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Jan. 20 (Bloomberg) — Henry Juszkiewicz, chief executive officer of Gibson Guitar Corp., talks with Bloomberg Businessweek’s Ben Austen about U.S. agents’ raids of the company’s plants in Nashville and Memphis last August and Gibson’s response to accusations it had illegally imported ebony and rosewood from India to be used for fingerboards produced in its Tennessee factories. (Source: Bloomberg)

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Video: Gibson CEO Calls Raids on Factories Federal `Overreach’

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Free Loan Consultation

by on September 3, 2011

Call me or complete the form below for the free consultation.   Our goal is to understand your commercial real estate loan needs and use our capital markets expertise, connections, and partners to provide the best loan solutions.   We find the best debt or equity loan solution for your requirement and get the loan closed. * = required field First Name * Last Name * Phone Number Email * Loan Type * Debt Equity Both Debt & Equity USER/SBA Hard Money Bridge Rehab Property Type Apartments Office Retail Industrial Hotel Senior Datacenter Healthcare Mixed-Use Single-Tenant Student Housing Other City * Reason * New Purchase Re-Finance Loan Buyout Line of Credit Other Loan Amount Property Value NOI Other Notes Follow-Up Email Phone Your Role Borrower Broker Attorney Other   Commercial Real Estate & Multi-Family Loans – Both Debt & Equity – California & Nationwide Bryan Shaffer – Questions: bshaffer@gspartners.com   Loans and Services: Construction Debt & Equity Financing | Interim Loans | Rehab Loans | Bridge Financing | Construction | Perm Financing Fixed-Rate and Adjustable-Rate Loans | Participating Loan Financing | Joint Venture Financing | Second Mortgage Loans Owner Occupied User Loans | Mezzanine Debt Financing Preferred Equity Financing | Credit | Tenant Lease Financing | Sale | Leaseback Financing | Bond Credit Enhancements | Hard Money | Quick Close Loans Specialty Healthcare Real Estate Loans | Specialty Technology & Data Center Loans

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Post Cuts Office Space

September 1, 2011

From WSJ.com… The Washington Post said it won’t renew the leases on several of its offices in Virginia and Maryland, in a push to save on rent. Continue reading here: Post Cuts Office Space Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

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Fierce Fight Over Hawaiian Hotel Escalates

September 1, 2011

From WSJ.com… A court ordered Marriott back onto the premises of a hotel in Hawaii seized by its owners, but the owners moved to reassert their control, escalating a fierce battle over the trendy, unsuccessful property. Excerpt from: Fierce Fight Over Hawaiian Hotel Escalates Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

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Home Builders Run Out of Lifelines

August 31, 2011

From WSJ.com… Five years into a housing meltdown, questions are arising about how long some home builders can survive without significant improvement in the market. Follow this link: Home Builders Run Out of Lifelines Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

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Wells Fargo Jumps on Commercial Deals

August 31, 2011

From WSJ.com… As the U.S. banking sector is reducing its exposure to commercial real estate, Wells Fargo has taken a different approach: expanding lending to the sector while also buying real-estate loans from other banks. View the original here: Wells Fargo Jumps on Commercial Deals Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

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Kerzner Weighs Atlantis Dubai Sale

August 30, 2011

From WSJ.com… The owner of several luxury resorts is exploring selling its 50% stake in the property to raise money to restructure $2.6 billion in mortgage debt. Taken from: Kerzner Weighs Atlantis Dubai Sale Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

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Beantown Scores Trifecta of Deals

August 30, 2011

From WSJ.com… A land swap at Harvard University, Boston’s Mandarin Oriental hotel and Renaissance Boston Waterfront Hotel are in the news. Follow this link: Beantown Scores Trifecta of Deals Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

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Geography of Risk: Helping HNW Families Trim Costs, Boost Protection – AdvisorOne

June 17, 2011

Geography of Risk: Helping HNW Families Trim Costs, Boost Protection AdvisorOne Many wealth families and their family office managers discover that insuring each home requires navigating special conditions imposed by different state regulations and contending with different insurance company preferences. …

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theGrio: Dream of black home ownership fading

June 10, 2011

After peaking at 50 percent in 2006, the African-American homeownership rate has now fallen to 44.8 percent, Census Bureau data show. By comparison, the homeownership rate for whites in the U.S. is 74.1 percent, and the nation’s overall homeownership rate currently stands at 66.4 percent.

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Commercial real estate market makes a comeback

June 7, 2011

But continued debt woes and tight corporate spending could temper the recovery, and office space demand is likely to lag.

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Bad housing market hurting job prospects

June 2, 2011

Life Inc.: Here’s a Catch-22 of the weak economy: You finally land that job you need desperately, only to find that you can’t sell your home to move.

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Video: Obama, Musharraf, Chertoff Own Words on Bin Laden Death

May 2, 2011

May 2 (Bloomberg) — President Barack Obama, former Pakistan President Pervez Musharraf, and former Department of Homeland Security Secretary Michael Chertoff offer their views on the killing of al-Qaeda leader Osama bin Laden by U.S. special forces yesterday in Pakistan. This report also contains comments from Mohamed El-Erian, chief executive officer of Pacific Investment Management Co.; Paul Rosenzweig, senior legal fellow for the Heritage Foundation and Richard Falkenrath, a principal at the Chertoff Group and a Bloomberg Television contributing editor. (Source: Bloomberg)

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Video: Grodzki Says HSBC Bracing for ‘Tougher Climate’ in Asia

February 28, 2011

Feb. 28 (Bloomebrg) — Georg Grodzki, head of credit research at Legal & General Investement Management, talks about HSBC Holdings Plc’s full-year profit and the outlook for the bank’s operations in Asia. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.”

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Richard Powell: Background-Check Business Booms Thanks to China

