Corporate Thanksgiving: Who Should Be Thankful For What
Some companies should be extra thankful this holiday season. Quite a few firms have managed to stay afloat when, at one point, it was looking like they were about to have their lights turned out for good. Back from the brink are not just the obvious suspects - like Citibanks and General Motors - but there are also some other firms that have dodged some major bullets. (Don't be tricked by bankrupt companies' low stock prices; they're low for a reason. Find out more in Don't Go Broke Buying Bankrupt Stocks.)
Credit Rating Agencies
The credit rating agencies should be extra thankful this year that they aren't under the white-hot spotlight of investigation, as many of them looked at pools of low quality loans in collateral debt obligations (CDO) and provided a high quality 'AAA' rating to at least a portion of these securities. This mispricing of risk led some to believe there was a conflict of interest between the credit rating agencies and the investment banks that pay fees for the ratings. The fact that these companies have avoided any serious investigation so far is something they should be thanking their lucky stars for! Mortgage Companies
If a mortgage company is still writing loans, it should be grateful for not only making it through the worst of times, but that serious regulatory changes aren't already in place that could cripple profits for decades to come. While there is still a battle going on in Congress, many regulatory changes in the mortgage industry that had gained momentum have stalled. For example, one regulation that would have required mortgage brokers to offer a plain vanilla 30-year home loan to all consumers, not just all exotic loan options, has already been dropped. Regulations to help borrowers understand the details of exotic products have also fallen away. Because the push for regulatory change in the mortgage industry has slowed considerably, mortgage companies should be extra thankful this year.
Any homebuilders that are still afloat should be thanking their lucky stars this year. Some are still paying dividends, despite negative earnings, and share prices have risen off the lows. Also, there didn't seem to be much blame focused on the homebuilders even though incentive programs and sales tactics could have been fodder for scrutiny. After the astronomical overbuilding of the last decade, if they made it this far, they must be thankful that they are still in business and can see some light at the end of the tunnel.
The TARP Babies
The banks that needed to take government money to prevent bankruptcy should indeed be thankful this year, especially as bonuses are still being handed out. There are quite a few taxpayers who would like to see TARP recipients not only pay the money back with interest, but also show a bit of contrition. Hopefully, they won't hold their breath. While they haven't avoided the spotlight altogether, as bonus pay and executive compensation is a hot topic, these companies should still be thankful this year that everyone is still just talking and no one is actually taking action.
The Banks That Already Paid The TARP Money Back
Now that these banks are out from under the governments thumb, they are free to pillage once again. For that, they are surely thankful. It's one thing to be regulated by the federal government; it's altogether another to be partially owned by it. This will allow unfettered management to take advantage of the constrained competition, as the strong will try to pounce on the weak. Also, there is no doubt they will be extra thankful for the better year-end bonuses too. (The subprime meltdown gave rise to a mouthful of financial acronyms. Learn how to sort through this alphabet soup, in Bailout Acronyms 101.)
For many companies, just surviving the recent debacle is reason enough to give thanks this year. But a few companies that could have clearly had it much worse than they have it now, they should be extra thankful this year. No doubt many of them will be. Now, if I could just think of something consumers should be thankful for, I'd feel a whole lot better.