FINRA’S FOOD OBSESSION
Coincidence or Executive placement at KRAFT Foods?
I have always been perplexed why FINRA allowed their former leader at the time to serve on the Board of Directors at both Kraft Food and Duke Energy simultaneously. After all, at most every brokerage firm in America registered representatives are rarely allowed to have a side job or any outside duty without written permission of the member firm. It’s not like the CEO of NASD/FINRA wasn’t making enough money and needed to supplement her income. Reports of compensation ranged from a low of 3.5 million annually to as much as 20 million in a golden parachute send off. In addition to the base and deferred compensation the annual reports also indicate that Apartments in New York City and Washington D.C. were provided as were an executive limousine with driver. One would think that with that type of compensation package, complete and total attention to the primary job of CEO at FINRA would be demanded. Perhaps I am looking at this from the wrong side and should instead question why the CEO of FINRA would want the added responsibility of being on the Board of Directors at two other large companies. After all, with the amount of loot that was being thrown her way one would think an extra hundred thousand or so per year would not be worth the effort. For instance the reported compensation as a member of the Kraft Food board was $187,000 and of course stock options and warrants. The reported Compensation for Duke Energy Board members was less. Now to mere mortals like me that is an enormous amount of money but for someone with a multi million dollar job like FINRA CEO it is probably not worth the time or effort is it?
Ms. Shapiro is not the first NASD/FINRA appointee to Kraft foods. Frank Zarb who headed both NASDAQ and NASD for several years, is a current member of the Kraft Board of Directors, although he was already resigned from NASD when he was appointed to the Board. Being the naturally brilliant investigator I am ( I love a good conspiracy theory) I decided to use all my skill, cunning, investigative techniques and common sense to try and figure out why a corporate giant like Kraft foods wants ex-SRO regulators on their Board. I could not understand what sort of Business savvy former and current regulators would bring to a board. They obviously do not know marketing nor food coloring techniques that appeal to a 5 year old eating macaroni and cheese so why the mutual attraction ? As always just ask one simple question: How is Goldman Sachs involved in this?
Que the CSI music and sit back and decide for your self if I’m on to something or just plain crazy.
Goldman has historically liked to place their own people in charge of anything in which they have an interest. Companies like the NY Stock Exchange, the Arca Exchange, AIG, CIT Group…the United States Treasury! Laugh if you want but look it up and you will see that they will put one of their own former cronies into a prime position so they can ‘update’ the motherland as to what is going on. Goldman likes to control regulation and that’s one of the reasons their former Chairman John Thain was anointed to replace Dick Grasso as Head of the NYSE. Shortly ater being appointed, Thain was the mastermind behind the merger of the ARCA exchange with the NYSE exchange and POOF! Most of the traders on the floor are obsolete. Amazingly Goldman not only owned 60% of the ARCA exchange but was allowed to broker the deal on the investment banking deal. Thain helped usher in the closing of NYSE regulation and the creation of FINRA that basically created a regulatory monopoly. Thain was also sent to the ailing Merrill Lynch when Goldman’s holdings were threatened and again to CIT Group when Goldman faced Billions in losses unless they could be bailed out. When AIG was on the brink of collaps, Goldman stood to lose tens of billion but big Hank Paulson the Treasury secretary at the time not only bailed them out but made them use the bailout money to immediately pay back Goldman. With this in mind let’s take a closed look at Kraft foods and see if there is a connection to Goldman and its close cartel buddies as well as regulatory control.
The single largest shareholder of Kraft is Warren Buffet’s Berkshire Hathaway. The 2nd largest holder of Goldman is Capital Research Global Investors, and the 3rd largest holder is State Street. Now take a wild guess who owns the most Goldman Sachs stock? That’s right Warren Buffet and Capital World Investors ( a division of Capital Research) and State Street are the 3 of the 4 largest holders of Goldman. State Street owns over 2 billion in publicly traded shares while Buffet made a 5 billion dollar investment in a private deal that is now valued at approximately 9 billion. Can this be just a Coincidence? Of course but just in case, another Board member of Kraft is Lois Juliber who just happens to be a member of Goldman’s board. In another interesting aspect, the largest holder of shares in Citi Group happens to be none other than our friends at State Street and Capital World Investors so I decided to see if there was some connections between them and Kraft and lo and behold one of the more prominent members of the Kraft Board is Citigroup director and CEO Ajay Banga. Hmmm…could it be that Buffet, Goldman, State Street and Capital World investors/research are holding the puppet wires?
Citi has been in the toilet for years now yet the CEO is finding time to serve on other boards? We have speculated for a few years now as to why the Federal Reserve didn’t just close Citi and move the assets over to a stable bank like Wells Fargo. Here’s where it gets even more interesting. Capital World is also the largest shareholder in State Street. In fact when I checked on the other FINRA friendly board company Duke Energy I discovered that the two single largest holders of Duke stock were …drum roll please…Capital World Investors and State Street. Is it just me or are all these companies overly intermingled and too many ‘Chinese walls” being circumvented? For instance, Goldman Sachs has raised hundreds of millions in funds for Duke energy in various reports. In another stunning twist, Kraft foods huge purchase of Cadbury last year benefited two distinct and related entities. First Kraft relied on Warren Buffet to raise additional capital when the price of Cadbury soared past original offering prices. Secondly, Goldman Sachs was the investment banker representing Cadbury on the deal and saw their Investment banking fees soar when the price became inflated. So lets recap:
· The largest holders of Kraft Food are also the largest holder of Goldman Sachs
· Members of Kraft Board has included a Goldman Director and two FINRA related Directors
· Kraft raises money to buy Cadbury by tapping into Buffet and on the flip side Goldman gets a huge Investment banking fee working for the take over target.
· No Chinese walls or insider trading is violated by any party because for sure a FINRA Board member would have spoken up.
· Citigroup just happens to “raise Kraft to a buy” shortly after the Cadbury announcement.
So what’s in it for Capital Group and their subsidiaries which include the American Funds of family? Well aside from booking huge profits as their holdings continue to rise there was this little tidbit today: SEC NAMES NEW MUTUAL FUND TOP COP!
The Securities and Exchange Commission has named Eileen Rominger, an 11-year veteran of Goldman Sachs Asset Management, as its new director of investment management, replacing Andrew J. “Buddy” Donahue.
I think I’ve seen it all now. Perhaps we should begin looking at these incestuous relationships instead of running around with financial reform that worries about fiduciary duties for every broker? Lastly, I think it may be time to look a little more closely at the ‘wizard of Omaha” and take a closer look at his investments, timing and whether he is really this good, lucky or perhaps as Gordon Gekko once said “The most valuable commodity I know of is information.”
Bernie Madoff was once a wizard of Wall Street….I am starting to question some of the other wizards on wall street.