February 21, 2011

Firms that provide background checks on businesses and individuals, from university applicants to management candidates, have never been in high demand thanks to a flood of fraudulent claims by Chinese businessmen and applicants. Some of the world’s leading commercial and private information services have reported that the growing problem of academic and work qualification fraud in China has lead to a huge hike in business for them. Worldbox Business Intelligence founder Adrian Ashurst says a range of international company clients operating in China have found that senior people they had hired on the strength of their CVs did not have the experience and/or academic qualifications required to fulfil their positions, after checking their credentials. The Swiss-based boutique intelligence-gathering service, with Asian bureaus in Beijing and Hong Kong, checks all details in an applicant’s CV on behalf of its customers and fills information requests that cannot be served by web-based subscription services or traditional search giants, such as Experian. Their personalised service and network of ground agents aims to provide a more comprehensive picture than their larger rivals at a time when the level of falsified information by applicants in the business and educational sectors is skyrocketing. Resume fraud in figures The latest Q4 Hudson Report on Employment and HR trends in China surveyed over 1,500 employers across Asia, and found that more than two-thirds (68%) of business respondents across all sectors had encountered candidates being dishonest about their background or experience in their resumes in China, a far higher proportion than in the other markets surveyed in Asia. According to the report, respondents in the Media/PR/Advertising sector were the most likely to have experience of candidates exaggerating or falsifying information in their resumes: 91% said they had done so. This was attributed to the very high churn rate of workers in this industry, who often make bold claims to present themselves as being less deserving of the axe than their co-workers. Second was the Tech sector, with the highest proportion of respondents saying that candidates are dishonest about their job responsibilities/achievements and years of experience at 61% and 43%, respectively. At 66%, the Banking and Financial Services sector had a very high proportion of respondents saying that candidates submit false information about their remuneration packages. This sector has expanded rapidly in recent years as many international banks have entered the market. Candidates are keen to switch jobs to increase their remuneration and tend to exaggerate pay levels to strengthen their negotiating position. At 64%, the Consumer sector had a relatively low proportion of respondents who have encountered dishonesty on the part of candidates. This industry is well-established and companies often have experienced HR teams that can identify falsified resumes. In addition, recruitment specialists operating in this business are highly effective at verifying candidates’ backgrounds before making recommendations to employers. The Manufacturing and Industrial sector reported the same relatively low figure as the Consumer sector at 64%. Employers in this sector often have highly technical requirements when filling vacancies and there is a significant crossover of candidates between companies, making it relatively simple to verify the information provided by candidates. ‘These factors mean that candidates are more likely to be honest when preparing their resumes,’ the report said. Respondents who said they had encountered candidates falsifying their resumes were also asked about the specific areas in which dishonesty or exaggeration occurred. Remuneration packages, job responsibilities and achievements are the areas in which candidates are most likely to distort the facts. Overall, these factors were mentioned by 59% and 55% of respondents, respectively. Stories of professional CV and academic qualification falsifying in China have been reported widely in the international press… Here are some recent examples: After a plane crash killed 42 people in northeast China last August, officials discovered that 100 pilots who worked for the airline’s parent company had falsified their flying histories. In an editorial published last year, The Lancet, the British medical journal, warned that faked or plagiarized research posed a threat to President Hu Jintao’s vow to make China a ‘research superpower’ by 2020. When the Zhejiang University in Hangzhou released results from a 20-month experiment it conducted by running plagiarism-detection software across a number of scientific journals last fall, nearly a third of all submissions were suspected of being pirated from previously published research. In some cases, more than 80 percent of a paper’s content was deemed unoriginal. In a study of 32,000 scientists by the China Association for Science and Technology conducted in summer 2009, more than 55 percent reported they knew someone guilty of academic fraud… Educated gamble? Chinese educators say the culture of cheating takes root in high school, where the competition for slots in the country’s best colleges is unrelenting and high marks on standardised tests are the most important criterion for admission. The Ministry of Education announced two major anti-fraud campaigns in the 90s, but the bodies they established to tackle the problem have yet to mete out any punishments. Dishonesty about academic qualifications, cited by 42% of respondees in Hudson’s report, was more than twice as common in China as in the other markets surveyed. This chimes with Worldbox’s reports that they are experiencing a sharp uptrend in the number of falsified qualifications submitted by young Chinese students to international universities they are applying to study at. These student checks can be broken into two tiers; a regular check where the student will have had little or no work history to check; and, checking of MBA students’ claims of qualifications and of their related or attached work experience. The padded resume of Tang Jun, the millionaire former head of Microsoft China and something of a national hero, was widely reported last summer to have falsely claimed to have received a doctorate from the California Institute of Technology. This story was broken by Fang Zhouzi, a Chinese blogger whose website, New Threads, has exposed more than 900 instances of fakery, some involving university presidents and nationally lionized researchers. Tang was subsequently quoted by the Beijing News as saying: “Losers cheat some people and get caught. Winners cheat the whole world all the time.” His supporters argued that it was fine for him to make such a mistake as long as his admirable business success is real. Employers in China have adopted stricter background checks on potential employees following the Tang Jun story and many employers now leave no stone unturned to crosscheck their job applicants’ credentials and credibility. Qiu Jialu, an HR specialist at a real estate investment company, says her company is stepping up investigation on potential employees’ background information. “Our company has strict procedures for recruitment, especially for those applying for high and middle-level positions. Now, we are planning to expand background checks on those applying for rank-and-file positions,” Qiu said. “Tang Jun’s case reflects a social problem. With the increasingly cut-throat competition, many people buy fake academic credentials to advance their careers,” said Zhu Shibo, manager of the recruitment service centre at the China International Intellectech Corporation Shanghai foreign enterprises service company, one of the country’s leading human resources service providers. Zhu said her centre has received unprecedented commissions to investigate job applicants in recent years. “The number of employers who hire our services for background investigation, which usually covers highest educational qualification, criminal record and work experience, has doubled in the past two years.” Corporate manhunt Conducting research on existing directors of Chinese companies is one of Worldbox’s more expensive services, and arises when businesses come to doubt the credentials of a manager they have already employed. Background checks are normally conducted in the final stages of the selection process, but more in-depth research is sometimes required at a later stage. Prices are highest for senior management checks because applicants’ education and work history is generally more extensive than for people applying for normal positions. Worldbox additionally undertakes corporate research services for key accounting and legal firms to provide accurate information on Chinese companies and their subsidiaries and has recently extended its range of reporting services to provide legal documents on Chinese companies as well as Companies Investigation Reports. “From our Beijing and Hong Kong offices, we can supply Research Reports and Company Registration Documents on most Chinese companies, with personalised services tailored to each customer,” Ashurst says. The full range of offerings from Worldbox in China includes Credit Reports, Investigation Reports, Company Profiles, Legal Document Research including Memorandum & Articles of Association, Certificates of Approval, Capital-inspection report, Business licenses, Applications for change in registered information, Annual Inspection Report and extract from the Company Register document (e.g. information related to shares capital, legal representatives, registered office, financial statements). As well as Land Register in Shanghai, Panyu and Guangzhou. Their investigation work often involves the retrieval of information that customers have not been able to find on the giant information providers they first turned to, including the likes of LexisNexis, who Worldbox works with to serve the search giant’s customers that it cannot cater for by itself, launching their investigation processes on the ground, locally. Ashurst says: “We maintain complete databases on the financial statements of Hong Kong-quoted companies as well as full details on their subsidiaries and investments. We are positioned between the expensive services who also use our information at times and the traditional business information companies like Dun & Bradstreet, Experian, and Graydon in the UK,” he adds. — The author of this article, Richard Powell, works for the global communications group, Presswire .

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Scott Gamm: Credit CARD Act One Year Later: Was it a Success?

February 21, 2011

One year ago on February 22, 2010, the epic Credit CARD Act took effect, which aimed to reform the entire credit card industry and help young people under age 21 steer clear of credit card dangers. Now one year later, was the CARD Act a success? The simple answer: yes and no. Studies published last week show how the CARD Act has benefited consumers, despite opponents who claimed the laws would only prompt banks to think of new ways to make money. Among the specifics of the CARD Act included clear and easy to understand disclosures on credit card statements. According to the Center for Responsible Lending, “an estimated $12.1 billion in previously obscure yearly charges are now stated more clearly in credit card offers.” Another component of the CARD Act dealt with minimum payments. Credit card companies must now disclose exactly how much money in interest it will cost and how long it will take consumers to get out of debt if they only pay the minimum payment. According to a survey conducted by Consumer Reports in July 2010, 23% of those of participated in the survey are now making payments greater than the minimum as a result of the warnings on the credit card bill. Interest rates on credit cards have increased. According to the Federal Reserve, interest rates on credit cards towards the end of 2010 on average were 13.44%, compared to about 12.08% in 2008. The credit card industry would argue that the increase in interest rates was due to the CARD Act and more rules and regulation. However, according to a study released last week from CardHub.com, the rise in interest rates was due to the unstable economy and not the CARD Act. CARD Act Fails to Help Students The CARD Act aimed to protect students from credit card dangers by requiring those under age 21 to have a cosigner on the account and prohibiting credit card companies from sending pre-approved credit card offers to those under age 21 via mail. According to a study released last month from the University of Houston, 76% of undergraduate students received credit card offers in the mail over the past year. While it’s still legal for companies to send credit card offers in the mail (pre-approved offers, however, are illegal and against the CARD Act), this study shows how willing credit card companies are to find any and all loopholes. Here’s a tip: if you’re a student and receive any type of credit card offer in the mail, rip it up and throw it away! Credit cards offers sent via mail are usually littered with high fees and high interest rates. Instead, apply for a secured credit card or visit CreditCardConnection.org to search for credit unions in your area. While the CARD Act was a win in terms of more transparency and disclosures, it’s up to the consumer to ensure that they are not getting ripped off by credit card companies. Best option: use cash – you won’t have to worry about what credit card companies do and you’ll never accrue credit card debt. Scott Gamm is the founder of the personal finance website HelpSaveMyDollars.com . He has appeared on NBC’s TODAY, MSNBC, Fox Business Network, Fox News, ABC News and CBS.

