February 2010

Dr. Mark Weiss: Abusive Rate Increases From Anthem Blue Cross: It’s Time For Us To Make Our Voices Heard

February 24, 2010

Excruciating, that’s the pain I feel from people all over the country who have let me know we need to work together to stop abusive rate increases from Anthem Blue Cross. I have reviewed over 350 of your comments responding to “Throw The Bums Out” and more are coming constantly. This is great work from all of you, thank you. I believe we have managed already with “Throw The Bums Out” to make huge difference. This morning President Obama said he would propose legislation giving federal authorities the power to limit rate hikes by insurance companies. This is modeled on legislation proposed by Sen. Dianne Feinstein (D-Calif.). It is time for us to make our voices heard . Our leaders and legislators need our help. They need to know we want them to act on our behalf. So California, reach out to the White House, Rahm Emanuel, Senators Feinstein and Boxer, Congressman Waxman and every other Republican and Democratic elected official who can help us. Tell them if they want to get re-elected, they need to pay attention to our message. Together, we have the power to persuade them to stop these rate increases and start taking care of our health concerns or they can’t operate their businesses in California. There is strength in numbers. We can get this accomplished and they need our help to make it happen quickly. Our medical insurance is for our well being not to increase the bottom lines of insurance companies. So join me in contacting Feinstein, Boxer, Waxman and all your respective representatives and tell them “It’s Time To Throw The Bums Out.” Together we can change policy in California and the country.

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hi5 Expands Management Team With Online Gaming Veterans

February 24, 2010

Big Six Acquisition Brings Co-Founders Kevin Gliner, Monty Kerr and Chad Hansing to hi5 Executive Team

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Americans Want To Get Back To Work: Why Won’t The Government Hire Them?

February 24, 2010

Glenn Blackburn, 45, has been collecting unemployment ever since he got laid off in August 2008. He’s grateful for the money, but what he really wants is to put in an honest day’s work. “It’s like a year and a half of just sitting around doing nothing,” said Blackburn. “It gets demoralizing.” In fact, he’d rather the government paid him to do something rather than just send him a check every two weeks while he searches for a job. “I live in Michigan, and there is plenty to fix around here,” the former casino worker tells HuffPost. “Put me to work digging ditches or helping build roads. Anything is preferable to sitting on my butt. This would give those of us on unemployment back our pride and actually accomplish something with the money being spent. There is a work force of a million people just sitting idle waiting for something to do. That is a massive amount of lost labor that could be fixing America’s infrastructure. Instead of unemployment, hire me to do that.” That potential work force is actually way greater than a million people; there are over 11 million American workers currently getting unemployment benefits and another 3.5 million or so who want jobs but can’t find them. Marvin Bohn, (pictured at right) a 57-year-old former executive chef in Ohio, is another American who wants to work for his money. He’s been getting unemployment checks since June 2008. “You keep wondering what’s gone wrong. Is there something wrong with you? You apply for jobs you’re overqualified for and you don’t get ‘em, and you get chided for making too much on unemployment.” By contrast, a government job sounds good to him. “Instead of receiving the unemployment checks, even if it’s a fill-in job, it’d be doing good,” he said. “I would be very happy to do that.” Christopher Hardin of Valdese, N.C., (pictured at right) said he, too, would jump at the opportunity to work rather than put up with the indignity of a futile job search in return for unemployment benefits. “Being 55, I haven’t been able to find any work,” said Hardin, whose most recent job was loading and unloading trucks for an auction house. “I apply for jobs all the time. I don’t get any return email or phone calls.” Blackburn, Hardin and Bohn — and however many other Americans want the government to put them back to work, too — don’t have many champions on Capitol Hill or in the White House. Democratic leaders, increasingly worried that members of their party will get swept out of office in the November elections, are desperate to do something about job creation. But the packages they are seriously considering are a mishmash of ineffective or inefficient measures, distinguished only by their political safety. The $15 billion jobs bill passed by the Senate Wednesday morning grants tax breaks to businesses that hire unemployed workers, and a $1,000 credit if the new workers stay on the job for a year. But economists point out that much of that will subsidize hires that would have been made anyway, and even in the best case won’t make a big dent in the problem. The bill also encourages business investment by accelerating tax write-offs. And yet, despite a distinct lack of enthusiasm from Democratic or Republican party leaders, economists from both the left and right made the argument at a Tuesday hearing of the House Financial Services Committee that there’s an urgent need for the government to put people to work directly. And they explained why. “Someone separated from the labor force runs the real risk of permanently separating from the normal economy. It is crucial that we reconnect as many people as possible before it is too late,” said Kevin Hassett, a former senior economist at the Federal Reserve and current director of economic policy studies at the conservative American Enterprise Institute. “The good news is that a lifeline now could easily start a worker back on a positive career track, making the lifeline a much more cost effective policy than years of welfare support. “Direct jobs programs could be a much more powerful way to get this process going than last year’s stimulus,” Hassett said. “If the economic stimulus moneys were spent directly hiring individuals, they would have created 21 million jobs.” Hassett suggested that more money should go to state programs that fund new private-sector and public-sector jobs. But he also supports direct government hiring. Larry Mishel, president of the progressive Economic Policy Institute, pointed out that this has been done before. “Twice in the past during times of high unemployment, the United States successfully turned to large-scale programs of direct job creation,” Mishel said. “We know from those experiences that a $40 billion public jobs program can be geared up quickly and help put a million of our citizens back to work in jobs that will improve their communities and contribute to shared prosperity.” Mishel suggested several “fast-track” jobs that could put people to work within six to nine months: painting and repairing schools and other public facilities, cleaning up abandoned buildings, and staffing emergency food programs, among others. Direct employment under Mishel’s proposal would cost $40 billion a year at $40,000 per job. (Princeton economist Alan Blinder wrote in a Washington Post op-ed last week that direct hiring for public works jobs would cost $30,000 per year — a lot less than the $100,000 per job he estimates for “garden variety” stimulus spending.) By contrast, the proposals emanating from Congress and the White House won’t work very well as long as consumers and other businesses aren’t buying. A growing consensus among economists is that it’s the demand side — not the supply side –of the problem that needs to be more directly addressed. “Businesses won’t invest and start hiring until consumer demand picks up, which won’t happen with 27 million people unemployed or underemployed. Obviously, the overwhelming need is to create jobs — millions of them, as quickly as possible,” Mishel said. Andy Stern, president of the Service Employees International Union, told the House committee: “We began 2010 with fewer jobs than we had in 2000, though the labor force has grown by almost 11 million workers since then. “There are currently more than 6 unemployed workers for every job opening. There are nearly 15 million unemployed workers in America; more than 6 million have been jobless for over six months. Worse yet, there are now almost 26 million workers who are either unemployed or underemployed. That is the equivalent to the population of 18 states. The scope and scale of the jobs crisis is clearly a national emergency.” And Mark Zandi, chief economist for Moody’s Economy.com, told the panel: “We should err on the side of doing too much, rather than doing too little.” “Congress has the tools to create millions of jobs over the next 12 months,” Mishel said. “It also has the responsibility. The public is rightly demanding action, and there is no excuse — not the budget deficit, not fears of inflation, not feasibility — for failure to act.” As for Glenn Blackburn, unemployed and living with his fiancee and her two daughters in Petoskey, Mich., he says he’d be more than happy to do the types of work Mishel talks about. He worked for nine years at the Odawa Casino Resort, making about $17 an hour in wages and tips, before his layoff. He says the only work available anywhere nearby is what he calls “putt-putt jobs” — clerking at convenience stores or washing dishes. With those jobs, he’d earn less than the $388 he’s been pulling down in unemployment benefits every week, so it makes no sense to take them before his unemployment runs out (which he said will happen soon). In the meantime, he’s taking computer classes in hopes of making himself more employable. He’d be happier if the government just put him to work helping his own neighborhood. “What I’m making on unemployment,” he said, “if I could make that much and go out and they said, ‘Go out and start digging, of course I would.”

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Lloyd Chapman: Obama Broken Campaign Promise Celebrates Second Anniversary

February 24, 2010

It has now been two years since President Barack Obama released the statement, “It is time to end the diversion of federal small business contracts to corporate giants.” To date, President Obama has refused to adopt any policy or support legislation to stem the flow of billions of dollars in federal small business funds to large businesses around the world. http://www.barackobama.com/2008/02/26/the_american_small_business_le.php President Obama’s February 26, 2008 campaign promise was made in response to a series of federal investigations, which found that every month billions of dollars in federal contracts that have been earmarked for small businesses have been diverted to Fortune 500 corporations and other large businesses. http://www.asbl.com/documentlibrary.html Investigations by the Government Accountability Office (GAO), Small Business Administration (SBA) Office of Inspector General (IG), SBA Office of Advocacy, and Inspector General’s from various agencies such as the Department of the Interior (DOI), have found that federal small business funds have been diverted to Fortune 500 firms in the United States and even some of the largest companies in Europe and Asia. The American Small Business League (ASBL) projects that since President Obama took office approximately $10 billion a month in federal small business contracts have been diverted to large businesses. The most recent data released by the Obama Administration found Textron Inc. as the largest recipient of federal small business contracts. Textron is a Fortune 500 firm with 43,000 employees and annual sales over $14 billion. Textron received approximately $775 million in federal small business contracts in a single year. http://www.asbl.com/documents/20090825TopSmallBusinessContractors2008.pdf Other firms receiving federal small business contracts from the Obama Administration included Xerox, General Dynamics, Lockheed Martin, Boeing, Raytheon, Northrop Grumman, British Aerospace (BAE), Ssangyong Corporation headquartered in Seoul, South Korea and Finmeccanica SpA, which is located in Italy with 73,000 employees. http://www.asbl.com/documents/20091202GeneralDynamics_Created_20091027.pdf http://www.asbl.com/documents/20091202Xerox_Created_20091002.pdf In 2005, the SBA IG referred to the diversion of federal small business contracts to corporate giants as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.” For the last five consecutive years the SBA IG has reported these rampant abuses as the #1 management challenge facing the SBA. http://www.asbl.com/documents/05-15.pdf The ASBL has written legislation designed to halt the flow of small business contracts to large corporations. H.R. 2568, the Fairness and Transparency in Contracting Act currently has bipartisan support from 20 co-sponsors. ASBL believes that H.R. 2568 would create more jobs and direct more federal infrastructure spending to the middle class than anything that has been proposed by the Obama Administration to date.

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Dave Johnson: $108 Million Income = No Taxes

February 24, 2010

This post originally appeared at Speak Out California Michael Hiltzik in the LA Times today , To everyone who claims that our wealthiest citizens pay more than their fair share of income taxes and we should cut them a break because they’re the ones who, you know, create jobs in our economy, I have four words for you: Frank and Jamie McCourt. The McCourts, who own the Los Angeles Dodgers (so she says; he says he’s the owner and she’s not), jointly pocketed income totaling $108 million from 2004 through 2009, according to documents Jamie McCourt recently filed in the couple’s divorce case in Los Angeles County Superior Court. On that sum, they paid zero federal and state income tax. Jamie suggests that some tax breaks will apply this year too. The McCourts have eight houses.

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AIG ‘Boys Club’: Former Employees Allege Older Women Were Discriminated Against In Cassano’s Derivatives Unit

February 24, 2010

Feb. 24 (Bloomberg) — American International Group Inc.’s derivatives unit, which brought the firm to the brink of failure with bets on mortgages, was sued by two ex-vice presidents who said a “boys club” culture discriminated against older women.

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Hummer Discontinued, Joins Other Now-Defunct Famous Car Brands (PHOTOS)

February 24, 2010

GM announced today it has discontinued its Hummer brand , hardly the first such announcement in recent years. The end of brands isn’t exactly surprising. Auto journalist Steve Parker declared the Pontiac, Hummer, Saab and Saturn brands all dead on HuffPost in April 2009 . Ironically today, Saab was finally sold to a Dutch company, a brand GM previously announced it would be discontinuing. But those other brands haven’t been so fortunate. GM had been trying to sell the Hummer brand, but those talks failed. Here are some other famous car brands that have died over the years. Which do you miss most? Do you own any of these vehicles or have you?

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House Votes To Repeal Antitrust Exemption For Health Insurers

February 24, 2010

The House voted overwhelmingly Wednesday to repeal the antitrust exemption currently granted to health insurance companies.

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John V. Budraitis, Former Kodak Executive, Joins myPhotopipe.com as Director of Sales

February 24, 2010

Budraitis to Spearhead Company’s Entry Into $1 Billion-Plus Event Photography Market

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Piero Bussani Elected to U-Store-It Trust’s Board of Trustees

February 24, 2010

WAYNE, PA–(Marketwire – February 24, 2010) –  U-Store-It Trust ( NYSE : YSI ) announced that Piero Bussani has been elected to the Company’s Board of Trustees effective February 23, 2010. He is expected to stand for re-election at the June shareholders meeting, when his current term of office expires.

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Dodd Introduces Constitutional Amendment To Reverse Supreme Court Campaign Finance Decision

February 24, 2010

Sen. Chris Dodd (D-Conn.) introduced a constitutional amendment today to overrule a recent Supreme Court decision on campaign spending. The court ruled 5-4 last month in Citizens United v. FEC that Congress cannot regulate independent expenditures by corporations and possibly labor unions. The ruling could dramatically increase third party spending on elections.

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GM Ending Hummer: Controversial Brand To Be Discontinued (PHOTOS)

February 24, 2010

The AP is reporting that the Hummer brand is no more, after a deal with a Chinese manufacturer fell through. It’s not GM’s first failed deal to sell a brand since it came out of bankruptcy, The New York Times notes . A deal to sell the Saturn line fell apart. After a few false starts, the Dutch company Spyker agreed to buy the Saab brand. (Scroll down for a slideshow retrospective on the Hummer brand.) Here’s the AP: “DETROIT – General Motors Co. said Wednesday it will shut down Hummer after its bid to sell the brand to a Chinese company collapsed. Heavy equipment maker Sichuan Tengzhong Heavy Industrial Machines Co. pulled out of the deal for Hummer, known for its hulking, military-like SUVs, because it was unable to get clearance from Chinese regulators within the proposed deal timeframe, the manufacturer said in a separate statement. GM said it will continue to honor existing Hummer warranties. “We are disappointed that the deal with Tengzhong could not be completed,” said John Smith, GM vice president of corporate planning and alliances. “GM will now work closely with Hummer employees, dealers and suppliers to wind down the business in an orderly and responsible manner.” GM has been trying to sell the loss-making brand for the last year and found a suitor in Tengzhong, but resistance from Chinese regulators created difficulties from the start. As recently as Tuesday private investors were trying to set up an offshore entity in a last-minute effort to complete the acquisition head of a Feb. 28 deadline. Hummer is the second brand after Saturn that GM has failed to sell as part of its restructuring. GM sold Swedish brand Saab to Dutch carmaker Spyker Cars NV earlier this year. Pontiac is being discontinued. GM is focusing its efforts on its four remaining brands: Chevrolet, GMC, Cadillac and Buick.” Last month Bloomberg reported that Hummer’s management was expecting a deal to come through. It’s unclear why the deal fell through. Here’s Bloomberg: “While the transaction approval process is not proceeding as quickly as originally forecasted, we’re optimistic about the progress that has occurred to date,” Jim Taylor, Hummer’s chief executive officer, said in an e-mailed statement. “There are more than 3,000 people directly employed in the design, build and sale of Hummer vehicles. As such, we are committed to giving the sale every reasonable opportunity toward a successful conclusion.” Check out these PHOTOS of the Hummer brand:

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Bernanke Backs Audit of Fed Loan Programs, Naming of Borrowers After Delay

February 24, 2010
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Apple’s Jobs Calls on `Outsider’ Avon CEO to Serve as Co-Leader of Board

February 24, 2010
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German Olympic Medal Tally Rises in Quest to Own Podium Again

February 24, 2010
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Greece Failed to Notify EU of 2001 Off-Market Swap Contract, Eurostat Says

February 24, 2010

By Jones Hayden and Gavin Finch Feb. 24 (Bloomberg) — Greece failed to notify the European Union about a 2001 swap contract that helped mask the size of its debt and told the EU in 2008 that the government was prohibited from using off-balance-sheet derivatives, the EU’s statistics office said. “For the first time, the Greek authorities have declared the existence of an off-market swap operation in 2001,” the Luxembourg-based statistics office, Eurostat, said in an e- mailed statement today. “Concerning the specific off-market swap operation, Greek authorities had not informed Eurostat about this kind of government transaction.” “On the contrary, during a Eurostat visit to Greece on 15- 19 September, 2008,” Eurostat said, “the Greek authorities declared that, in Greece, government units are not allowed by law to engage in off-market financial derivatives.” That was after Eurostat in March of that year had issued new regulations on the recording of derivatives. The EU accounting watchdog last week ordered Greece to provide information on its swaps as it investigates whether the country used derivatives to hide the extent of its budget deficit, and if other countries used them. Eurostat said the Greek authorities delivered a package of information yesterday evening on off-market swaps for 2001-2009 that it called “incomplete.” Goldman Sachs Group Inc. helped the Greek government hedge bonds sold in euros and yen in 2000, the firm said in a statement on its Web site on Feb. 22. The nation sought to cut its borrowings in foreign currencies after deciding to join the euro because a rising dollar or yen would inflate its debt level in euros, Goldman Sachs said. The bank then arranged new cross- currency swaps and restructured its other swaps with Greece at a historical exchange rate in December 2000 and June 2001. New York-based Goldman Sachs helped Greece raise $1 billion of off-balance-sheet funding through the swap, which EU regulators said they knew nothing about until recently. The Greek authorities told Eurostat that repayment on the swap contract began in 2004, the statistics office said. “The increase in government debt due to this specific swap operation from 2004 onwards” will have to be determined, Eurostat said. To contact the reporters on this story: Jones Hayden in Brussels at jhayden1@bloomberg.net ; Gavin Finch in London at gfinch@bloomberg.net .

