Bloomberg News

Bank of America Seeks `Edge’ with Merrill Rivaling Schwab, Fidelity Online

by on June 15, 2011

From Bloomberg…

By Margaret Collins and Alexis Leondis June 18 (Bloomberg) — Bank of America Corp. , the largest U.S. bank by assets, is trying to attract investors with less to invest through a new online trading site. Bank of America’s Merrill Lynch, the world’s largest brokerage with more than 15,000 financial advisers and about $2.2 trillion of client assets, will let customers trade stocks, mutual funds and options online starting June 21, through Merrill Edge , Dean Athanasia , head of banking and the direct investment division for Bank of America Global Wealth and Investment Management, said in an interview. “It’s an integrated bank and brokerage offering” that will compete with companies such as Charles Schwab Corp . and closely held Fidelity Investments, said Athanasia, who is based in New York and Boston. The site will target customers who have $250,000 or less to invest, those with “emerging wealth” or self-directed investors, he said. Customers of Merrill Edge will pay from $4.95 to as much as $8.95 a trade depending on the size of their accounts, Athanasia said. Those with at least $25,000 in total banking and brokerage accounts will get 30 free equity trades a month. Users may open investment and retirement accounts on the site and those with more than $20,000 to invest may contact advisers, who are separate from Merrill Lynch’s full-service advisers, by phone. Schwab, based in San Francisco, charges $8.95 for all online stock trades regardless of account balances, how many shares are traded and how often shares are traded, according to the company’s website. Trading Costs Fidelity, based in Boston, generally charges $7.95 for online U.S. equity trades, and TD Ameritrade Holding Corp ., based in Omaha, Nebraska, charges $9.99 for online stock trades. New York-based E*Trade Financial Corp . charges from $7.99 to $9.99, depending on the number of trades. Steve Austin , a spokesman for Fidelity, the world’s largest mutual-fund manager, declined to comment on Merrill Edge. Greg Gable, a spokesman for Schwab, also declined to comment. Schwab, TD Ameritrade and E*Trade, the largest U.S. independent online brokers, fell in stock trading yesterday after Bank of America’s plans were reported by the Wall Street Journal. It’s “highly unlikely” that Merrill Edge will cause a significant number of existing clients to leave Schwab, TD Ameritrade or E*Trade, and the initial negative market reaction is an “overreaction,” Raymond James Financial Inc.’s Patrick O’Shaughnessy , an analyst, and Megan Repine , a research associate, wrote in a research note yesterday. Re-Branding Effort “We believe this is simply a re-branding of Bank of America’s existing online brokerage,” said O’Shaughnessy and Repine, who are based in Chicago. Merrill Edge may lead to more financial advisers leaving the firm because they fear the platform might cannibalize their clients, they said. The firm’s full-service advisers target high-net-worth clients with complex needs while the online site is aimed at investors who choose to be self-directed, said Selena Morris , a spokeswoman for the Charlotte, North Carolina-based bank. “The attrition rate for clients that have both a full- service and a self-directed account is half of those with only a full-service relationship,” Morris said. To contact the reporters on this story: Margaret Collins in New York at mcollins45@bloomberg.net . Alexis Leondis in New York aleondis@bloomberg.net .

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Celebrity Adviser Ken Starr Name-Dropped Peterson, Mellons in Alleged Scam

by on June 9, 2011

From Bloomberg…

By John Helyar and David Glovin June 18 (Bloomberg) — Kenneth I. Starr knew how to cultivate relationships with powerful people, and he did it in the most transparent way — by serial name-dropping. Dining with Starr in the Grill Room at the Four Seasons in New York meant listening to him reel off bold-face names as fast as he guzzled Diet Cokes, according to one occasional lunch companion who asked not to be identified. Certain people would come up again and again in his boasts, according to a story in the June 21 issue of Bloomberg Businessweek. Starr would say he had lunch with Peter Peterson, co-founder of the private-equity firm Blackstone Group LP , or that he and “Pete” were talking at the Council on Foreign Relations, long chaired by Peterson, or that he had done something with “Pete,” according to the companion. Starr managed money for a living, and his relationship with Peterson was one of his key assets. Rachel “Bunny” Mellon, the 99-year-old widow of the bank heir and philanthropist Paul Mellon was a longstanding client, according to Alex Forger , Mellon’s lawyer. It was his connection to the Mellons that started Starr on his path to wooing the rich, according to people who knew Starr and who asked not to be identified. Starr’s career famously came to an end last month when government agents arrived at his home on Manhattan’s Upper East Side and found him hiding in a closet, prosecutors in Manhattan said on the night of his arrest. His $7.5 million condominium, which he shared with his fourth wife, Diane Passage, a pole dancer, featured floor-to-ceiling windows, a granite lap pool, and a 1,500-square-foot garden, financed with what prosecutors said was plundered cash, according to a criminal complaint. ‘Secret’ Interest Days after his arrest, a grand jury indicted Starr for cheating 11 clients — Jim Wiatt, the former head of the William Morris Agency, and actress Uma Thurman among them — out of $59 million. Starr pocketed half that amount, while the other half was placed in investments in which he or his friends had a secret interest, prosecutors said. Starr has denied wrongdoing and is being held at the Metropolitan Correctional Center in lower Manhattan. The Securities and Exchange Commission brought its own civil fraud lawsuit against Starr and Passage, seeking the return of tens of millions of dollars. The two haven’t yet responded to the SEC suit. A judge last week extended the freeze on the couple’s assets at a hearing attended by Passage, who looked uncharacteristically demure in a pink cardigan and a black skirt. She declined all reporters’ questions except for one from Bloomberg Businessweek, about her age. “Thirty-four,” she said. “You can take a couple of years off that if you want to.” Elite Crowd The disintegration of Starr & Co., which once managed more than $700 million for about 175 wealthy individuals, exposes an uncomfortable truth about the elite crowd he preyed on — that wealthy, sophisticated people could be such easy marks for fraud. While the numbers involved aren’t on the scale of Bernie Madoff ’s Ponzi scheme, Starr shared Madoff’s ability to create an aura of exclusivity around himself that appealed to the elite. His allure was augmented by Starr’s attendance at invitation-only business gatherings, such as Allen & Co. President Herbert Allen ’s annual media conference in Sun Valley, Idaho. Still, there is no special trick to Starr’s alleged con game that one can glean from his indictment or the SEC complaint. So how is it so many people so willingly allowed their pockets to be picked? The Herd “Everyone follows the herd,” said Ken Springer, a former Federal Bureau of Investigation agent and founder of New York- based investigative firm Corporate Resolutions. “Everyone says this guy is the best, and no one vets the people.” Starr & Co. rose by buzz and fell by buzz. A court- appointed receiver has reported that only 30 to 40 clients remained with the firm, after scores of others left amid repeated incidents of unauthorized client wire transfers and money-losing investments. Individuals once affiliated with Starr have typically gone mum — Peterson declined to comment on either his relationship with Starr or the accusations against him — or distanced themselves from him. Millennium Technology Ventures, a venture- capital firm that grew out of one co-founded by Starr and Peterson, addressed the issue in a June 4 letter to investors. ‘Not Involved’ “He has not been involved in investment decisions for the fund and has not been actively involved in any operational or strategic decision-making capacity with the fund for many years now,” wrote Daniel Burstein , one of Millennium’s two managing partners who were once with Blackstone. In addition, he wrote, “Mr. Starr has been removed from his role as a member of the Special Advisory Board.” Peterson remains a special advisory partner with Millennium, according to the firm’s website. Burstein declined to comment for this story. Starr’s connections to Blackstone go back to the early 1990s, when the firm was considerably smaller than it is now. Blackstone received $90 million from clients of Starr & Co., according to a lawsuit filed in 2009 by the estate of former Starr client Joan Stanton. Actor Wesley Snipes , for instance, put $1 million into Blackstone, according to testimony in the actor’s 2008 tax- evasion trial. Injecting himself as a middleman, Starr charged clients for placing their money with the firm and pooled their investments in partnerships he controlled, prosecutors said. The Stanton complaint doesn’t claim that Blackstone was aware of Starr’s motives. ‘Excessive’ Fees The Stanton estate’s suit decried “excessive fees,” which came on top of Starr’s regular ones. His annual charges rose from $120,000 in the years after he began working with Stanton in 1987 to $240,000 in 2004. The suit also accused Starr of using the partnerships to prevent Stanton from having direct communication with Blackstone. Stanton committed $5.1 million to a fund called Blackstone Domestic Capital Partners II, a Blackstone entity, her estate alleged. Her money didn’t go straight to Blackstone Domestic, according to the lawsuit. Stanton’s money was instead put with that of other Starr clients in a $12.4 million pool he formed called Blackstone Investors Partnership, which wasn’t affiliated with the Peterson Blackstone, according to the complaint. Stanton’s Blackstone Domestic returns were supposed to go to a trust whose assets would be distributed tax-free to heirs. Those Blackstone returns went to purposes unknown, according to the Stanton estate’s complaint. Venture Firm By 1997, Starr and Peterson had grown close enough to create and co-invest in a tech venture firm called P.S. Capital, according to filings and a person familiar with the enterprise. The vehicle’s chief financial officer and general counsel was Ronald Starr , a son from Ken Starr’s first marriage, and it created two investment funds totaling $13 million, according to this person. As Internet fever spiked around the year 2000, P.S. Capital morphed into the more ambitious Millennium Technology Venture Fund, which, according to press releases, raised $160 million of investor capital, yielded more than two dozen technology startups, and included “special limited advisory partners” Peterson and Starr. Dan Burstein , who previously had been a senior adviser to Blackstone and chief investment officer of P.S. Capital, became a managing partner of Millennium, as did Richard