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‘Almost No Chance’ Of Obama Budget Passing, Moody’s Says

February 21, 2011

NEW YORK (By Walter Brandimarte) – President Barack Obama’s budget proposal would be “marginally positive” for U.S. credit ratings in the short term, but there is “almost no chance” Congress will pass the plan as it was presented, Moody’s Investors Service said on Monday. In the longer run, the budget proposal fails to address key structural issues such as entitlement programs, Moody’s senior analyst Steven Hess said in a report. Some of the plan’s projections also are questionable, he added. “These uncertainties, combined with the continued, elevated levels of debt, indicate that additional measures would be required to improve the government’s finances and debt position over the long term,” Hess said in the report. Moody’s, which has recently warned about the rising likelihood of a negative outlook on the U.S. triple-A rating, noted that the estimated budget deficit of 10.9 percent of GDP for this year represents the largest shortfall since the World War II, resulting from the extension of the tax cuts introduced by former President George W. Bush. It is still an open question, however, whether or not the government will raise taxes for high-income earners after 2012, when the tax cuts expire, Moody’s said. The agency also raises questions about some of the projections included in the current budget proposal, in particular for non-security discretionary spending, which is forecast to be 11 percent lower in nominal terms by 2021. “Such an extended period of no-growth in nominal spending would be unprecedented,” Hess said. “The feasibility of such a large, prolonged declined in discretionary spending is highly questionable.” (Editing by Theodore d’Afflisio) Copyright 2010 Thomson Reuters. Click for Restrictions .

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CEO, COO Of E-Commerce Giant Alibaba Resign

February 21, 2011

SHANGHAI — Chinese e-commerce giant Alibaba says two of its top executives are resigning to take responsibility after a probe discovered more than 2,000 suppliers had defrauded customers, sometimes with the alleged collusion of its sales staff. Alibaba said in a notice Monday to the Hong Kong Stock Exchange that its chief executive and chief operating officers, who were not implicated by the investigation, were resigning to take responsibility for the company’s “breakdown in integrity.” The company said 100 sales representatives, out of a total workforce of 14,000, allegedly involved in defrauding customers were fired. Some supervisors and sales managers had either intentionally or negligently allowed the creation of fraudulent “storefronts” by letting some 2,326 suppliers evade authentication and verification measures, it said. Most purchases involved offerings of popular consumer electronics at bargain prices with low required minimum orders. “The methods of the perpetrators suggest that they have engineered an organized and systemic attack on the integrity of the Alibaba.com platform for illegal gains,” the company said. “The investigation concluded that the pursuit of short-term financial gain at all cost had tainted parts of our sales organization, risking serious damage to our company’s core values,” it said. Jack Ma, the entrepreneurial whiz and former English teacher who founded Alibaba in 1999, said he was sending a strong message meant to reinforce trust in his company, which has thrived in this age of online commerce and outsourcing. “One of our most important values is integrity. That means the integrity of our employees and the integrity of our online marketplaces as trusted and safe places for our small business customers,” Ma said in a statement. Jonathan Lu Zhaoxi, CEO of affiliated Chinese e-commerce company Taobao, will replace David Wei Zhe as Alibaba’s CEO, the notice said. It did not say who would replace resigning COO Elvis Lee Shi-Huei. Alibaba, based in the eastern Chinese city of Hangzhou, claims more than 56 million registered users in more than 240 countries and regions. The company says it investigated after noticing an increase in complaints of fraud by buyers using its websites in late 2009. The probe found that 1,219 of its “Gold Supplier” customers who joined in 2009 and 1,107 that joined in 2010 had engaged in fraud against buyers. Alibaba terminated the “storefronts” of those allegedly fraudulent customers and will collaborate with authorities to seek redress, said company spokeswoman Linda Kozlowski. But such efforts would depend partly on buyers deciding to take legal action, she said. The average amount of fraud involved in the cases was less than $1,200, the company said. It gave no total amount involved. But Kozlowski said the company has paid out $1.7 million since 2009 from a fund set up to redistribute to buyers any revenues from companies found to be engaged in fraud. “We decided we did not want to take revenue from fraud,” she said. Alibaba, whose shares are traded in Hong Kong, says the cases would not have an impact on its overall finances.

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Raising Wages Would Be ‘Stupid,’ Europe’s Trichet Says

February 20, 2011

(Reuters) – European Central Bank President Jean-Claude Trichet warned on Sunday against raising wages in the euro zone as inflationary pressures heat up in the bloc. “It would be the stupidest thing to do,” Trichet told France’s Europe 1 radio, asked about pressure in countries like Germany for wage rises as economies emerge from the economic crisis and as higher commodity prices fan inflation. “We can’t do anything about the current rise in fuel and commodity prices but we must do everything to avoid what we call second-round effects, the fact that other prices start moving and settle at a higher level than complies with our definition (of stability),” Trichet said. “I am thinking of the whole range of other prices, including of course, salaries, and we say to employers and unions: remember that we are in a medium to long-term perspective, to maintain price stability.” Trichet was speaking the day after a Paris meeting of G20 finance ministers and central bankers where inflation was a key topic of discussion. ECB governing council member Christian Noyer commented there that pay demands should be limited. Euro zone inflation stands at 2.4 percent, above the ECB’s 2 percent target, and the ECB has warned that its inflation outlook could move to the upside. Meanwhile German Chancellor Angela Merkel and Economy Minister Rainer Bruederle have called for bigger pay rises for workers in 2011 after unions accepted modest increases in recent years as Germany was battling with recession. Trichet said inflation remained the ECB’s top concern and noted that it was those countries in the euro zone that had kept a lid on costs that had managed to reduce unemployment. The Spanish government, keen to convince markets of its long-term growth prospects, is pushing to de-link wage increases from inflation, something Germany wants to make the rule across the euro zone as part of a new competitiveness pact. (Reporting by Catherine Bremer; editing by Sophie Walker) Copyright 2010 Thomson Reuters. Click for Restrictions .

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‘Buy Everything’ Sentiment Continues On Wall Street

February 19, 2011

Angela Moon, New York – Investors will continue to ride the speediest rally in U.S. stocks since the Great Depression despite growing concerns that the market is overbought and due for a correction. Wall Street posted its third consecutive week of gains with the S&P 500 now up 6.8 percent for the year and more than 20 percent in just six months. “I’ve never seen a market like this,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont, a market watcher for 35 years. “I’m showing, by every technical and quantitative standard I have, this market is at extreme levels. But no matter where we start out in the morning, buyers come in.” The trend of stocks starting off lower in the morning session but ending higher by the afternoon has been ongoing for weeks as investors view the small dips as reasons to buy. But there is a perceptible level of anxiety in the market. Trading volume has been exceptionally low recently and the CBOE Volatility Index .VIX, Wall Street’s so-called fear gauge, is up on the week despite the gains in stocks. The index is usually inversely correlated to the S&P 500, and a rise in the VIX typically means a drop in the stock market. The VIX, which ended at 16.43, up 4.7 percent on the week, is still historically low but substantially higher than in recent months. That suggests investors see more share gyrations ahead. The driving force behind the rally is the money that poured into riskier assets like stocks in the last quarter of 2010 after the U.S. Federal Reserve pledged to keep interest rates low. “With so much momentum in the market, we are likely to see some sideways consolidation next week but nothing more than that,” said Ryan Detrick, technical analyst at Schaeffer’s Investment Research in Cincinnati, Ohio. LOW VOLUME=SIGNS OF FATIGUE About 7.13 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq on Friday, below last year’s estimated daily average of 8.47 billion. Stocks have been struggling to match last year’s trading levels, hovering in the 7 billion range this week. On Thursday, the volume was the second-lowest of the year at 6.7 billion shares, and Monday’s session was the lowest of the year with a mere 6.6 billion shares. “This is a sign that the market is tired, and unless we see an uptick in this volume,” the level of investor anxiety will not retreat, Detrick said. U.S. markets are closed on Monday for the Presidents Day holiday. Copyright 2010 Thomson Reuters. Click for Restrictions .