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SEC Votes 3-2 to Restrict Short Sales, Rejecting Goldman Sachs’s Lobbying

February 24, 2010

By Jesse Westbrook Feb. 24 (Bloomberg) — The U.S. Securities and Exchange Commission curbed some bearish stock bets, ending a yearlong debate between individual investors and Wall Street with a solution that fails to satisfy anyone. SEC commissioners voted 3-2 today to restrict short sales of a company’s stock once it falls 10 percent from the previous day’s closing price. When the 10 percent threshold is triggered, traders could only execute short sales for the stock at a price above the market’s best bid. The curb would be in place through the following day. General Electric Co. , Charles Schwab Corp. and more than 5,600 people who signed a petition sent to the SEC wanted a short-selling restriction that was always in effect, similar to the so-called uptick rule the agency abolished in 2007. Goldman Sachs Group Inc. and hedge funds Citadel Investment Group LLC and D.E. Shaw & Co. lobbied against a limit. “Short selling can play an important and constructive role in the markets, such as by providing market liquidity and pricing efficiency,” SEC Chairman Mary Schapiro said before the vote in Washington. “However, we are also concerned that excessive downward price pressure on individual securities, accompanied by the fear of unconstrained short selling, can destabilize our markets and undermine investor confidence.” S&P Drop The SEC said in March that it would consider restrictions on short selling, which involves the sale of borrowed stock in the hope of profiting by buying the securities later at a lower price and returning them to the shareholder. The decision followed a 19 percent drop in the Standard & Poor’s 500 Index in the first two months of 2009 and lobbying by 27 members of Congress, including Representative Barney Frank , the Massachusetts Democrat who leads the House Financial Services Committee . “Nobody is going to be happy,” said James Angel , a finance professor at Georgetown University in Washington who has served as an adviser to stock exchanges. “The benefit of this new rule is that it provides political cover to the SEC so they can say they did something.” The lawmakers wanted the SEC to bring back the uptick rule, which barred investors from betting against a stock until it sold at a price higher than the preceding trade. The limitation had been in place for almost 70 years before the SEC scrapped it in June 2007. Four months later, the S&P 500 began a 17-month bear market that erased 57 percent of its value. Commissioners Elisse Walter and Luis Aguilar , both Democrats, joined Schapiro, a political independent, in backing the curbs. Implementation Costs Once the rule takes effect in 60 days, securities firms and stock brokers will have another six months to revise their trading systems to implement the changes. The SEC estimates implementation will cost the financial industry about $1 billion, or an average of $70,000 to $90,000 per firm. Ongoing costs will also be about $1 billion a year, or $120,000 per firm, the SEC estimated. Republican Commissioners Kathleen Casey and Troy Paredes opposed the rules, saying they weren’t convinced the benefits from limits on bearish bets will outweigh the costs. Casey said the SEC failed to provide empirical data that shows more regulations are needed, giving the impression that the agency’s vote was mostly about public relations. ‘Regulation by Placebo’ “We should resist the urge to act simply to say we have acted,” she said. “This is regulation by placebo.” The rule is a failed attempt to boost stocks that will increase transaction costs for traders, said James Chanos , chairman of the Coalition of Private Investment Companies, a Washington based hedge-fund group. “This puts a government thumb on the scale of stock prices,” Chanos said in a statement after the vote. “Efforts to prop up stock prices where the fundamentals will not sustain them will inevitably fail.” Chanos, who also serves as president of New York-based Kynikos Associates, is a short-seller who was one of the first investors to bet against Enron Corp. The energy company collapsed amid an accounting fraud in 2002. The SEC ignored a request from trading venues including the Chicago Board Options Exchange to exempt market makers from the new rules. Brink of Collapse Short selling was blamed by lawmakers, former Morgan Stanley Chief Executive Officer John Mack and investors for pushing the U.S. economy toward the brink of collapse by driving down bank stocks. Under pressure from politicians, the SEC temporarily banned bearish bets against almost 1,000 financial stocks in September 2008. Michael McAlevey , a vice president at GE, urged the SEC during a May conference to restrict short selling all the time instead of just enacting circuit breakers following a 10 percent plunge. He said the Fairfield, Connecticut-based company, whose units range from a finance division to a producer of turbines for power plants , was concerned temporary curbs would encourage bearish bets because traders would rush in to execute short sales before the circuit breaker was triggered. GE spokeswoman Anne Eisele said the company’s stance hasn’t changed. There’s no evidence the SEC proposals will reduce abusive short selling or boost investors’ confidence, Paul Russo , the head of U.S. equities trading for Goldman Sachs, wrote in a September letter to the SEC. Bearish bets help expose fraud and prevent companies from becoming overvalued, he said. His New York-based employer is the most-profitable securities firm in Wall Street history. Russo’s letter reflects Goldman Sachs’s current views, company spokesman Ed Canaday said. Goldman Sachs, Chicago-based Citadel and D.E. Shaw in New York all urged the SEC against restricting short selling. If the SEC determined that new rules were necessary, the three companies encouraged the agency to opt for a circuit breaker. To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net .

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Deutsche Bank Subprime Trader Lippmann May Leave for New Investment Firm

February 24, 2010

By Jody Shenn, Pierre Paulden and Jacqueline Simmons Feb. 24 (Bloomberg) — Greg Lippmann , the Deutsche Bank AG trader whose bets against subprime securities helped Germany’s largest lender weather the financial crisis, may leave to join a new investment firm, three people with knowledge of the talks said. The new company is being started by Fred Brettschneider , Deutsche Bank’s head of global markets in the Americas, according to the people, who declined to be identified because the discussions are private. Brettschneider’s departure and plans were announced internally in a memo today, according to Deutsche Bank spokeswoman Michele Allison . Lippmann declined to comment. Brettschneider has committed to remaining with Deutsche Bank until his replacement is named, she said. He didn’t return a phone call seeking comment. To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net ; Pierre Paulden in New York at ppaulden@bloomberg.net ; Jacqueline Simmons in Paris at jackiem@bloomberg.net

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General Motors to Wind Down Hummer After Sale to Sichuan Tengzhong Fails

February 24, 2010

By Bill Koenig Feb. 24 (Bloomberg) — General Motors Co. said Sichuan Tengzhong Heavy Industrial Machines Co. was unable to complete the acquisition of the Hummer brand. GM said it will “begin the orderly wind-down of the Hummer operations.” The information was on GM’s Web site.

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Toyota Doesn’t `Run Away’ From Problems, Akio Toyoda Tells U.S. Lawmakers

February 24, 2010

By Angela Greiling Keane and Jeff Plungis Feb. 24 (Bloomberg) — Toyota Motor Corp. ’s president told a U.S. congressional panel “we never run away from our problems,” as the committee examines the world’s largest automaker’s record recalls. Akio Toyoda ’s remarks before the U.S. House Oversight and Government Reform Committee came in his first U.S. testimony following recalls of about 8 million cars and trucks worldwide for defects that may cause sudden acceleration. To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net ; Jeff Plungis in Washington at jplungis@bloomberg.net

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U.S. Stocks Climb, Dollar Falls on Bernanke Remarks; Treasuries Pare Gain

February 24, 2010

By Elizabeth Stanton Feb. 24 (Bloomberg) — U.S. stocks rose, halting a two-day drop in the Standard & Poor’s 500 Index, after Federal Reserve Chairman Ben S. Bernanke said the economy still requires low interest rates to spur demand. JPMorgan Chase & Co. and Bank of America Corp. paced gains in banks after Bernanke told Congress that the “nascent” recovery will warrant “exceptionally low levels of the federal funds rate for an extended period.” Autodesk Inc., the biggest maker of engineering-design software, jumped 9.4 percent on profit and sales that beat analyst estimates. “The market is breathing a sigh of relief that he didn’t say anything hawkish,” said John Kattar , chief investment officer at Eastern Investment Advisors in Boston, which manages $1.6 billion. “The Fed is trying to walk a very fine line between satisfying the tremendous political pressures on them and maintaining credibility.” The Standard & Poor’s 500 Index rose 0.8 percent to 1,103.62 at 2:27 p.m. in New York following its biggest decline in more than two weeks yesterday. The Dow Jones Industrial Average increased 82.99 points, or 0.8 percent, to 10,365.40. U.S. stocks retreated yesterday after a gauge of consumer confidence decreased to the lowest level since April 2009, spurring speculation the economic rebound will slow. The S&P 500 is down about 4 percent since reaching a 15-month high on Jan. 19 amid growing concern that widening budget gaps in Greece, Portugal and Spain will send Europe into another recession. Rate Bets Interest-rate futures traders increased bets the Fed will leave its target for the overnight lending rate between banks unchanged through September. The Fed dropped the target to a record low range of 0 percent to 0.25 percent in December 2008 to halt the recession. While the U.S. economy grew at an estimated 5.7 percent rate during the fourth quarter and short-term funding markets have recovered to pre-crisis levels, the U.S. unemployment rate stands at 9.7 percent, up from 5 percent two years ago, and the housing market’s recovery has stalled, Bernanke said. Stock benchmarks temporarily pared their advance in the half hour after Bernanke’s testimony was released as a Commerce Department report at the same time showed sales of new homes unexpectedly fell to the lowest level on record in January even after the extension of a government tax credit. ‘Additional Comfort’ “The Bernanke comments were as expected and the continued low rates language gives the market additional comfort,” said Lon Erickson , a portfolio manager who helps invest about $4 billion at Thornburg Investment Management Inc. in Santa Fe, New Mexico. “The home sales numbers were a little bit at odds with Bernanke talking about early signs of recovery.” Bernanke’s semi-annual monetary policy testimony before the House Financial Services Committee also discussed the central bank’s progress toward ending the various market-stabilization programs introduced during the financial crisis. The central bank “will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets,” he said. JPMorgan Chase, the second-largest U.S. bank by assets, rose 2.5 percent to $40.86, the biggest gain in the Dow average. Bank of America, the biggest U.S. bank, climbed 2.3 percent to $16.30. Financial stocks in the S&P 500 increased 1.7 percent as a group, the most among the index’s 10 industry groups. Earnings Season Autodesk jumped 11 percent to $28.43. Excluding some costs, profit was 30 cents a share. Sales were $456 million in the period, which ended Jan. 31. Analysts had estimated profit of 23 cents and sales of $432 million on average, according to a Bloomberg survey . Transocean Ltd. fell 5.1 percent to $80.22. The world’s largest offshore driller reported fourth-quarter profit that was below analyst estimates amid waning demand for exploration rigs. Excluding one-time items such as gains and costs from the sale of a joint-venture stake, per-share profit was 13 percent less than the average of 34 analysts’ estimates compiled by Bloomberg. H&R Block Inc. slid 14 percent to $17.05. The biggest U.S. tax preparer said it will miss its fiscal 2010 forecast as it processed fewer returns. The combined per-share earnings for the S&P 500 are $17.50 based on fourth-quarter reports by 453 companies, according to Bloomberg data, compared with a per-share loss of 9 cents in the year-earlier period, according to Standard & Poor’s. Profits Top Estimates Per-share profit declined from the year-earlier figure in each of the past nine quarters, a record slump. Per-share earnings topped analysts’ average estimates at three-quarters of the 429 companies in the S&P 500 that have posted quarterly results since Jan. 11, according to Bloomberg data. The risk that a government funding crisis in Europe will spread across the Atlantic Ocean is declining, bolstering corporate bond markets in the U.S., credit-default swaps show. Since Feb. 10, the day before European Union President Herman Van Rompuy pledged to safeguard financial stability in the euro region, the cost to protect company debt in America from default has dropped 7.3 percent, while it fell 2.1 percent in Europe. In the five weeks before the statement, prices moved almost in lockstep with swaps climbing 34 percent in the U.S. and 35 percent in Europe, CMA Datavision data show. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net .

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StartUp Visa Act: Senators Kerry, Lugar Propose Legislation That Would Grant Visas To Entrepreneurs

February 24, 2010

It looks like the startup founder visa, a concept that has a lot of backing from the startup and venture community, might actually become a reality: Senators John Kerry and Richard Lugar (a Democrat and a Republican, respectively) today introduced the Startup Visa Act, which reflects many of the ideas pushed by the movement’s advocates.

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Taylor Leake: Walmart’s Sick Day Policy Hurts Workers, Families, and Customers

February 24, 2010

Walmart’s irresponsible sick leave policy encourages workers to come in to work when they are sick, which risks spreading diseases like the flu to other employees and the public. Last fall, Walmart was exposed for its track record of giving employees “demerits” that can lead to termination when they call in sick. In addition, full-time Walmart associates aren’t able to use their accrued sick leave for the first day they are sick. Walmart also ignored government recommendations to let employees suffering from H1N1 stay home without fear of punitive action. Walmart’s policies and actions create a working environment where employees feel they are faced with a choice between going to work sick (and potentially spreading the illness) and keeping their job. Patricia from Ohio faced such a choice and had to work with pink eye so severe that one of her eyes was swollen shut and she could barely see. She told her managers she needed to go home because she was contagious, but Walmart informed her that she would get a “demerit” if she worked less than 4 hours. Patricia couldn’t afford any more “demerits” because she had already taken sick leave time for a rotator cuff injury she sustained on the job. We’ve heard similar stories from workers across the country. Beatrice enjoyed her two years as a greeter at Walmart, but twice was refused bathroom breaks. As a result she suffered a bladder infection and was chastised for taking time off to recover. We made a video of Beatrice’s incredibly moving story. Because of Patricia, Beatrice and all of Walmart’s employees Wake Up Walmart is working to raise awareness about Walmart’s irresponsible sick leave policy and demand change. Today marks the launch of a week of action lead by Wake Up Walmart and a coalition of advocacy groups like MomsRising.org calling on Walmart to change its harmful sick day policy. You can learn more and help us spread the message by going to Wake Up Walmart .