Kimball, then Peterson’s son-in-law. Settled Suit The firm’s location in the same office building as Starr & Co. enabled Starr to be active in the firm. He was “actively involved in managing personnel matters,” according to a former Millennium secretary named Mystery Masiello, who filed a discrimination lawsuit against the company in 2003. She alleged that when she told the firm’s leaders she was pregnant in July 2001, Starr said, “Oh great, now Dan is going to have to get a new assistant,” referring to Burstein. The case was settled on undisclosed terms in 2003. The Millennium fund, launched just before the Internet bubble burst, proved to be a dud. Its few successes — such as the Internet security company Phobos, which was sold to SonicWALL in 2000 — were overshadowed by big losses. About half of the original $160 million has been returned to investors, according to a person familiar with its finances who asked not to be identified. Millennium is in the process of being wound down, according to the June 4 letter to investors. ‘Land Rush’ “They were caught up in the Oklahoma land rush” along with many other Internet investors, says Neil Livingstone, former chief executive officer of GlobalOptions Group Inc. , a security company. GlobalOptions, which he said was the Millennium Fund’s only non-tech investment and its top- performing portfolio company after the bubble burst, went public in 2005. It owed much of its success to business it received directly from Millennium during the post-bubble malaise. “We shut down a lot of their Silicon Valley companies,” said Livingstone, who is now CEO of Washington security firm ExecutiveAction. The firm was an early example of Starr’s growing propensity to invest client funds “in questionable and suspicious investments, often with a direct benefit to himself, his wife,” or friends, prosecutors said last month in Starr’s criminal complaint. Starr also put his clients’ money straight into GlobalOptions stock. In a February 2008 SEC filing by GlobalOptions, Thurman and playwright Neil Simon together were listed as owning almost as many shares as the company’s CEO, Harvey Schiller . New Incarnation In 2004, Millennium was reinvented by Burstein as Millennium Technology Value Partners, a provider of liquidity for distressed tech companies in exchange for equity stakes. In its new incarnation it has had some success, investing in companies that were later bought by Amazon.com Inc. , Microsoft Corp. and AT&T Inc. , and in April it closed a new $280 million fund to new investors, according to Millennium’s press releases. Starr was listed on the Millennium website as a “special limited advisory partner” until February 2008. He effectively ceased involvement when Burstein changed the concept, according to people familiar with the firm. Starr met Bunny Mellon when he was a young certified public accountant with Manhattan-based Oppenheim, Appel, Dixon & Co. The Bronx-born graduate of Queens College and Brooklyn Law School loved the idea of handling taxes for one of America’s richest families, according to a person familiar with the situation. Modest Dress He absorbed his clients’ methods and desires, though he dressed inexpensively himself. He was following the advice of Paul Mellon, according to Livingstone, who recalls Starr invoking this line from the philanthropist: “If you have a bigger yacht than your clients, they won’t trust you.” The Mellons led Starr to another big-fish Oppenheim client, Arthur Stanton, who made his fortune as the first U.S. distributor of Volkswagen Beetles. Stanton and his wife, Joan, lived at one of Manhattan’s finest addresses, 10 Gracie Square, according to a published report of her apartment’s sale in February. The Stantons’ apartment served as a salon to many of the city’s elite. Joan Stanton was an actress who had played Lois Lane in The Adventures of Superman radio show, and their home was often filled with performing artists, according to a person familiar with the matter. When their daughter turned 21, Leonard Bernstein led the singing of Happy Birthday, the daughter, Jane Stanton Hitchcock, once recounted in an interview. Arthur Stanton introduced Starr to his social circle and endorsed his accounting. Film director Mike Nichols and stage director Hal Prince became Starr clients. Arthur Stanton died in 1987, leaving $60 million to his widow, and Starr pitched himself to manage it for her, according to a person familiar with the matter. ‘Predator’ The lawsuit brought against Starr by Joan Stanton’s estate 22 years later, soon after her own passing at age 94 in May 2009, portrayed him as a predator who defrauded her of “tens of millions of dollars.” “Mrs. Stanton’s lack of financial acumen was known to Mr. Starr,” according to the complaint. “Mr. Starr began to cultivate Mrs. Stanton as a client who would come to rely on his services exclusively.” Starr left Oppenheim in 1987 to start his own firm, he said in testimony at the 2008 tax-evasion trial of client Wesley Snipes. Skills honed on the Mellons and Stantons served him well in building a larger clientele, according to a person who has known him professionally for years. The person describes Starr as a master of ingratiating himself with people. He wasn’t suave; he wasn’t a Madoff in appearance and charm; he was rather abrupt. Detailed Investments So what was the appeal? This person describes Starr as very bright and says he came across as sincere. He could sit down with a piece of paper and map out detailed investments. Starr’s reputation took its first public beating in 2002 when his client Sylvester Stallone sued him for keeping him invested in Planet Hollywood from 1997 to 2001, as the restaurant chain spiraled toward bankruptcy and the value of his 4 million shares withered. The actor accused Starr of putting his friendship with Keith Barish , a founder of Planet Hollywood, ahead of his fiduciary duty to clients, and sought at least $10 million in damages. The litigation, settled on undisclosed terms in 2003, was an example of what prosecutors later said was Starr’s habit of making decisions without his clients’ approval. In 2006, Starr formed Starr Investment Advisors; regulatory filings indicate he had 26 to 100 clients and 11 to 50 employees. Two Funds Starr placed $6.5 million of Bunny Mellon’s fortune into two investment funds from 2005 to 2007 without informing his longtime client that they were “highly speculative and risky,” according to prosecutors. He also failed to “disclose certain conflicts of interest,” according to indictment against Starr. Barish didn’t return a call seeking comment. Only in August 2009, when investigators asked Mellon’s attorney about these illiquid investments, did her representative become aware of the funds. Starr returned $4.3 million to Mellon that month, according to the indictment. Starr’s behavior outside the office also turned erratic after taking up with Passage in 2005. He began to forsake his own counsel about modest appearances, spending more than $400,000 on jewelry from Jacob & Co., aka Jacob the Jeweler, during the span of several months in 2006, according to the criminal complaint. Pole Dancer In May 2007, he divorced Marisa Starr. He did so by filing court documents without her knowledge that claimed she agreed to end 16 years of marriage, according to her 2009 lawsuit. Starr’s fourth wife was a flashy, jarring presence in Manhattan society — tattooed, provocatively dressed and a pole dancer. She put on a Poledance Superstar competition in New York in October 2009 to raise money for a charity she started called S.P.I.N. (Single Parents In Need), according to a website promoting the event. Starr was proud of her, too, showing iPhone pictures of her gyrating on a pole to fellow attendees at a Tribeca Film Festival function in 2008, according to people who were there. In early 2008, Starr recruited Jacob the Jeweler, whose real name is Jacob Arabo , as an investment client. His money was invested in “sure deals” that included Glassnote Entertainment Group, which gave Passage a $150,000-a-year job, and Martin Bregman Productions, a movie venture involving Marty Bregman, a Starr client and a veteran producer of films such as Scarface, according to the criminal complaint. Prosecutors said Passage wanted to make the film version of “The Desert Rose,” Larry McMurtry ’s novel about an aging Las Vegas showgirl. The two doomed ventures represented $2.7 million of the $13 million of which Arabo was defrauded by Starr, according to the complaint. Strange Behavior The same network that made Starr rich quickly undid him, as stories of losses and strange behavior spread. Clients left the firm, including Mike Nichols and his broadcaster wife, Diane Sawyer , according to a person familiar with the matter. Four months after Stanton’s death, her estate sued Starr for “gross abuse of trust and confidence” over 20 years. The Stanton complaint, combined with some individual complaints, spurred the Manhattan District Attorney’s office and the SEC to start asking questions. Starr settled with the Stanton estate for an undisclosed sum in January, according to a person familiar with the situation. He also reached a $4 million settlement that month with an unidentified playwright and screenwriter who complained of being fraudulently induced to invest in a failed restaurant chain, according to the indictment. Top Clients Starr raided other clients’ accounts to make the payment, prosecutors said. In another winter development, a veteran account manager for Starr named Arnold Herrmann left for rival firm Citrin Cooperman & Co. and took some of his top clients, according to a Feb. 11 Citrin Cooperman press release. One of the clients was Barbara Walters , according to a person familiar with the matter. As his firm disintegrated, Starr tried to maintain appearances. In February he borrowed $2.6 million from Los- Angeles-based City National Bank , according to a lawsuit filed by the bank on June 16, two weeks after Starr missed a $9,385 interest payment. At a March 10 meeting with federal investigators, he said his firm had 200 clients. While that would have almost been true at its peak, the list had dwindled to less than a quarter of that by the time of his arrest, according to the criminal complaints and a document filed in court by the Starr & Co. receiver, Aurora Cassirer. Final Straw In April, prosecutors said, Starr bought the $7.5 million condominium. This proved to be the final straw. On May 25, the lawyer for Bunny Mellon, Starr’s first big client and one of his last, was looking through her financial statements. He saw a series of mid-April wire-transfers out of her Starr & Co. account, totaling $5.75 million, according to prosecutors. Starr had allegedly raided the account to close on his condominium. The lawyer called the authorities. Two days later, federal agents were removing him from the closet. The civil case is SEC v. Starr, 1:10-cv-04270, and the criminal case is U.S. v. Starr, 1:10-mj-01135, U.S. District Court, Southern District of New York (Manhattan). To contact the reporters on this story: John Helyar in Atlanta at jhelyar@bloomberg.net ; David Glovin in New York federal court at dglovin@bloomberg.net .

