Friday, October 19, 2007

Capital One It's Art!

Whats in your wallet Capitol One (COF) announces huge losses. That was to be expected given their announcement that their GreenPoint Mortgage Business had died and needed to be buried. Financial funerals are very expensive.

Executive comments were front end loaded with how well the share repurchase program was going and supporting the stock. I guess you lead with your best card in these cases. Speaking of share repurchase the ASR (Accelerated Share Repurchase)was completed in Aug at a cost of billions of dollars of capital at a time when huge losses are occurring and extra capital would be a good idea.

While the ASR was going great guns Richard D Fairbank (Chairman, President & CEO)was very actively selling during the same time frame. Given the very bad news that was blowing up at the time the sales have a very "Angelo Mozilo" quality to it. We will have to see how it all turns out.

Much of the financial press has jumped on the "Its a little bit of an art form" comment made by Richard Fairbank when commenting on write offs. Essentially in the past the write offs were too low and now they are moving into the scary part of the graph on the other side of the chart. So do earnings need to be restated?

The music has stopped and all we get is an art critique. Richard Fairbank you would not accept that comment from subordinates when dealing with bad or tough news. Why should the shareholder be happy?

By the way this is another case where the same person holds three titles Chairman, President and CEO. With a market cap of approximately $28 billion you can afford to hire a couple of good guys.