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Toyota CEO Akio Toyoda To Congress: ‘I’m Deeply Sorry’

February 24, 2010

WASHINGTON — Toyota CEO Akio Toyoda apologized on Wednesday to Congress – and millions of American Toyota owners – for safety lapses that led to deaths and widespread recalls for accelerator and braking failures. But he disputed claims by some safety experts that the cars’ electronic throttles might be at fault. “I’m deeply sorry for any accident that Toyota drivers have experienced,” said the grandson of the founder of the world’s largest automaker. Amid a phalanx of cameras, Toyoda, dressed in a dark suit, stood before the House Oversight and Government Reform Committee, raised his right hand and promised to tell the truth. House committee chairman Edolphus Towns welcomed him and thanked him for volunteering to testify. “We’re very impressed with that. It shows your commitment to safety as well,” Towns said. Toyoda pledged his company would change the way it handles consumer complaints, including seeking greater input from drivers and outside safety experts when considering recalls. Toyota managers will also drive cars under investigation to experience potential problems first hand, he said. He suggested his company’s “priorities became confused” in its quest for growth over the past decade at the expense of safety concerns. Toyoda told the panel he was “absolutely confident” there was no problem with the electronics of Toyota vehicles and repeated the company’s stance that sudden accelerations were caused by either a sticking gas pedal or a misplaced floor mat. Toyota has recalled 8.5 million vehicles, mostly to fix problems with floor mats trapping gas pedals or with pedals getting stuck. In addition, Toyoda said the company is making changes so brake pedals can override a sudden acceleration and bring a runaway vehicle to a safe stop. Toyoda read from prepared remarks that had been released the day before. “My name is on every car. You have my personal commitment that Toyota will work vigorously and unceasingly to restore the trust of our customers,” he said. He delivered his short remarks clearly in somewhat accented English. However, when the questioning session began, he switched to Japanese with the help of a translator. Asked by Towns if Toyota has divulged all safety information it has to U.S. officials, Toyoda said through the interpreter, “We fully share the information we have with the authorities.” Appearing with him was Yoshimi Inaba, head of Toyota Motor North America. “We are committed not only to fixing vehicles on the road and ensuring they are safe, but to making our new vehicles better and even more reliable through a redoubled focus on putting our customers first,” Inaba said. Moments before Toyoda’s arrival, dozens of photographers sat on the floor in front of the witness table, waiting for the automotive scion. About a dozen TV cameramen were ushered in by an aide, their cameras almost colliding with each other as they rushed to get good spots. “Easy, easy! Slow it down,” someone called out. At 2:20 p.m., a stonefaced Toyoda entered the committee room from a side doorway, trailed by the female interpreter and Inaba. He walked down two steps, past the desks of two congressmen and into the swarm of photographers amid a cascading sound of clicking camera shutters. Some early communication problems emerged when Towns asked whether the automaker would install a brake override system on all vehicles as an additional safety mechanism. Toyoda, through his translator, explained that there were four factors that contributed to the problems and the company was installing the override system on some vehicles. “Is that a yes or no?” asked a puzzled Towns. “I’m trying to find out, is that a yes or no?” Inaba stepped in and told the committee the automaker would install the brake override system on all new models by the end of the year, reiterating a previously made pledge. Rep. Paul Kanjorksi, D-Pa. asked Toyoda whether the company treated Japanese and American consumers differently, saying he wanted “to hear in my own mind that there hasn’t been this difference between the home market and the American market.” Toyoda said the automakers provided “the same degree of care to customers in the United States and the world over.”

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Slamming Bank of America With Fine Slams Victims: Ann Woolner

February 24, 2010

Commentary by Ann Woolner Feb. 24 (Bloomberg) — U.S. District Court Judge Jed S. Rakoff really, really, really wanted to toss out a $150 million settlement between Bank of America Corp. and federal regulators this week. He called the agreement “half-baked justice,” “inadequate and misguided” even as he approved it, fingers firmly grasping nose. Rakoff had already nixed an earlier, $33 million agreement between the bank and the Securities and Exchange Commission as a sweetheart deal. He ordered both sides to tell him more, much more, about how and why Bank of America shareholders were denied material information at a critical time. The bank was buying Merrill Lynch, which was losing money, far more money and much faster than bank managers were telling shareholders. It’s the sort of thing shareholders would have wanted to know before voting on the merger, to know what they were getting into and whether they wanted to go there. When the bank and the SEC gave their version of events, the judge remained unconvinced that either side was giving him the full picture. The SEC seemed to lack that adversarial edge that digs for the truth. So Rakoff sought out one of the bank’s most adversarial foes, New York Attorney General Andrew Cuomo , for the evidence his investigators had marshaled in a separate, state case he filed against the bank and two former executives. But that didn’t resolve Rakoff’s underlying dilemma. Nothing short of rejecting the money part of the deal could have. He wrote as if he should and would in this week’s ruling. The settlement’s $150 million fine “penalizes the shareholders for what was,” he wrote, “a fraud by management on the shareholders,” intentional or otherwise. The victims pay. The managers don’t. So, why impose a fine at all? Shareholders Deceived If the point is to deter wrongdoing, it should be assessed against the people responsible, not some corporate entity, Rakoff wrote. But the SEC sued only the bank, which Rakoff concluded misled investors about mammoth Merrill losses and about Merrill’s bonuses. At least he pushed for the fine to be tailored so that only former Merrill shareholders would pay it and the bank’s shareholders would receive it, except for directors and officers. That doesn’t solve the fundamental problem. Merrill shareholders didn’t cause the misrepresentations, though they benefited from them by getting more than their shares were worth. Yet Rakoff can’t fine the specific culprits because the SEC didn’t sue any people. Cuomo Names Names Cuomo did. The state’s lawsuit specifically blames former bank President Kenneth Lewis and ex-Chief Financial Officer Joseph Price . Because the SEC didn’t, they weren’t part of the settlement and weren’t standing before Rakoff for judgment in federal court. The real culprit in Rakoff’s order is the SEC, for its habit of going after corporations instead of taking on the tougher task of naming individual managers, says John C. Coffee Jr. , securities law professor at Columbia University. He hopes the SEC realizes that punishing shareholders only tarnishes its reputation as an enforcer. How much stronger the message if Rakoff had rejected any and all monetary penalties against the bank. Think of the headlines that would have produced, the people forced to ponder whether it makes sense to slam corporations and shareholders but not the individual deciders. That is what James Cox , securities law professor at Duke University, says should have happened to spare investors a double whammy. Managers Get Off “Why should they have to pay for the ineptitude of their managers, when they are the victims?” he asks, adding that he doesn’t necessarily believe ineptitude explains what happened. Cuomo calls it fraud, albeit civil fraud not criminal. His suit blames it on “self-interest, greed, hubris and a palpable sense that the normal rules of fair play don’t apply.” The funny thing is that Rakoff’s ruling could signal that Cuomo’s claims lack substance. The judge sifted through mounds of Cuomo’s investigative documents to see whether the SEC had ignored evidence of intentional fraud. He also hoped to explain the vastly different versions of events offered by Cuomo, the bank and the SEC. After doing all that, Rakoff determined that the SEC had acted reasonably. He found “substantial evidence” that the bank’s misleading statements resulted from mere negligence, not intentional lying. Taking No Sides And even though Rakoff made it clear he wasn’t deciding which version was true, or whether one side had more evidence than the other, surely Lewis and Price took some solace. This is a judge who wanted names to be named, but he stepped back from the chance. Rakoff gave a credible explanation for keeping his thumb off the scales. It isn’t his job to rule on Cuomo’s case. And yet, I can’t help but notice that Rakoff’s seemingly neutral finding said there is solid ground on which the defense can stand. If the SEC had named individuals, even if only for negligence, Rakoff wouldn’t have had to go through such contortions. On page 14 of his 15-page ruling, Rakoff says judicial restraint prevents him from slapping down the settlement, as unsatisfying as it is. And yet, what a grand way to get the message heard. Keep the corporate governance measures, strengthen them if you can and kick out the fine. The way to punish corporate wrongdoers is to punish the wrongdoers, not the shareholders who are the corporation. ( Ann Woolner is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in sidebar display to send a letter to the editor. To contact the writer of this column: Ann Woolner in Atlanta at awoolner@bloomberg.net .

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Obama’s `Man’ Goes Nuclear as Global Fixer: Alexandre Marinis

February 24, 2010

Commentary by Alexandre Marinis Feb. 24 (Bloomberg) — Barack Obama couldn’t have imagined that a casual exchange with Brazil’s president would complicate U.S. efforts to prevent Iran from developing nuclear weapons. On April 2, when world leaders convened in London for a G- 20 meeting, Obama approached President Luiz Inacio Lula da Silva and said, “That’s my man right here. I love this guy. The most popular politician on earth.” Lula, who doesn’t speak English, didn’t understand Obama’s friendly banter. The following day Brazil’s press reported that Obama called Lula “the man,” which in Portuguese translates into not “my buddy,” as Obama intended, but rather “the most important leader in the universe.” This mistranslation of an off-hand remark turned out to be no small deal. Many Brazilians viewed it as a case of Obama conferring first-world status on a nation that usually doesn’t get the respect it deserves. Afterward, Lula’s already strong approval rating shot up to 80 percent. Lula endears himself to Brazilians by reminding them that he’s one of them, someone who grew up poor and is tired of being treated as a second-class citizen of the world. He enjoys telling people that the global financial crisis was caused by the U.S. and other rich nations, not by Brazil. This is true, of course, and Brazilians love hearing their leader repeat it in speeches. Inflated Ego No one has ever accused Lula of lacking a healthy ego. So it’s no surprise he embraced this inflated interpretation of Obama’s bonhomie. Since the encounter in London, Lula has come to believe he can solve most, if not all, the world’s major problems, from an internal political crisis in Honduras to the Arab-Israeli conflict, global climate change and now even Iran’s apparent pursuit of atomic bombs. On Feb. 8, following Iran’s announcement that it was producing 20 percent enriched uranium — which paves the way for the higher grade material used in nuclear weapons — European diplomats told Le Monde that the Brazilians were making it more difficult for the United Nations Security Council to impose economic sanctions on the Islamic nation. Sanctions require approval of nine of the 15 council members. The five permanent members — China, France, Russia, the U.K. and the U.S. — have veto power. The Chinese, who buy oil from Iran and have other business interests in the country, such as the construction of a $3 billion refinery, oppose sanctions. They may veto the initiative, unless the other four permanent members can win the support of five additional temporary members. This would help to isolate the Chinese, possibly leading them to abstain from a vote. That’s where Brazil comes in. Lula’s Diplomacy Without the support of a strong emerging nation such as Brazil, persuading the council’s smaller members to approve economic sanctions against Iran will be difficult. Historically, Brazilian diplomacy has been recognized as effective and managed by a foreign service staffed with highly qualified professionals. Under Lula, though, the country’s foreign policy has proved ineffective in several ways. Lula’s approach hasn’t always supported Brazil’s best economic interests. It’s failed to swiftly adapt to changing circumstances. And it has been infused with an outdated anti- U.S. mentality. All these shortcomings are present in the way Brazil is responding to Iran’s nuclear program. Just last week, for example, when Lula was asked why he supported Iran’s government, he turned his response into an attack on the U.S. for waging war on Iraq. ‘Dangerous’ Assumptions Brazilian diplomats, like their counterparts in China, believe pressuring the Islamic nation is counterproductive, and they are probably right. “Unfortunately, the prospect of crippling the Iranian economy is a fallacy, and a dangerous one at that”, former U.S. State Department policy adviser Suzanne Maloney , an expert on Iran, wrote in a report in January. Nonetheless, at least so far, Brazilians have been unable to come up with an option other than economic sanctions. On Nov. 23, while under attack by the international community for hiding a uranium enrichment facility from the UN, president Mahmoud Ahmadinejad visited Brazil and was welcomed by Lula. The Brazilian president defended Iran’s right to pursue peaceful nuclear technology. Ahmadinejad, however, rejected Brazil’s offer to help Iran enrich uranium for civilian use. Earlier this month, the U.S. announced new unilateral sanctions against Iran. Lula, who recently received the first Global Statesmanship Award from the World Economic Forum , may still be able to help mediate a diplomatic solution to this conflict during an official trip to Iran in May. But his prospects don’t seem too bright. Backing Ousted Leader In 2009, Brazilian diplomats tried unsuccessfully to reinstate ousted Honduran President Manuel Zelaya. Violating international laws, the Brazilians allowed Zelaya to occupy their embassy in Tegucigalpa and to use the place as his political headquarters to spread social unrest throughout Central America’s second-poorest country. As was clear from the day he was ousted in a coup, Zelaya lacked sufficient public support to regain power. Finally, in November Hondurans democratically elected a new president, whom Brazil refuses to recognize. That’s the sort of diplomacy that grows out of an inflated ego. And all thanks to a couple of words lost in translation. (Alexandre Marinis, political economist and founding partner of Mosaico Economia Politica, is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Alexandre Marinis at amarinis1@bloomberg.net

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Job-Creation Bill Is Approved by U.S. Senate, Sending Legislation to House

February 24, 2010

By Brian Faler Feb. 24 (Bloomberg) — The U.S. Senate approved a $15 billion jobs plan that gives companies a temporary tax break for hiring those who have been unemployed for at least 60 days. The measure, passed 70-28 today, now goes to the House where Democratic leaders must decide whether to pass it without changes or to try to merge it with a $150 billion jobs plan the House approved in December. The Senate bill’s centerpiece is a $13 billion plan to fight unemployment by offering companies a one-year holiday from paying a 6.2 percent Social Security payroll tax for each of the new workers they add who meet the 60-day unemployed criteria. Other provisions would increase aid to state governments by expanding federal subsidies for bonds they issue to pay for construction projects, allow small businesses to immediately write off more of the cost of equipment purchases and raise infrastructure spending. The cost to the Treasury would be offset in part by cracking down on offshore tax evasion. Democrats previously rejected the payroll tax idea as part of an economic stimulus package passed last February. Senator Charles Schumer , a New York Democrat and one of the chief sponsors of the tax provision, said it makes more sense now that the U.S. economy is growing. ‘Business Sense’ “Obviously employers decide to hire workers when it makes business sense” and “no tax incentive, if your sales are declining, is going to encourage you to hire somebody,” he said. “But we’re finding that at this stage of the nascent, incipient and all-too-small recovery that many businesses, large and small, are finding orders beginning to rise.” Schumer said, “It is those businesses that our tax credit is aimed at — this proposal may give them the push they need to add a few workers or hire them a few months sooner than they otherwise might. Either would be a good thing.” The plan would save or create as many as 234,000 jobs, according to the Congressional Budget Office. Today’s vote came two days after Scott Brown of Massachusetts, along with four other Senate Republicans, joined Democrats to approve a motion to end Republican stalling tactics on the bill. Senate Minority Leader Mitch McConnell , a Kentucky Republican, had demanded a chance to make additional changes to the plan, including adding more tax cuts. Asked yesterday if we was unhappy with Brown, McConnell said his party “represents all parts of the country, different points of view. We don’t expect our members to be in lockstep on every single issue and we’re happy to have him here.” Senate Democrats said the jobs bill is the first in a series they hope to pass to boost the economy. Reid said lawmakers will soon take up legislation extending unemployment benefits, including subsidies to help the jobless buy health insurance, as well as additional aid to state governments struggling with slack tax revenue. To contact the reporter on this story: Brian Faler  in Washington at   or bfaler@bloomberg.net .

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WellPoint Increased Rates to Boost Profit, Executive Salaries, Waxman Says

February 24, 2010

By Alex Nussbaum and Nicole Gaouette (Corrects $1 million in second paragraph to compensation rather than bonuses.) Feb. 24 (Bloomberg) — WellPoint Inc. ’s internal documents show the health insurer sought to raise rates in California to boost company profits and cover costs ballooned by executive pay and corporate retreats, U.S. Rep. Henry Waxman said. WellPoint, the biggest U.S. insurer by enrollment, may have manipulated the actuarial assumptions it cited to justify a rate increase as high as 39 percent, Waxman, a California Democrat, said at a congressional hearing. The Indianapolis-based insurer also paid compensation of at least $1 million apiece to 39 executives in 2008 and spent $27 million over two years on executive getaways, Waxman said, citing documents obtained by the House Energy and Commerce Committee. The higher premiums, which would affect up to 800,000 Californians, have become a rallying cry for Democrats pushing an almost $1 trillion overhaul of the U.S. medical system. While WellPoint has blamed rising medical costs and the recession, Waxman said company documents show the intention was to “return California” policies to higher profit margins. “Corporate executives in WellPoint are thriving but its customers are paying the price,” said Waxman, the committee chairman. “WellPoint executives may get richer but our nation’s health is suffering.” Angela Braly , the insurer ’s chief executive officer, said the proposed increase was the “‘unfortunate” result of surging prices charged by hospitals, drugmakers and medical-device manufacturers. ‘Portrait of Future’ President Barack Obama said the increase was “a portrait of the future if we don’t do something” to fix the insurance market, in a Feb. 7 interview with CBS News. The White House will host a meeting with Republican and Democratic leaders and the president tomorrow. Democrats on the Waxman’s committee said WellPoint’s proposal, and the industry’s profits, were proof of the need to pass legislation. WellPoint rose 22 cents to $59.23 at 11:01 a.m. in New York Stock Exchange composite trading. The shares gained 50 percent in the 12 months before today. In remarks prepared for the committee, Braly said the controversy “does not change the underlying facts: All health plans are in the same situation in trying to deal with the steadily increasing medical costs in the delivery system.” “We need to refocus the health-care reform debate toward steps that will improve quality and control the underlying medical costs, which is driving the high cost of coverage,” Braly said. Drugmaker Profit WellPoint’s under attack even as pharmaceutical companies and other health industries rack up higher profit margins , she said. The premium increases, which the company has temporarily postponed, would generate a 1.5 percent profit margin for Anthem Blue Cross, the insurer’s California subsidiary, she said. California customers also have the option of switching to less expensive Anthem plans, or shopping among WellPoint’s competitors, she said. Texas Representative Michael Burgess, a doctor acting as the lead Republican on the committee, said that Wellpoint’s premium increases might be due to any number of legitimate factors. In that case, he said, “Any number, no matter how big, may be acceptable.” He mentioned Americans’ lifestyle choices, longer life- spans and medical advances, as well as shrinking risk pools. On Feb. 22, the White House proposed giving the federal government authority to overturn insurer rate increases deemed “unreasonable and unjustified” as part of a larger plan to cover 31 million uninsured Americans. Michigan, Maine Increases A White House report on Feb. 18 highlighted additional increases last year in Michigan, Connecticut and Maine that it said were five to 10 times higher than the growth rate in national health spending. Health and Human Services Secretary Kathleen Sebelius said WellPoint, UnitedHealth Group Inc., Aetna Inc., Cigna Corp. and Humana Inc., the top U.S. health plans, were trying to preserve executive pay and profits “way over anybody’s estimates.” WellPoint’s Anthem Blue Cross subsidiary agreed to postpone the higher premiums by at least two months on Feb. 13, to give the California insurance commissioner time to review the plan. The increase would affect customers who buy coverage on their own. The insurer needs to raise rates because costs for medical treatment keep increasing even as the recession has pushed healthier people to drop coverage, said Brian Sassi , head of the company’s consumer business, in a Feb. 18 interview. That leaves WellPoint with a smaller customer base that’s also sicker and costlier to care for, he said. WellPoint canceled the investor conference it planned to hold yesterday, saying executives needed time to prepare for today’s hearing. In a Feb. 16 statement, the insurer said its previous earnings forecast of at least $6 a share was now subject to the “ability to secure and maintain sufficient premium rates.” To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net .