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‘Flash Crash’ Panel Calls For U.S. Market Overhaul

February 18, 2011

WASHINGTON/NEW YORK (By Roberta Rampton and Jonathan Spicer) – U.S. regulators should stem the growing tide of anonymous stock-trading and consider charging high-frequency traders for their disproportionate amount of buy and sell orders, said a panel of experts advising how to avoid another “flash crash.” The panel’s 14 recommendations for U.S. securities and futures regulators contained some bold ideas that, taken together, would overhaul the high-speed electronic trading market. The advisers on Friday told regulators that today’s markets can easily breed uncertainty among investors, and asked them to move urgently on the suggestions. Yet many of the ideas called only for “consideration” or “further study” — potentially raising more questions as the first anniversary of the May 6 flash crash nears. “The recommendations are a good first step … but from a practical standpoint of avoiding another (crash) in the future, it doesn’t go far enough. I don’t think it’s possible to prevent another one from happening,” said Adam Sarhan, chief executive of Sarhan Capital in New York. U.S. regulators were cautious about some of the boldest recommendations, including new fee structures to encourage liquidity and discourage high numbers of order cancellations. “I do not know where we as a commission would come down on fees,” Securities and Exchange Commission Chairman Mary Schapiro told reporters after the panel meeting on its recommendations. The unprecedented May 6, 2010, market crash sent the Dow Jones industrial average down some 700 points before rebounding, all in a matter of minutes. It rattled investors, exposed flaws in the structure of markets, and set regulators on a mission to fix the system and restore confidence. The eight-member panel suggested the SEC consider forcing the banks, hedge funds and others that facilitate stock-trading away from the public exchanges to give investors a better price by a minimum amount. It also wants regulators to consider a way to better allocate the “costs imposed by high levels of order cancellations, including perhaps requiring a uniform fee across all exchange markets.” That suggestion comes after regulators and others began raising questions this past summer about the massive amount of message traffic, or “noise” in the markets, and whether it allowed some high-speed, short-term traders to manipulate prices for profit gains. “What market regulation now has to do is limit uncertainty,” said Maureen O’Hara, professor of finance at Cornell University and member of the flash crash panel. “You limit uncertainty by limiting the amount of movement a price can have before it falls off the map.” The changes would require the SEC and fellow regulator, the Commodity Futures Trading Commission, to take on a massive amount of research and rulewriting at a time when the agencies are straining to carry out the Dodd-Frank financial reform law. REGULATORS VS TECHNOLOGY While some have argued the crash was a freak event that called for obvious adjustments, such as the new “circuit breaker” trading halts, others said it was a wake-up call to finally get a firm handle on what could destabilize capital markets. It wants regulators to consider a so-called “trade at” order routing rule — something that would hurt the growing ranks of “dark pools” where trading is done anonymously. Some 33 percent of U.S. stock-trading takes place away from exchanges, up from 20 percent four years ago. Some of the biggest internalizers are market maker Knight Capital Group Inc, bank Goldman Sachs Group Inc, and hedge fund Citadel. A “trade at” rule, which Schapiro on Friday expressed support for, would generally prohibit any of the dozens of U.S. venues and wholesale market makers from executing an incoming order unless they were already publicly displaying the best bid or offer in that particular stock. After the crash, one of the regulators’ first steps was to form the committee to come up with some answers. Many of its ideas fall squarely in the “esoteric” category, though even small adjustments could revamp the flow of tens of trillions of dollars annually in the markets. The panel wants regulators to consider adjusting trading fees so that firms that provide liquidity get additional rebates that would help stabilize markets during stressful times; “depth of book protection” that would cut down on investors getting poor prices; and a closer look at “disruptive trading activities” in the futures markets. Other recommendations unveiled on Friday, such as expanding and modifying the “circuit breaker” trading pauses, had been telegraphed by regulators and mostly endorsed by market participants and exchanges such as NYSE Euronext and Nasdaq OMX Group. The exchanges at the center of the breakdown, however, added a new wrinkle to the debate when in the last week they set off a new wave of planned global mergers, including the takeover of Big Board parent by Germany’s Deutsche Boerse. The mergers highlight the increasingly interconnected global marketplace, where drops in one region can rapidly trigger plunges elsewhere, and show how aggressively traditional exchanges are investing in newer, faster systems. “The whiz-bang technology in markets today means that when things go wrong, they go wrong very fast,” CFTC Commissioner Bart Chilton said. (Reporting by Sarah N. Lynch, Jonathan Spicer and Roberta Rampton, with additional reporting by Ryan Vlastelica; Editing by Steve Orlofsky, Dave Zimmerman and Tim Dobbyn) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Will NYSE’s Merger Help Prevent Another ‘Flash Crash’?

February 18, 2011

NEW YORK (By Jonathan Spicer) – The merger frenzy among the world’s top exchanges could cast the U.S.-centric “flash crash” debate in a global light, as experts on Friday pitch some possibly radical changes meant to avoid another market breakdown. A special committee is set to meet in Washington to make its long-awaited recommendations to regulators — now more than nine months since the unprecedented market crash sent the Dow Jones industrial average down some 700 points before rebounding, all in a matter of minutes. The May 6 crash rattled investors, exposed flaws in the structure of today’s electronic markets, and set regulators on a mission to fix the high-speed system. The exchanges at the center of the breakdown, however, added a new wrinkle to the debate when in the last week they set off a new wave of planned global mergers, including the takeover of Big Board parent NYSE Euronext by Germany’s Deutsche Boerse. While the deals could strengthen the oversight of cross-border trading and boost the flow of global liquidity, they also tie the world’s interconnected markets tighter together, possibly setting the stage for larger-scale crashes, some observers said. Seth Merrin, chief executive of market operator Liquidnet, said the U.S. Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission need to coordinate with regulators elsewhere to understand how sharp movements in one country’s market can hit derivatives traded in others. “Nobody as far as I can see has said to all of the other regulators that if you’re going to create securities that link to anything in my market, we have to talk,” said Merrin, whose venue lets institutional investors trade anonymously. “I don’t know that investors can sustain another flash crash,” he said in an interview. After the crash, one of the first steps taken by the CFTC and the SEC was to strike the committee to come up with some answers. The group includes Financial Industry Regulatory Authority head Richard Ketchum and former CFTC Chairman Brooksley Born, among others. Robert Engle, an Nobel Prize-winning economist also on the committee, told Reuters that members discussed several possible changes, including giving special rebates that would help stabilize markets during stressful times, and cracking down on the growing amount of trading outside of the public exchanges. Engle, interviewed earlier this month, said at the time that no final recommendations had been set. The SEC and CFTC, which hosts the Friday meeting, could formally propose rule changes based on the recommendations. They have already made a handful of adjustments to the marketplace in the wake of the flash crash, including adding trading pauses known as circuit breakers. In another nod to boosting market security, SEC Chairman Mary Schapiro told a U.S. Senate panel on Thursday the agency asked all exchanges for audits of their security policies, after Nasdaq Stock Market parent Nasdaq OMX Group said on February 5 that hackers had breached its computer systems. Rounding out the merger activity that caught fire last week, London Stock Exchange bid to buy Canada’s TMX Group, and, according to a source, BATS Global Markets is nearing a deal to buy fellow private exchange operator Chi-X Europe. BATS accounts for about 10 percent of all U.S. stock trading. (Reporting by Jonathan Spicer; Editing by Gary Hill) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Les Leopold: Wall Street Wins Big in Deficit Battle