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Celebrity Adviser Ken Starr Name-Dropped Peterson, Mellons in Alleged Scam

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Weber Defies Trichet Over Europe Bond Bailout as ECB Succession Approaches

June 9, 2011

By Christian Vits, Jana Randow and Richard Tomlinson June 18 (Bloomberg) — On May 10, just hours after the European Central Bank stepped into government bond markets for the first time, Axel Weber broke ranks with most of his colleagues on the ECB’s Governing Council — including his boss, President Jean-Claude Trichet . “The purchase of government bonds poses significant stability risks, and that’s why I’m critical of this part of the ECB council’s decision,” said Weber, president of Germany’s Bundesbank. His comments, in an interview with the Frankfurt-based Boersen-Zeitung that was later posted on the Bundesbank’s website , came after he had spent part of the previous night on an emergency ECB conference call, Bloomberg Markets magazine reports in its August 2010 issue. As finance ministers in Brussels hammered out a European Union-led rescue package worth about $927 billion, Trichet persuaded almost all of his council colleagues that purchasing government bonds was essential to halt a bond market rout triggered by Greece’s yawning fiscal deficit. One of the dissenters was Weber — the top candidate to become the ECB’s third leader when Trichet’s eight-year term expires in October 2011. Weber’s words matter because he represents the central bank of more than one-quarter of the euro region’s economy and a German habit of fiscal discipline and price stability that most of the euro-member countries have broken. Just as German Chancellor Angela Merkel held out on rescuing debt-stricken Greece until the last minute, Weber, 53, stands against getting the ECB too entwined with indebted nations. ‘First Among Equals’ “After Trichet, Weber is the first among equals,” says Juergen Michels , chief euro-region economist at Citigroup Inc. in London. “He’s not an ideologue, but he does represent a lot of the hard-money values that Germany is associated with.” Weber’s intransigence presents a dilemma for European leaders, who must decide in the next year whom to pick as Trichet’s successor. The ECB president chairs a 22-member council of the heads of all 16 central banks plus a 6-member Executive Board. By moving Weber from the Bundesbank’s bunker-like concrete building in northern Frankfurt to the Eurotower, the ECB’s 36- story glass-and-steel headquarters downtown, the member countries would be guaranteed an inflation fighter in the German tradition that underpinned the deutsche mark for half a century. They would also be choosing a plain-spoken former monetary economics professor who’s prepared to question policies he thinks are hazardous. Wanting Him? “Weber’s public opposition to a policy move by the ECB that the politicians are presumably very keen on could make his appointment a bit difficult,” says David Mackie , chief European economist at JPMorgan Chase & Co. in London. “They might feel: ‘Do we really want this guy to be in charge?’” Weber was nonetheless right to warn about the danger of buying bonds, Mackie says. By taking the helm of the world’s second-most-important central bank, Weber would face “huge” challenges, says Nouriel Roubini , the New York University economist who predicted the financial crisis. “There’s a rising risk of breakup of the monetary union, and the ECB will have to play an important role to prevent that from happening,” says Roubini, who sees Weber as the “leading candidate” for the top post. Tackling the Deficit Germany has a 2010 estimated budget deficit of 5 percent of gross domestic product, smaller than all but 4 of the 16 euro- member countries, and is fighting to keep the euro region under fiscal control. Merkel insisted Greece’s deficit be “tackled at its roots” before agreeing to the bailout package and is touting Germany’s constitutional amendment on fiscal restraint, which will start to go into effect in 2011, as an example to all euro governments. The euro has plunged 13.8 percent this year against the dollar, falling below $1.20 on June 4. Even after the round of rescue measures announced by the EU and the ECB, the extra yield that investors demand to hold 10-year Spanish bonds over German bunds is close to a euro-era high of 216 basis points. (A basis point is 0.01 percentage point.) Trichet’s successor thus may be confronted with the prospect of continuing to implement unconventional policy measures to safeguard the currency, such as wading deeper into the European debt market. “The ECB has crossed the Rubicon with the bond purchases,” says Julian Callow , chief European economist at Barclays Capital in London. By June 4, the ECB had purchased 40.5 billion euros ($50.1 billion) of bonds, according to the bank. First in Decades If Weber takes over from Trichet, he’ll be the first German to win a top EU post since Walter Hallstein, who led the European Commission’s predecessor institution from 1958 to 1969. To get this far, Weber — who has a British wife, Diane, and speaks fluent English — gave up a two-decade-long academic career specializing in applied monetary and international economics when he became Bundesbank president in 2004. “It’s the combination of his gravitas as an academic but also as head of the Bundesbank that matters,” says James Nixon , co-chief euro-region economist at Societe Generale SA in London. “I find it really hard to see any other person in Germany who can play in the same league.” Weber, who declined to be interviewed, grew up in Glan- Muenchweiler, a village of 1,200 people surrounded by tree- covered hills in southwestern Germany , about 45 kilometers (28 miles) from the French border. His father, Hans, taught at the local primary school and still lives in the village. Shoulder-Length Hair While he was a student at the University of Constance from 1976 to 1982, Weber sported shoulder-length hair and supplemented his income by working as a roofer when home during vacations, recalls Rudolph Hanss, a former co-worker. Fellow roofers nicknamed Weber “the theorizer” because of his academic background, says Hanss, who’s still employed at the same company. “But he certainly knew how to work.” After graduating, Weber taught and did research from 1982 to 2004 at German universities in Siegen, Bonn, Frankfurt and Cologne. He ran Cologne’s marathon in 2002, registering a time of 4 hours, 7 minutes. As an academic, Weber developed ties to the inner circle of Berlin politics. He was a member of the so-called Five Wise Men, the government’s panel of economic advisers, from 2002 to 2004. Former students include Deputy Finance Minister Joerg Asmussen and Jens Weidmann , Merkel’s chief economic adviser. Merkel has increasingly enlisted Weber to sell unpopular financial bailouts at home and abroad to skeptical politicians. Time in Berlin “He’s been very involved in rescuing the banks and dealing with the politicians,” says Joachim Fels , co-chief global economist at Morgan Stanley in London. “My guess would be that he’s spent more time in Berlin these past two years than Frankfurt.” On May 19, Weber spoke in a cramped meeting room in Berlin’s rebuilt Bundestag building. His task: Selling the euro bailout program to lawmakers. He wasn’t enjoying himself. “I’m personally dismayed about the fact that following the bank rescue program and help for Greece, I am now appearing before the German parliament for the third time,” Weber said. “It creates the impression that one is being driven by markets and is not in control of markets.” The Bundesbank president’s tone was counterproductive, says Steffen Bockhahn, a legislator for the opposition Left Party who attended the hearing. That Human Touch “Weber lacked sensitivity, that human touch that alleviates the job of conveying bad news,” he says. “When you’re trying to tell the keepers of the country’s public purse why they have to sign off on a huge aid package, a certain humanity can go a long way.” Selling himself as the next ECB president may require Weber to improve his conciliation skills. “He positions himself explicitly,” says Klaus Liebscher , who headed the Austrian central bank from 1995 to 2008 and thus sat with Weber on the ECB council. “He’s always honest about his convictions but possibly not always diplomatic.” Since becoming Bundesbank president, Weber has been a regular guest at the annual August conference of central bankers and economists hosted by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming. During the afternoon break, he hikes for hours with fellow participants in the surrounding Teton Range. Swiss National Bank President Philipp Hildebrand says he met Weber for the first time on such a jaunt in 2003 or 2004. “We started walking and marched far into the Grand Tetons,” he says. “I was impressed by his stamina and endurance. We just made it back in time for dinner.” Economics Department Inside the Bundesbank, Weber holds the reins tightly. One official says he wants to be No. 1 — and wants others to accept that. For example, when he arrived at the German central bank, he assumed leadership of its economics department. Weber reflects the Bundesbank’s traditional role as guardian of price stability. Runaway inflation gripped Germany in the early 1920s after the government printed bank notes to finance crippling World War I reparation payments imposed by the Allies. In 1957, the West German government created the Bundesbank, whose prime responsibility was to safeguard the mark as the bedrock of the country’s post-World War II recovery. “When you talk with German monetary policy makers, they still have the 1920s hyperinflation in their minds,” says Stephane Deo , chief European economist at UBS AG in London. “They have an aversion to inflation that is much higher than in other countries.” Implementing the Bailout The Bundesbank, which gave up setting Europe’s de facto benchmark interest rate after the ECB took over in 1999, retains some powers . It acts as an agent for about a quarter of the bond purchases conducted by the euro region’s network of central banks — in essence, helping implement the bailout package. And more than 70 percent of all European banks that accessed ECB money market funds last year did so through the Bundesbank. While Weber generally advocates a tight monetary policy stance to counter inflation risks, he can quickly adapt to a crisis. After Lehman Brothers Holdings Inc.’s 2008 bankruptcy shattered confidence in financial markets and pushed Europe into its worst recession since World War II, Weber turned pragmatic. With other ECB council members, he became an advocate of pumping unlimited liquidity into the banking system to encourage lending and a supporter of lower interest rates. ‘Further Easing’ “Owing to a remarkable decline in inflationary pressures in the medium term and rapidly deteriorating economic prospects, euro-area monetary policy in my view has enough leeway for further easing if necessary,” Weber said at a banking conference in Frankfurt on Nov. 21, 2008. He sometimes speaks more forthrightly. Weber landed on Trichet’s so-called black list last November by revealing that the ECB would tighten its lending to banks. The list is drawn up by the ECB’s press division and given to all policy makers when they convene. The remarks breached ECB protocol that major announcements be made by the president. They also came within a week of a council meeting, when officials are supposed to refrain from commenting on policy. Weber will temper his style if he becomes ECB president, says Allan Meltzer , political economy professor at Pittsburgh’s Carnegie Mellon University. “Anybody in that job will have to make consensus moves,” says Meltzer, who has known Weber for more than 30 years and is the author of a two-volume history of the U.S. Federal Reserve. Draghi’s History The only challenger for Trichet’s 35th-floor corner office is Mario Draghi , 62, governor of the Bank of Italy. His handicap may be his previous job as vice chairman of the international division of Goldman Sachs Group Inc. from 2002 to 2005. In 2000, Goldman Sachs helped Greece shave 2.4 billion euros from its official deficit through currency swaps, the New York-based bank said in a Feb. 21 statement. The Bank of Italy said on Feb. 17 that Draghi had “nothing to do with those transactions.” Merkel, 56, has won French President Nicolas Sarkozy ’s support for Weber’s candidacy, German magazine Spiegel reported in February, and the newspaper Handelsblatt said in May that Germany agreed to support the bailout package in return for a guarantee Weber would get the job. Government spokeswoman Sabine Heimbach denied there was a deal in a May 12 statement. “If Merkel says she wants Weber, Sarkozy probably won’t stand in her way,” says Philippe Chalmin , an economics professor at the University of Paris-Dauphine who advises France’s government on economic policy. “Now it’s Germany’s turn.” And it may be the turn of Weber, the former construction worker, to rebuild the ECB as a central bank that stands apart from governments. As he told Bundesbank employees in Mainz, Germany, on May 31: “The damaged foundations of the currency union need to be reinforced.” To contact the reporters on this story: Christian Vits in Frankfurt at cvits@bloomberg.net ; Jana Randow in Frankfurt at jrandow@bloomberg.net ; Richard Tomlinson in London at rtomlinson1@bloomberg.net .

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BP to Increase Oil Recovery Rate From Leaking Well After Collection Halted

June 9, 2011

By Katarzyna Klimasinska June 20 (Bloomberg) — BP Plc plans to increase the rate it recovers oil from its leaking well in the Gulf of Mexico after collection was halted yesterday. BP has the capacity to recover between 26,000 barrels and 28,000 barrels of oil daily, Robert Wine , a company spokesman, said today. The company recovered 21,040 barrels yesterday after the Discoverer Enterprise drillship stopped capturing oil for 10 hours because of an equipment problem and lightning storm. The temporary halt in the recovery rate came as BP Chief Executive Officer Tony Hayward was photographed at a yacht race in the U.K. White House Chief of Staff Rahm Emanuel criticized Hayward, saying today on ABC’s “This Week” that it was “part of a long line of PR gaffes and mistakes.” About 11,050 barrels of oil were collected onto the drillship and 9,990 barrels and 43.4 million cubic feet of natural gas were burned aboard a second vessel, the London-based company said in a statement posted today on its website . If it’s able to recover 28,000 barrels of oil a day, BP would be preventing between 46 and 80 percent of the oil from entering the Gulf, based on leak estimates from a government-led panel of 35,000 barrels to 60,000 barrels a day. ‘Worst-Case Scenario’ Representative Edward Markey , a Massachusetts Democrat, said today a BP internal document shows the well may leak as much as 100,000 barrels a day under a “worst-case scenario.” That scenario would include a damaged bore and removing the blowout preventer and wellhead, according to an e-mailed statement from Markey’s office. The company has been recovering at least 15,000 barrels a day since June 8, with the exception of June 15, when capture was temporarily halted because of a fire that may have been caused by lightning. The vessels are now operating at their full capacities and BP “would like to get every drop” of oil, Wine said. BP said it has recovered 249,500 barrels in total from the well, which began leaking after an April 20 explosion aboard the Deepwater Horizon rig. The company’s CEO returned to the U.K. this week to see his family, Wine said. Hayward is “still very much in charge” of BP, Wine said. BP Chairman Carl-Henric Svanberg said on Sky television on June 18 that Hayward was handing over control of the spill to BP Managing Director Robert Dudley . Wine declined to comment on a Wall Street Journal report today that BP hasn’t decided whether to sue Anadarko Petroleum Corp. , a minority partner in the Macondo well. BP said June 18 that both parties are responsible for the spill, while Anadarko said well operator BP should pay the claims related to the damage. To contact the reporter on this story: Katarzyna Klimasinska in Houston at kklimasinska@bloomberg.net

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Video: Kedrosky Says Groupon Isn’t a Technology Company

June 4, 2011

June 3 (Bloomberg) — Bloomberg News contributor Paul Kedrosky and A.B. Mendez, senior research analyst at Greencrest Capital Management LLC, discuss prospects for Groupon Inc. Groupon, the biggest provider of online daily-deal coupons, said yesterday that it plans to raise $750 million in an IPO, the most yet for a U.S. social media company. Mendez and Kedrosky speak with Julie Hyman and Cory Johnson on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Al Hunt on Palin’s Bus Tour, Potential GOP Nominees

May 27, 2011

May 27 (Bloomberg) — Al Hunt, executive editor at Bloomberg News, talks about Sarah Palin, former Republican governor of Alaska and 2008 nominee for vice president, and her “One Nation Tour.” Hunt, speaking on Bloomberg Television’s “InBusiness with Margaret Brennan,” also discusses the contenders for the 2012 Republican presidential nomination and his interview with Representative James Clyburn, the assistant Democratic leader in the U.S. House. Hunt’s interview with Clyburn airs this weekend on “Political Capital With Al Hunt.” (Source: Bloomberg)

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Video: Al Hunt on Jon Huntsman, Obama’s Meeting With Netanyahu

May 20, 2011

May 20 (Bloomberg) — Al Hunt, executive editor at Bloomberg News, talks about President Barack Obama’s meeting with Israeli Prime Minister Benjamin Netanyahu and U.S. policy for the Middle East. Hunt, speaking on Bloomberg Television’s “InBusiness With Margaret Brennan,” also discusses a potential bid for the Republican presidential nomination by former Utah Governor Jon Huntsman. (Source: Bloomberg)

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Video: Bloomberg’s Johnson Discusses Hewlett-Packard Earnings