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SEC Approves Rule to Collect Securitized-Debt Trading Data Without Release

February 24, 2010

By Jody Shenn Feb. 24 (Bloomberg) — The U.S. Securities and Exchange Commission approved a plan that will initially withhold data on the trading of securities backed by loans and leases even as regulators start to collect the information. The SEC agreed to a proposal by the Financial Industry Regulatory Authority to expand its Trade Compliance and Reporting Engine system to cover the securities, according to a notice late yesterday on the agency’s Web site. The SEC said it “encourages” Finra, the U.S. brokerage industry’s main regulator, to follow through on its plan to study whether to publicly release trading prices and other data. Trace started in 2002, providing for the first time real- time data on most corporate bond trading to anyone with Internet access. Finra’s proposal for asset-backed bonds only calls for it to consider disclosing the information, which it says it may confuse investors or reduce liquidity, even after the opacity of the market contributed to the worst financial crisis since the 1930s. More disclosure “would go a long way toward helping ensure what occurred over the last couple of years didn’t occur again,” said Jeffery Elswick , the director of fixed income at San Antonio, Texas-based Frost Investment Advisors, which oversees $6.5 billion. “I personally have had a lot of conversations with broker-dealers where I say ‘I can’t believe the SEC hasn’t required something like this.’” In its request to the SEC, Finra said it decided against immediate public disclosure of prices because of the potential to confuse investors or make trades harder to execute. Collecting the information will allow the New York and Washington-based organization to assess the impact on specific markets and let regulators better detect fraud, market manipulation and other illegal activity, Finra said. Asset-backed debt was among the largest sources of more than $1.7 trillion of writedowns and credit losses at the world’s largest financial companies since the start of 2007, according to data compiled by Bloomberg. To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net

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RBS Said to Win Approval to Pay $2.01 Billion in Investment Banker Bonuses

February 24, 2010

By Andrew MacAskill and Gavin Finch Feb. 24 (Bloomberg) — Royal Bank of Scotland Group Plc , Britain’s biggest government-controlled lender, will set aside about 1.3 billion pounds ($2.01 billion) for bonuses at its investment bank for 2009, a person familiar with the situation said. The Edinburgh-based bank received approval from the U.K. Treasury and U.K. Financial Investments, which manages the government’s stakes in RBS, to make the payments, said the person, who asked not be identified because the talks are confidential. This means the investment bank’s compensation-to-revenue ratio will be below 30 percent, the person said, compared with Barclays Plc which said it would pay 38 percent of revenue last week. Michael Strachan, an RBS spokesman, declined to comment. RBS, 84 percent owned by the U.K. government, handed control over its bonus pool to the Treasury in November in return for a second bailout. The percentage of “high achievers” leaving the bank doubled in 2009, Chief Executive Officer Stephen Hester said in December. British financial institutions are under pressure from politicians to reduce compensation amid public anger about the more than 1 trillion pounds of taxpayer money used to support the banking system during the credit crisis. In December, Chancellor of the Exchequer Alistair Darling introduced a one- off 50 percent levy on discretionary bank bonuses of more than 25,000 pounds. The story was reported earlier by Sky News. To contact the reporter on this story: Andrew MacAskill in London at amacaskill@bloomberg.net

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U.S. Stocks, Treasuries Gain as Dollar Declines on Bernanke’s Rate Remarks

February 24, 2010

By Michael P. Regan and Nikolaj Gammeltoft Feb. 24 (Bloomberg) — U.S. stocks rallied, halting a global retreat, and Treasuries gained after Federal Reserve Chairman Ben S. Bernanke said the central bank will keep interest rates low to ensure the economic recovery. The Standard & Poor’s 500 Index jumped 0.8 percent to 1,103.32 at 11:51 a.m. in New York. The MSCI World Index of stocks in 23 developed nations reversed a 0.5 percent retreat to gain 0.3 percent. The MSCI Emerging Markets Index fell 0.8 percent as political tension in Turkey and Greece rattled investors. The yield on the two-year Treasury note rose for the first time in four days, gaining 0.04 percentage point to 0.87 percent. The Dollar Index retreated from an eight-month high. Bernanke told Congress that while policy makers will need to tighten monetary policy at some point, the “nascent” economic rebound still requires low interest rates for an extended period. An unexpected drop in new U.S. home sales to a record low underscored the vulnerability of the recovery. Stocks extended gains as the Senate approved a $15 billion plan to give companies tax breaks for hiring the unemployed. “The market has been appeased by Bernanke’s comments, which broke no new ground,” said Michael Strauss , who helps oversee about $25 billion at Commonfund in Wilton, Connecticut. “The Fed is not ready to withdraw the extended-period phrase because they’re still worried about the fragile nature of the recovery.” The U.S. central bank has left the federal funds rate, the target for interest rates on overnight loans between banks, at a record low near zero for more than 14 months to bolster the economy. The Fed is wrestling with unwinding economic stimulus programs without worsening an unemployment rate that the Fed forecasts at 9.5 percent to 9.7 percent in the fourth quarter. Jobs Bill The jobs bill that passed 70-28 today in the Senate now goes to the House where Democratic leaders must decide whether to pass it without changes or to try to merge it with a $150 billion jobs plan the House approved in December. Nine of 10 industry groups in the S&P 500 advanced, led by a 1.5 percent rally in financial firms and a 1.2 percent gain in technology companies. JPMorgan Chase & Co. and Bank of America Corp. advanced more than 1.8 percent. Autodesk Inc., the biggest maker of engineering-design software, rallied 10 percent after results topped analyst estimates. Treasuries gained even as the U.S. is scheduled to sell $42 billion of five-year notes today. The Treasury plans to auction $32 billion of seven-year securities tomorrow, the last of four sales totaling an unprecedented $126 billion for a single week. Dollar Retreats The Dollar Index, which gauges the currency against six major U.S. trading partners, lost 0.3 percent to 80.617 after climbing to the highest level since June yesterday. Europe’s Dow Jones Stoxx 600 Index fluctuated. CSM, the world’s largest supplier of ingredients to bakeries, dropped 6.9 percent in Amsterdam after reporting earnings that missed analysts’ estimates. Bilfinger Berger AG lost 5.9 percent as Equinet AG cut its price forecast for the German construction company. Turkish stocks slumped the most in almost three weeks, with the ISE National 100 Index losing 3.4 percent to extend this week’s retreat to 6.9 percent. Turkey’s army, which has ousted four governments since 1960, called the detention of retired officers over an alleged coup plot a “serious situation” that deepened strains with Prime Minister Recep Tayyip Erdogan . Russia’s Micex Index dropped 1.4 percent, the most since Feb. 12, as trading resumed after a two-day holiday. Greek Bonds Greek bonds slumped, sending the premium investors demand to hold the nation’s 10-year debt instead of German government bonds to the widest level in two weeks. Greek two-year bond yields rose 22 basis points to 5.74 percent and the spread over German two-year debt increased 24 basis points to 476 basis points. The yield spread widened to an 11-year high of 564 basis points on Feb. 8. The 10-year spread climbed to 338 basis points. Greece’s unions are striking for a second day to protest measures designed to cut Europe’s biggest budget deficit. The cost of protecting against default on European government debt rose on concern Greece will have trouble financing its debt after the credit ratings of the nation’s biggest banks were downgraded by Fitch Ratings yesterday because of “weakening asset quality and profitability.” Credit-default swaps on Greece climbed 12 basis points to 382, according to CMA DataVision prices at 3:30 p.m. in London. Contracts on Portugal jumped 9 to 179, Spain increased 5.5 to 133.5 and Italy rose 4 to 130, CMA prices show. The MSCI Asia Pacific Index fell 1.1 percent. Nissan Motor Co., which gets 35 percent of revenue in North America, sank 3.4 percent in Tokyo. Hyundai Motor Co., South Korea’s biggest carmaker, declined 2.6 percent after announcing a recall. To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net ; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net .

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Brokerage Prices Don’t Reflect Actual U.S. Stock Trading Costs, Study Says

February 24, 2010

By Whitney Kisling and Nina Mehta Feb. 24 (Bloomberg) — The U.S. Securities and Exchange Commission should require brokers to include transaction fees and rebates in customer prices to reflect actual trading costs, according to a study released yesterday. In the pricing model used by all U.S. stock exchanges, traders who post orders are paid a rebate as an incentive to boost liquidity, while those who execute against them must pay a fee. Existing rules require brokers to transact sales at the best bid price or higher and buy orders at the best ask price or better, without accounting for fees or rebates. Exchanges employ this pricing system, known as the make-or- take model, to win business from high-frequency traders, who account for the largest chunk of equity volume and use computer- driven strategies that can produce hundreds of buy and sell orders every second. This affects the decisions brokers make when routing orders to markets and has produced strategies designed to avoid fees, which affects the bid-ask spread on exchanges, the professors who conducted the study said. “Make-or-take pricing has significantly distorted trading,” wrote James Angel of Georgetown University in Washington, Lawrence Harris of the University of Southern California in Los Angeles and Chester Spatt of Carnegie Mellon University in Pittsburgh. “Brokers make most order-routing decisions based on the quoted prices that their clients will receive, and not the true net prices of the trades.” Knight Capital Harris and Spatt are former chief economists at the SEC. Angel has chaired the Nasdaq Economic Advisory Board. The study, which examines the impact of technology on markets and brokers’ execution decisions, was commissioned by Knight Capital Group Inc. The Jersey City, New Jersey-based financial-services firm has commented on several market-structure rule proposals put forth by the SEC. Spreads between bid and ask prices have narrowed as a rule introduced in 1997 required orders to be executed at the best prices no matter which venue posted them, and another in 2001 cut quoting increments to a penny. While the tighter spreads improve the prices for the client, they don’t reflect the total fees for the broker to execute a transaction, making it more difficult to determine “true costs,” according to the study. The make-or-take pricing model “creates perverse incentives for some broker-dealers who may prioritize margin considerations over liquidity and best execution obligations,” said Joe Gawronski , president and chief operating officer at Rosenblatt Securities Inc. in New York. Serving Clients “The SEC could solve these make-or-take problems by requiring that all brokers pass through access fees and liquidity rebates to their clients,” the professors wrote. “These changes would ensure that brokers route all orders to best serve their clients, rather than enrich themselves.” The commission should also ensure that the best execution mandate for brokers applies “to net prices and not to quoted prices,” they said. Another solution would be for the SEC to ban access fees, making quotes comparable across all exchanges, according to the professors. The authors said exchanges shouldn’t be allowed to “require that traders pay them to trade with their clients” and that brokers shouldn’t be able to get rebates for routing clients’ limit orders to particular venues. “In other contexts, these payments would be recognized as illegal kickbacks,” they wrote, citing common law concerning agents. Exchanges have been introducing platforms with different fees and prices to cater to clients as competition for equity market share increases. Bats Global Markets, owner of the fourth-largest U.S. stock venue, plans to open a second trading network this summer. Nasdaq OMX Group Inc. , which owns the second-largest platform, announced in October that it would start a third with its Nasdaq OMX PHLX license, which it got when it bought the Philadelphia Stock Exchange in 2008. To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net ; Nina Mehta in New York at nmehta24@bloomberg.net .

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Goodyear Names Kramer as Chief Executive; Keegan Will Remain as Chairman

February 24, 2010

By Bill Koenig and Keith Naughton

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Brain-Eating Zombies Invade Disney in Iger Spending Spree to Win Boy Fans