February 18, 2011

Maybe it’s something in the water. Some potent little parasite has wormed its way into Washington, and now everyone’s coming down with the disease: certifiable deficit hysteria. Politicians and pundits are all marching in lockstep chanting “Cut, Cut, Cut,” fearing that if they don’t they’ll be assaulted by the right-wing budget police. They rationalize the madness with the slogan “equality of sacrifice,” a platitude that is supposed to make us feel better about destroying our public sector. For all the pompous pontifications, the real argument politicians are having is over which group of working Americans they should screw first. No one’s asking Wall Street to sacrifice. The bankers and hedge fund gamblers are getting a free ride — again. You’d think this would be a good moment to mention that we wouldn’t even be having these budget deficit hysterics right now if Wall Street hadn’t just destroyed over $13 trillion dollars in wealth as well as wiping out several hundred billion dollars in yearly government tax revenues. Do we even remember that the reason 30 million Americans can’t find full-time jobs is that Wall Street’s reckless gambling crashed the economy? (If you still have any doubt about this, please see The Looting of America for the sad tale of how we got here.) Instead, even NPR reporters (who may soon feel the sharp edge of the budget-cutting guillotine themselves) command us again and again to “Text, Twitter or Facebook us about what you think ought to be cut.” PBS News Hour’s Gwen Ifill seems to be on a righteous mission as she presses White House budget director Jack Lew over and over: “What about the entitlements, Mr. Lew? What about the entitlements, Mr. Lew?” Yes, Serious People everywhere know that Social Security and Medicare cuts are inevitable and that their job is to nail those slippery pols down: How much? When? But suggesting that perhaps Wall Street should sacrifice something is too ludicrous even to mention. Serious People don’t bring up issues that have been quarantined by deficit hysteria. New Taxes on Wall Street to Help Reduce the Deficit? But hold on, deep in the bowels of the president’s budget you can actually find new Wall Street taxes. If you look real hard you’ll see a category called “Total Reform Treatment of Financial Institutions and Products.” Hmm, looks promising. Maybe they’re proposing to finally tax the hell out of the derivative products that destroyed our economy a couple of years ago. So, let’s see. It says the total tax increases in 2012 come to … $159 million? Million, not billion? Is that a typo? Is the decimal point in the wrong place? Or is this the new definition of “equality of sacrifice”? Let’s do the math: John Paulson, the hedge fund manager who earned $2.4 million an HOUR in 2010, could pay off the proposed tax increases for the entire financial industry personally — by working less than two weeks. But not to worry, Mr. P. You and your fellow hedge fund elites have been saved yet again by the deficit fanatics’ exclusive focus on squeezing middle- and low-income Americans instead of you. No one’s talking about closing the shameless tax loophole that allows hedge fund managers to pay only a 15 percent “capital gains” tax on their enormous incomes instead of the top income tax rate of 35 percent. Closing that tax loophole on just the 25 top hedge fund managers — just 25 individuals! — would pull in twice the revenue compared to freezing the wages of 2 million federal employees. Apparently the new math of “equality of sacrifice” means that 25 people equals 2 million. To be fair, the president’s budget does propose gradually raising financial taxes by a total of $33 billion over the next decade. Unfortunately that only amounts to 3.3 percent of the trillion dollars he’s proposing to cut — more Orwellian equality. The nauseating ironies abound. The hedge fund managers are likely to pay a lower income tax rate than the families who find out they can’t send their kid to college because Congress cut their Pell tuition grant. It’s one thing to have an in-depth debate over steeper taxes on financial billionaires and lose. It’s quite another to see the entire debate buried by Democrats, Republicans, the media and just about every other force in society. Buried under great heaping mounds of deficit drivel. Wall Street owes the American people. And the American people, I am sure, would love Wall Street to make restitution for the damage it has done. In a saner world, we’d be considering a wider menu of real financial industry tax increases. Taken together these would raise more money than all of Obama’s proposed budget cuts combined: Close the hedge fund loophole so that hedge fund managers have to pay the top income tax rate. Enact a 50 percent surcharge on financial sector profits and bonuses until the unemployment rate drops below 5 percent. Impose a small financial transaction tax on all short-term financial transactions. This would both raise revenue and tap the brakes on reckless financial gambling. Together these taxes could raise federal revenues by $100 to $200 billion a year. In the process they would: a) reduce the size of Wall Street’s dangerous casino economy; b) reduce the outsized pay packages of financiers, whose “innovations” contribute next to nothing to the real economy; and c) make our economy more stable by reining in the reckless gambling. (This would be a return to the post WWII practice of keeping Wall Street salaries in line with salaries of those in other fields with similar educational levels.) But instead of looking for constructive solutions to our budget challenges, politicians are using deficit hysteria as an excuse to gut and privatize the public sector, invade the few remaining union strongholds, and turn working people against each other. The budget axes are flying, but on Wall Street all is peaceful and calm. The new financial oligarchs are quietly collecting the happy returns from all the taxpayer dollars we gave them. They’re back to flying high on their financial trapeze, making reckless bets in the hopes of outrageous returns. But no worries: Now more than ever, they’ve got a net. It comes in the form of an enormous implicit federal guarantee: If you fall, we will catch you (or actually, the taxpayers will). Because the institutions that were too big to fail in the last round are now way too big to fail. Remember, there now are even fewer of them and they are much bigger. The obsessive focus on budget cuts keeps us from noticing that we, the people, now own billions of dollars of toxic assets (via the Federal Reserve) that once were rotting on the books of our largest financial institutions. We’re the ones who are paying off the largest Ponzi scheme ever created. (If you want to really get a rage on, read the Financial Crisis Inquiry Report’s account of how banks traded the most toxic slices of CDOs back and forth to create a make-believe market in toxic assets. You’ll either want to free Bernie — the sacrificial lamb — or throw the whole bunch of them in jail with him.) “Equality of sacrifice?” There ought to be a law against any politician uttering that phrase. But despite it all, something good is percolating. Financial billionaires are whining more and more about the criticism they are receiving for bankrupting our economy. One plutocrat even waved legal action at me for suggesting that maybe his financial “genius” involved some fraudulent activities. Think about it. If our financial titans are coming after lowly bloggers, maybe they’re just a tiny bit worried. Maybe events in Tahrir Square or Madison have them spooked. Maybe they fear the sparks could ignite into a massive conflagration of demands for financial billionaires finally to pay up for the damage they have done. Let’s blow harder on those sparks. Les Leopold is the author of The Looting of America: How Wall Street’s Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009. He is currently working on a new book, How to Earn $900,000 an Hour: The Rise of Wall Street Billionaires and the One-sided Class War, (hopefully to be published in 2011).

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Sara Ackerman: State Banks: A New, Old Idea To Increase Growth In Your Community

February 17, 2011

Every year billions of state tax dollars are taken from their respective states and deposited into the Wall Street “Too Big To Fail” banks. These same banks use municipal deposits to give loans to out-of-state big businesses, often shifting wealth from local communities; a huge loss of potential that could be better used encouraging local businesses and creating more jobs. With increased attention to where and how municipalities deposit their operating funds due in large part to the Move Your Money project, many are beginning to wonder: why can’t that money stay local? If community banks could accept public deposits, we could keep local money in the communities where it originated. Unfortunately, community banks are often unable or unwilling to accept large public deposits due to high collateral limits, making the venture unprofitable. That is where the idea of a public state bank–or partnership bank–comes into play. The movement to create a publicly owned state bank has been on the rise this year as multiple states including Washington, Hawaii, and Oregon have already introduced bills in their respective states, with more expected to follow. The idea of a state bank is not new, but rather models after the Bank of North Dakota created in 1919 which today runs at a profit and allows for the state of North Dakota to make significant investments in agriculture, economic development, and student loans- all at no cost to the state. So what has caused a resurgence of an idea nearly one hundred years old? It is in large part due to the remarkable success experienced by North Dakota as the rest of the nation suffers through the global financial crisis. After the economic downturn sent shockwaves felt throughout the world, North Dakota ran counter-cyclical, leaving many to wonder what insulated the state from all the turmoil. While most municipal governments found record deficits, North Dakota found record surpluses and while most communities grappled with high unemployment, foreclosures, and bank failures, North Dakota remarkably survived the brunt of the attack unscathed. Undoubtedly, the fact that North Dakota’s economy which is primarily based on agriculture and oil was a major contributor, but many are also pointing to North Dakota’s state-owned bank as a major impetus to their success. The Bank of North Dakota was created by a non-partisan populist movement in 1919 after farmers were fed up with out of state bankers limiting their access to credit. Farmers, whose livelihood primarily rests on factors outside of their control, revolted against their dire situation in creating the Bank of North Dakota. While the Bank of North Dakota was not an immediate success, over time the bank would serve as a tool to increase capital for local businesses and farms. A common misconception of state banks is that they compete with private banks. This however, is not the case. While the Bank of North Dakota has the legal right to accept private deposits, in practice only 1 percent of their total deposits come from individuals and businesses (many of the current proposals will potentially go one step further and outright ban the ability for state banks to accept private deposits). Rather, a public bank mainly serves as a “bankers’ bank,” allowing a small, community bank to make larger loans by sharing the risk and buying down the interest rate or buying loans from community banks which increases lending for small businesses and agriculture. Small businesses, which account for 70 percent of the nation’s workforce, have been particularly hurt by the credit crunch. In a recent survey of small business owners in Oregon, 67 percent reported problems with accessing capital to expand and 75 percent supported the creation of a state bank. Easing community banks ability to supply loans will not only increase profits for the bank but also help small businesses grow and create jobs. Additionally, a state bank could provide additional services to banks including currency exchange, check clearing, and providing liquidity. Thus, the relationship is more akin to a partnership, encouraging and strengthening community banks and allowing them to compete against the Wall Street behemoths. The benefits of state banks however, go further than just community banks. Since public banks have no shareholders to please, they have more freedom in choosing where they allocate their capital. Start-ups and small businesses that may provide long-term economic growth to a community are often passed over by Wall Street for investments that are more profitable to their immediate bottom-line. Yet a state bank would be able to leverage earned income through more lucrative activities to help subsidize economic growth in local communities. An additional plus of the state bank movement is that it could be a potential source of revenue for the state. The Bank of North Dakota was able to return over $350 million to the state’s General Fund in the last decade, which came in handy when the state faced a $40 million budget shortfall at the turn of the century. A state bank may or may not be the solution for your state, but it is an interesting experiment that some state legislators feel is worth a try. During this legislative session, it will be exciting to see which bills are successful and which fall short. Nevertheless, the creation of a state bank is a new, old idea that is worth a strong consideration.