May 18, 2011

May 17 (Bloomberg) — Bloomberg’s Cory Johnson discusses Hewlett-Packard Co.’s second-quarter earnings. The biggest personal-computer maker missed analysts’ profit projections as consumers shunned PCs. The report comes a day after Bloomberg News reported Chief Executive Officer Leo Apotheker sent a memo warning of “another tough quarter” in the July period. Johnson speaks on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Blitz Sees `Dangerous’ Signals from Core Inflation Data

May 13, 2011

May 13 (Bloomberg) — Steve Blitz, economist at ITG Investment Research, talks about U.S. consumer-price report released today by the Labor Department and the economic implications. The consumer-price index increased 0.4 percent in April, matching the median forecast of economists surveyed by Bloomberg News and following a 0.5 percent advance in March. Blitz speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” (Source: Bloomberg)

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Video: Al Hunt on U.S. Debt-Ceiling Debate, Eric Holder

May 13, 2011

May 13 (Bloomberg) — Al Hunt, executive editor at Bloomberg News, discusses negotiations between Republican and Democratic leaders over extending the U.S. government’s borrowing authority. Hunt, speaking with Margaret Brennan on Bloomberg Television’s “InBusiness With Margaret Brennan,” also previews his interview with U.S. Attorney General Eric Holder, which airs this weekend on “Political Capital With Al Hunt.” (Source: Bloomberg)

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Video: Al Hunt on Indiana’s Mitch Daniels, U.S. Jobs Data

May 6, 2011

May 6 (Bloomberg) — Al Hunt, executive editor at Bloomberg News, discusses the political reaction to the U.S. April employment report and previews his interview with Indiana Governor Mitch Daniels, which airs this weekend on “Political Capital With Al Hunt.” Hunt speaks with Scarlet Fu on Bloomberg Television’s “InBusiness With Margaret Brennan.” (Source: Bloomberg)

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Video: Horowitz Says RIM in `Precarious Position’ Versus Apple

April 29, 2011

April 29 (Bloomberg) — Ben Horowitz, co-founder of Andreessen Horowitz, talks about challenges facing Research In Motion Ltd., the company’s competition with Apple Inc. and Google Inc. operating systems, and the outlook for the technology industry. He speaks with Cory Johnson on Bloomberg Television’s “Bloomberg West.” Bloomberg LP, which owns Bloomberg News, is an investor in Andreessen Horowitz. (Source: Bloomberg)

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Video: Kedrosky Says Demand `Hot’ for Engineers on West Coast

April 22, 2011

April 21 (Bloomberg) — Bloomberg News contributor Paul Kedrosky talks about technology companies’ hiring and demand for engineers on the U.S. West Coast. He talks with Cory Johnson on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Lippmann’s LibreMax Said to Gain as Mortgage Funds Rise

April 20, 2011

April 19 (Bloomberg) — LibreMax Capital LLC made money in mortgage securities last month, weathering the first loss for subprime-backed bonds in 10 months. Greg Lippmann’s $605 million LibreMax hedge fund rose 0.6 percent, bringing 2011 returns to 4.2 percent, according to investor documents obtained by Bloomberg News. Bloomberg’s Erik Schatzker reports in today’s Movers & Shakers. (Source: Bloomberg)

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Video: Kedrosky Says Microsoft May Expand Google Complaint

March 31, 2011

March 31 (Bloomberg) — Bloomberg News contributor Paul Kedrosky talks about Microsoft Inc.’s antitrust complaint to European Union regulators against Google Inc. which may expand an existing EU probe beyond Internet searches to online video and mobile phones. Kedrosky speaks with Emily Chang and Cory Johnson on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Kedrosky Says Microsoft May Expand Google Complaint

March 31, 2011

March 31 (Bloomberg) — Bloomberg News contributor Paul Kedrosky talks about Microsoft Inc.’s antitrust complaint to European Union regulators against Google Inc. which may expand an existing EU probe beyond Internet searches to online video and mobile phones. Kedrosky speaks with Emily Chang and Cory Johnson on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Kedrosky Is `Pessimistic’ on Research In Motion’s Future

March 26, 2011

March 25 (Bloomberg) — Bloomberg News contributor Paul Kedrosky talks about Apple Inc.’s iPad and the outlook for Research In Motion Ltd.’s PlayBook tablet and the mobile device market. Kedrosky talks with Cory Johnson and Emily Chang on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Kodak Wins Round in $1 Billion Apple, RIM Patent Dispute

March 25, 2011

March 25 (Bloomberg) — Eastman Kodak Co. has won the latest round in its patent dispute with Apple Inc. and Research In Motion Ltd., a case with the potential to generate more than $1 billion in new licensing revenue for the camera company. Bloomberg News San Francisco Bureau Chief Jeffrey Taylor reports on the stakes involved with Cory Johnson and Emily Chang on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Kodak Wins Round in $1 Billion Apple, RIM Patent Dispute

March 25, 2011

March 25 (Bloomberg) — Eastman Kodak Co. has won the latest round in its patent dispute with Apple Inc. and Research In Motion Ltd., a case with the potential to generate more than $1 billion in new licensing revenue for the camera company. Bloomberg News San Francisco Bureau Chief Jeffrey Taylor reports on the stakes involved with Cory Johnson and Emily Chang on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Kodak Wins Round in $1 Billion Apple, RIM Patent Dispute

March 25, 2011

March 25 (Bloomberg) — Eastman Kodak Co. has won the latest round in its patent dispute with Apple Inc. and Research In Motion Ltd., a case with the potential to generate more than $1 billion in new licensing revenue for the camera company. Bloomberg News San Francisco Bureau Chief Jeffrey Taylor reports on the stakes involved with Cory Johnson and Emily Chang on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Bloomberg’s Winkler Says Fed Had Become Used to Secrecy

March 21, 2011

March 21 (Bloomberg) — Matthew Winkler, editor-in-chief of Bloomberg News, talks about today’s U.S. Supreme Court ruling that upholds a lower court order requiring the Federal Reserve to disclose details of emergency loans it made to banks in 2008. The central bank has five days to release the records, sought by Bloomberg News’s parent company, Bloomberg LP. Winkler speaks with Mark Crumpton on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

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Video: Kedrosky Sees Groupon as a Short-Selling Opportunity

March 18, 2011

March 17 (Bloomberg) — Bloomberg News contributor Paul Kedrosky talks about the outlook for Groupon Inc., owner of the biggest coupon website. Groupon has held talks with banks about an initial public offering that would value the company at as much as $25 billion, according to two people with knowledge of the discussions. Kedrosky talks with Cory Johnson and Emily Chang on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Payrolls Rose 192,000; Jobless Rate at 8.9% in February

March 4, 2011

March 4 (Bloomberg) — U.S. employers added 192,000 workers in February, amid an improving economy and more seasonable weather, and the unemployment rate unexpectedly declined to 8.9 percent, the lowest level since April 2009. The gain in payrolls followed a 63,000 increase in January and compared with the 196,000 median estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. Bloomberg’s Lizzie O’Leary reports. (Source: Bloomberg)

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Video: Payrolls Rose 192,000; Jobless Rate at 8.9% in February

March 4, 2011

March 4 (Bloomberg) — U.S. employers added 192,000 workers in February, amid an improving economy and more seasonable weather, and the unemployment rate unexpectedly declined to 8.9 percent, the lowest level since April 2009. The gain in payrolls followed a 63,000 increase in January and compared with the 196,000 median estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. Bloomberg’s Lizzie O’Leary reports. (Source: Bloomberg)

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Wisconsin Governor Threatens To Fight Union Protest With National Guard

February 15, 2011

State workers in Wisconsin are protesting a move by Republican Governor Scott Walker to use the threat of the National Guard to break the public union. Citing a $137 million budget deficit, Walker announced a plan last week which would essentially take away the public union’s collective bargaining rights and slash benefits for state employees. Meanwhile, the share of corporate tax revenue funding the state government has fallen by half since 1981 and, according to Wisconsin Department of Revenue , two-thirds of corporations based in state pay no taxes. In the case of a walkout, Walker has put the National Guard on alert. On Monday he told reporters that the guard is “prepared” for “whatever the governor, their commander-in-chief, might call for.” Wisconsin is one of a growing number of states facing severe budget cuts and difficult choices regarding public unions. But as Bloomberg News points out , the biggest savings Walker is proposing have nothing to do with state workers or collective bargaining. Walker claims the state can save $165 million by the end of next June simply by restructuring its existing debt. “I’m just trying to balance my budget,” Mr. Walker told the New York Times last week. “To those who say why didn’t I negotiate on this? I don’t have anything to negotiate with. We don’t have anything to give. Like practically every other state in the country, we’re broke. And it’s time to pay up.” The Republican Party of Wisconsin has said that Walker’s plan will save Wisconsin $30 million over the next three months and $300 million over the next two years. Union leaders and labor scholars don’t think Walker’s move to crush the union is about the deficit. “If it had simply to do with the budget there doesn’t seem to be a need to eliminate collective bargaining,” said Joseph McCartin, a labor historian at Georgetown University. “In other states where state’s municipalities have faced difficult times, unions have helped negotiate the way forward.” “Denying people’s rights has nothing to do with the budget,” said Michael Uehlein, field director for the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). Uehlein views Walker’s proposal as “an excuse to go after his political enemies” and “the first step that will lead to drastically reduced wages across the state.” Rick Badger, the executive director of AFSCME’s Wisconsin 40 council, one of the most active unions in the state, characterised Walker’s proposal as a “man-made disaster” that is “really about taking away people’s rights and creating a second-class citizen.” Badger is adamant that a compromise could be reached and outraged that Walker has made no attempt to sit down with the unions. “It’s been painted as being all about the money but what this is really about is workers who won’t be able to negotiate health insurance, pension, vacation, hours of work, the arbitration process, just cause or discipline,” Badger said. “[Walker] claims there’s nothing to bargain with. The message we need to get out there is that this could not be further from the truth.” Badger continued, “none of the unions involved in this have said that they would not be willing to make sacrifices. They have said that they are, and they will.” Public and private sector labor leaders in Wisconsin and around the country are joined in opposition of the bill. On a conference call on Monday, conservative and Republican employees across the state spoke out against Walker’s plan. “The right to join a union and collectively bargain is a freedom that people have died to protect. To have anyone threaten to wipe it away with minimal public debate, deliberation or discussion is unconscionable,” said Janice Bobholz, an employee with the Dodge County Sheriff’s Department and a resident of Beaver Dam. The governor’s proposal is especially painful given Wisconsin’s long history of collective bargaining. “[Walker's proposal] really represents a break in a 50-year tradition,” McCartin said. “I think it’s really significant and its implications are frightening for public sector unions not just in Wisconsin but over much of the country.” In Ohio, collective bargaining rights for state workers are no more secure . Republican Senator Shannon Jones has proposed a similar bill to Walker’s, and last month, Ohio governor John Kasich said that if employees strike, “they should be fired.” However, he has not yet threatened to call in the National Guard. “It’s hard to imagine why that had to be raised except to purposely stoke a fire,” McCartin said. “It’s a painful history that Wisconsin has had in that respect and to raise the specter of calling in the National Guard seems totally warranted in this case.” The last time Wisconsin called in the National Guard was in 1886. The Guard, then called the State Militia, were brought in to break a rally of Milwaukee workers advocating an 8-hour work day. The militia fired into a crowd of unarmed picketers; it’s estimated that 5 to 7 workers were killed. Badger is a veteran of the armed forces. He is astounded that the governor has suggested the Guard might be called in. “I volunteered to defend the rights of citizens in this country,” Badger said. It’s really offensive — not the National Guard soldiers — just that the governor could find the time and resources to put the National Guard on alert but not to sit down with any of the unions.” In a press release put out by VoteVets.org, an outreach group devoted to veterans issues, a veteran and former National Guard member shared his unhappiness with the Governor’s proposed solution to a union strike. “Maybe the new governor doesn’t understand yet – but the National Guard is not his own personal intimidation force to be mobilized to quash political dissent,” said Robin Eckstein, a former Wisconsin National Guard member, Iraq War Veteran from Appleton, WI, and member of VoteVets.org. “The Guard is to be used in case of true emergencies and disasters, to help the people of Wisconsin, not to bully political opponents.” The governor’s office did not immediately respond to request for comment.