February 24, 2010

By Seth Lubove and Andy Fixmer Feb. 24 (Bloomberg) — When Walt Disney Co. asked publisher Dan Vado to make a series of comic books based on its Haunted Mansion theme-park ride, he worried that the empire built on the likes of Snow White and Tinker Bell would reject his brand of creepy humor. Vado gave Disney skeletons dangling from nooses, scattered corpses and a ghostly poodle that says “crap.” To his surprise, Disney signed off on his vision. “Everything we did was really strange,” says Vado, founder of San Jose, California-based SLG Publishing , as in Slave Labor Graphics. “The interesting thing about Disney is, for a company perceived as being stodgy, they do a good job of reinventing themselves.” Disney Chief Executive Officer Robert Iger , 59, is on a spending spree at the world’s biggest media company to transform his film studio, amusement parks and stores. In fiscal 2009 , net income at Disney fell 25 percent to $3.3 billion — the worst annual performance in Iger’s five-year reign — and was almost flat in the first quarter of 2010 compared with a year earlier. The global recession has hammered the company’s 11 theme parks, which are offering promotions and discounts. The Burbank, California-based company’s studio is also struggling: In 2009, it churned out box office flops such as “G-Force,” which featured wisecracking guinea pigs. Iger is pouring billions into attracting a new generation of kids — boys especially — raised on violent video games and reality shows. Buying Marvel In December, Disney completed its $4.3 billion purchase of Marvel Entertainment Inc., home of Iron Man, Spider-Man and the X-Men, paying a 40 percent premium over the stock price. The company is now building two additional cruise ships, one of which includes an AquaDuck water coaster that plunges four decks. Park guests will see more-complex, life-size electronic robots made to look like U.S. presidents and Disney characters. And with input from Apple Inc. CEO Steve Jobs , Disney’s largest shareholder , Iger is giving his 350 retail stores a high-tech makeover and opening a new one in New York’s Times Square in the fall. The total price tag for all of the upgrades through 2014: more than $12.3 billion, according to New York-based Soleil Securities Corp. analyst Alan Gould , a 59 percent increase over the prior five years. Investors give mixed reviews of Iger’s moves to refresh the entertainment giant, which was founded as a cartoon studio by Walt Disney and his brother Roy Disney in 1923. Beating S&P After Iger took over in October 2005, the stock rose 53 percent to a seven-year peak of $36.30 in May 2007 before crashing in 2009 during the credit crisis to a low of $15.59. From that bottom last March through Feb. 23, the shares jumped 98 percent to $30.92, beating the Standard & Poor’s 500 Index gain of 62 percent but lagging behind rival News Corp.’s 164 percent rise . “What we look for is a company that is constantly refreshing its operations, improving and continuing to build a business, and that’s true of Disney,” says Michael Cuggino , president of San Francisco-based Permanent Portfolio Family of Funds Inc., which owns 720,000 Disney shares. In December, S&P affirmed its earlier revised outlook on Disney’s debt to negative from stable, citing concerns about the company’s recovery, the growth in spending and threats from deep-pocketed rivals. “Disney is going to be basically doubling what they are spending,” says James Tarkenton , a managing director at Lateef Investment Management. Greenbrae, California-based Lateef has sold all of the 149,984 Disney shares it held in April 2009. Disney spokeswoman Zenia Mucha declined a request for an interview with Iger. Iger’s Deals Iger, who came to Disney in 1996 as part of the company’s $19 billion purchase of Capital Cities/ABC Inc., has proved to be a serial acquirer. Three months after taking the helm as CEO, he agreed to pay $7.4 billion for Pixar, which was co-founded by Jobs, to improve Disney’s flagging animation pipeline. In all, the CEO has snapped up 28 companies in whole or part, according to data compiled by Bloomberg. When announcing the deal for Marvel and its cast of superheroes in August, Iger said they would add to Disney’s stable of characters and attract more boys to its cable cartoon offerings. While some Disney entertainment such as Pixar’s “Cars” and the “Pirates of the Caribbean” action films may be popular with boys, most of its movies, cable shows and characters appeal to young children and adolescent girls, says UBS AG analyst Michael Morris in New York. ‘High School Musical’ The Disney Channel is the leading cable network in reaching girls age 6 to 14 with hits such as “Hannah Montana,” about a teenage pop singer, Disney has said. “Content and products for boys have been less consistent for Disney than those for girls,” Morris says. “When Disney looks for growth opportunities, it sees big potential with boys.” Last year, Disney also bought Wideload Games Inc. , maker of the violent video game “ Stubbs the Zombie in Rebel Without a Pulse ,” featuring brain-eating zombies. And the company rebranded its Toon Disney cable cartoon channel into Disney XD. The channel’s new programming features shows such as “Kick Buttowski” aimed at boys age 6 to 14, the company said. When Disney creates a franchise — such as “High School Musical,” which features teen heartthrob Zac Efron — Iger tries to exploit it across the company’s empire. The Disney Channel movie also found life in theaters, a stage musical, CDs, DVDs, video games, an ice-skating show and at parks. ‘Up’ “When they get a hit, they can really leverage that for big profits,” says Cuggino. “But when they miss, they miss on many levels. That makes for a rough and volatile business.” While Pixar’s “Toy Story” and “Finding Nemo” films have produced some synergy, the Academy Award-nominated “Up” has not. The lead character, a grumpy old man, would be unappealing in other venues, analysts say. Iger said in July that while he was satisfied with the movie’s box office sales, he didn’t consider it a franchise. “Disney needs to figure out how to develop those properties,” says Janna Sampson , co-chief investment officer of Lisle, Illinois-based OakBrook Investments LLC, which has 300,000 Disney shares. “That’s why I thought they paid all that money for Pixar.” Iger took over from Michael Eisner, who in 2004 was stripped of his chairmanship by Disney’s board while he was embroiled in feuds, including one with Jobs over a Pixar distribution deal. Eisner, 67, retired the following year, after Walt Disney’s nephew, Roy Disney, led a shareholder revolt, claiming Eisner was a micromanager who had caused a creative brain drain. ‘Most Enthusiastic’ Eisner’s strategic planning division applied so much scrutiny to business proposals that managers were reluctant to pitch ideas, Iger said in a 2005 analyst meeting after disbanding the group. “Where Eisner micromanaged, Iger gives his managers much more freedom,” says Soleil Securities’ Gould. “The strategic planning division was really disliked under Eisner.” Born in Brooklyn and raised on Long Island, New York, Iger honed his diplomacy on the student council at Oceanside High School, where he was voted the “most enthusiastic” member of the class of 1969. At ABC, he ascended in rank as the entertainment industry consolidated: In 1987, the one-time studio supervisor became vice president of programming at ABC Sports. After the Disney deal, he rose to chairman of ABC Group, president of Walt Disney International and president of Disney in 2000. Dick Cook Resigns “Iger manages people extraordinarily well,” says Laura Martin , an analyst at Needham & Co. in Pasadena, California. As CEO, Iger named Pixar creative director John Lasseter the chief creative officer of both Walt Disney and Pixar Animation studios. Lasseter also offers advice to executives involved with theme parks, video games and merchandising. And he appears in corporate videos expounding on changes he has made, such as creating realistic Pixar toys by using digital data from movies to craft the face of Woody from the “Toy Story” films, for example. After years of executive turnover under Eisner, Iger’s top lieutenants have mostly stayed put — until recently. During a conference call in May, Iger criticized his studio, led by 40- year Disney veteran Dick Cook, which had produced clunkers such as “Bedtime Stories” about a hotel handyman. “It’s about choice of films and the execution of the films that have been chosen for production, and we’ve had a rough year in terms of the performance,” Iger said. Four months later, Cook resigned, replaced by Rich Ross , then president of Disney Channels Worldwide. Captain America Soon after, Ross named new heads of studio production and distribution. “Everyone liked Dick Cook, but the results weren’t coming through,” Gould says. In 2009, Disney finished No. 5 in box office sales among the six major studios, according to Box Office Mojo . The studio’s operating income dropped 84 percent in fiscal 2009, its worst showing in a decade, before rebounding in the first quarter, which ended on Jan. 2. To fill theaters, Ross, 48, can’t yet rely on several of Marvel’s most popular comic-book characters. They’re tied up in licensing deals: News Corp. has the rights to the X-Men, Sony Corp. controls Spider-Man and Universal Studios Inc. claims several Marvel characters for exclusive use in its Orlando theme parks. Ross has to mine the likes of Captain America, Thor and lesser-known figures like Ant-Man until the bigger superhero licenses expire beginning in 2013. The licensing deals soured some analysts on the Marvel purchase. ESPN “Over the long run, we suspect this will be viewed as Mr. Iger’s first major mistake as CEO,” Citigroup Inc. analyst Jason Bazinet wrote in September. Iger’s best-performing business is the one that bears no resemblance to Disney’s iconic brands: ESPN . Disney picked up ESPN, the No. 1 U.S. sports network by ratings, in the Capital Cities/ABC deal. ESPN has become the workhorse in the company’s media division , its largest, composed of broadcast and cable networks. Buoyed by growing subscriber fees, cable generated 29 percent of Disney’s revenues in 2009, up from 23 percent three years earlier, and produced 64 percent of the company’s total operating profit in fiscal 2009. “Disney should be called ESPN Co.,” Gould says. ABC’s Decline ABC , the third-ranked broadcast network, according to Nielsen Co., is dwarfed by cable. Gould estimates that ABC, including its local stations and production operations, is worth about $5.3 billion, or about 14 percent of ESPN’s value. Iger may consider selling the 66-year-old broadcaster, says analyst Michael Nathanson of New York-based Sanford C. Bernstein & Co. “ABC is a good question,” Nathanson says. “I would ask the company if ABC fits in.” As ABC’s advertising revenue falls, Iger is demanding an increased share of the fees paid by cable and satellite companies to the broadcaster’s independent affiliate stations that carry its programming. “We should get paid for the value we deliver,” Iger said in December. Nexstar Broadcasting Group Inc. , an Austin, Texas-based affiliate of ABC and other networks, plans to resist Iger’s demand for a bigger slice of fees. CEO Perry Sook says he needs the fees — $22.5 million in the first nine months of 2009 — to subsidize the decline in ad sales from the 63 local stations Nexstar owns and works with. Theme Parks “I have a company car. Do the networks also feel they’re entitled to drive that for two days a week?” Sook asks. Iger’s biggest financial bet is on his theme park, resort and cruise ship business, which in fiscal 2009 posted its steepest decline in operating income since the 2001 terrorist attacks in the U.S. Disney has used discounts , including as much as 45 percent off hotel rates at Walt Disney World in Florida, to lure visitors. In keeping with the CEO’s edict to apply technology wherever possible, new rides at Epcot in Florida include a motion simulator called the “Sum of All Thrills.” Using a touchscreen monitor, kids customize their ride by programming simulated corkscrews, inversions and hills. At Disneyland in California and Walt Disney World, the “Star Tours” rides, using scenes based on the original “Star Wars” movies, will be updated next year with 3-D versions of the more-recent trilogy of movies. Walt Disney World will have to work harder for visitors after the nearby Universal Studios Florida park opens a new “Wizarding World of Harry Potter” area this spring. It will feature a replica of Hogwarts School of Witchcraft and Wizardry. Executive Shuffle “Look out, Cinderella Castle, here comes Hogwarts castle,” says Dennis Speigel , president of Cincinnati-based consulting firm International Theme Park Services Inc. Even in Asia, Disney is finding it hard to make a buck. Five years ago, the company and the local government in Hong Kong formed a joint venture to open a Disneyland in the region, where Ocean Park , a sea-themed venue, has proven tough competition. Disney’s venture is still losing money. “They missed the mark in Hong Kong in underestimating the competition,” Speigel says. Disney is now moving into Shanghai after the Chinese government in November gave its approval to build an amusement park. In leaving his mark on the Magic Kingdom, Iger is also shuffling his top managers. In November, he switched Chief Financial Officer Thomas Staggs , 49, with James Rasulo , 54, head of the theme parks. Bloodthirsty Zombies Iger said he was handing them new challenges, not preparing for succession. But Gould says Staggs, a former Morgan Stanley & Co. investment banker, is likely being given operational experience to groom him for the top job. Cuggino, the Disney investor, praises Iger’s moves. “I like companies that invest in their business when economic times are tough,” Cuggino says. “That means they’ll be stronger when the economy improves.” If Iger gets a fairy tale ending to his tenure as CEO, it will at least partly come from muscle-bound superheroes and bloodthirsty zombies — a far cry from the characters Walt Disney made famous at Disneyland, the Happiest Place on Earth. To contact the reporters on this story: Seth Lubove in Los Angeles at slubove@bloomberg.net ; Andy Fixmer in Los Angeles at afixmer@bloomberg.net

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Greek Police, Protesters Clash in Central Athens Over Austerity Measures

February 24, 2010

By Natalie Weeks and Maria Petrakis Feb. 24 (Bloomberg) — Greek police fired tear-gas and clashed with demonstrators in central Athens after a march organized by unions to oppose Prime Minister George Papandreou ’s drive to cut the European Union’s biggest budget deficit. Hooded youths threw rocks, marble and other objects at riot police after the march today to the country’s Parliament building. At least one person was detained. “People on the street will send a strong message to the government but mainly to the European Union , the markets and our partners in Europe that people and their needs must be above the demands of markets,” Yiannis Panagopoulos, president of the private-sector union GSEE , told NET TV yesterday. “We didn’t create the crisis.” Half a million civil servants, who held a one-day strike on Feb. 10, today joined forces with GSEE , which represents 2 million workers, after EU warnings that Papandreou’s government needs to bring in new taxes and make more spending cuts if it fails to rein in the largest budget gap of all 27 EU member states. Air-traffic controllers, customs and tax officials, train drivers, doctors at state-run hospitals and school teachers walked off the job to protest government spending cuts that will freeze salaries and hiring and cut bonuses. Journalists also joined the strike, creating a media blackout. Bonds Slump Greek bonds have slumped, driving up borrowing costs, as investors fear that government plans outlined so far will fail to reduce the gap this year to 8.7 percent of GDP from 12.7 percent. Papandreou’s government needs to sell 53 billion euros ($72 billion) of debt this year, the equivalent of 20 percent of gross domestic product. The cost of protecting against default on European government debt rose on concern Greece will have trouble financing its debt after the nation’s biggest banks were downgraded. Credit-default swaps on Greece climbed 11 basis points to 381, according to CMA DataVision prices at 11:30 a.m. in London. Greece’s fiscal woes have stoked concerns that it may need a bailout and helped spark a rout in global stocks . The premium that investors demand to buy Greek debt over comparable German bonds ballooned on Jan. 28 to the highest since 1998 amid worries that Papandreou’s deficit plan relied too much on one- off measures for revenue and not enough on expenditure cuts. ‘Depth of Mess’ “We haven’t yet seen anything of the fiscal contraction that Greece has to go through if it wants to avoid a sovereign default,” Fredrik Erixon , director of the Brussels-based European Centre for International Political Economy, said in a phone interview. “The main problem is that the Greek government and the prime minister himself have not yet realized the depth of the mess.” Almost 500 international and domestic flights have been canceled today, a spokeswoman for Athens International Airport , Greece’s biggest, said by telephone. The Athens metro, which carries 650,000 commuters to work each morning, isn’t running nor are the capital’s trams. Passenger ferries and other vessels will remain docked until the end of the strike. Groups of hotel workers picketed the five-star Grande Bretagne Hotel and others on the city’s central Syntagma Square this morning, holding up banners reading “the crisis should be paid for by the plutocracy.” The three luxury hotels on the square were open for business with closed shutters to protect against protests. Exchange Blocked Yesterday, the PAME union group, aligned to the Communist Party of Greece, blockaded the Athens stock exchange headquarters, preventing staff from entering the building. The Athens benchmark general index rose 1.2 percent to 1,945.06 at 3:20 p.m., bringing losses so far this year to 11 percent, the second-worst performance in western Europe. Greek government bonds extended their decline after Fitch Rating downgraded the country’s four largest banks, pushing the yield on the 10-year bond up to 6.5 percent. Ratings companies, which cut the country’s grades in December after Papandreou revealed the country’s budget shortfall was more than four times the EU limit, have warned the government’s three-year budget plan must be implemented to the letter. EU governments are looking for guarantees that Papandreou, elected in October, will slash spending before they spell out what help they may offer. Under proposals adopted by finance ministers from the 16 nations that share the euro, the Greek government will have to take additional measures to cut its deficit if it fails to satisfy the European Commission next month. These may include higher value-added tax, a levy on luxury goods, higher energy taxes and spending cuts, they said. Merkel German Chancellor Angela Merkel , in a speech in Hamburg on Feb. 22, said a solution to the Greek crisis is the “core element” in re-establishing confidence in the single currency. Greek Finance Minister George Papaconstantinou has resisted calls for deeper spending cuts and said Feb. 16 the government was “ahead of the target” set out in its deficit-reduction plan. He said yesterday the government will do “everything it needs” to meet the budget targets. Ta Nea newspaper reported today that the European Commission is pushing Greece to remove restrictions on firing workers, abolish collective labor agreements and other measures to make the labor market more flexible. Most Greeks support the measures outlined so far, which include an increase in the retirement age and a freeze on increases for public-sector workers, according to opinion polls. “New measures may be needed,” said George Mikonyiatis, 42, who has watched civil servants protesting cuts in their income rally outside the Finance Ministry for weeks from his camera shop in central Athens. “They need to be just. If you can prove the measures are just then the strikes won’t have mass support. They need to be targeted at those who aren’t paying their way.” To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net ; Natalie Weeks in Athens nweeks2@bloomberg.net .

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New York City May Get as Much as 10 Inches of Snow Starting Early Thursday

February 24, 2010

By Brian K. Sullivan and Alex Morales Feb. 24 (Bloomberg) — Snow will probably begin falling in New York City by 3 a.m. tomorrow, and before the storm ends a day later there may be as much as 10 inches (25 centimeters) on the ground, according to the National Weather Service. Between 5 and 10 inches of snow is forecast to fall on New York with as much as 14 inches to the north and west of the city, said Matt Scalora, a weather service meteorologist in Upton, New York . Tomorrow’s snow will be from the second storm to hit the area this week. A system that brought rain to New York City and 12 inches of snow to Albany starting yesterday is now disrupting air traffic in Philadelphia and New York’s La Guardia Airport. It will move into Maine today, said Eric Wilhelm of private- forecaster AccuWeather.com . “A really complex situation is developing in the Northeast,” Wilhelm said by telephone from State College, Pennsylvania. “The Northeast is being impacted by one storm now, and the monster storm is going to impact the region tomorrow into Friday.” Wilhelm said an exact forecast for snowfall in New York will be difficult because a slight variation in the track of the second storm could mean no snow at all for the city or even more than forecast. “It is a very tricky forecast in that zone,” Wilhelm said. More Washington Snow Wilhelm said Washington may receive about 3 inches of snow from the storm, while Boston and Providence, Rhode Island, will likely just experience rain and heavy winds. The storms will add to what’s already been a benchmark winter in the eastern U.S., where seasonal snowfall records were broken in Washington and Baltimore. Philadelphia may receive as much as 8 inches of snow, according to the National Weather Service in Mount Holly, New Jersey. Delays of about an hour were being reported today at LaGuardia airport and about 30 minutes at Philadelphia International Airport, according to the Federal Aviation Administration’s Web site. Winter snow warnings and watches have been issued from northern Virginia to Maine, the weather service reported. A storm watch means snow can be expected within 12 to 36 hours, while a warning means it has already started or is about to begin. Tomorrow’s snow will likely be heavy and wet, Wilhelm said. The storm will also produce high winds through much of the Northeast, he said. High Winds Scalora said wind gusts as intense as 30 miles per hour (48 kilometers per hour) could whip New York. On the Rhode Island and Massachusetts coasts, gusts as high as 70 mph may occur, Wilhelm said. “There could be real problems with power outages,” Wilhelm said. “That could be the real legacy of this storm.” The heavy snow will taper off the day after tomorrow, although snow flurries and clouds will linger over much of the Northeast through the weekend, Wilhelm said. To contact the reporters on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ; Alex Morales in London at amorales2@bloomberg.net

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Pimco Buys High-Yield Corporate Bonds in Credit Rating `Barbell’ Strategy