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A QUICK FIX: Bank Regulator’s Easy Solution May Hurt Homeowners

February 17, 2011

The federal bank regulator overseeing the nation’s largest lenders is pushing for a quick and modest settlement to the months-long federal and state probes into abusive mortgage practices, frustrating other federal agencies and state regulators and raising questions over President Barack Obama’s delay in naming a pro-consumer chief to head the agency. The Office of the Comptroller of the Currency, which oversees lenders like JPMorgan Chase and Bank of America, plays a key role in the ongoing investigations launched last September into improper foreclosure practices. The federal review involves the OCC and other bank regulators, as well as the Departments of Justice, Housing and Urban Development and the newly formed Bureau of Consumer Financial Protection. The 50-state probe involves state attorneys general and state bank regulators. But the OCC, known for its light-touch approach, is trying to come to a quick settlement with the banks it supervises, according to officials from multiple agencies involved in the investigations. The agency is negotiating an agreement that would cost the industry less than $5 billion in fines and mortgage modifications for troubled homeowners, including principal reductions, the officials said. Other agencies are pushing for something bigger. On Wednesday, Rep. Patrick McHenry, a North Carolina Republican, said during a House hearing on housing issues that he had heard the potential settlement would be in the “tens of billions range.” In 2008, state attorneys general reached an $8.4 billion agreement with just one company — Countrywide Financial — to settle predatory lending accusations. The money was used to aid distressed homeowners. The OCC is also trying to persuade mortgage companies that collect payments from borrowers, known as servicers, into adopting new standards in how they deal with homeowners. The agency has wide influence over the way banks service mortgages: It supervises firms that control nearly two-thirds of all home mortgages in the U.S., or more than 33 million loans totaling about $5.8 trillion. But officials said the OCC’s proposals give the institutions wide discretion, potentially undercutting their intent. The OCC is said to be rushing to settle in hopes of forcing the hand of other regulators on the federal and state level, weakening their efforts to extract a more meaningful resolution. The probes have cast a pall over the industry as bank executives have been forced to answer questions about the investigations posed by investors and analysts. The industry wants to put the whole matter behind it and move on. Officials at the Treasury Department and Federal Deposit Insurance Corporation have grown frustrated with the OCC’s efforts, people familiar with the matter said. State regulators conducting their own probe said they aren’t a part of the OCC’s seemingly lonely action. “Any statements or actions by the OCC at this point are on the agency’s own behalf and not in conjunction with the 50-state attorneys general,” Iowa Attorney General Tom Miller said in a statement. “Regardless of any federal action, we intend to fully pursue all state claims and remedies.” Spokesmen for the OCC didn’t respond to a request for comment e-mailed after regular business hours. State and federal officials are trying to reach a global settlement that will deter future abuses in the way mortgage servicers modify delinquent home loans and foreclose on homeowners, as well as levy penalties as a measure of restitution and force lenders to restructure distressed mortgages. The OCC’s efforts subvert the possibility of a unified settlement, officials said. In December, Federal Reserve Governor Daniel K. Tarullo said the federal review had found “significant weaknesses in risk-management, quality control, audit, and compliance practices as underlying factors contributing to the problems associated with mortgage servicing and foreclosure documentation.” “We have also found shortcomings in staff training, coordination among loan modification and foreclosure staff, and management and oversight of third-party service providers, including legal services,” he said. In the wake of the worst housing crisis in generations, consumer advocates, housing analysts and bank regulators have heavily criticized the industry’s performance. In addressing the recent controversies of improper foreclosures during a speech last November, Fed governor Sarah Bloom Raskin said procedural flaws like robo-signing and other efforts that cut corners are “part of a deeper, systemic problem.” She added that she was “gravely concerned.” “The complex challenges faced by the loan servicing industry right now are emblematic of the problems that emerge in any industry when incentives are fundamentally misaligned, and when the race for short-term profit overwhelms sustainable, long-term goals and practices,” Raskin said. “I believe that serious and sustained reform is needed to address the larger problems in mortgage servicing.” Tarullo said the “problems are sufficiently widespread that they suggest structural problems in the mortgage servicing industry.” “The servicing industry overall has not been up to the challenge of handling the large volumes of distressed mortgages,” he said in December. “It is clear that the industry will need to make substantial investments to improve its functioning in these areas and supervisors must ensure that these improvements occur.” But as of last week, nothing had changed, Raskin said in another speech. “These problems existed before November and as far as I can tell they remain unaddressed,” Raskin said. “How do I know this? Late last year, the federal banking agencies began a targeted review of loan servicing practices at large financial institutions that had significant market concentrations in mortgage servicing. The preliminary results from this review indicate that widespread weaknesses exist in the servicing industry.” “These deficiencies pose significant risk to mortgage servicing and foreclosure processes, impair the functioning of mortgage markets, and diminish overall accountability to homeowners,” she added. “I’m sure this has been said, but I’ll say it again because I have seen little to no evidence of improvement in the operational performance of servicers since the onset of the crisis in 2007.” Bank regulators will address the issue on Thursday during a Senate hearing. On Wednesday, Federal Housing Administration Commissioner David Stevens said that a settlement would come in the next month. Options include penalties against the nation’s largest banks, more mortgage modifications for borrowers, and the reduction of homeowners’ mortgage principal, he said. Stevens also touched on how regulators aren’t on the same page. “There’s two ways we can go about coming to a conclusion here,” Stevens said. “We can come up with one set of solutions, assuming the general findings are the same, or we can go individually. That process is being worked through right now.” The FHA chief added that the agencies would have to work together “to make this less disruptive in the market,” an acknowledgement that a massive principal write-down scheme would likely impair the nation’s largest financial institutions. The OCC’s actions in trying to derail a more substantial settlement raises questions over the Obama administration’s delay in nominating the agency’s next leader. Its last chief, John C. Dugan, stepped down in August after his five-year term ended, and joined Covington & Burling LLP, where he leads the firm’s financial institutions group. Dugan “advises clients on a range of legal matters affected by significantly increased regulatory requirements resulting from the financial crisis,” according to the firm’s Web site. One of his colleagues is Edward Yingling, who last year stepped down as president and chief executive officer of the American Bankers Association, the industry’s largest trade group. Consumer advocates pushed for the White House to nominate an outsider who was less connected to the OCC’s prior failures. The agency came under withering criticism for its lax oversight of the industry in a report published by the bipartisan, Congressionally-appointed Financial Crisis Inquiry Commission. Treasury Secretary Timothy Geithner picked Dugan’s former chief of staff at the OCC, John Walsh, as Dugan’s interim replacement. Obama has not yet named his successor. The nomination requires Senate approval. But Democrats lost six seats in the Senate in last fall’s election. The administration now faces an uphill battle to get a tough regulator in the role. ************************* 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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Rich Nadworny: Corporate People

