Case Blog

This past weekend lived up to my expectations, with the U.S. Ryder Cup team pulling off a surprise upset of their European rivals.  The U.S. captain Paul Azinger created a team, while European captain Nick Faldo seemed to remain aloof,  and there appeared to be a lack of camaraderie on his side, in spite of his most controversial pick, Ian Poulter, winning 4 points, more than any other player.  On the U.S. side we continued to see the rising star of Anthony Kim.  This son of Korean immigrants was a proud American, and with his outstanding play Kim took center stage. Sergio Garcia, one of my current favorites on the PGA tour, was overshadowed by him.  Finally, Boo Weekley led the good ol’ boy contingent, while Kim led the rookies. They were deceptive with their approach, but they played outstanding golf and are to be congratulated as a team.

Dallas went into Green Bay and finally won at Lambeau. The NFL East with the Cowboys, Giants, Eagles and Redskins certainly looks, at this point, as the NFL’s strongest division. They will clearly beat up on each other as the season progresses, but the next Super Bowl champion could well emerge, once again, from this division. Miami’s turnaround continued with a strong showing against the Patriots, who clearly miss Tom Brady. In the college ranks one of the surprise teams so far is the Colorado Buffaloes, who upset West Virginia to go 3-0. Their next three games are against Florida State, Texas and Kansas. We will know after these games if they belong in the top 20 and if this program has been turned around by Coach Hawkins and his son Cody, the Buffaloes’ quarterback.

The weekend also saw Treasury Secretary Hank Paulson make the rounds of the Sunday morning talk shows. In an exchange with Tom Brokaw on Meet The Press, Paulson was very clear that this was not about the stock markets, which had rallied on Thursday and Friday, but about the frozen credit markets. Will either presidential candidate be able to attract a talent like Paulson to their administration? The Fed Chairman Ben Bernanke  has studied and written about the causes of the Great Depression and clearly understands the need to take unprecedented actions. We are in uncharted waters and the Bush administration has taken a page from FDR’s playbook, as opposed to Hoover’s. There are times that the government needs to step in to restore confidence.

Many of us have been vocal about our opposition to government intervention into free markets, but at this point what are the alternatives? Are we prepared to have our financial markets unravel? Will we see more deals fall through, like the Informa (INF:L) acquisition in the United Kingdom, which failed because Providence, Carlyle & Blackstone (BX) could not raise their price in the current frozen credit markets? The price drop has been precipitous for shareholders. We also learned as the weekend ended that Goldman Sachs (GS) and Morgan Stanley (MS) would survive as bank holding companies, changing the landscape of investment banking in a very significant way. And we saw Warren Buffett reading a market bottom and making a $5B dollar investment in Goldman Sachs on very favorable terms. As I am writing this, GE (GE) cut its earnings guidance. To preserve capital in these challenged markets, GE has suspended their stock buyback and most likely will maintain their dividend, but not raise it for the first time since the ’70s. GE Capital has been a significant funding source for many of the B2B mid-market deals over the past several years.

It is time for both parties to work together on a solution and to put finger-pointing aside. The world is looking once again to America for leadership, and our leaders need to demonstrate that they understand what it means to operate in a bipartisan fashion. The presidential campaign needs to go forward and the American people deserve to have debates to better understand the fine distinctions between the candidates. But while we move forward the current administration and the Congress must move to fashion a solution that restores confidence.  There will be plenty of opportunity for history to assess blame for the subprime debacle.