February 24, 2010

By Sarah McDonald Feb. 24 (Bloomberg) — Pacific Investment Management Co., manager of the biggest bond fund, is buying debt at opposite ends of the high-yield ratings scale as it seeks investments that can provide returns in a slower-growth environment. Pimco is buying BB rated bonds because they deliver better returns than investment-grade notes and the risk isn’t much higher, portfolio manager Andrew Jessop said in a commentary posted on the Newport Beach, California-based company’s Web site. A so-called “barbell” approach means it’s also buying bonds rated CCC and lower from issuers it expects will survive in the “new normal” economic environment. “There are certainly some opportunities where low-rated companies are improving their financial condition more quickly than the ratings agencies can account for these efforts,” Jessop said. “We also think there is a large disconnect between the spreads on BB high-yield debt and the lower-rated tiers of investment-grade corporate debt, where the spreads are back to pre-crisis levels in many cases.” Global high-yield bonds returned an average 61 percent last year compared to 16 percent for investment-grade notes with ratings of Baa3 or higher at Moody’s Investors Service or BBB- and higher at Standard & Poor’s, Bank of America Merrill Lynch indexes show. After the shock of the global credit freeze, the “new normal” will be lower-than-average returns with greater government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy, according to Pimco. “2010 is going to herald a return to an environment in which returns will be dominated by coupon income,” Jessop said. To contact the reporter on this story: Sarah McDonald in Sydney at smcdonald23@bloomberg.net

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Goldman Sachs Is Unpopular Because Its Success `Brings Envy,’ Corzine Says

February 24, 2010

By Michael J. Moore and Deirdre Bolton Feb. 24 (Bloomberg) — Goldman Sachs Group Inc. , the most profitable securities firm in Wall Street history, is unpopular because some people envy its performance, said Jon Corzine , the company’s former chairman and chief executive officer. “When you’re successful it brings envy,” Corzine, 63, said today in a Bloomberg Television interview. “People are broadly frustrated with the financial institutions, and since it is the leader of the industry and has shown great success over a long period of time, I think it’s more vulnerable.” Goldman Sachs posted a record $13.4 billion profit in 2009, a year after receiving $10 billion in taxpayer aid during the financial crisis. It repaid the funds in June. The company, led by CEO Lloyd Blankfein , has been criticized by lawmakers and pundits for issues from its pay practices to its role in helping Greece raise off-balance-sheet funding and report smaller debt. Responding in part to that public pressure, Goldman Sachs subtracted $519 million in the fourth quarter from the compensation fund set aside during the year and instead made donations to a company philanthropy. Wall Street employees “need to be a little more humble in the overall scheme of public society,” Corzine, the former governor of New Jersey, said in a later Bloomberg Radio interview. “People are very frustrated, angry about the compensation issues, particularly in the context of what people perceive as bailouts of each and every one of the folks that participated.” Greece ‘Transparency’ Corzine said Goldman Sachs probably could have benefited from more “transparency” related to the currency swap arranged for Greece, which European Union regulators said they knew nothing about until recent days. He said the “ethos” of serving clients and shareholders still remains at the firm where he spent more than 20 years, before leaving in 1999. “Lloyd, in my view, has done a much better job than some of the publicity surrounding him,” Corzine said. “This was an incredibly challenging time for any financial institution, and that institution has gotten through this better than most, held the team together better than most, and has continued to serve clients better than most.” To contact the reporters on this story: Michael J. Moore in New York at mmoore55@bloomberg.net ; Deirdre Bolton in New York at dbolton@bloomberg.net

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Bernanke Says `Nascent’ Recovery in U.S. Still Requires Low Interest Rates

February 24, 2010

By Craig Torres Feb. 24 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is in a “nascent” recovery that still requires low interest rates to encourage demand by consumers and businesses once federal stimulus expires. “A sustained recovery will depend on continued growth in private-sector final demand for goods and services,” Bernanke told the House Financial Services Committee today in Washington at the start of his two days of semi-annual testimony before Congress. “Private final demand does seem to be growing at a moderate pace.” The 56-year-old Fed chairman, who began his second four- year term this month, said slack labor markets and low inflation will allow the Federal Open Market Committee to keep the benchmark lending rate, which has been in a range of zero to 0.25 percent for more than a year, low “for an extended period.” He said the Fed will need to start tightening policy “at some point.” “The FOMC continues to anticipate that economic conditions — including low rates of resource utilization, subdued inflation trends, and stable inflation expectations — are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” he said. Bernanke’s testimony follows the Federal Reserve Board’s decision last week to raise the cost of direct loans to banks by a quarter-point to 0.75 percent. The Fed portrayed the move as a “normalization” of bank lending and said it didn’t change the outlook for the economy or monetary policy, a message the Fed chairman reiterated today. Labor Markets Bernanke cited “tentative” signs of stabilization in labor markets, such as lower job losses, a rise in manufacturing employment, and stronger demand for temporary help. “Notwithstanding these positive signs, the job market remains quite weak, with the unemployment rate near 10 percent and job openings scarce,” Bernanke said. He said the 40 percent of the unemployed who have been without work for six months or more are a “particular concern.” Policy makers are trying to ensure a durable expansion that will start generating enough jobs to bring down an unemployment rate they forecast to end the year at 9.7 percent, above their estimate of full employment of around 5 percent. At the same time, they want to convince investors that they can start withdrawing $1.1 trillion in excess cash from the banking system in time to keep inflation at bay. “As the expansion matures, the Federal Reserve will at some point need to begin to tighten monetary conditions to prevent the development of inflationary pressures,” the Fed chairman said. “Notwithstanding the substantial increase in the size of its balance sheet associated with its purchases of Treasury and agency securities, we are confident that we have the tools we need to firm the stance of monetary policy at the appropriate time,” he said. Manufacturing Rebound Manufacturing is leading the rebound from the worst recession since the 1930s as companies prevent inventories from being further depleted and invest in new machinery and equipment to take advantage of a rebound in global demand. The economy grew at a 5.7 percent annual pace in the fourth quarter of last year, the fastest in six years. Fed officials last month forecast growth in 2010 of 2.8 percent to 3.5 percent, and minutes of their January meeting showed they are seeking more evidence the recovery is sustainable. Bernanke said that conditions in financial markets have improved, making equity and debt financing available for larger firms. “In contrast, bank lending continues to contract, reflecting both tightened lending standards and weak demand for credit amid uncertain economic prospects,” he said. Balance Sheet The Fed has expanded its balance sheet to $2.28 trillion in an attempt to supplement credit to the economy. U.S. central bankers are finishing up a $1.43 trillion in mortgage-backed securities and housing agency debt purchase program next month. “The FOMC will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets,” Bernanke said. The actions by the central bank haven’t stimulated private bank credit. Total loans and leases by banks in the U.S. have fallen 7 percent for the 12 months ending January. Consumer loans have fallen 6.5 percent over the same period. “They want to see sustained job growth and credit growth to small businesses,” Michael Darda , chief economist at MKM Partners LP in Greenwich, Connecticut, said before the testimony was released. “The Fed is going to keep rates low and the balance sheet big until you see those two things start recovering.” To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net ;

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Sales of New Homes in U.S. Unexpectedly Declined in January to Record Low

February 24, 2010

By Bob Willis Feb. 24 (Bloomberg) — Sales of new homes in the U.S. unexpectedly fell in January to the lowest level on record, a sign that an extension of a government tax credit may not be enough to rekindle demand. Purchases declined 11 percent to an annual pace of 309,000, below the lowest forecast in a Bloomberg News survey of economists, from a 348,000 pace, figures from the Commerce Department showed today in Washington. The median sales price dropped 2.4 percent from January 2009 and the supply of unsold homes increased. The report underscores Federal Reserve Chairman Ben S. Bernanke’s comments today that the economy is in a “nascent” recovery the still requires low interest rates. Homebuilders face competition from foreclosed properties that have driven down prices at the same time companies are reluctant to create jobs. “The foreclosure flow is robbing demand from the new-homes market and that process seems to be strengthening,” said Julia Coronado, a senior economist at BNP Paribas in New York, “The new-homes market just can’t get off the floor. If new homes suffer, construction suffers and jobs suffer.” Sales were projected to climb to a 354,000 annual pace from an originally reported 342,000 rate in December, according to the median estimate in a Bloomberg survey of 72 economists. Forecasts ranged from 325,000 to 386,000. Stocks trimmed gains after the report, with the Standard & Poor’s 500 Index rising 0.2 percent to 1,097.27 at 10:13 a.m. in New York. Three Regions Drop Three of the four U.S. regions showed declines in new-home sales last month, led by a 35 percent plunge in the Northeast. Purchases fell 12 percent in the West and 9.5 percent in the South. They rose 2.1 percent in the Midwest. The median price of a new home in the U.S. decreased to $203,500 in January, the lowest since December 2003, from $208,600 in the same month last year. The supply of homes at the current sales rate increased to 9.1 months’ worth, the highest since May 2009. Housing, the industry that spawned the sub-prime mortgage meltdown and triggered the worst recession in seven decades, appeared to be recovering in 2009 after a three-year decline. Purchases of new homes have declined from an all-time high of 1.39 million reached in July 2005. They have declined 6.1 percent from January 2009. New-home purchases, which account for about 6 percent of the market, are considered a leading indicator because they are based on contract signings. Sales of previously owned homes, which make up the remainder, are compiled from closings and reflect contracts signed weeks or months earlier. Rising Foreclosures Rising foreclosures are the main threat to a sustained housing recovery. A record 3 million U.S. homes will be repossessed by lenders this year as unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast last month. Last year there were 2.82 million foreclosures, the most since the Irvine, California-based company began compiling data in 2005. The lack of jobs is another hurdle. Consumer confidence in February fell to its lowest level since April 2009 and a gauge of current conditions declined to the lowest level in 27 years on concerns about the labor market and the economy, the Conference Board reported yesterday. Bernanke told Congress today that there are “tentative” signs of stabilization in the labor market, including fewer job cuts, a rise in factory employment and stronger demand for temporary help. Job Market ‘Weak’ “Notwithstanding these positive signs, the job market remains quite weak, with the unemployment rate near 10 percent and job openings scarce,” Bernanke said in testimony to the House Financial Services Committee. Economists surveyed by Bloomberg at the beginning of this month forecast unemployment this year will average 9.8 percent, just a percentage point below the historic post-war peak of 10.8 percent reached in November 1982. The end of Fed purchases of mortgage-backed securities, aimed at keeping borrowing costs low, represents another challenge for the housing industry. The program is scheduled to expire at the end of March. ‘Years to Recover’ “The housing market took several years to recover, following the downturn of the late 1980s and early 1990s,” Robert Toll, chief executive officer of Toll Brothers Inc., said in a statement today. Toll Brothers, the largest U.S. luxury-home builder, said its first-quarter loss narrowed. The Horsham, Pennsylvania-based company’s new orders almost doubled in the three months ended Jan. 31 as the housing market showed signs of stabilizing. To contact the report on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Masa’s $68 Tuna, Mina’s Turbot Make Vegas Casual Dining Fancy: Ryan Sutton

February 24, 2010

Review by Ryan Sutton Feb. 24 (Bloomberg) — Vegas needs fewer high-end dining venues with tasting menus and white tablecloths, and more New York-style neighborhood spots like Fatty Crab or Momofuku. Ambitious fare in casual settings with reasonable prices. While I have no qualms about my excellent $300 plus solo meals at fancy French joints like Savoy and Joel Robuchon, I wish I’d spent more time at more affordable joints like Michael Mina’s American Fish. I look at the menu and think: Why didn’t I try Mina’s $26 abalone and Kobe hot pot? Instead, I went for the $500 tasting at Shaboo downstairs. Regrets indeed. American Fish is hidden within the depths of the sprawling Aria Resort & Casino , part of the $8.5 billion CityCenter complex. The restaurant is as loud as an Irish bar and as dark as a nightclub. Its decor is as drab as a shopping mall’s — some of the seats overlook a brightly lit section of Aria. But it serves a piscine dish that wouldn’t be out of place at say, Alain Ducasse ’s Louis XV in Monaco. The turbot was poached in ocean water, barely cooked through. It sat in a bowl of clear, saffron-flavored broth that tasted like a pristine bouillabaisse. Even came with a rouille- topped cracker for dipping. Bottled Ocean One tiny issue: There’s no ocean in Vegas. Mina ships the aqua in from Hawaii. This has prompted some criticism about sustainability and jet-fuel usage. If that’s how you feel, don’t bother coming to Vegas, because not much is local in this desert town. If you’ve ever tried the horrific tap water here, you’ll know why people drink bottled water. So yes, Mina should stick with the Hawaiian water, especially for a dish this good. It’s not cheap at $42, but it’s enough meat to feed two. Mina is probably the most famous U.S. chef New Yorkers have never heard of. He has 17 restaurants from California to New Jersey, but none in New York. My companion, a Vegas local who’s sampled most of Mina’s West Coast venues said American Fish ranks with his best. Mustard-marinated cod ($43 — also enough for two) was as good as the miso version at Nobu. Raw sweet shrimp was spiced with horseradish panna cotta; don’t use too much of the cream, which can overwhelm. Scallops and foie gras? We’ve seen this pairing at Aureole (also in Vegas). Except here it actually worked — rare, delicate shellfish beneath rare, jiggly liver. Mina says, somewhat pompously, that American Fish has one of the best cocktail programs in Vegas. And I think he might be right. So finish off with a Knickerbocker ($11), a sweet-sour mix of Curacao, rum, lemon juice and raspberry syrup. The lost libation might have been the ancestor of modern Tiki drinks. Forget tablecloths; that’s the type of old-school charm Vegas needs. Bar Masa My second regret about Vegas is that I didn’t bring Bar Masa’s Kobe skewers to snack on my flight home. (My JetBlue flight didn’t have meal service.) Aria hosts the second location of Masa Takayama ’s eponymous sushi bar, which, like the original, oddly lacks a proper sushi bar. In fact, it’s not really a bar either. It’s a gorgeous, high-ceilinged restaurant that evokes an ultra-modern, silent nighttime garden in Tokyo. The Michelin three-starred chef gravitates toward shopping malls (his $400 per person raw fish temple is at New York’s Time Warner Center) and now casinos. Sit at the front counter and shell out $35 for the Kobe skewers. The addictive little sticks ooze beefy fat that yield to a stinging, salty yuzu spice. Tuna belly rolls ($68) are so wonderfully rich you wonder if these tuna died from high cholesterol. Order more. Kabayaki barbecue sauce coats about a foot’s worth of eel. Order three different mackerel sushi for a clever study in oil. But if Masa wants to preserve his ultra- luxury brand, he might want to consider adding a sushi chef to prepare them piece by piece and brush them with sauce in front of you. Otherwise, Bar Masa is just a better version of the more industrial Blue Ribbon chain. The Bloomberg Questions Cost? Plates in the teens to over $100 at both. Sound level? 80 decibels at American Fish, as loud as a baseball game; quiet as a library at Bar Masa. Date place? Yes to both. Inside tip? Stellar cocktail program at American Fish. Special feature? Try Shaboo next door to Bar Masa for $500. Will I be back? To American Fish. There’s a Bar Masa here in New York. American Fish and Bar Masa are at the Aria Resort & Casino in the CityCenter complex, 3730 Las Vegas Blvd., Las Vegas. Information: +1-866-359-7111; http://www.arialasvegas.com Sound-Level Chart (in decibels): 51 to 55: A church on a weekday. 56 to 60: The vegetable aisle at the Food Emporium. 61 to 65: Keyboards clacking at the office. 66 to 70: My alarm clock when it goes off inches from my ear. 71 to 75: Corner deli at lunchtime. 76 to 80: Back of a taxi with announcements at full volume. 81 to 85: Loud crowded subway with announcements. ( Ryan Sutton writes about restaurants for Bloomberg News. The opinions expressed are his own.) To contact the writer of this column: Ryan Sutton in New York at rsutton1@bloomberg.net .

