Five Dumbest Things on Wall Street: Dec. 12

Uncle Mel's Missing Channels; Thain's Brain Freeze; GMAC's Simple Plan; Moody's Lehman Post Mortem; Money for Nothing.
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Uncle Mel's Missing Channels

Mel Karmazin can't play CEO, so he's playing disc jockey instead.


Sirius XM Radio

(SIRI) - Get Report

chief told reporters at the Reuters Media Summit in New York last week that the satellite radio company is reducing its offerings as part of a $400 million cost-saving program. Karmazin said he will decide "the best channels" from now on, taking the best of breed in each music channel genre from either Sirius or XM.

"You as a subscriber, though you may miss your channel, you need to make sure we make money because you want us to be around so we can invest in programming and we can provide you with all these services," said Karmazin, whose company's stock trades around 16 cents a share, giving it an equity value of $510 million.

Yes, Sirius subscribers, Uncle Mel, whose 2007 compensation topped $5 million, says it's your duty to keep his company afloat and his lofty paycheck coming. Not to forget Howard Stern, Martha Stewart, Oprah Winfrey and all the talent he signed to expensive contracts.

What makes Karmazin's pleas most galling, however, is the fact that he sold the merger between

XM and Sirius

to regulators on the grounds that it would provide consumers with "a broader selection of content." In February 2007, when the combined market cap of the two satellite radio operators was $13 billion, Sirius announced the merger saying, "The combined company is committed to consumer choice, including offering consumers the ability to pick and choose the channels and content they want on a more a la carte basis."

Not anymore. Karmazin is calling the tunes from here on in.

At least until the company's crushing $3.4 billion debt load turns his airwaves to static.

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Dumb-o-meter score: 95 -- Mel is spinning stories and tunes at the same time. In other words, he's just spinning.

Thain's Brain Freeze

John Thain went temporarily insane.

At least that's our explanation as to why the

Merrill Lynch


chairman and CEO requested a $10 million bonus Monday, according to

The Wall Street Journal

, only to

back off

from his demand later that day. Thain reportedly argued that he merited the extra millions for averting what could have been a larger crisis at the firm by agreeing to a deal with

Bank of America

(BAC) - Get Report

on the same day

Lehman Brothers

filed for bankruptcy.

Thain took over at Merrill in December 2007, then stewarded the firm into a merger with BofA in September. Last Friday, shareholders of

Merrill Lynch

and BofA separately approved the deal, which would create the nation's largest financial-services company.

In an attempt to end the uproar over Thain's alleged flip-flop, Merrill's board released a statement saying the decision to forego a bonus is the best option "given current economic and market conditions."

Sorry folks, but we don't believe Merrill's board came to this conclusion on its own. In a letter sent Monday to Merrill's board, New York Attorney General Andrew Cuomo called reports of Thain's request "nothing less than shocking."

And it certainly wasn't peer pressure that caused Thain, who made $83 million in 2007, to reconsider. Executives at

Morgan Stanley

(MS) - Get Report

, as well as Thain's alma mater

Goldman Sachs

(GS) - Get Report

are also repudiating their year-end prizes.

No, it was public outrage snapped Thain back to sanity, essentially by stuffing his ego and greed back in their rightful places.

Listen Johnny-boy, you did a great job in keeping Merrill Lynch from becoming the next Lehman Brothers. For that we give you a pat on the back, not an extra $10 million.

But asking for more dough while

Bank of America

is gearing up to shed as many as 35,000 employees, well, that's a resounding kick to the soft parts.

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Dumb-o-meter score: 90 -- Hopefully the insanity is just temporary.

GMAC's Simple Plan


better come up with a Plan B quickly. Shoving its way into the government's bank rescue package doesn't seem to be working out too well for the besieged auto lender.

In a do-or-die effort to drum up needed funds Wednesday, GMAC, the financing arm of

General Motors

(GM) - Get Report

, extended the delivery time for its cash tender offers by three days. The move marked the third time that the company, which is majority-owned by private equity giant

Cerberus Capital Management LP

, has pushed out its cash-raising deadline since launching its bid to become a bank holding company and qualify for the government's $700 billion bailout fund.


Federal Reserve

is requiring GMAC to have at least $30 billion in regulatory capital before granting it bank status. So far, the lender has raised just $8.3 billion, and it's pinning its survival on purchasing or swapping $38 billion of debt held by its divisions and mortgage business, Residential Capital, for cash, new notes or preferred stock.

If, by some miracle, GMAC raises the cash by the extended deadline, converts itself into a bank and gets government assistance, then GMAC says it will use the money to make loans to car buyers unable to get affordable financing.

If not, then GMAC said it would have a "near-term material adverse effect" on its business. Or in other words, game over. And we mean really over.

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Dumb-o-meter score: 85 -- GMAC is in trouble. You can bank on that.

Moody's Lehman Post Mortem

Three months after Lehman's demise,


(MCO) - Get Report

is finally giving the failed investment bank the hook.

Credit ratings agency Moody's Investors Service downgraded various ratings for failed investment bank Lehman Brothers Monday. Moody's slashed Lehman's senior rating and those of guaranteed subsidiaries by five notches to "C" from "B3." The firm's subordinated debt rating was also sliced to "C" from "Caa2." Its preferred stock rating was reduced to "C" from "Ca."

A rating of "C" is the lowest a company can receive from Moody's, indicating a recovery rate of between zero and 50%. Bond traders often refer to a "C" rating as a



Lehman filed for bankruptcy protection in mid-September as a result of the credit crisis. The firm was unable to find a buyer and collapsed under the weight of its towering debt load.

Undoubtedly, most of the toxic collateralized mortgage debt that felled the once mighty investment bank was at one time stamped with a pristine


rating by Moody's itself. Moody's latest grading action, therefore, was not only morbid and ironic, but stupid and needless as well.

Moody's said it expects recoveries from Lehman's bankruptcy filing -- Wall Street's equivalent of a wake -- to extend for several years and be "somewhat disorderly."

We say Moody's should just let the cadaver decompose in peace and move on. We're in no mood to hear the useless judgments anymore.

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Dumb-o-meter score: 75 -- Moody's ratings are better never than late.

Money for Nothing


U.S. Treasury

is literally getting money for nothing over the next month.

In a testament to the shocking level of financial unrest in the world, the government auctioned $32 billion in four-week T-bills at 0% interest Tuesday, the lowest auction rate ever.

That's right. Zilch. Nada. Nothing. Uncle Sam is getting the same 0% financing deal being offered at your local furniture store or auto dealer.

Demand for the no-interest T-bills was unbelievably high. The Treasury received $128.5 billion in bids, or more than $4 in bids for every $1 it accepted. A year ago, the Treasury sold $23 billion in

one-month T-bills

yielding almost 3% and only attracted $57.5 billion in offers.

And that's not all. The credit crisis has investors so unnerved -- and we're mostly talking about institutional buyers here, the pros -- that three-month T-bills briefly traded in the secondary market below zero percent Tuesday at -0.01%.

So not only are the pros using Treasuries as a mattress for their money, but some are even paying for the right to do so. (And forget about putting money into a mattress maker, shares of

Sealy Corp.


are down 75% this year.)

On the bright side,

contributor Tony Crescenzi says financial institutions may be snapping up Treasuries to "window-dress their portfolios" before year-end, which certainly beats the doomsday scenario.

Moreover, taxpayers concerned about the ballooning $10.4 trillion national debt may be able to sleep better at night knowing the government is saving money on interest charges.

Sure. In your wildest dreams.

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Dumb-o-meter score: 75 -- Last time we checked, the sale on Washington, D.C., was going down in Illinois.

Before joining, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.