The Millennium Semiconductor Survival Guide.

Chapter 357 Cake or Trap
“Unlike Xinxin Technology, the cooperation between emerging investment and these enterprises does not involve the participation of government-led funds. It is completely an independent behavior between enterprises. It will be more utilitarian than Xinxin Technology’s industry-university-research transformation.

This utilitarianism leads to the fact that we will invest in fewer projects than the fund led by Xinxin Technology, and we will also be less patient.

This is just a different direction, not good or bad. Projects led by emerging investment have better performance in terms of return rate and continuity of subsequent projects.

We believe that this type of investment should not be limited to the Yangtze River Delta region. First-class universities and enterprises across the country can participate. We hope that this time China’s support package plan can further expand the scope and intensity of support for industry, academia and research. , in other words, China needs industrial upgrading.

China needs to rely on technology to achieve industrial upgrading, so that our companies can be more competitive internationally, employees can have higher incomes, and consumption can be better promoted. "

The fundamental reason behind improving consumption power must be to increase the income level of residents. Whether it is to increase the current income level so that they can consume, or to increase the future income level, that is, to establish a more complete social security system, this is to allow them to dare Consumption.

There are only two ways to improve residents' income levels, which are to improve distribution methods and improve corporate profitability. The former requires government efforts, which is very difficult, especially in China today.

Because in the past 20 years, we have developed the inertia that everything can make way for economic development. Only by ensuring the competitiveness of enterprises can we have taxation, employment, foreign exchange, etc. As for the legitimate rights and interests of the labor group, sorry, productivity is not there yet. step.

Zhou Xin does not think that his arrival can change this problem that cannot be solved in ten years. Even in his own company, he does not have the ability to strictly protect the rights and interests of workers like Europe and the United States.

Zhou Xin wants to do this, but specific managers will not do it. This involves a company that is too big. Managers can only control macro things, and it is impossible to cover all details.

This is why China has always said that the country is governed by section chiefs. This is actually a modern expression of the imperial power not going to the countryside. Of course, technological progress is changing everything. In the Internet era, these are all issues of whether you want to manage or not. Wanting to control is always a question. There is a way to manage it.

“I think China has great potential in science and technology. Emerging Investment’s investment department in China has invested in many great technology companies in the past ten years.

These technology-based companies ultimately brought huge returns to emerging investments.

Including Xinxin Technology, which John just mentioned. When Newman founded Xinxin Technology, we talked about this issue. My advice to him was that Xinxin Technology can only develop well if it is placed in Silicon Valley.

But Newman did not listen to my advice and insisted on returning to China to start Xinxin Technology. The final result proved that he was right.

China has an equally outstanding group of scientific research talents and engineers, which is the cornerstone of China's science and technology enterprises.

Moreover, compared with Americen, China's labor costs are much lower, which can help Chinese companies maintain very strong competitiveness in international competition. ” added Warren Jensen.

"The bankruptcy of Lehman Brothers is not the end. Merrill Lynch, a famous securities firm with a history of nearly 100 years, has officially declared bankruptcy."

When China was holding a financial summit, a series of thunderstorms were still happening in America in the distance. Originally, under federal compulsory requirements, Bank of America acquired Merrill Lynch for US$450 billion. In fact, they did not want to acquire it because they did not want it. Know how much thunder there is in the middle.

Seeing that the Federal Reserve provided US$400 billion of the total, and they only needed US$50 billion to acquire Merrill Lynch, Bank of America gritted its teeth and went ahead.

But Merrill Lynch's thunder was still too big, even Bank of America couldn't handle it.

This is like Bear Stearns, the fifth largest investment bank before Amerikan. The Federal Reserve found JPMorgan Chase and asked JPMorgan Chase to acquire Bear Stearns.

In the first half of this year, the Federal Reserve used various means to save Bear Stearns. Because Bear Stearns has an asset size of US$3950 billion, its collapse will trigger a domino effect.

Therefore, at the beginning of this year, in order to prevent Bear Stearns' situation from deteriorating, the Federal Reserve launched an unprecedented tool: the Term Securities Lending Facility, which allows investment banks to use housing guaranteed by Fannie Mae and Freddie Mac. Mortgage-backed securities are used as collateral to lend U.S. debt from the Federal Reserve.

This is almost a monetary policy financing tool designed specifically for Bear Stearns.