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Masa’s $68 Tuna, Mina’s Turbot Make Vegas Casual Dining Fancy: Ryan Sutton

February 24, 2010

Review by Ryan Sutton Feb. 24 (Bloomberg) — Vegas needs fewer high-end dining venues with tasting menus and white tablecloths, and more New York-style neighborhood spots like Fatty Crab or Momofuku. Ambitious fare in casual settings with reasonable prices. While I have no qualms about my excellent $300 plus solo meals at fancy French joints like Savoy and Joel Robuchon, I wish I’d spent more time at more affordable joints like Michael Mina’s American Fish. I look at the menu and think: Why didn’t I try Mina’s $26 abalone and Kobe hot pot? Instead, I went for the $500 tasting at Shaboo downstairs. Regrets indeed. American Fish is hidden within the depths of the sprawling Aria Resort & Casino , part of the $8.5 billion CityCenter complex. The restaurant is as loud as an Irish bar and as dark as a nightclub. Its decor is as drab as a shopping mall’s — some of the seats overlook a brightly lit section of Aria. But it serves a piscine dish that wouldn’t be out of place at say, Alain Ducasse ’s Louis XV in Monaco. The turbot was poached in ocean water, barely cooked through. It sat in a bowl of clear, saffron-flavored broth that tasted like a pristine bouillabaisse. Even came with a rouille- topped cracker for dipping. Bottled Ocean One tiny issue: There’s no ocean in Vegas. Mina ships the aqua in from Hawaii. This has prompted some criticism about sustainability and jet-fuel usage. If that’s how you feel, don’t bother coming to Vegas, because not much is local in this desert town. If you’ve ever tried the horrific tap water here, you’ll know why people drink bottled water. So yes, Mina should stick with the Hawaiian water, especially for a dish this good. It’s not cheap at $42, but it’s enough meat to feed two. Mina is probably the most famous U.S. chef New Yorkers have never heard of. He has 17 restaurants from California to New Jersey, but none in New York. My companion, a Vegas local who’s sampled most of Mina’s West Coast venues said American Fish ranks with his best. Mustard-marinated cod ($43 — also enough for two) was as good as the miso version at Nobu. Raw sweet shrimp was spiced with horseradish panna cotta; don’t use too much of the cream, which can overwhelm. Scallops and foie gras? We’ve seen this pairing at Aureole (also in Vegas). Except here it actually worked — rare, delicate shellfish beneath rare, jiggly liver. Mina says, somewhat pompously, that American Fish has one of the best cocktail programs in Vegas. And I think he might be right. So finish off with a Knickerbocker ($11), a sweet-sour mix of Curacao, rum, lemon juice and raspberry syrup. The lost libation might have been the ancestor of modern Tiki drinks. Forget tablecloths; that’s the type of old-school charm Vegas needs. Bar Masa My second regret about Vegas is that I didn’t bring Bar Masa’s Kobe skewers to snack on my flight home. (My JetBlue flight didn’t have meal service.) Aria hosts the second location of Masa Takayama ’s eponymous sushi bar, which, like the original, oddly lacks a proper sushi bar. In fact, it’s not really a bar either. It’s a gorgeous, high-ceilinged restaurant that evokes an ultra-modern, silent nighttime garden in Tokyo. The Michelin three-starred chef gravitates toward shopping malls (his $400 per person raw fish temple is at New York’s Time Warner Center) and now casinos. Sit at the front counter and shell out $35 for the Kobe skewers. The addictive little sticks ooze beefy fat that yield to a stinging, salty yuzu spice. Tuna belly rolls ($68) are so wonderfully rich you wonder if these tuna died from high cholesterol. Order more. Kabayaki barbecue sauce coats about a foot’s worth of eel. Order three different mackerel sushi for a clever study in oil. But if Masa wants to preserve his ultra- luxury brand, he might want to consider adding a sushi chef to prepare them piece by piece and brush them with sauce in front of you. Otherwise, Bar Masa is just a better version of the more industrial Blue Ribbon chain. The Bloomberg Questions Cost? Plates in the teens to over $100 at both. Sound level? 80 decibels at American Fish, as loud as a baseball game; quiet as a library at Bar Masa. Date place? Yes to both. Inside tip? Stellar cocktail program at American Fish. Special feature? Try Shaboo next door to Bar Masa for $500. Will I be back? To American Fish. There’s a Bar Masa here in New York. American Fish and Bar Masa are at the Aria Resort & Casino in the CityCenter complex, 3730 Las Vegas Blvd., Las Vegas. Information: +1-866-359-7111; http://www.arialasvegas.com Sound-Level Chart (in decibels): 51 to 55: A church on a weekday. 56 to 60: The vegetable aisle at the Food Emporium. 61 to 65: Keyboards clacking at the office. 66 to 70: My alarm clock when it goes off inches from my ear. 71 to 75: Corner deli at lunchtime. 76 to 80: Back of a taxi with announcements at full volume. 81 to 85: Loud crowded subway with announcements. ( Ryan Sutton writes about restaurants for Bloomberg News. The opinions expressed are his own.) To contact the writer of this column: Ryan Sutton in New York at rsutton1@bloomberg.net .

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Obama’s Employer Tax-Credit Plans May Fail to Spur Small-Business Hiring

February 24, 2010

By Catherine Dodge Feb. 24 (Bloomberg) — Speed Exterminating Co. in Cleveland is the kind of small business where President Barack Obama wants to spur hiring through tax credits. Instead of interviewing applicants to replace a retired worker, Speed Exterminating President John Young is poring over route sheets to see where he can squeeze more work from current employees. With sales down 10 percent and the company coming off a 2009 loss , the prospect of a tax credit won’t motivate him to take on more hands. “I’m not going to just hire somebody because I have the opportunity for a tax credit,” said Young, whose great- grandfather started the company in 1908. “I need to make sure the business is sound.” The credits Obama has backed, and a similar incentive in a jobs bill the U.S. Senate may vote on today, aren’t enough to prompt an increase in payrolls, some small business owners and organizations say. “A business is not going to bring on a new employee , with the very significant expenses that go along with that, for a tax credit of several thousand dollars,” said Mike Elmendorf , New York state director of the National Federation of Independent Business , a trade and lobbying group for small companies. Timothy Bartik , an economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan, said tax credits don’t have to persuade every business to hire to benefit the economy. ‘On the Fence’ “It just needs to be relevant to a few employers who are on the fence,” Bartik said. If four out of five businesses would have hired employees without an incentive, a tax credit is still a cost-effective way to put people to work and pump money into the economy, he said. The president called for tax credits in a Jan. 22 speech in Ohio, where December’s unemployment rate was 10.9 percent. He has proposed a $33 billion package that would give businesses a $5,000 tax credit for each new hire this year and reimburse an employer’s 6.2 percent Social Security tax on wage increases that exceed inflation. Obama said the measures would help 1 million small businesses wavering on whether to increase payrolls. “A job credit can potentially accelerate people who may be planning to hire at some point anyway, but right now are just dipping their toe in the water,” the president said in a Feb. 9 interview with Bloomberg BusinessWeek. Tax Holiday The Senate jobs bill includes a $13 billion plan to offer companies a one-year holiday from the Social Security tax for each person they hire who has been jobless for at least 60 days. The plan would save or create as many as 234,000 jobs, according to the Congressional Budget Office . Obama and members of Congress have made job creation a priority as the unemployment rate hovers near 10 percent. With small businesses generating almost two-thirds of jobs in the U.S. over the past 15 years, those companies are a policy focus. “Most of what we’re hearing out of Washington right now is more about politics than it is about creating jobs,” said business owner Doug Newman, whose Newman Concrete Services Inc. in Richmond, Maine , is down to about 25 employees from a peak of 125 people 18 months ago. “Before you can take advantage of a tax credit you have to be making some money,” he said. “We posted a six-figure loss last year.” Newman said uncertainty about the impact of health-care and energy debates in Washington, on top of economic concerns, makes small businesses reluctant to expand . Let Economy Recover “The best thing Washington could do is say, ‘Let’s take a break from all this expansion of government and let the economy recover,’” Newman said. Roberton Williams , a senior fellow at the Washington-based Tax Policy Center , said much of the benefit of a tax credit would go to companies that would have hired people anyway. “If they need the workers, they will hire them,” he said. “If they don’t need them, it doesn’t make sense even if they are cheap.” The federal government last used tax credits to induce general hiring in the mid-1970s during Democratic President Jimmy Carter ’s administration, Bartik said. In that program, about 2.1 million tax credits were given, he said. If two out of three hires would have been made without the incentive, the program still generated about 700,000 jobs, Bartik said. Cheaper Workers “There’s no doubt that if workers are cheaper, more are hired,” said Daniel Hamermesh , an economist at the University of Texas in Austin, who worked on ideas in the Labor Department that led to the 1970s tax credits. Claudia Kovach, who runs City Machine Technologies Inc. in Youngstown, Ohio, said broader tax relief may help more than targeted hiring measures. Her family business, which refurbishes large equipment, cut workers last year for the first time since the company started about 25 years ago. “We need tax reductions not tax incentives,” she said. “The tax credit for hiring is a nice thought, but it’s not going to fix the economy. It’s not going to help my company when I don’t have work coming in.” To contact the reporter on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net

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Obama’s Employer Tax-Credit Plans May Fail to Spur Small-Business Hiring

February 24, 2010

By Catherine Dodge Feb. 24 (Bloomberg) — Speed Exterminating Co. in Cleveland is the kind of small business where President Barack Obama wants to spur hiring through tax credits. Instead of interviewing applicants to replace a retired worker, Speed Exterminating President John Young is poring over route sheets to see where he can squeeze more work from current employees. With sales down 10 percent and the company coming off a 2009 loss , the prospect of a tax credit won’t motivate him to take on more hands. “I’m not going to just hire somebody because I have the opportunity for a tax credit,” said Young, whose great- grandfather started the company in 1908. “I need to make sure the business is sound.” The credits Obama has backed, and a similar incentive in a jobs bill the U.S. Senate may vote on today, aren’t enough to prompt an increase in payrolls, some small business owners and organizations say. “A business is not going to bring on a new employee , with the very significant expenses that go along with that, for a tax credit of several thousand dollars,” said Mike Elmendorf , New York state director of the National Federation of Independent Business , a trade and lobbying group for small companies. Timothy Bartik , an economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan, said tax credits don’t have to persuade every business to hire to benefit the economy. ‘On the Fence’ “It just needs to be relevant to a few employers who are on the fence,” Bartik said. If four out of five businesses would have hired employees without an incentive, a tax credit is still a cost-effective way to put people to work and pump money into the economy, he said. The president called for tax credits in a Jan. 22 speech in Ohio, where December’s unemployment rate was 10.9 percent. He has proposed a $33 billion package that would give businesses a $5,000 tax credit for each new hire this year and reimburse an employer’s 6.2 percent Social Security tax on wage increases that exceed inflation. Obama said the measures would help 1 million small businesses wavering on whether to increase payrolls. “A job credit can potentially accelerate people who may be planning to hire at some point anyway, but right now are just dipping their toe in the water,” the president said in a Feb. 9 interview with Bloomberg BusinessWeek. Tax Holiday The Senate jobs bill includes a $13 billion plan to offer companies a one-year holiday from the Social Security tax for each person they hire who has been jobless for at least 60 days. The plan would save or create as many as 234,000 jobs, according to the Congressional Budget Office . Obama and members of Congress have made job creation a priority as the unemployment rate hovers near 10 percent. With small businesses generating almost two-thirds of jobs in the U.S. over the past 15 years, those companies are a policy focus. “Most of what we’re hearing out of Washington right now is more about politics than it is about creating jobs,” said business owner Doug Newman, whose Newman Concrete Services Inc. in Richmond, Maine , is down to about 25 employees from a peak of 125 people 18 months ago. “Before you can take advantage of a tax credit you have to be making some money,” he said. “We posted a six-figure loss last year.” Newman said uncertainty about the impact of health-care and energy debates in Washington, on top of economic concerns, makes small businesses reluctant to expand . Let Economy Recover “The best thing Washington could do is say, ‘Let’s take a break from all this expansion of government and let the economy recover,’” Newman said. Roberton Williams , a senior fellow at the Washington-based Tax Policy Center , said much of the benefit of a tax credit would go to companies that would have hired people anyway. “If they need the workers, they will hire them,” he said. “If they don’t need them, it doesn’t make sense even if they are cheap.” The federal government last used tax credits to induce general hiring in the mid-1970s during Democratic President Jimmy Carter ’s administration, Bartik said. In that program, about 2.1 million tax credits were given, he said. If two out of three hires would have been made without the incentive, the program still generated about 700,000 jobs, Bartik said. Cheaper Workers “There’s no doubt that if workers are cheaper, more are hired,” said Daniel Hamermesh , an economist at the University of Texas in Austin, who worked on ideas in the Labor Department that led to the 1970s tax credits. Claudia Kovach, who runs City Machine Technologies Inc. in Youngstown, Ohio, said broader tax relief may help more than targeted hiring measures. Her family business, which refurbishes large equipment, cut workers last year for the first time since the company started about 25 years ago. “We need tax reductions not tax incentives,” she said. “The tax credit for hiring is a nice thought, but it’s not going to fix the economy. It’s not going to help my company when I don’t have work coming in.” To contact the reporter on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net

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Obama to Tell CEOs U.S. Must Get Past Ideology to Revive Economic Growth

February 24, 2010

By Nicholas Johnston and Julianna Goldman Feb. 24 (Bloomberg) — President Barack Obama will tell a group of U.S. corporate executives today that “crippling” ideological divisions threaten economic growth and the nation must be committed to building widely shared prosperity. Before a gathering in Washington of almost 90 corporate executives who are members of the Business Roundtable, Obama will continue an effort to combat perceptions that his administration is anti-business as he pushes for government measures to encourage hiring and overhaul financial regulations. “A thriving, competitive America is within our reach,” Obama will say, according to excerpts released by the White House. “It’s not about being anti-business or pro-government; it’s about being pro-growth and pro-jobs.” Obama will be making his remarks at about 1 p.m. Washington time after a private dinner last night at the White House with 17 chief executive officers, including Verizon Communications Inc. ’s Ivan Seidenberg and State Farm Insurance Co.’s Ed Rust , the chairman and vice chairman of the business group’s executive committee; General Electric Co.’s Jeffrey Immelt ; JPMorgan Chase & Co. ’s Jamie Dimon ; and American Express Co. ’s Kenneth Chenault . In his speech today, Obama will say that in tackling issues such as education, health care and taxes, he can’t choose policies based on whether they are good for either business or labor. They must be based on whether they help the U.S. be competitive and grow. Sharing Prosperity “Despite growing global competition, this country can continue to lead,” Obama will say. “Whatever differences we have in this country, all of us have a stake in meeting the same goal: an America in which a growing prosperity is shared widely by its people.” Obama’s outreach today, and at last night’s dinner, is the latest in the president’s efforts to highlight the “fundamentally business-friendly” agenda he said his administration has pursued as officials worked to help pull the economy out of the worst recession since the Great Depression. “The irony is, is that on the left we are perceived as being in the pockets of big business; and then on the business side, we are perceived as being anti-business,” Obama said in a Feb. 9 interview in the Oval Office with Bloomberg BusinessWeek. Among the other CEOs at last night’s dinner in the State Dining Room were: David Cote of Honeywell International Inc. ; Antonio Perez of Eastman Kodak Co. ; Xerox Corp. ’s Ursula Burns ; Indra Nooyi of PepsiCo Inc. ; Wal-Mart Stores Inc. ’s Michael Duke ; Steve Odland of Office Depot Inc. ; William Green of Accenture PLC ; Michael Morris of American Electric Power Co .; Randall Stephenson of AT&T Inc .; Boeing Co .’s James McNerney ; Harold McGraw of McGraw-Hill Cos.; and Clarence Otis of Darden Restaurants Inc. Most of the corporate leaders at the dinner are members of the Business Roundtable’s executive committee . Education, Innovation In his talk to the Business Roundtable, Obama plans to repeat a theme he’s used repeatedly in talking about the economy: that the nation needs to invest more in education and fostering innovation and energy development. He also will make a pitch for his proposals to overhaul financial regulations and the health-care system and steps to rein in a deficit that the administration forecasts will hit $1.6 trillion this year. One of the immediate concerns Obama plans to address is reviving economic growth and job creation. Jobs Bill The U.S. Senate has been debating this week a $15 billion jobs bill that offers companies a one-year holiday from paying a 6.2 percent Social Security payroll tax for each worker they hire who has been jobless for at least 60 days. Obama also plans to discuss his call to double U.S. exports over the next five years. The U.S. trade deficit in 2009 was $380.7 billion, down 45 percent from 2008, according to figures from the U.S. Commerce Department. The Business Roundtable has applauded that part of the president’s agenda. Throughout Obama’s term, his administration has invited business leaders to private lunches, dinners and other meetings in Washington to reach out to the business community. Cote, Perez and Seidenberg were among attendees at the President’s Feb. 7 Super Bowl Party at the White House. Earlier that week, Obama, senior adviser Valerie Jarrett and Chief of Staff Rahm Emanuel had lunch with CEOs including Microsoft Corp. ’s Steve Ballmer , Cisco Systems Inc. ’s John Chambers and FedEx Corp. ’s Frederick Smith . With unemployment at 9.7 percent, administration officials have repeatedly stressed the need for private-sector cooperation to boost jobs. Obama has predicted that he would sign legislation this year to cut corporate taxes by about $70 billion. Industry Opposition Obama has clashed with industries such as insurance companies over his health-care plan, energy companies over climate change, and banks over an overhaul of U.S. financial regulations. He said each of the proposals would benefit American businesses as a whole. In the Bloomberg BusinessWeek interview, Obama attributed perceptions among business leaders and investors that he is anti-business, in part, to “a spillover effect” from criticism he has leveled at large banks . “You would be hard-pressed to identify a piece of legislation that we have proposed out there that, net, is not good for businesses,” he said in the interview. To contact the reporters on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net ; Julianna Goldman in Washington at jgoldman6@bloomberg.net