February 16, 2011

A lot of people got very worked up last year over the Supreme Court’s Citizens United decision. In it, the Court decided that corporations were just like regular people and thus deserved the right of free speech. The more I read the news these days, the more I think those justices might be on to something. Take for instance the latest news that the Entergy’s Vermont Yankee nuclear power plant is still leaking . This has been an ongoing issue with the plant, one that the company initially denied. According to the court’s decision, we should all look at this as a simple case of corporate incontinence. And we all know that it’s not right to make fun of incontinence. Still, we do expect Vermont Yankee to do something about it. I mean, it’s one thing if they’re doing it in the privacy of their corporate home, but it’s another entirely if they’re making a mess while out visiting! Vermont Yankee, like many other older people, seems to have a hard time recognizing its problem. It should listen to the Supreme Court and go out and by some Corporate Depends before things get out of control! Otherwise the doctors at the Vermont Legislature in Montpelier will surely want to operate on it. That’s not the only way big corporation act like real people. In some sense, those huge profits companies make these days are like a version of Corporate Viagra. Yes, they sure appear big, robust and powerful. But it’s not that simple; those profits seem to be hiding a more serious affliction, namely employing fewer people, making fewer things, and rewarding people with obscene bonuses. Nowhere does corporate Viagra seem more rampant than in the financial sector. Even though they’ve deflated the world’s economy, they’re still rewarding their Big Swinging Dicks, to use a phrase from Michael Lewis’ book Liars Poker . If these obscene profits and bonuses last for more than four straight years, should we call a doctor? You know, now that I think of it, the Supreme Court was dead on in saying the corporations were just like people. They reminded me of a time I lived in Sweden. Back in the 80s and 90s lots of Swedish men couldn’t deal with the demands and equality of Swedish women. So they went looking for wives in Southeast Asia and Eastern Europe. I’m not saying they were trafficking or doing anything illegal; those men were just looking for the path of least resistance, where the women were trained in subservience. And when you think about it, that’s pretty much what a lot of corporations did when they moved its manufacturing overseas. They left the American workers just like all of those Swedish guys who couldn’t deal with those terrific, smart blonde women. It sure looks like some corporation act like people. Or more precisely, it seems that some corporations act a lot like weak men. So maybe being just like a person isn’t really all that great. Maybe it’s okay for corporations to act, well, like responsible businesses. I mean, if you push this all the way out it might mean that one day we could actually elect a corporation as president of the United States. And that would be a supreme mistake.

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BP, ARCO Sued For Alleged Water Contamination From Toxic Mine

February 16, 2011

RENO, Nev. — Neighbors of a toxic mine in northern Nevada have filed a class-action lawsuit against BP America and Atlantic Richfield Co. accusing them of intentionally and negligently concealing the extent of the contamination leaking off the abandoned site for decades. The suit filed in U.S. District Court in Reno on Monday seeks a minimum of $5 million on behalf of at least 100 residents in the rural town of Yerington where the old Anaconda copper mine opened in 1941. The plaintiffs say the wells they once used for drinking water are polluted with uranium, arsenic and other metals in a plume of groundwater that slowly has migrated off of the site that covers 6-square miles – an area equal to the size of about 3,000 football fields – about 65 miles southeast of Reno. The lawsuit says that even after whistleblowers started to publicize previously secret records documenting the dangers, the corporations refused to cooperate with state and federal regulators trying to clean up the radioactive and other hazardous waste the past 10 years. “They destroyed the water supply to this community and now it’s time to clean it up. It’s time to get the contamination off these people’s land and out of their wells,” said Steven German, one of the lawyers who filed the lawsuit on behalf of the residents. “A mother should not have to tell her child they can’t turn on the spigot because their water is dangerous. That is not acceptable in this country,” he told The Associated Press on Tuesday. The lawsuit said the companies knew or should have known that their discharge of toxic and hazardous materials would pollute neighboring properties, air, water, groundwater and the surrounding environment. It said they have `intentionally allowed toxic and hazardous substances to enter and remain on” the neighbors’ land. “Despite their knowledge of the serious health and environmental effects associated with exposure to toxic and hazardous substances and despite orders and warnings form health and environmental regulators, (BP and ARCO) intentionally masked the true extent of the contamination, thereby enabling (them) to avoid taking all appropriate steps to properly remediate the toxic and hazardous substances or to mitigate the dangers created by their release, discharge, storage, handling, processing, disposal of and dumping of toxic and hazardous substances,” the suit said. Tom Mueller, a spokesman for BP America, said Tuesday evening that company officials have not had a chance to review the lawsuit and had no immediate comment. Fueled by demand after World War II, Anaconda produced nearly 1.75 billion pounds of copper from 1952-78 at the mine that runs along U.S. Highway 95 in the Mason Valley, an irrigated agricultural oasis in the area’s otherwise largely barren high desert. The U.S. Environmental Protection Agency has determined over the years that uranium was produced as a byproduct of processing the copper and that the radioactive waste was initially dumped into dirt-bottomed ponds that – unlike modern lined ponds – leaked into the groundwater. Officials for BP and its subsidiary Atlantic Richfield, which bought Anaconda Copper Co. in 1978, have provided bottled water for free to any residents who want it over the past few years. But they have insisted that uranium naturally occurs in the region’s soil and, until recently, they argued there was no way to prove that a half-century of processing metals there was responsible for the contamination. However, a new wave of EPA testing first reported by The Associated Press in November 2009 found that 79 percent of the wells tested north of mine have dangerous levels of uranium or arsenic or both that make the water unsafe to drink. “You now have evidence of mine-impacted groundwater,” Steve Acree, a highly regarded hydrogeologist for the EPA in Oklahoma brought in to examine the test results, told AP at the time. One monitoring well a half mile away had levels of uranium more than 10 times the legal drinking water standard. At the mine itself, wells tested as high as 100 times the standard in an area where ore was processed with sulfuric acid and other toxic chemicals in unlined ponds. Though the health effects of specific levels are not well understood, the EPA says long-term exposure to high levels of uranium in drinking water may cause cancer and damage kidneys.

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Countdown To No Kickoff: Next Football Season Hostage To Owners’ Demands