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Video: Romer Says U.S. Must Forge a Budget Solution `Now’

February 14, 2011

Feb. 14 (Bloomberg) — Christina Romer, former chairman of U.S. President Barack Obama’s Council of Economic Advisers, discusses Obama’s $3.7 trillion budget proposal submitted to Congress today. Romer, a Bloomberg News contributor, speaks with Tom Keene on Bloomberg Television’s “Surveillance Midday.” (Source: Bloomberg)

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Video: Egyptian Policeman Threatens Bloomberg Reporter in Cairo

February 4, 2011

Feb. 4 (Bloomberg) — Bloomberg News reporter Maram Mazen talks about her ordeal yesterday in Cairo when she and four of her friends were confronted by Egyptian police and civilians as they tried to deliver food and medical supplies to those injured in clashes with pro-Mubarak protesters. Mazen talks with Mark Crumpton on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

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Video: ING’s Knightley Sees 175,000 New U.S. Jobs in January

February 4, 2011

Feb. 4 (Bloomberg) — James Knightley, an economist at ING Financial Markets, talks about the outlook for U.S. payrolls in January. Employment increased by 146,000 workers last month after a 103,000 gain in December, according to the median forecast of 85 economists surveyed by Bloomberg News. Knightley speaks with Maryam Nemazee on Bloomberg Television’s “Countdown.”

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Video: Westpac’s Jones Sees 125,000 Extra U.S. Jobs in January

February 4, 2011

Feb. 4 (Bloomberg) — Russell Jones, global head of fixed income at Westpac Banking Corp., talks about his estimate for U.S. payrolls in January. Employment increased by 146,000 workers last month after a 103,000 gain in December, according to the median forecast of 85 economists surveyed by Bloomberg News. Jones speaks from Sydney with Linzie Janis on Bloomberg Television’s “Global Connection.”

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Richard (RJ) Eskow: Afghanistan’s "Too Big to Fail" Bank Is Failing — Guess Our System Doesn’t Work There, Either

February 2, 2011

The collapse of Afghanistan’s largest bank will seem familiar to Americans, and so will the upcoming reports of its bailout. We’ve heard the story before: Unheeded warnings. Lax (or nonexistent) law enforcement. An American auditor who said nothing as the books imploded. Sloppy, reckless, and greedy lending. Politicians in bed with banks. And a corporate crime wave led by bankers who can break the law with impunity, knowing they won’t be punished even if they’re caught. The Kabul Bank story is a sad inversion of nation-building. It might have provided some moments of black humor for the recession-ravaged middle class, if only Americans and Afghans weren’t paying for it with their lives. We promised to teach the Afghans everything we know about running a modern economy. Apparently we did. Exporting hypocrisy The financial collapse of 2008 discredited an economic philosophy which had dominated both political parties for decades. That philosophy created a toxic cocktail of deregulation, ineffective oversight, concentrated wealth, and incentives to cheat. The end result cost the economy trillions in lost wealth, ongoing hardship for tens of millions of people, and a bailout whose true cost is still being hidden from the public. And what did we learn from all of that? Not very much, judging by the evidence. The list of institutions advising the Afghans includes the US Treasury Department and the Department of Justice — both of whom have, shall we say, underperformed when it comes to regulating banks and prosecuting financial crimes. And the consulting group that was awarded nearly $100 million to help the Afghans develop sound financial practices went bankrupt in the middle of its assignment. That’s right — bankrupt. But the source of our failure in Afghanistan isn’t in the government’s choice of advisors or its failure to manage its developmental efforts properly, as harmful as those things have been. The real problems in Afghanistan are philosophical, not managerial, and they’re the same ones that have plagued us at home: a continued belief in failed economic theories; indifference or hostility toward regulation and regulatory agencies; a too-cozy relationship between banks and politicians; and, worst of all, the willingness to tolerate (and therefore condone) a list of bank crimes that includes fraud, forgery, and laundering drug money. “Thin Tightrope” Cables released by WikiLeaks reveal that U.S. Ambassador Karl Eikenberry considered it necessary to walk a ” thin tightrope ” when working with corrupt officials. The cable indicated that Eikenberry collaborated with an “allegedly corrupt official because he could serve as a “stabilizing… force” (militarily, in this case.) This official’s “illicit (drug) trafficking” was not to be tolerated in the interests of security. That philosophy extended to banking, where the now-failing Kabul Bank and other banks were widely understood to be helping Afghans get illicit drug money out of the country. Kabul Bank is no different from Wells Fargo, either in its willingness to handle drug money or its apparent impunity from the law. As Bloomberg News originally reported, Wells Fargo’s internal screening unit repeatedly turned a blind eye to money laundering on behalf of mass-murdering Mexican drug cartels. Regarding these drug laundering charges, Bloomberg reported that “no big U.S. bank — Wells Fargo included — has ever been indicted. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again.” As Bloomberg explains, “Large banks are protected from indictments by a variant of the too-big-to-fail theory.” In other words, once a bank is big enough to pose a threat to the economy it receives effective immunity for past and future criminal behavior — a license to commit crime. Yet “too big to fail” provisions were removed from last year’s US financial reform law by lawmakers on Capitol Hill whose own favorite investments included Bank of America, Goldman Sachs, and JPMorgan Chase. And Afghanistan’s largest bank, a corrupt collaboration between its president and the bank’s principal owners, grew large enough to become a “systemic risk” to the nation’s economy… as our own government stood and watched. Meanwhile, here at home, corporate lawbreakers like Bank of America, Wells Fargo, Goldman Sachs, and JPMorgan Chase are apparently still considered a “stabilizing force.” Too big to fail As the New York Times reported this week: Fraud and mismanagement at Afghanistan’s largest bank have resulted in potential losses of as much as $900 million — three times previous estimates — heightening concerns that the bank could collapse and trigger a broad financial panic in Afghanistan, according to American, European and Afghan officials. The extent of these losses make it clear that keeping the bank afloat — something the government has said it is determined to do — would require large infusions of cash from an already strained budget. The crisis was a long time coming. As the Times reported last September , Afghan President Hamid Kharzai has family ties and a personal financial interest in the bank, and agreed to bring the brother of one of the bank’s principals into the government as his Vice Presidential running mate. (But then, American Administrations from both parties (including the current one) have hired a string of senior bank officials and watched others leave government to join big banks — not as egregious, perhaps, but a clear conflict of interest.) If an institution is allowed to become “too big to fail,” it’s rarely an accident. The corruption has already taken place somewhere along the line. Austerity and Deregulation We’re told that Deloitte, the auditor in place at Kabul Bank, was not specifically tasked with reviewing its accounts. Deloitte apparently acquired the contract when it purchased BearingPoint, the consulting firm that went bankrupt. But unless there are more contracts being awarded than have been widely reported, the original BearingPoint contract (worth a reported $98 million) was designed to help banks “improve economic governance.” There were reports as far back as 2005 that some of the consultants on the project were “subpar” and that US contractors were receiving widespread criticism locally. BearingPoint has promoted a privatization-oriented approach during its richly (and, let’s not forget, publicly ) funded tenure in Afghanistan, as it has in other countries. The firm and its successor unit within Deloitte have done some good work, but remain part of a well-paid consultant nexus that emphasizes the same set of shared values that undermined the US economy. In other words, BearingPoint and like-minded vendors have been faithful in the execution of an austerity-minded philosophy — a philosophy that can sometimes become anti-government in many ways, and whose philosophy of “austerity” rarely extends to its own practitioners. The Afghan Research and Evaluation unit, a group set up by the international aid community in Afghanistan, assessed Afghan aid as follows: “Consistent with the current consensus on development held by the donor community and international financial institutions (IFIs), the privatisation process has gained increased momentum in Afghanistan … Fifty four fully state-owned enterprises (SOEs) have been slated for privatisation as going concerns or through liquidation by the end of 2009.” In BearingPoint’s case, their sympathy for this downsizing-government approach isn’t surprising. Alice Rivlin, the economist best-known for relentlessly advocated Social Security cuts, was a member of the Board and the company’s leading economic figure — before it went bankrupt. They say they weren’t doing the bank’s books. But if they were there to “improve the economic governance” of Kabul Bank, an institution whose misdeeds were well-known and whose implosion could topple the economy, then it’s certainly fair to say that their work has been “subpar.” Toxic Assets A report commissioned by the International Monetary Fund got the problems right. “As of March 2008,” the report noted, “the two largest domestic private banks accounted for almost 50 percent of total banking system assets. The combined loans of these two banks were 70 percent of total commercial bank lending.” The mayor of Kabul was indicted by the Afghan government on corruption charges, but U.S. officials wound his explanation credible: He was arrested by corrupt officials after he exposed their own misdeeds. Specifically, he told officials that he found files for more than 30,000 applicants who paid for “nonexistent plots of land in Kabul.” These toxic assets were part of a larger get-rich-quick schemes for officials who apparently found his investigations inconvenient. The IMF report also included this observation: “Most banks did not attach particular importance to analysis of borrowers’ balance sheets, cash flow, or business plans.” That kind of lax underwriting will be familiar to observers of American lending practices. The report also noted, somewhat laconically, that “banks that lend extensively domestically engage in extra-judicial, non-traditional contract enforcement. ” Extra-judicial? As in illegal? It sounds like we’ve exported foreclosure fraud, too. Do as we say, not as we do The procurement process for USAID projects in Afghanistan seems to be a mess. Sen. McCaskill was surprised to learn that major contractors there were not being asked to file the usual tracking reports . The Obama Administration was criticized for awarding a major contract to a Democratic party donor , and for using the “no-bid” process it has criticized in the election campaign to do it. After Kabul Bank’s impending failure was reported, the US government insisted that the Times update its story to include a quote from a Treasury Department spokesperson saying that “no American taxpayer funds will be used to prop up Kabul Bank.” But that doesn’t have any more credibility than Treasury Department claims that bank bailouts in this country have been fully repaid — a claim that doesn’t count aid funneled through the Federal Reserve, the cash value of low- and zero-interest bank loans, and other taxpayer-funded measures. Ninety percent of Afghanistan’s national budget was financed by foreign countries last year, with the US assuming a significant chunk of the cost. When the Afghans conduct their first bank bailout, under United States supervision, the funds will undoubtedly come from the Afghan treasury. And then funds from ours will help make up the shortfall elsewhere. Yes, corruption among politicians and other officials is a much greater problem there. They’re a drug-based economy whose principal export is poppies. Their country is divided, impoverished, and largely illiterate. But economic behavior is universal. Their bankers are subject to the same “moral hazard” as bankers everywhere: When “too big to fail” banks can gamble with absolute certainty that they’ll be rescued, that’s exactly what they’ll do. When bankers know they can commit crimes go unpunished, they’ll commit crimes. And they won’t stop until people start going to jail — in both countries. “You complete me …” A jargon-laden report from the Congressional Research Service addressed what it called “ROL,” an acronym that stands for the “rule of law,” and concluded: “Helping Afghanistan build its justice sector … suffers from the same difficulties that have complicated all efforts to expand and reform governance in that country: lack of trained human capital; traditional affiliation patterns that undermine the professionalism, neutrality, and impartiality of official institutions; and complications from the broader lack of security and stability in Afghanistan.” In other words, they’re saying that Afghans are too tribal and primitive to do things the American way. But that’s not true. Yes, education and training is needed. But their lack of law enforcement, especially in the financial sector, directly reflects the level of emphasis we’ve placed on it ourselves — in their country and here at home. We’ve lavishly funded privatization efforts and the unrestrained growth of private and morally corrupt banks, while at the same time devaluing the role of regulation and law enforcement. The problem with the Afghans isn’t that they’re not like us. The problem is that we’re too much alike. People everywhere are, pretty much, especially where money’s concerned. So until we change the way we govern, the results are likely to be the same wherever we go. Crimes will still be committed, banks will still fail, and we’ll all keep paying the price for a moral, legal, and economic blindness that keeps leading us off the same cliff over and over again. Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Wall Street Pay Jumps 5.7 Percent, Breaking Record