The Federal Reserve passed Section 13, Section 3 of the Federal Reserve Act. The general meaning of this provision is that the rescue situation needs to be extremely urgent. This provision has not been cited in more than 70 years, and it is a no-brainer.

Bear Stearns' cash reserves fell from $200 billion to $20 billion in less than a week, and Morgan finally acquired Bear Stearns for $2 per share, a price that was higher than its share price a year ago. Still over $70.

The liquidation and takeover of Bear Stearns led to the bankruptcy of Lehman Brothers, which in turn led to the bankruptcy of Merrill Lynch.

Originally, Bank of America had promised Paulson that it was willing to acquire Merrill Lynch to cover the costs, and the Federal Reserve would use the primary dealer credit facility to inject capital into Merrill Lynch.

This mechanism means that primary securities dealers can borrow mortgages from the Federal Reserve just like commercial banks.

However, after Merrill Lynch's third-quarter report was released, the CDOs backed by subprime mortgages caused a book loss of more than US$300 billion, which was its largest single-quarter loss since 93. This hole cannot be filled by Bank of America.

"Newman, is NewPay willing to acquire Merrill Lynch?" Paulson still doesn't want to give up. If Merrill Lynch goes bankrupt again, who will end the dominoes this time?
Bear Stearns-Lehman Brothers-Merrill Lynch?They are all famous institutions on Wall Street in the past.

Is it possible that Goldman Sachs and Morgan Stanley will also be dragged into the water?

Zhou Xin was a little in disbelief after receiving the call. This is Merrill Lynch. Merrill Lynch is as red as ever. Amerikan is also red. Are you even willing to sell Merrill Lynch to the Chinese?

"I'm not sure about the specific situation. I remember reading the news a few days ago. Didn't it say that Bank of America was planning to acquire Merrill Lynch as a whole?"

"Merrill's exposure was higher than what they advertised to the Fed, and Bank of America rejected the acquisition at the last minute," Paulson lamented.

This group of Amerikan financial institutions will not tell the truth until the last moment, and there are many dead ducks who have tough mouths.

Merrill Lynch is definitely not an exception. Last year, Citigroup first informed investors in September that their subprime loan exposure was US$9 billion.

By the time the third quarter financial report was released in October, this number had become US$10 billion, a full US$550 billion in subprime loan risk exposure.

Its CEO, Prince, announced his resignation. When he resigned, he said that he knew nothing about the trading decisions of Citigroup’s investment banking department. I had no idea that they had provided liquidity guarantees for so many subprime loans and that they also had such a large number of assets. Multiple super senior debt obligations.

Citigroup is like this, Merrill Lynch is like this too

"Newman, there are still twelve hours before the New York stock market opens tomorrow. Once the news comes out tomorrow that Bank of America refuses to acquire Merrill Lynch, the financial crisis will most likely continue to worsen.

To use an old Chinese saying, the capital market is now like a frightened bird, unable to bear any negative news. "

Zhou Xin thought to himself, don't you mean that Bank of America won't take over, and you need a new takeover?Paulson continued: "We now need new people to take on Merrill Lynch.

Currently, the only large financial institution on the market that still holds a huge amount of cash and has the ability and willingness to acquire Merrill Lynch is NewPay. "

NewPay raised a large amount of cash by going public. In addition, NewPay is a financial technology company with more technological attributes than financial attributes. It did not have a license before, so it did not personally participate in the financial business, and its debt situation is very healthy.

Zhou Xin said: "Henry, this is too sudden. Merrill Lynch is very good. When I first went to Americen, Merrill Lynch was very famous. Including when Riot Games was launched, Merrill Lynch executives came to talk to me. , saying they wanted to be Riot’s listing sponsor.

At that time, Merrill Lynch was still at its peak. You asked me to acquire Merrill Lynch at this time. It was too sudden. It was like a beautiful woman called me tonight and said she wanted to marry me. I had to tell my parents today, and then tomorrow Just go through the formalities.

I need to think about it. You need to tell Peter the specific details. Now you can go to Peter and convene a meeting with NewPay’s executive team to discuss this matter.

In addition, we also need the policy concessions provided by the Federal Reserve to Bank of America. "

Normally, it doesn't matter how much debt you have. The bigger the financial institution, the greater the debt. What they earn is the interest rate difference, low-cost money, and income higher than the cost.