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Morgan Stanley’s Mack, Clooney Help Resourceful Charities Beat Recession

February 24, 2010

By Patrick Cole Feb. 24 (Bloomberg) — George Clooney worked the phones day and night to produce a telethon last month that raised $66 million for Haitian earthquake victims. Actor Alyssa Milano asked for donations instead of presents for her birthday party and raised $92,000 for charity: water , a New York nonprofit that builds wells in developing countries. Morgan Stanley Chairman John Mack and Chief Executive Officers Leslie Moonves of CBS Corp. and Frank Bennack of Hearst Corp. helped Partnership for a Drug Free America raise $2 million at its December gala, topping the organization’s goal by $500,000. With the U.S. in a severe economic slump, nonprofit groups must work harder to raise money and find new ways to reach patrons. While some are focusing on wealthy executives and celebrities, others are utilizing social network sites such as Facebook to reach a younger audience. “The nonprofits that ask more people for donations are the ones that are succeeding,” Stacy Palmer , editor of the Washington-based Chronicle of Philanthropy, said in a phone interview. “They just have to work harder at it.” Declining Donations Charitable donations by U.S. corporations may decline by up to 10 percent in 2009, according to Melissa Berman , chief executive officer of Rockefeller Philanthropy Advisors in New York. In 2008, those companies gave away $14 billion. “The organizations that come to us are run like a business, and they have to show that they can have an impact,” said Shannon Schuyler, corporate responsibility leader for the Americas at PricewaterhouseCoopers LLP in Chicago. “They didn’t come to us saying, ‘We’re having hard times, write us a check.’” Dozens of cultural organizations have shut down over the past two years, including the Fresno Metropolitan Museum in California, the Milwaukee Shakespeare Co. and the Las Vegas Art Museum. However, the economic downturn didn’t stop charity: water from boosting donations to $9 million in 2009, a 30 percent increase over the previous year. Facebook and Twitter have helped the 4-year-old nonprofit build a list of 80,000 donors, President Scott Harrison said in a phone interview. “A number of charities make the mistake of not continuing an aggressive fundraising approach,” said William Woodson, managing director and head of family wealth management for Credit Suisse Private Banking USA in Chicago. “We found that those that retained a rigorous approach were exceedingly effective.” Bigger Pledge Persistence paid off for the Lupus Research Institute in New York. After a regular donor pledged $50,000 instead of the $100,000 that was requested, director of major gifts Dorey Neilinger called him and managed to increase the donation to $75,000. Then Margaret Dowd , the institute’s chief executive, followed up with another call that resulted in the full $100,000 pledge. “It’s the cause and the mission that makes these gifts possible, and we never give up,” Dowd said in a phone interview. Showing donors that their money will be used for an important cause is essential in a recession, said Joel Simon , executive director of the New York-based Committee to Protect Journalists . Explaining how his nonprofit aids imprisoned and tortured journalists helped convince Microsoft Corp . to buy a $25,000 table at the organization’s November gala, Simon said. Santa Barbara The Santa Barbara Bowl Foundation, which raises money to renovate the California city’s 74-year-old outdoor amphitheater , received a $250,000 gift from a donor in November after board chairman Paul Dore made a personal pitch. Dore, a managing director at Santa Barbara Asset Management and a former Credit Suisse wealth manager, showed the patron the architect’s blueprint for renovating the facility. “Donors said, ‘I see what you’re doing, and we’re on board,’” Dore said. “We lead horses to water and hope they drink.” To contact the writer on this story: Patrick Cole in New York at pcole3@bloomberg.net .

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Canada Faces Russia in Olympic Hockey Quarterfinals

February 24, 2010

By Michael Buteau and Erik Matuszewski Feb. 24 (Bloomberg) — Canada faces Russia in Winter Olympics hockey competition today in a match-up of two of the world’s top teams after Canada beat Germany 8-2 last night. Jarome Iginla scored twice yesterday to lead Canada. Joe Thornton , Shea Weber , Sidney Crosby , Mike Richards , Scott Niedermayer and Rick Nash each added a goal for the host country. Eric Staal had three assists. Today’s quarterfinal game will pit Crosby, who captained the National Hockey League’s Pittsburgh Penguins to the 2009 Stanley Cup title, against Russia’s Alex Ovechkin , the NHL’s most valuable player the past two seasons. Crosby and Ovechkin are tied for the NHL lead with 42 goals each this season. “That’s a big rivalry, we all know it,” Crosby told reporters after the win over Germany. “It’s something that everyone’s been talking about even before the Olympics. I expect it to be a pretty incredible atmosphere.” In the win over Germany, the red-and-white clad home crowd of 17,723 filled the arena with chants of “we want Russia,” during the final minutes of the third period. Canada was forced to play Germany after losing to the U.S. in its final preliminary round game on Feb. 21, the first win by the U.S. over Canada at an Olympics in 50 years. Roberto Luongo , who replaced Martin Brodeur in goal for Canada, turned aside 21 German shots to earn his second win of the tournament. The U.S. will face Switzerland, which knocked off Belarus 3-2 in a shootout yesterday, in another quarterfinal game today. Slovakia plays Sweden after beating Norway 4-3, while the Czech Republic advanced to meet Finland with a 3-2 win over Latvia. Mancuso’s Quest Julia Mancuso will seek to return the U.S. to the Alpine skiing podium today in the women’s giant slalom. Bode Miller was disqualified for missing a gate on the first run of yesterday’s men’s giant slalom. It was the first time in seven Alpine events at the Vancouver Games that the U.S. had failed to medal. Mancuso, defending Olympic gold medalist in the giant slalom, won silver in the women’s downhill and Super-G events. Among her challengers will be Tanja Poutainen of Finland, the 2006 Olympic silver medalist in the giant slalom and a two-time World Cup giant slalom champion. Lindsey Vonn of the U.S., who won gold in the downhill and bronze in the Super-G during the Vancouver Games, never has finished in the top three of a World Cup giant slalom. Other Medals Other medals will be awarded today in women’s bobsled, women’s 3,000-meter short track speedskating relay, women’s 5,000-meter speedskating and women’s freestyle skiing aerials. Yesterday, Seung-Hoon Lee of South Korea won the men’s 10,000-meter speedskating gold medal when Sven Kramer of the Netherlands was disqualified for failing to change lanes. Carlo Janka won the men’s giant slalom, giving Switzerland its sixth gold medal of the Games. In the speedskating race, Lee finished in 12 minutes, 58:55 seconds, followed by Ivan Skobrev of Russia and Bob de Jong of the Netherlands at the Richmond Oval in British Columbia. Kramer was disqualified after finishing in 12:54.92, eclipsing the Winter Games record Lee had set earlier in the final. Judges ruled the Dutch athlete failed to make a proper change of lanes with eight laps remaining in Olympic speedskating’s longest race. Kramer Pushes Coach Kramer, 23, threw his sunglasses to the ice and pushed Dutch coach Gerard Kemkers after learning of the disqualification. Kramer, who won the 5,000-meter race on Feb. 13, blamed Kemkers for the mistake. “I wanted to go on the outer lane,” Kramer told reporters through a translator after the race. “Then, just before the cone, Gerard shouted ‘inner lane.’ I thought he’s probably right and went to the inner lane. I should have gone with my own thoughts. This really sucks.” Janka, 23, finished his two slalom runs in a combined time of 2 minutes, 37.83 seconds at Whistler Creekside in British Columbia. Norway picked up the silver and bronze medals with Kjetil Jansrud and Aksel Lund Svindal . Miller was more than a second behind Janka’s split times when he missed a gate, pulled to the side of the course and didn’t finish the run. Miller won a gold medal in the super- combined two days ago, and also has claimed silver and bronze medals at these Games. Switzerland’s six gold medals are tied with Canada and Norway for third behind the U.S. and Germany, which have seven apiece. Austrians Shut Out Austria, which has an Olympic-record 103 Alpine skiing medals, missed out this time. Marcel Hirscher finished fourth, followed by teammates Romed Baumann and Benjamin Raich . Giant slalom is similar to the slalom, with fewer, wider and smoother turns. The times for the two runs are combined, with the fastest total time determining the winner. Austria won the four-man Nordic combined relay yesterday after Mario Stecher pulled away from U.S. skier Bill Demong with about 500 meters to go. The U.S. took silver, its first Nordic combined medal, while Germany won bronze. Nordic combined includes ski jumping and cross-country skiing. Medals also were awarded yesterday in the women’s 4×6- kilometer biathlon relay and women’s ski cross. Russia took the gold in the biathlon event. France won the silver medal, followed by Germany. Vancouver native Ashleigh McIvor, 26, won gold in ski cross, giving host Canada its 11th medal. Hedda Berntsen of Norway won the silver, while Marion Josserand of France was third. Ski cross, in which groups of skiers race down a narrow mountain run at the same time, made its debut at these Games. Germany now has 23 medals, three behind the U.S., which leads the Vancouver Winter Games. Norway is third with 17 medals. The U.S.’s medal count tops its total at the 2006 Winter Olympics in Turin, Italy. To contact the reporters on this story: Michael Buteau in Vancouver, at mbuteau@bloomberg.net ; Erik Matuszewski in Vancouver, at matuszewski@bloomberg.net

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Mexico Says It’s Safe From `World of Sovereign Stress’ in Reversal of 2009

February 24, 2010

By Ye Xie and Lester Pimentel Feb. 24 (Bloomberg) — A year after a widening budget gap made Mexico a laggard in emerging markets, the country has “solid” finances that shield it from growing investor concern about countries’ ability to service debt, said Deputy Finance Minister Alejandro Werner . Mexico “frontloaded” budget cuts and tax increases last year while other countries buoyed spending to pull their economies out of recession, Werner said. Mexico’s fiscal measures, aimed in part at limiting credit-rating downgrades, have its markets “behaving correctly” as other governments slip into a “world of sovereign stress,” he said. “Under this international environment of fiscal laxity and fiscal doubts, our fiscal stance is very solid,” Werner said in an interview in New York. “Looking at what’s going on in Europe today, it looks like a good move.” A rally in Mexican debt has sent benchmark peso-denominated bond yields to a nine-month low while the currency has gained against 22 of its 25 emerging-market peers this year. The yield on the government’s 10 percent bonds due in 2024 has dropped 37 basis points, or 0.37 percentage point, this year to 7.9 percent, the lowest since May. By comparison, in Greece, 10-year bond yields are up 72 basis points to 6.49 percent after topping 7 percent in January for the first time since 1999 on concern the government will be unable to finance its deficit. Mexico’s dollar bonds have returned 1.3 percent this year, topping the average 0.1 percent gain on emerging-market debt, according to JPMorgan Chase Co.’s EMBI+ index. That’s a reversal of last year, when the 10 percent return on Mexican debt was less than half the 26 percent gain for developing-nation debt. Budget Cuts Mexico is winning over investors after President Felipe Calderon carried out spending cuts and tax increases totaling more than $10 billion to contain the deficit even as the economy shrank 6.5 percent last year in the worst recession since 1932. Standard & Poor’s has shifted the outlook for Mexico to stable from negative after lowering its rating one step to BBB, the second-lowest investment-grade level, in December, a month after Fitch Ratings made the same move. While the tax increases should have been more broad-based, the measures were key to restoring confidence in the country’s finances after falling output at the state oil company crimped government revenue, said Flavia Cattan-Naslausky , a currency strategist with RBS Securities Inc. in Stamford, Connecticut. “You have to give credit to them as they did fiscal tightening when the economy was tanking,” said Cattan- Naslausky, who predicts gains in the peso. During the global financial crisis, “everyone was spending money like crazy. Now you see fiscal deterioration everywhere. Certainly on the fiscal side, we don’t have to worry about Mexico.” Syndicated Bond Sale Mexico’s first-ever domestic bond sale through a syndicate of banks yesterday lured bids worth three times the 25 billion pesos ($1.9 billion) of 10-year debt on offer, Gerardo Rodriguez , head of the Finance Ministry’s Public Credit Department, said in a phone interview. The government sold the bonds to yield 7.66 percent. Pacific Investment Management Co., manager of the world’s biggest bond fund, has been adding Mexican debt because it’s “attractively priced,” fund manager Michael Gomez said in a Feb. 9 interview. Five-year credit-default swaps tied to Mexico’s bonds and used to hedge against losses traded at 1.30 percentage points yesterday, three basis points less than that for Brazil, according to data compiled by CMA DataVision. The cost of protecting Mexican bonds fell below that of Brazil on Feb. 17 for the first time since January 2009, reversing a gap that swelled to as much as 72 basis points last year. Deficits Credit swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 a year on a contract protecting $10 million of debt. Last year’s fiscal measures, which were criticized by Mexico’s opposition parties, are helping spur demand for the country’s bonds, said Werner, an economist who earned his Ph.D at Massachusetts Institute of Technology. Mexico forecasts it will keep its deficit at the equivalent of 2.8 percent of gross domestic product this year after posting a 2.1 percent gap in 2009. The deficit in the Group of 20 developed economies will reach 6.9 percent of GDP this year, the International Monetary Fund said in November. ‘Debt Scares’ Mexico will “likely” hold its debt-to-GDP ratio at 37 percent this year as the economy grows 3.9 percent, Werner said. The ratio will resume a “declining trend” in 2011, he said. The IMF estimates debt in the advanced G-20 economies will reach 118 percent of GDP in 2014, up from about 80 percent before the crisis. “We can distinguish ourselves,” said Werner. “We have shown we have stable debt dynamics. We started doing the fiscal reforms in 2009 even when the country was still under a very stressful situation.” Kenneth Rogoff , a Harvard University professor and former IMF chief economist, predicted yesterday in Tokyo that there will be a “bunch” of government defaults over the next few years in the wake of the banking crisis. Werner said that while he doesn’t expect many defaults, there will be “debt scares” that shake global financial markets in the next two years. “We will be living in a world of sovereign stress,” Werner said. To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net Lester Pimentel in New York at lpimentel1@bloomberg.net

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Record U.S. Debt Hampers Fiscal, Monetary Policy Effectiveness: Analysis

February 24, 2010

Feb. 24 (Bloomberg Multimedia) — Record U.S. debt may hamper the ability of spending and interest-rate policies to soften the extremes of the business cycle, an analysis shows. Click here for a Bloomberg Multimedia interactive visual analysis of debt, fiscal and monetary policies and economic growth. # # -0- Feb/24/2010 11:35 GMT

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`Snow Hurricane’ Threatens New York, New England; Bigger Storm Approaches

February 24, 2010

By Brian K. Sullivan and Alex Morales Feb. 24 (Bloomberg) — A winter storm threatened to dump more than a foot (30 centimeters) of snow across parts of upstate New York and New England, while forecasters warned of an even more powerful system hitting the northeast tomorrow. “You may hear it called a ‘snow hurricane’ because blizzard may not even do it justice,” said Alex Sosnowski , an expert senior meteorologist with AccuWeather Inc. in State College, Pennsylvania. “It is like we’re getting a decade’s worth of storms all in one season.” Warnings for the current storm stretch from Maine through New Hampshire, Vermont and New York state as well as Massachusetts and Connecticut, according to the National Weather Service. Rain was falling today in New York, while inland, it was snowing in Albany, where up to 13 inches of snow were forecast through the night and today, the agency said. The next storm will develop off the U.S. East Coast out of a system coming up from the Gulf of Mexico, Sosnowski said. They’ll add to what’s already been a benchmark winter in the eastern U.S., where seasonal snowfall records have already been set for Washington and Baltimore. AccuWeather’s Web site describes the coming storm as “nothing short of a monster” and predicts high winds and heavy rain across Long Island, Connecticut and New York. “Midday models show a region from Cape Cod to northern Maine receiving hurricane-force winds at the storm’s peak, Thursday afternoon and overnight,” private forecaster MDA Federal Inc. said in a statement. The lowest hurricane-force wind is 74 miles per hour (119 kilometers per hour). NYC Snow The storm is forecast to enter New York’s metropolitan area early in the morning on Feb. 25, said Joe Pollina, meteorologist with the National Weather Service in Upton, New York. The weather service Web site said up to five inches of snow may fall there tomorrow, with winds gusting as high as 36 miles an hour. In coastal areas, the storm is likely to draw in warm air that will mean rain, while areas from upstate New York to Ottawa may receive 12 inches or more of snow, Sosnowski said. “This thing is a little different animal,” Sosnowski said by telephone. “Instead of passing on by, it looks like it is going to hook back.” To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ; Alex Morales in London at amorales2@bloomberg.net

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