February 2, 2011

Wall Street pay is rising, while income for normal Americans has stagnated. Even as the real economy limped, financial firms paid employees a record sum last year, the Wall Street Journal reports. In 2009, the last full year data are available, average wages for Americans fell 1.5 percent from the previous year, according to the National Average Wage Index. Median household income in 2009 was “not statistically different” from 2008, according to the Census Bureau . But total pay at Wall Street firms rose 5.7 percent in 2010, as the 25 companies that have already reported results shelled out a record $135 billion. Even as regulators pressured firms to alter compensation, prominent executives got big pay bumps, seeming to suggest that the former Wall Street culture has emerged virtually unscathed from the recession. In the years leading up to the financial crisis, executives got bonuses based on their companies’ short-term performance, a phenomenon that experts say encouraged excessively risky behavior. When lawmakers drafted regulations for the financial sector, executive compensation became a crucial subject for reform. The stimulus act, passed in early 2009, contained rules limiting pay. But those rules have not worked, according to a December report from the Council of Institutional Investors. While some firms did decrease bonuses, they also raised base salaries to compensate. Even the new forms of pay — such as restricted stock, designed to align executives’ interests with those of shareholders — don’t effectively curb dangerous risk, the report found. Indeed, combined pay at the financial firms surveyed by the WSJ hit an all-time high last year. Despite concerns in recent months that firms were suffering from a decline in trading volume, revenue rose 1 percent to $417 billion, another all-time record. Meanwhile, the percentage of revenue that went into employees’ pockets climbed as well, from 31.1 percent in 2009 to 32.5 percent last year. The taxpayer bailout that firms received during the crisis has helped amplify Wall Street’s bottom lines . With hundreds of billions from the Troubled Asset Relief Program and other initiatives, the five biggest investment banks — Goldman Sachs, JPMorgan, Bank of America, Citigroup and Morgan Stanley — saw their revenues soar, Bloomberg News reported last year. As TARP has wound down, the Federal Reserve has launched a $600 billion asset-purchase program, intended to augment the flow of cash through the economy, which has also been a direct and indirect boon for the banks. As it buys U.S. government debt, the Fed announces its purchases ahead of time, giving certain banks an opportunity to profit on the trades.

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Even After Record Growth, Hedge Funds Don’t Pose Risk, Group Says

January 31, 2011

Even as hedge fund assets grew at a record-breaking pace last quarter, no firm is so big that its failure would pose a threat to the financial system, a hedge fund trade group asserts. The comment comes after two regulators — the Securities and Exchange Commission and the Commodity Futures Trading Commission — proposed new rules that would require advisers to hedge funds to regularly disclose financial information to a government watchdog. More than two years after the near-failure of widely interconnected financial firms prompted a taxpayer bailout, many of these firms are larger than ever. But this danger doesn’t apply to hedge funds, the trade group said. “I don’t believe there is a firm that would be systemically relevant today,” Richard Baker, president of the hedge fund industry group Managed Funds Association, told the New York Times . The issue of “systemic risk,” the phenomenon of a firm’s being so large or interconnected that its failure would take down the system, was graphically displayed in the fall of 2008, when the U.S. government gave the financial industry a more than $700 billion taxpayer rescue. While hedge funds were not direct recipients of the bailout, they remain a key component of the financial system, managing trillions in assets. Baker defended the way hedge funds do business, saying transparency is already a central tenet. “Hedge funds are the last corner of financial free market enterprise,” he said, according to the NYT . Even in the wake of the financial crisis, hedge fund growth has broken records. In the fourth quarter of last year, hedge fund assets grew by a record $149 billion, Reuters reported this month. The global industry now manages more than $1.9 trillion. John Paulson , the hedge fund manager who made billions betting against the housing market, reportedly earned roughly $5 billion last year, logging not only a personal best but also a record for the industry. His firm, Paulson & Co., manages $35.9 billion in assets, according to Bloomberg News . A decade before the government bailout of the financial system, Wall Street banks pooled their resources to bail out Long-Term Capital Management, a fund on the verge of failure. If the firm had gone under, banks would have been exposed to “tremendous — and untenable — risks,” writes Roger Lowenstein in the book When Genius Failed . “Undoubtedly, there would be a frenzy, as every bank rushed to escape its now one-sided obligations.”

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Video: Herrmann Says U.S. Growth May Be Above 4% in Second Half

January 28, 2011

Jan. 28 (Bloomberg) — John Herrmann, senior fixed-income strategist at State Street Global Markets, discusses U.S. fourth-quarter gross domestic product released today and the outlook for the economy. Gross domestic product climbed at a 3.2 percent annual pace from October through December, falling short of the 3.5 percent median forecast of 85 economists surveyed by Bloomberg News, Commerce Department figures showed. Herrmann speaks with Betty Liu and Michael McKee on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Video: U.S. Economy Grew 3.2 Percent in Fourth Quarter of 2010

January 28, 2011

Jan. 28 (Bloomberg) — U.S. gross domestic product climbed at a 3.2 percent annual pace from October through December, falling short of the 3.5 percent median forecast of 85 economists surveyed by Bloomberg News and restrained by the biggest drag from inventories in two decades. Betty Liu reports on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Obama Consumer Agency May Not Be Able To Oversee Payday Lenders, Mortgage Firms

January 19, 2011

The nascent consumer agency dedicated to protecting borrowers from abusive lenders, a cornerstone of the Obama administration’s efforts to reform the financial industry, will not be able to regulate the kinds of lenders that helped cause the crisis if the White House doesn’t meet a key deadline, federal auditors say. Firms like New Century Financial, Ameriquest, Fremont General and Countrywide Financial — lenders that aren’t banks and fall outside the bounds of regular federal supervision — made the kinds of shoddy mortgage loans that ultimately led to the housing crisis. The Bureau of Consumer Financial Protection, currently led by Elizabeth Warren on an interim basis, is supposed to change that by putting them under the umbrella of a robust federal regulator. But if the White House can’t get a nominee through the Senate by July, the bureau will lack the authority to supervise nonbank lenders, according to a Jan. 10 report by the inspectors general of the Treasury Department and Federal Reserve obtained by The Huffington Post. In six months, the agency officially assumes the power formally held by bank regulators. Bloomberg News first reported on the existence of the report Wednesday afternoon. The dilemma poses a challenge to the Obama administration, which sold the agency to Congress and the industry in part based on the promise that it will help level the playing field between banks and nonbanks when it comes to government oversight. Banks have long been regulated by federal agencies and subject to regular audits. Nonbanks, like home mortgage and payday lenders, have been subject to sporadic oversight, at best. Such companies have been hit with billions in fines and legal settlements in response to accusations they engaged in abusive and predatory lending. Adding to bankers’ frustrations is the fact that the agency, even without a director, will be able to oversee consumer lending by banks with more than $10 billion in assets. Because this authority already exists with bank regulators, the consumer agency will be able to assume this responsibility in July, federal auditors said in their report. Nonbanks, though, will be off-limits. The report puts added pressure on the White House to meet the July deadline. It has struggled to name an agency chief. Industry officials and their allies in Congress prefer someone who will take a more relaxed approach to oversight. Consumer advocates are pushing for an aggressive regulator who will prevent the kinds of abuses that were common during the housing boom. The White House is stuck in the middle of this fight, wanting to please its allies who helped get the agency enacted into law in the first place, and helped the administration counter critics who say it’s too close to Wall Street. But the administration also wants to name an agency head who will face limited opposition in the Senate. Created as part of Dodd-Frank, the 2010 law overhauling financial regulation, President Barack Obama hailed it as one of the top achievements of his presidency. Under pressure, President Barack Obama tapped Warren in September to lead the agency on a temporary basis. Warren, a passionate consumer advocate, is supposed to stand up the unit before it assumes its full power in July. The White House has two choices: either go around the Senate and tap the agency’s director through a recess appointment, or pick someone the Senate will confirm. Shortly before tapping Warren, Obama noted the difficulty he’s had in getting the Senate to confirm his nominees. “I’m concerned about all Senate confirmations these days,” Obama said Sept. 10. “I mean, if I nominate somebody for dog catcher…” “I’ve got people who have been waiting for six months to get confirmed who nobody has an official objection to and who were voted out of committee unanimously, and I can’t get a vote on them,” he continued. Because of that difficulty, the White House “has always looked at a recess appointment as a possibility,” said Michael Calhoun, president of the Center for Responsible Lending. “And they can’t let the agency go without a director come July.” White House spokesmen didn’t respond to e-mailed requests for comment. Opponents have vowed a nomination fight. Observers believe that whomever the White House chooses will likely face extensive grilling and opposition by Senators who oppose the very idea of a dedicated consumer agency. Not having a director in place by July — and thus preventing the agency from supervising nonbank lenders — would be a “positive” for the industry, said Bill Cosgrove, president and chief executive of Union National Mortgage Company, a nonbank lender based in Ohio. “What we’re concerned about is overkill in terms of regulation,” he said. Cosgrove added that state regulators, which currently oversee lenders like his firm, have stepped up their oversight of his industry. His firm has been audited by six different state regulators in the past year alone, he said. Though the auditors’ report places additional pressure on the administration to get a director in place so the agency can police firms like Cosgrove’s, and not face the wrath of bankers who will note the administration’s broken promise of a “level playing field,” Calhoun said he was confident that the White House will meet its deadline. “They have to,” he said. ************************* Shahien Nasiripour is a business reporter for The Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

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Video: Goldman’s Blankfein Said to Visit Groupon to Pitch IPO

January 14, 2011

Jan. 14 (Bloomberg) — Bloomberg News reporter Douglas MacMillan talks about Groupon Inc.’s plans for an initial public offering. Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein visited the Chicago headquarters of Groupon today to pitch executives on hiring his firm for a possible share sale this year, a person familiar with the matter said. MacMillan talks with Matt Miller and Carol Massar on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Video: Von Furstenberg Says She Aimed to `Be Known’ in China

January 14, 2011

Jan. 14 (Bloomberg) — Fashion designer Diane von Furstenberg talks with Norman Pearlstine, Bloomberg News chief content officer, about expanding her retail brand in China and the importance of protecting intellectual property. Margaret Brennan reports on “InBusiness.” (Source: Bloomberg)

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Video: Professor Lott Says Gun Control Laws Can Encourage Crime

