About Patrice Sarath

What a difference a year makes? Not much.

A year ago almost to the day, Barclays withdrew its bid for Dutch bank ABN AMRO, allowing Royal Bank of Scotland, Banco Santander, and Fortis to buy the bank and carve up its assets.

Now Fortis is in the hands of the Dutch government and is selling assets, including some of its hard-won ABN AMRO businesses, and it is being carved up itself. Royal Bank of Scotland is putting up a brave front, but it has also been wounded by the world credit crisis. (Santander seems to be okay for now, rather like Bank of America in the US.)

In turn Barclays executives have had to console themselves with the North American operations of Lehman, but this was probably less of a rebound and more of a relief. In seeing what happened to Fortis, they could be forgiven for feeling relieved at the way things turned out, something along the lines of, “There but for the grace of God go I.”

Now, one year later, another tumultuous deal has grabbed headlines. Citigroup and Wells Fargo’s wrangling over Wachovia is reminiscent of the Barclays/ABN AMRO/Royal Bank of Scotland triangle of 2007, down to and including the robber bridegroom (Wells Fargo this time, the RBS consortium last year), lawsuits, recriminations, and ultimately, the breakup of Wachovia. It’s been positively operatic. Instead of the Children’s Investment Fund playing the part of Iago, this time it’s the Federal Reserve, but otherwise, we’ve seen this before.

Even the world’s precarious financial situation is the same — the only difference is that in 2007 we didn’t really know how much trouble we were in.

Frankly, I’d like a different plot for 2009, if you please.

What if CEOs of public companies only got paid in stock? And when they retire, they can cash it all in. Sure would be an incentive to run a company responsibly, right? And if there’s stock manipulation and mismanagement a la Enron, they have to give it all back.

Okay, the stock thing is naive. But if we are going to nationalize the entire financial system, shouldn’t a CEO’s pay be the same as a government official’s? The president gets $400,000 a year. True, he also gets room and board. So make that $450,000. And he has a jet and a helicopter. $475,000, but that’s my final offer!

Anyone else have a disconcerting moment when they found themselves agreeing with Newt Gingrich on the bailout?

Did you get the American e-mail yet? I think my response could be described best as, “laughed hollowly.”

Hey, I know! “What would Warren Buffett do?!” Why didn’t Henry Paulson think of investing in Goldman? Instead, we got the companies with all the bad debt. I’m not sure that’s value investing.

Bank of America has barely had a chance to swallow Countrywide Financial, and now it has agreed to buy Merrill Lynch.

Is Bayer HealthCare (the maker of Alka-Seltzer) next?

Obviously, Kenneth Lewis is a bargain hunter. When you’ve always wanted an investment bank of your very own, and now you can get one cheap, Merrill Lynch would be irresistible. The all-stock deal is valued at $50 billion. But just because you can get something cheap doesn’t mean that it’s a bargain or even that you can afford it. Lewis is doing shoe math.

(What — you don’t know shoe math? That’s when you can get the Manolos at half off for $650, leaving you with another $650 to buy the Steve Maddens and have enough left over for a latte. )

The deal was pushed through with the greatest of speed too, denoting Merrill’s desperation and BofA’s eagerness — or was it the other way around? I just can’t get over the feeling that maybe BofA made an impulse buy in the equivalent of an old city marketplace where you are supposed to haggle. Lewis didn’t haggle! He even said BofA could have gotten a better price for Merrill and elected instead to pay around a 70% premium.

A lot has to happen before stockholders approve the deal. I wouldn’t be surprised if BofA shareholders said no way (but what have we learned about my predictions?). Still, I have a very bad feeling about this.

Bank of America now has expanded its exposure to the subprime mortgage market, directly through Countrywide and indirectly through Merrill’s bad bets. Could be a recipe for indigestion.

The world’s cheapest car has been put on hold, as protests over Tata Group’s plans for a Nano plant in eastern India have been stymied by protesters and politics.

Although Tata plans to repurpose other plants to build  what it has billed as the world’s least expensive car (around $2,500), it had to nix plans for a production volume of 40,000 per month, instead settling for 10,000. The move could affect the price as well, since one of the factors allowing the company to offer the car at this price point was cheap land.

Although normally I would take umbrage at the forced change in Tata’s plans, the critics have a point. From an environmental standpoint, does India need more vehicles? Should it be moving farmers off their land and building factories?

The giant nation is beset by pollution, as are most countries with growing middle classes, and the Nano could exacerbate the problem in India. Another question is that of energy. Won’t 40,000 extra cars a month on India’s roads put pressure on the country’s energy supplies? What about the world’s oil markets?

India has been stepping up its oil development and exploration efforts as domestic demand has risen. The country is a net importer of oil, although it looks to be sitting on some fecund oil and gas fields of its own. The US isn’t the only country seeking energy independence — that could be India’s slogan as well.

The question is, is the increase in oil production going to fuel the Nano, or is the Nano (and increasing wealth that is causing rising consumption) fueling oil production? And if India is truly seeking energy independence, is a Nano in every garage the way to go about it?

Even though I would like countries to scale back their energy consumption, it’s hardly fair to insist that nations forego the conveniences of cheap energy that Americans and Europeans have enjoyed for more than a century. In general, the benefits of a sturdy middle class outweigh the disadvantages of consumption. So I hope Tata’s plan for a Nano plant gets the green light again.

And then, maybe next, Tata can tackle global warming. After all, is there nothing this company can’t do?

Add Wachovia to the list of banks that have agreed to buy back auction rate securities. Investors claimed that these securities were marketed to them as safe as cash, but when the market froze they became worthless.

New York State Attorney General Andrew Cuomo has been working hard to ensure that investors, including municipalities and government agencies, get their money back after the investments failed. This is a good thing, because banks should suffer the consequences of what may be fraudulent sales tactics. But it makes one ask, why were the securities sold as essentially risk-free in the first place?

I understand the concept of caveat emptor, but investors need more protection than a dealer’s word that an investment is safe and appropriate. Yes, there is the prospectus of course. But here’s the shocking news — most people don’t read them. Since these documents are written in as obfuscating a manner as possible, is it reasonable to ask if investment firms are hoping that people succumb to the MEGO (my eyes glaze over) effect?

And since the banking and financial services industries are so interconnected, even someone who diligently decides to avoid investments that he or she doesn’t understand (hey, it works for Warren Buffett) can’t steer entirely clear of risk-laden investments. Even putting your money in a savings account with a pitiful interest rate is placing it in a bank that invests in risky derivatives.

So it’s hardly fair to say, “Read the prospectus,” because these documents only appear to exist as a way for banks to cover their … assets.

What’s the solution? There’s always going to be a tension between risky investments and safe investments, and between what’s good for the buyer and what’s good for the seller. Tighter regulations, maybe plain English documents, and tougher consequences for dealers that cross the line from overzealous to illegal would help.

Because, seriously, we can’t keep having do-overs like the current situation.