New York Times Chief Financial Correspondent Floyd Norris Weighs In On The Financial Crisis
Wednesday, September 24, 2008PAUL KANGAS: Joining me now to talk about the financial crisis is Floyd Norris , chief financial correspondent at The New York Times, and the author of the blog "Floyd Norris: Notions on High and Low Finance." And, Floyd, welcome to NIGHTLY BUSINESS REPORT.
FLOYD NORRIS, CHIEF FINANCIAL CORRESPONDENT, THE NEW YORK TIMES: Thank you, Paul.
KANGAS: You've been writing and blogging about this situation for days now. What in the world do you think is going on? Is it a good deal or a bad deal for tax payers as you see it?
NORRIS: There's no way to know right now. It's clearly a good deal for the banks because they're going to be able to unload assets that are at very low value at prices higher than market value. Whether it works out for the Treasury depends on whether those assets turn out to be worth something in the long run.
KANGAS: What's your guess?
NORRIS: My guess is that some of them will turn out to be worth more money than current market value, but I have my doubts it will overall be a good deal.
KANGAS: Does Warren Buffet's $5 billion investment in Goldman Sachs give you a warm and fuzzy feeling about confidence in the financials?
NORRIS: No, it gives me a warm and fuzzy feeling that I wish I was Warren Buffet. (LAUGHTER) He got an excellent deal. He's assured a 10 percent return, which is a very high return these days from a company as solid as we think Goldman Sachs is -- as I think it is. But he did give up unlimited upside potential because they have the right to buy the securities back any time they want to at a 10 percent premium.
KANGAS: But he also has warrants where you can buy the common stock, right?
NORRIS: He has got an equity thing but I think that may go away if they buy back the stock. So it's not unlimited, so he can't just sit there with the warrants and wait for the stock to soar.
KANGAS: I understand, OK. What about the issue of CEO pay, Floyd? We've received a ton of viewer e-mail with folks that are outraged at the thought of golden parachutes for corporate honchos.
NORRIS: There is a lot of anger about that, and it appears the Bush administration is going to give in on that and put in some kind of limitation into this bill on companies that accept their help. They didn't want to do that because they wanted this to appear to be a thing where they were giving the aid to everybody and that the fact you took the aid didn't mean there was anything bad about you. And now it may be taken that way. And that's the risk.
KANGAS: I see. In one of your blogs -- posts, well, you call the treasury secretary "King Henry." What do you mean by that?
NORRIS: Well, that's the thing that had been going around on the Web today. His original proposal was incredibly audacious, saying there should be no oversight, no legal review of what he did, that he could do anything he wanted. And, you know, that wasn't going to fly in the current atmosphere.
KANGAS: Mm-hmm. Any final observations for our viewers tonight, Floyd?
NORRIS: No, I think it's going to be very interesting to see what the president has to say tonight. They will probably pass something this week. And if they do, it will be interesting to see if that gets the financial system moving again.
KANGAS: Is time really of the essence? Is it that important, how quickly they do this?
NORRIS: I mean, this week versus next, I don't see it. The principal urgency in Congress I think is they want to get out and campaign. (LAUGHTER)
KANGAS: A very good point. Listen, Floyd, I want to thank you very much for sharing your thoughts with us tonight.
NORRIS: Thank you.
KANGAS: My guest, Floyd Norris, chief financial correspondent at The New York Times.