January 13, 2011

Jan. 12 (Bloomberg) — John Lott, a professor at the University of Maryland, College Park and author of “More Guns, Less Crime,” Eric Pianin, Washington editor for the Fiscal Times and Bloomberg News’s Michael Riley talk about U.S. gun control laws and the Jan. 8 shootings at a shopping center in Arizona. One-day sales of handguns in Arizona jumped 60 percent to 263 on Jan. 10 compared with 164 the corresponding Monday a year ago, the second-biggest increase of any state in the country, according to Federal Bureau of Investigation data. They talk with Pimm Fox on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

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Jamie Dimon: Be Afraid of Municipal Bonds

January 12, 2011

As cities across the nation face increasing budget strains, the vocal group of experts warning about municipal defaults has gained a powerful member: Jamie Dimon. The JPMorgan CEO said he expects to see more U.S. municipalities declare bankruptcy, Bloomberg News reports. His concerns echo those of Meredith Whitney , the analyst who has said the next major financial crisis will come from a wave of local government defaults, and those of famed investor Warren Buffett , who has called the municipal debt situation a “terrible problem.” “If you are an investor in municipals you should be very, very careful,” Dimon said, according to Bloomberg . His warning comes as local governments contend with painfully depreciated tax revenue, which in some cases threatens to ruin budgets. In the wake of the worst financial crisis since the Depression, cities and states have had to severely cut back their spending, even as the need for their services has grown. While official bankruptcy remains rare (Vallejo, California, is the most recent example ), experts say there’s trouble brewing. Different cities have different problems, but one thing remains constant: there’s not enough money coming in. Often, revenue isn’t enough to cover even the most basic of services. In Detroit , the problem has gotten so bad that a new proposal would deprive a fifth of the city of basic municipal services, like trash collection and police protection. Neighboring Hamtramck has run out of services to cut, and expects to spend its last dollar early this year. Prichard , Alabama, in a desperate response to depleted coffers, has illegally stopped paying its pensioners. Newark has cut 13 percent of its police force. Camden , N.J., one of the nation’s most dangerous cities, has begun a process of cutting about half of its police department. “It’s a frequency issue,” Whitney said on CNBC Wednesday morning. When host Andrew Ross Sorkin asked her to name the three municipalities most at risk of default, she refused. “Too dangerous a game,” Sorkin admitted. Indeed, the bond market tends to punish the weakest cities. As ratings agencies downgrade municipalities, and as investors get nervous, yields on muni bonds rise, meaning it’s more expensive for cities to borrow money. “It’s a downward spiral,” George Rusnak, national director of fixed income for Wells Fargo, told the Wall Street Journal .

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CHART: Florida AG’s Disturbing Foreclosure Fraud Presentation

January 7, 2011

In their effort to sniff out foreclosure fraud, Florida regulators followed the trails of mortgage and foreclosure paperwork into a world of alleged forgeries and false identities. The Florida Attorneys General (FLAG) office recently released a PowerPoint presentation highlighting findings from their investigation into potentially fraudulent foreclosure practices that may have illegally evicted families from their homes. In late 2009, two years after the foreclosure crisis began, all 50 states attorneys general announced a joint investigation into the legality of foreclosure practices around the country. FLAG’s presentation presents even more evidence that some banks and mortgage firms may have used fake witnesses, fake notaries, fake documents and false affidavits during the foreclosure process. One section of the presentation shows documents issuing mortgage-backed security assignments authorized with a signature by Linda Green, a supposed mortgage firm Vice President. The problem FLAG found is that the name Linda Green is on hundreds of thousands of mortgage assignments as the ‘Vice President’ of multiple mortgage firms, indicating that someone who was not authorized to assign the mortgages was doing the job. As the documents below show, signatures for Linda Green come in numerous styles – some clearly written while others are loopy and illegible. Check out this slide from the FLAG’s presentation: Another part of the presentation features a selection from court testimony by Tammie Lou Kapusta, an employee at a law firm hired to help banks process foreclosure paperwork. According to Kapusta, employees who were not authorized to sign foreclosure paperwork used notary stamps they were not authorized to use to push the paperwork through the law firm and into Florida courts. Banks who committed this kind of foreclosure fraud may not face criminal consequences , according to Bloomberg News . Iowa Attorney General Tom Miller, who headed up the states attorneys’ general investigation, reportedly isn’t pursuing a criminal investigation. “Our focus is to reform the servicing process and that’s inherently civil, not criminal,” Miller told Bloomberg news. Check out FLAG’s presentation below: Florida Attorney General Fraudclosure Report | Unfair, Deceptive and Unconscionable Acts in Foreclosure Cases

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Video: Portales’s Kos Says U.S. Labor Market in `Slow Recovery’

January 7, 2011

Jan. 7 (Bloomberg) — Dino Kos, managing director at Portales Partners LLC, discusses the December U.S. employment report, Federal Reserve Chairman Ben S. Bernanke’s testimony before the Senate Budget Committee and the outlook for Fed policy. Payrolls increased 103,000, compared with the median forecast of 150,000 in a Bloomberg News survey, Labor Department figures showed today in Washington. Kos speaks with Betty Liu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Video: Kroszner Says Jobs Data Proves QE2 Is `Right Policy’

January 7, 2011

Jan. 7 (Bloomberg) — Former Federal Reserve Governor Randall Kroszner discusses the December employment report, the outlook for the U.S. unemployment rate and Fed policy. Payrolls increased 103,000, compared with the median forecast of 150,000 in a Bloomberg News survey, Labor Department figures showed today in Washington. Kroszner speaks with Betty Liu and Michael McKee on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Video: Westpac’s Shugg Expects U.S. Payrolls to Rise by 100,000

January 7, 2011

Jan. 7 (Bloomberg) — James Shugg, a senior economist at Westpac Banking Corp., talks about the outlook for U.S. non-farm payrolls for December. Payrolls likely rose by 150,000, according to the median forecast in a Bloomberg News survey of 78 economists. Shugg speaks with Francine Lacqua on Bloomberg Television’s “On The Move.”

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Video: ING’s Carnell Bets U.S. Added 210,000 Jobs in December

January 7, 2011

Jan. 7 (Bloomberg) — Robert Carnell, chief international economist at ING Financial Markets, talks about the outlook for today’s U.S. payrolls data. Payrolls are expected to have have risen by 150,000 in December, according to the median forecast of 78 economists surveyed by Bloomberg News. Carnell speaks from London with Maryam Nemazee on Bloomberg Television’s “Countdown.”

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Richard (RJ) Eskow: Which of These Banks Was 2010′s Most Shameless Corporate Outlaw?