Citibank, for example, has a total of US$550 trillion in assets on its balance sheet, of which only US$[-] billion are subprime loans. It is normal for Prince not to notice the difference.

Because before the subprime mortgage crisis, the bonds corresponding to subprime loans were AAA risk-free bonds. You would not even notice that there are 3 billion more risk-free bonds in your $400 trillion balance sheet.

"Okay, I'll contact Peter first." Paulson heard the hint of drama in Zhou Xin's tone, so he quickly agreed.

The role of the Secretary of the Treasury is so boring. He acts like a tinker, patching up one wall and tearing down one wall to patch another. Paulson is under so much pressure that he suffers from insomnia every day.

He had been in New York during this period, and Peter Thiel, who had just completed the Douglas acquisition not long ago, was also in New York.The two briefly chatted on the phone and then made an appointment to meet at an address to discuss in detail.

Zhou Xin was very excited in Zhangjiang and had never thought about the opportunity to acquire Merrill Lynch. Merrill Lynch was the big cake, a very rare big cake in this financial crisis.

But Bank of America doesn't want it. It may also contain risks that he can't think of, so no matter how stable it is, all he needs to do is wait for news.

Because of the time difference between China and America, Zhou Xin stayed awake, waiting for a call from America.

During this period, he communicated with Peter twice, expressing his intention not to care what time it was in China in the morning and to notify him as soon as the results were available.

At the same time, Zhou Xin also found Warren Johnson and asked him to use his contacts on Wall Street to find out what the specific situation of Merrill Lynch was.

"Boss, I think this is a rare opportunity. Merrill Lynch's situation is very bad. They are facing huge losses. Their losses are as high as 300 billion U.S. dollars, and they are facing credit losses of more than 400 billion U.S. dollars.

They are already trying to sell risky assets to raise cash.

Although their debt situation is terrible, it is not without value.

Merrill Lynch's greatest value to NewPay is that they have branches in various countries and regions around the world, 1.7 financial advisors, and manage US$1.7 trillion in assets.

For NewPay, our cooperation with Merrill Lynch can achieve the effect of 1 plus 1 being far greater than 2. "

In fact, it is still a matter of greed. It also deals with subprime loans. In 2006, Goldman Sachs realized the risks and reduced its exposure to residential mortgage loans.

Merrill Lynch was also aware of this. Jeff, who was in charge of this business at the time, revealed the risks and believed that Merrill Lynch's risk exposure to the subprime loan guarantee business was too great and that they should reduce this type of business. As a result, Jeff was fired Fired.

Merrill Lynch went further and further into the subprime mortgage crisis until the situation was irreversible.

Time is urgent. Zhou Xin has to make a decision within twelve hours. Lehman Brothers has gone bankrupt. Merrill Lynch sounds good, but is it really so good?

If it's so good, why doesn't Bank of America buy it?

Zhou Xin said: "Okay, Peter, I understand, I need time to think about it."

Zhou Xin felt that it was not that simple. Pies in the sky would not fall, especially for Chinese people. How could such an opportunity come to the Chinese people?

He chose to give up the takeover, no matter how good the Merrill Lynch cake was, it would be over if NewPay was dragged down with it.

But he still wanted to wait for news from Warren, and was a little reluctant to give up.

“Boss, Merrill Lynch’s asking price is too high. They want a purchase price of US$1000 billion, which is fully double what Bank of America expected.

O'Neill particularly insisted on his decision. The Federal Reserve could only provide Bank of America with an emergency capital injection of US$150 billion, which was too far from the price Merrill Lynch wanted.

Neither O'Neal nor Levis were willing to bow to the other. "

O'Neal is the CEO of Merrill Lynch, and Levi is the CEO of Bank of America.

“Merrill Lynch is currently facing huge losses and an unprecedented dilemma. Users are leaving Merrill Lynch, its business is shrinking, its liabilities are huge, and Merrill Lynch has lost the trust of its users.

O'Neill's past crazy behavior left Merrill Lynch saddled with a large number of non-performing assets, which became increasingly difficult to liquidate as the financial crisis spread.

Merrill Lynch is definitely not worth US$1000 billion. I think US$500 billion is too high.

If you want to acquire Merrill Lynch, it depends on when the financial crisis ends. If the financial crisis ends this year, then acquiring Merrill Lynch will be valuable.

But it seems that the financial crisis is far from over. "

(End of this chapter)