SevenToTen - Blogging About Everything

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In recent years, a pseudoscience has emerged around the theory that left-partedness signals leadership potential, while parting on the right suggests a little something off-kilter. Among CEOs of the 50 largest companies in the Fortune 500, only three part their hair on the right. Here’s a sampling of top execs and their ‘dos.

1. Warren Buffet

America’s richest man and chief of the 500’s 11th-largest company comes across as the classic left-brainer: rational and assertive.

2. Jamie Dimon, J.P. Morgan

Banking’s alpha dog swooped in and got Bear Stearns for the fire-sale price of $10 a share. Was it moxie - or the left part?

3. Indra Nooyi, PepsiCo

As CEO of the $39 billion consumer giant, the leftie ranks No. 1 on Fortune’s Most Powerful Women in Business list.

Citigroup delivered another quarter of devastating results, losing more than $5 billion due to troubles in its fixed-income business and higher consumer credit costs, adding it would cut an additional 9,000 jobs.

The New York-based company also recorded more than $15 billion in writedowns, with the lion’s share coming from subprime-related direct exposures. But investors cheered the news, sending shares of Citigroup more than 6% in early trading, as the results were not as bad as some had feared.

Citi, however, did surprise analysts by delivering better-than-expected top line growth. The company said revenue rose sharply to $13.22 billion from the previous quarter, still it remained at just about half of what it was a year ago.

At the same time, Friday’s results paled in comparison to the eye-popping $9.83 billion quarterly loss the company suffered three months ago - the worst ever recorded in the 196-year history of the firm and its predecessors.

Citigroup CEO Vikram Pandit said he was not happy about the results, but noted that he believed that efforts to cut costs, sell non-core businesses and beef up risk management would pay off.

“I think you will see we are taking all the action you’d want us to take to maximize the value of this franchise,” said Pandit.

Since Pandit’s ascension to the CEO post in December, management has made great strides in shaping up what some critics have called the company’s bloated corporate structure.

On Thursday, Citi announced it would sell its commercial lending and leasing business to General Electric for an undisclosed amount. The company has also announced other major moves including the sale of Diners Club International and its stake in Brazilian credit card company Redecard SA.

Citigroup’s results wrap up what has been a particularly tough week of results for the nation’s largest financial firms. Merrill Lynch recorded a loss of $1.96 billion, after about $6.6 billion in new writedowns. The company also said it planned to cut about 3,000 more jobs.

Wachovia Corp. surprised Wall Street Monday with a first-quarter loss of $350 million, while Washington Mutual reported a loss of $1.1 billion, or $1.40 a share, on Tuesday. JPMorgan Chase topped Wall Street expectations after reporting earnings of $2.4 billion. Still the results were just half of what they were a year ago.

Citi and Merrill are expected to announce another series of writedowns due to eroding values of mortgage-backed securities and leveraged loan portfolios. Other areas, like home equity loans, have shown increasing signs of deterioration too.

The question now is how bad do losses get? The numbers, in some cases, are really disastrous. To make matters worse, consumer spending has slowed and unemployment has increased - driving bigger losses in banks’ consumer-related businesses such as credit card, small business and even their commercial real estate portfolios. As a result, banks are having to set aside more money for potential loan losses.

Washington Mutual revealed on Tuesday that it had to set aside $3.5 billion in loan loss provisions and could be staring at a loss of $14 billion by year end.

The bad news isn’t limited to loan portfolios, either. When the Federal Reserve aggressively cut interest rates earlier this year, the expectation was the cuts would boost banks’ net interest margins, a key measure of the profit banks make from taking in deposits and lending them back out.

But competition for customers has been so tough that banks have been unable to cut their deposit rates as much as they would have in the past. At the same time, companies with sizeable investment banking divisions like Citigroup, JP Morgan and Merrill Lynch are expected to be hit by a slowdown in merger and initial public offering activity. Merger advisory and equity underwriting are two key sources of lucrative fees for investment banks.

Bear Stearns was considering potential bankruptcy and liquidation options, and the private equity firm was trying to put together details to make its proposal viable.

The management did not believe it could open for business on Monday without a transaction that restored market confidence in the firm. Adding pressure to the situation, the firm was advised that it would not be able to start trading in Asia the next morning.

Meanwhile, the private equity buyer was unable to secure funding for the credit facility portion of its proposal in time and was not able to get support from the New York Fed, leaving JPMorgan as the only bidder.

JP Morgan said, based on the New York Fed’s willingness to provide $30 billion in special funding, it thought it could work toward a deal that valued Bear Stearns at $4 per share, but eventually decided that it could not offer more than $2, which was subsequently accepted.

How did the $2 offer from JP Morgan came about?

It seems that days before, Bear Stearns announced the company’s finances were sound. Still, nervous investors sold their shares sending the stock down more than 60% . The shares traded as high as $159.36 apiece in the last 12 months.

JPMorgan claimed that a private equity firm expressed interest in a transaction with Bear Stearns and proposed a deal that included a $3 billion cash infusion in return for 90% equity interest in the firm. The proposal required a $20 billion credit facility from a consortium of banks. Assurance that the New York Fed would make loans to Bear Stearns through its discount window for one year was also needed.

JP Morgan then met with representatives from Bear Stearns and its investment bankers to discuss a deal that would value Bear Stearns at $8 to $12 per share. It also considered buying 19.9% of the then outstanding shares, options to purchase its prime brokerage business and Bear Stearns’ headquarters building.

But by Sunday, JPMorgan expressed doubt that it would do the transaction because of the risk involved and informed Bear Stearns, the U.S. Treasury and the New York Fed, that to proceed, it would need some level of financial support from the New York Fed.