December 30, 2010

Bankers. The red carpet’s still being rolled out for them in Washington, but if there’s a stain on it they’ll pout for days. Jason Linkins documents the latest set o f cheap white whines from very wealthy white men . This time they’re upset because nobody from the six largest banks in America was invited to the President’s CEO Roundtable. They’re offended because they didn’t meet with the President? From the looks of things they’re lucky not to be meeting with the warden . Let’s review the record for these corporate malefactors, and then decide: Which of these six banks was “America’s Most Shameless Corporate Outlaw” in 2010? #1. Bank of America Here are some recent headlines for the country’s largest bank: ” Bank of America Ends Year With Flurry of Lawsuits ” ” Arizona Sues Bank of America ” ” Arizona Wants Bank of America Held in Contempt ” ” Nevada, Arizona sue Bank of America over failed mortgage aid ” ” Allstate Sues Bank Of America For Selling ‘Toxic’ MBS ” ” Bank of America Hit With Missouri Class Action Over Loan Modifications ” Here are the details: Associated Press : “Attorneys general in Arizona and Nevada filed civil lawsuits Friday against Bank of America Corp., alleging that the lender is misleading and deceiving homeowners who have tried to modify mortgages in two of the nation’s most foreclosure-damaged states.” Courthouse News Service : “Bank of America violated a consent judgment it signed almost 2 years ago to provide loan modifications and help relocate borrowers, the Arizona attorney general claims … Bank of America has continued to misrepresent ‘to Arizona consumers whether they were eligible for modifications of their mortgage loans, when Bank of America would make a decision on their modification requests, whether Bank of America had approved their modification requests, why Bank of America declined their modification requests, and whether and when Bank of America would foreclose upon their homes.’” Consumer Affairs : “The bank is also facing at least three suits claiming that it reneged on duties it undertook by accepting $25 billion under the Troubled Asset Relief Program (TARP).” In total, Bank of America’s last annual report lists 29 pending lawsuits against the company. Lawsuits are not proof of guilt, of course. But the bank has already paid a fine for illegally concealing $6 billion in payouts to employees, and another fine for concealing major losses at its Merrill Lynch subsidiary. ( Both fines were low – not much more than a slap on the wrist – because Bank of America was on taxpayer-funded life support at the time.) BofA also confessed to committing fraud as part of a settlement this month, which the Justice Department noted was restitution “for its participation in a conspiracy to rig bids in the municipal bond derivatives market.” The Bank was also ordered to pay Lehman $590 million for illegally seizing its deposits , in violation of bankruptcy law. Bank of America has been one of the worst offenders during the foreclosure crisis, with documented case of widespread abuse and legal violations. From the Associated Press : “A document obtained last week by the Associated Press showed a Bank of America official acknowledging in a legal proceeding that she signed thousands of foreclosure documents a month and typically didn’t read them. The official, Renee Hertzler, said in a February deposition that she signed 7,000 to 8,000 foreclosure documents a month.” How generous has the taxpayer been to Bank of America? There was the TARP money, of course. And BofA, like other banks, has been suckling at the teat of Federal Reserve’s discount money window throughout the crisis. And, as Zach Carter noted, the bank was also one of two institutions that were the main beneficiaries of a special Fed program called the Primary Reserve Credit Facility. There were those cushy settlements with the SEC. BofA stock was trading at $53 at the end of 2006. As of this writing the stock is trading for $13.30. But its executives have been wasting corporate money and resources buying up 419 web URLs with insulting phrases and the names of their senior executives – most of whom nobody’s ever heard of – to protect their personal reputations. No company’s ever done that before. Bob Scully “blows” (bobscullyblows.com) and Bill Boardman “sucks” (billboardmansucks.com)? Who knew? Last year two senior executives received $9.9 million and two others received $6 million in total compensation. If they’re really worried about their reputations they should stop running their company in a way that “sucks” and “blows.” The guy who robbed a Bank of America branch in West Palm Beach is going to prison . The bank’s senior executives are hurt that they didn’t get invited to the Rose Garden for tea. Rap Sheet: BofA has probably committed more foreclosure offenses than any other single institution. It deceived stockholders, and the public, about the $6 million in bonuses it paid out (during the rescue process). It was equally deceptive about Merrill Lynch’s financial status. And it admitted to rigging bids for municipal bond derivatives. Shameless Quotes: CEO Brian Moynihan’s response toward demands that his bank comply with HAMP’s legal requirements? “Sure,” he sneered,” we’ll go back and check our homework again.” And he says he won’t accept anything but “constructive criticism.” #2. JPMorgan Chase ” We don’t think there are cases where people were evicted out of homes when they shouldn’t have been .” JPM Chase CEO Jamie Dimon. From the Washington Post : “J.P. Morgan Chase, one of the nation’s leading banks, announced Wednesday that it will freeze foreclosures in about half the country because of flawed paperwork.” As we learned recently, Jamie Dimon doesn’t feel loved or admired enough. Small wonder, given the way his bank treats customers. Even as he was making arrogant statements like this one, papers like the New York Times were telling the truth about the sleazy operation he’s running at JPMorgan Chase: “At JPMorgan Chase & Company, they were derided as ‘Burger King kids’ — walk-in hires who were so inexperienced they barely knew what a mortgage was … revelations that mortgage servicers failed to accurately document the seizure and sale of tens of thousands of homes have caused a public uproar …” Failure to accurately document home foreclosures is illegal. I’s lousy management, too. Chief Executive Dimon oversaw a sloppy operation that’s going to cost his shareholders a lot of money : “JPMorgan set aside $2.3 billion of reserves to cover mortgage repurchases or litigation expenses, including some for ‘mortgage-related matters,’ the lender said Oct. 13.” A whistleblower complaint alleges that the bank “sold to third party debt buyers hundreds of millions of dollars worth of credit card accounts. . .when in fact Chase Bank executives that many of those accounts had incorrect and overstated balances.” According to the complaint, “Chase Bank executives routinely destroyed information and communications from consumers rather than incorporate that information into the consumer’s credit card file … mass-executed thousands of affidavits in support of Chase Banks collection efforts … (and) did not have personal knowledge of the facts set forth in the affidavits.” It also claims that “when senior Chase Bank executives were made aware of these systemic problems, senior Chase Bank executives — rather than remedy the problems — immediately fired the whistleblower and attempted to cover up these problems.” There are also multiple lawsuits against Chase for allegedly manipulating the price of silver, and there is at least one report that the bank is being probed by several Federal agencies (including the Justice Department) over its trading activities in precious metals. JPMorgan Chase is also one of several banks that are being sued over the handling of Bernie Madoff funds . JPMorgan Chase “agreed to pay $25 million to settle allegations it sold unregistered securities, many of which defaulted, to the state of Florida,” as the Orlando Sentinel reported. That’s a crime. Chase was also one of several banks that paid to settle charges that it illegally propped up a failed mortgage lender . (These settlements have typically allowed the banks to “admit no wrongdoing” – a practice which should be stopped. These are crimes.) JPMorgan Chase’s behavior in Jefferson County, Alabama made Huey Long look like a piker. The bank spread more than $8 million around the county through local interediaries to secure highly lucrative deals on municipal derivatives. As Bloomberg News put it, ” JPMorgan, the second-largest U.S. bank by assets, used fees on the unregulated derivative contracts — and a trip to a New York spa for one elected official — to curry political favor, a decade after the SEC adopted rules to drive out pay-to-play from the $2.8 trillion municipal bond market.” The bank conducted this criminal behavior under Dimon’s watch. And while it “neither admitted nor denied wrongdoing,” as usual, it had to pay a three-quarters-of-a-billion dollar settlement to wrangle its way out of this snakepit of illegality. Rap Sheet: Corruption in Alabama; widespread violation of foreclosure laws; sale of unregistered securities. Also under investigation for illegal manipulation of the precious metals market; mishandling of Madoff funds; deliberate lawbreaking in credit card processing, concealment of criminality. Shameless quotes: “Judy Dimon says the crisis took a toll on him. He used to stand up to bullies who threatened his smaller twin; now he felt as if he, and bankers in general, were being bullied.” (from a New York Times profile of Dimon) 3. Citigroup Citi’s being sued for gender discrimination by its own employees. Citi settled a class action lawsuit after illegally raising rates for credit card customers . The bank’s being sued by an independent trustee for allegedly “aiding and abetting” a Ponzi schemer . Citi executives were given slap-on-the-wrist fines for lying to investors about $40 billion in subprime exposures, which is a criminal act. It should also be remembered that Citigroup paid $2.65 billion in 2004 to settle class action lawsuits over its alleged illegal actions in propping up WorldCom stocks in return for enormous fees. As Citi’s annual report notes, “Citigroup and Related Parties have been named as defendants in numerous legal actions and other proceedings asserting claims for damages and related relief for losses arising from the global financial credit and subprime-mortgage crisis that began in 2007.” Citi is still being investigated by Italian courts for possible criminal behavior in the Parmalat case, and it’s being sued by a Norwegian bank for misrepresenting its financial condition and failing to disclose material information. It’s being sued by investors for misrepresenting its underwriting of mortgage backed securities. Rap Sheet : Violation of SEC law regarding corporate disclosures; illegal rate activity toward credit card customers. Under investigation for aiding and abetting a Ponzi scheme. Shameless quotes: “Almost all of us … missed the powerful combination of forces at work and the serious possibility of a massive crisis.” (Robert Rubin) “On November 3, 2007, I sent an email to Mr. Robert Rubin and three other members of Corporate Management. In this email I outlined the business practices that I had witnessed and attempted to address. I specifically warned about the extreme risks that existed within the Consumer Lending Group.” (Former Citi exec Richard Bowen) 4. Wells Fargo They illegally laundered drug money for the Mexican cartels – and nobody went to jail. Here’s a suggestion: Read stories “War Torn Mexico: A Population in Terror ,” which begins: “Massacres, beheadings, YouTube videos featuring cartel torture sessions and even car bombs are becoming commonplace in Juarez.” Study the statistics on the violent murders – which include Federal agents , children, and “penniless immigrants ” – and then remind yourself: These are Wells Fargo’s business partners. Rap Sheet: What can anyone add to that? Shameless quotes: “We’re more of a Main Street bank than a Wall Street bank.” “”Of all the decisions I’ve had to make, few have been as difficult as cutting the dividend.” (Wells Fargo CEO John Stumpf) 5. Goldman Sachs Goldman is Goldman. The SEC charged them with fraud, and they settled the suit by admitting their marketing materials contained lies – they called them “mistakes.” They were fined by Great Britain for illegally concealing US fraud investigations. Goldman has a gender discrimination lawsuit, too, and theirs comes complete with strippers and racist emails . Goldman’s being sucked for deceiving its clients over an offering its own people privately (and thanks to Sen. Levin, famously) bragged was ” a shitty deal .” Goldman paid $60 million in Massachusetts to settle charges of predatory loan practices. After mismanagement drove Goldman into impending doom, the firm was saved by TARP funds and Federal Reserve’s Emergency Liquidity Programs. Total taxpayer lending to Goldman exceeded three-quarters of a trillion dollars. Goldman also received $13 billion in backdoor payouts through the AIG liquidation (under Tim Geithner’s supervision). Rap Sheet: Fraudulent misrepresentation; predatory loan practices; illegal concealment of an investigation. And God know what else. They’re Goldman, man! S hameless Quotes: “”We’re very important … We do God’s work.” (Goldman CEO Lloyd Blankfein) “If I whet My glittering sword, and Mine hand take hold on judgment; I will render vengeance to Mine enemies.” (God) 6. Morgan Stanley Earlier this year the Wall Street Journal reported that “U.S. prosecutors are investigating whether Morgan Stanley misled investors about mortgage-derivatives deals it helped design and sometimes bet against.” The firm’s also being sued by US Bank for fraudulently misleading it and other investors over a structured residential investment called “Tourmaline.” A group of investors in Singapore is suing the firm for designing CDOs to fail and then selling them as “conservative investments.” The Financial Industry Regulatory Authority fined Morgan Stanley this year for failing to disclose material conflicts of interest to investors. The same agency hit the firm with a $12.5 million fine in 2007 for illegally concealing emails during customer arbitration hearings. In a particularly sleazy move, Morgan Stanley claimed that the emails had been lost on 9/11, when they were all safely stored in backup copies elsewhere. MS was also sued by the EEOC for gender discrimination . The firm was able to beat back an investors’ lawsuit over bloated executive pay – it set aside 62% of net revenue for employee compensation – so its executives get to keep fat bonuses for driving the company into the ground. Greed and stupidity aren’t illegal, after all. On the other hand, their portfolio of lawsuits including one that says they defrauded nuns in Europe . Rap Sheet: Despite numerous violations and charges, Morgan Stanley is a relatively minor player compared to its bigger colleagues. On the other hand, it illegally concealed evidence from arbitrators by using the World Trade Center attack as an excuse, and six of its own employees died in that attack. That’s simply vile. On top of that, they’re being sued by nuns . Shameless Quotes: “When we think back on 2001, we are filled with deep sorrow and outrage over the events of September 11. Who among us will ever forget the shock and horror of that day?” (Morgan Stanley Annual Report, 2001) “When you come that close to really going out of business, call it near death, death experience, the end of the line, whatever you want to call it, your only focus is to make sure your company survives.” (former CEO John Mack) __________________ We rescued these six banks. They’ve all broken the law, and they’re all under a cloud of suspicion regarding even more possible illegalities. And yet they’re all pouting because they weren’t invited to the White House. Which is our most shameless corporate lawbreaker? Bank of America’s the biggest, and it has probably committed the most widespread foreclosure fraud. JPMorgan Chase has played fast and loose with the law, and Dimon’s unwarranted arrogance raises their shamelessness quotient dramatically. It’s hard to top Wells Fargo and the drug cartels (although getting sued by nuns comes pretty close). Citi had Chuck Prince and Robert Rubin, two pretty shameless individuals. And Goldman … well, as we were saying, they’re Goldman . In any normal period of history all of these organizations would be recognized as corrupt institutions, and their leaders would be ashamed to show their faces among respectable people. But these aren’t normal times, are they? Frankly I’m stumped. You guys decide. They all deserve the title as far as I’m concerned.

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Video: Brown Says Take Jobless Claims Data With `Grain of Salt’

December 30, 2010

Dec. 30 (Bloomberg) — Scott Brown, chief economist at Raymond James & Associates Inc., talks about data showing initial U.S. jobless claims fell last week to the lowest level since July 2008. First-time filings for unemployment insurance decreased by 34,000 to 388,000 in the week ended Dec. 25, compared with the median forecast of 415,000 in a Bloomberg News survey, Labor Department figures showed today in Washington. Brown speaks with Carol Massar and Jon Erlichman on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Video: John Dorfman Likes Intel, Transocean, GT Solar, Amedisys

December 27, 2010

Dec. 27 (Bloomberg) — John Dorfman, chairman of Thunderstorm Capital and a Bloomberg News columnist, discusses equity investment strategy and some of his stock recommendations. Dorfman speaks with Carol Massar on Bloomberg Television’s “Fast Forward.” (Dorfman is a Bloomberg News columnist. The opinions expressed are his own. Source: Bloomberg)

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Video: U.S. Capital Goods Orders, Consumer Spending Increase

December 23, 2010

Dec. 23 (Bloomberg) — Bloomberg’s Michael McKee reports on U.S. economic data released today. Orders for U.S. capital equipment like computers and communications gear climbed 2.6 percent in November after a 3.6 percent decline in October that was smaller than previously estimated, figures from the Commerce Department showed today. Consumer spending increased 0.4 percent last month after a 0.7 percent increase the previous month. Initial filings for unemployment insurance declined by 3,000 to 420,000 for the week ended Dec. 18, matching the median forecast in a Bloomberg News survey, Labor Department figures showed. (Source: Bloomberg)

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Video: Winkler Says Bloomberg Sues ECB Over Swaps Disclosure

December 22, 2010

Dec. 22 (Bloomberg) — Matthew Winkler, editor-in-chief of Bloomberg News, discusses the news agency’s lawsuit against the European Central Bank. The lawsuit, filed by Bloomberg Finance LP, the parent of Bloomberg News, asks the European Union’s General Court in Luxembourg to overturn a decision by the ECB not to disclose documents that show how Greece used derivatives to hide its fiscal deficit. Winkler speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” (Source: Bloomberg)

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Video: Winkler Says Bloomberg Sues ECB Over Swaps Disclosure

December 22, 2010

Dec. 22 (Bloomberg) — Matthew Winkler, editor-in-chief of Bloomberg News, discusses the news agency’s lawsuit against the European Central Bank. The lawsuit, filed by Bloomberg Finance LP, the parent of Bloomberg News, asks the European Union’s General Court in Luxembourg to overturn a decision by the ECB not to disclose documents that show how Greece used derivatives to hide its fiscal deficit. Winkler speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” (Source: Bloomberg)

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