation domestically and abroad.
Translation: You want Congress in charge of figuring out the financial system? I know Congress. I was in Congress. I’m telling you: Why don’t you just give it to Barnum & Bailey?

Cox: “In recent months the SEC’s Division of Corporation Finance has asked financial institutions, including both commercial banks and investment banks, to provide additional disclosure regarding off-balance sheet arrangements and the application of fair value to financial instruments…Financial institutions have improved their disclosures in subsequent public filings by taking into consideration these suggestions.
Translation: You’ve given us the power of suggestion! Suggestion! Have you seen some of these guys on Wall Street? Do they look like they take “suggestion” well?

Cox: No one today has sufficient authority to take effective action if a major financial enterprise experiences rapid financial deterioration.
Translation: Yeah, I said it. No one’s minding the store. Thanks for nothing, Congress.