February 16, 2011

WASHINGTON — The National Football League’s 32 owners are hurtling toward a March 4 deadline, giving every indication that they plan to lock out the players and stadium employees, potentially jeopardizing the next season in an effort to extract an extra billion dollars per year for themselves and require the players to put in two extra regular season games. The move comes after the owners have managed to siphon hundreds of millions of dollars from taxpayers to build and maintain stadiums for their private businesses. With the exception of Green Bay, which is collectively owned by community members and run as a nonprofit, the other 31 teams are privately owned, meaning that the NFL’s lucrative business generates an extraordinary amount of money for a handful of men. The owners are claiming that they need an extra billion dollars to make it worthwhile to invest in the upkeep of the stadiums and other facilities. The players say they are more than willing to help make those investments, but, like all investors, they want a cut of the returns and they want to see the owners’ books to verify their claims of impoverishment. There’s reason for suspicion. The owner of the Cincinnati Bengals, for instance, is insisting that he needs the extra money from the players to maintain the team’s stadium. “The investments that need to be made to keep the stadium and our other facilities in first-class condition require an economic system that fairly allocates financial reward and risk,” said Bengals owner Mike Brown in an October letter explaining the team’s position to progressive advocacy group Progress Illinois. Problem is, the Bengals don’t pay for those investments. The local taxpayers do. The stadium was entirely a gift from taxpayers to the team. The lease requires taxpayers to pay the costs of routine maintenance and upgrades, which amounted to $10.2 million over the past decade, according to the Cincinnati Enquirer . And now the Bengals want four times as much from taxpayers for the next decade. Listening to the owner’s argument, one would think he was footing the bill himself. “Our stadium has repeatedly been recognized as one of the finest venues in the league, and we are very proud for what it means to our fans, our players and our community. Like any facility of its size and complexity, our stadium needs ongoing maintenance and improvement,” he wrote, skipping over the part about who paid for it, adding that the community should be grateful that the team still plays where it does. “Even though the Bengals operate in one of the smallest communities in the NFL, and in an area that has been hit hard by the recession, we have maintained our commitment to provide fans with the highest-quality football in an outstanding setting.” Some of the fans remain unconvinced of the high-quality claim, as well. “The community is fed up with the Bengals. They don’t try to put a winner on the field,” Hamilton County Commissioner Todd Portune told HuffPost, noting that the team has had a losing record in 19 of the last 21 seasons. People are fed up, he said, by an “ownership that feels like it did the community a favor by playing ball here.” Hamilton County taxpayers are reminded of their generosity to the Bengals each time they pay a half-cent sales tax surcharge that is dedicated to paying for the stadium and its maintenance. With revenue declines as a result of the recession that followed 9/11 and the downturn following the financial crisis, tax receipts are no longer covering the county’s bills — the type of risk that Mike Brown was referring to. “I don’t want to get in the middle of their labor dispute, but the problem is the financial model that the NFL has actively pursued, that the ownership of teams have been willing co-conspirators to, that has put a gun to head of taxpayers to foot the bill for costs that ought to be born by private enterprise,” Portune said. Cincinnati City Councilman Wendell Young introduced a resolution expressing the council’s outrage at the Bengals’ request of even more subsidies for its business. “[I]n order for Hamilton County to fund this level of improvements, it would have to raise taxes or potentially cut funding for hospitals, public safety and other vital public services, none of which is reasonable or appropriate to impose on the citizens of the City of Cincinnati or Hamilton County who have provided the Bengals with such a significant public subsidy for nearly 20 years that has helped to make the Cincinnati Bengals one of the most profitable franchises in the National Football League.” Young said the resolution will see a vote next week. “It seems to me unconscionable for them to ask the city to pay for things they can obviously afford themselves,” he said. With taxpayers tapped out, the owners are turning to the players. The owners want a bigger slice of the profit pie. If they don’t get it, they will lock the players out, preventing them from getting on the field. It’s not a strike: Just like factory owners would chain the door to keep out union workers, NFL owners will lock shut the door on the 2011-2012 season. In a Tuesday op-ed , NFL Commissioner Roger Goodell, who represents team owners, conceded that it is only the owners who are making demands, but tried to flip the situation upside down. He argued that the fact that players aren’t making demands is evidence of owners’ impoverished situation. “The union has repeatedly said that it hasn’t asked for anything more and literally wants to continue playing under the existing agreement. That clearly indicates the deal has moved too far in favor of one side,” Goodell wrote. The owners have two key demands: They want an extra billion dollars of the roughly $9 billion revenue pie that is the NFL, and want an additional two regular season games. The owners say they need the extra billion for upkeep and “professional fees” for legal and other services (fees that would presumably go to cover owner lawsuits against the elderly who can no longer afford season tickets or small alternative newsweeklies that run articles critical of ownership). The owners also want to limit pay to unproven rookies, many of whom just finished playing for free for four or five years for a lucrative college program. The players’ union is willing to concede this, to an extent. But the average NFL career lasts only three-and-a-half years, meaning the owners want to take a big chunk from nearly a third of a player’s typical career. The owners want to replace two of four preseason games with regular-season games, which players oppose: They say two more games will increase injuries at a time when player safety is ostensibly a paramount concern of the league’s. The league has been preparing for this lockout for years, the players say, noting that the owners hired the same attorney who led the NHL lockout and has instructed teams to include provisions in contracts that reduce or eliminate pay in the event of a lockout. The NFL has been similarly adept negotiating with the television networks and the owners will get paid even if the games aren’t played. Last year, roughly two-thirds of the 100 most-watched television shows were individual NFL games, said George Atallah, a top NFL Players Association official. “We didn’t get here yesterday. The league has taken steps to prepare for a lockout for almost three years now,” Atallah told HuffPost. The union also been preparing, encouraging players to be ready for paychecks to stop and health insurance to be cut. Star players are involved in the union: Aaron Rodgers, the Super Bowl MVP, is the Packers’ union representative; Drew Brees is on the union’s executive committee; Peyton Manning has been personally involved in negotiations and is an alternate rep for the Colts. More starting quarterbacks serve as player representatives today than at any other time in the union’s history. Meanwhile, city officials across the country are letting team owners know that a lockout would damage local economies. Minneapolis Mayor R.T. Rybak said in his letter that he takes no position on the contract negotiations, but that a lockout would “hurt working families in Minneapolis.” “As Mayor of Minneapolis, the city that hosts the Minnesota Vikings, I know that the NFL season has an important economic impact on my city and region. One study has estimated that regular-season games generate $6 million in economic impact, while playoff games generate an additional $9 million in economic impact. Directly and indirectly, these dollars support a wide variety of good jobs for workers in the hospitality, hotel and service industries. Minneapolis is one of the leading hospitality and entertainment cities in the country and these jobs are an important part of our overall economic vitality.” Rybak wrote that he was glad players had pledged not to strike and that he wished the league would make a similar pledge not to do a lockout. Other mayors have said the same thing. “It is clear that the vast popularity and financial success of football means that a lockout cannot be in the interest of anybody involved, particularly the fans, workers or businesses who support the game,” wrote Kansas City Mayor Mark Funkhouser to Chiefs chairman Clark Hunt. Miami Mayor Tomás Regalado sent an identical letter to Goodell. It continues: “I call upon the owners to announce to the fans that they will not lockout the players. The players already have pledged to not strike. By making the parallel commitment, the owners would create the breathing room for a deal to be struck.” Mayors in Houston, Texas, and Baltimore, Md., have sent similar letters. Jerry Watson, who owns a bar near the Green Bay Packers’ Lambeau Field, says no games would mean less revenue for his business, the Stadium View Bar & Grill. “Without the NFL it would cost me a third of my business, and it’s going to cost my employees a lot of money,” Watson said. “It’s going to hurt the state of Wisconsin.” The players’ union estimates that having no NFL games would reduce economic activity by $160 million in each city with an NFL team. An NFL spokesman referred HuffPost to a story by the Atlanta Journal-Constitution dubbing the players’ union’s claim “false,” speculating that if people don’t spend money going to games, they’ll spend it elsewhere. “Attending a professional sporting event is one of many entertainment options in metropolitan areas,” the article states, quoting a 2000 study by Dennis Coates and Brad R. Humphreys of the University of Maryland-Baltimore County. “Fans could alternatively go out to dinner and a movie, or bowling, during a sports strike.” HuffPost had asked the NFL if it had any response to the mayors who say their towns will be hurt by a lockout. “The focus of the clubs is to reach a fair agreement by the March 4 expiration of the CBA,” the NFL’s spokesman said.

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WATCH: Fannie CEO Explains Why He Deserves To Be Paid More Than Barack Obama

February 16, 2011

WASHINGTON (By Corbett B. Daly) – A key congressional panel charged with overseeing financial matters plans to question Fannie Mae and Freddie Mac executives over their multimillion-dollar compensation packages paid for by U.S. taxpayers. Texas Representative Randy Neugebauer on Tuesday said he would bring Fannie Mae chief executive Michael Williams and Freddie Mac chief executive Ed Haldeman before his House Financial Services Subcommittee on Oversight and Investigations. “I think we will be on a first name basis … because I think we will have them” testify, Neugebauer, a Republican, told reporters after a feisty hearing on the use of millions of taxpayer dollars to pay legal bills for former Fannie Mae executives accused of accounting fraud. Fannie Mae and Freddie Mac were seized by the Bush administration in late 2008 amid mounting losses from mortgages gone sour and are controlled by a government conservator, the Federal Housing Finance Agency (FHFA). Edward DeMarco, the acting director of FHFA, in 2009 approved compensation packages allowing the top executives at each firm to receive as much as $6 million each in annual compensation. “What is going on over at Freddie and Fannie and what is the conservator doing to make sure the taxpayers are represented?” Neugebauer asked. The comments come just days after the Obama administration outlined plans to wind-down Fannie and Freddie gradually and to take steps to make the $10.6 trillion U.S. mortgage market less dependent on the government, which now backs more than 85 percent of new home loans in some fashion. The Texas Republican said business as usual is not acceptable for the so-called government sponsored enterprises because “their business got taxpayers on the hook for a lot of money.” The pair have received more than $130 billion in direct taxpayer aid since being taken over by then Treasury Secretary Henry Paulson. The Obama administration on Monday said that tally could climb to $169 billion next year before slowing shrinking as losses are paid back to Treasury coffers. “So what we want to make sure is that they understand, and hopefully we will fire a shot here, of whose interests that they need to be most concerned about. It’s not the employees or the executives over at Freddie Mac and Fannie Mae, it’s the American taxpayers,” Neugebauer said. Asked after the hearing why he deserved to paid more than U.S. President Barack Obama, who earns about $400,000 annually, Williams told Reuters his salary is determined by the government. “My compensation is determined by the board of directors of FHFA and they determine what the appropriate compensation is for the executives of the company,” Williams said. Lawmakers debated with Williams and DeMarco over whether it was “reasonable” for taxpayers to foot more than $24 million in legal bills for former chief executive Franklin Raines and two other former Fannie executives accused of accounting misdeeds. Asked by Reuters if his own compensation was “reasonable,” Williams replied: “I leave it to them (FHFA) to determine what is appropriate compensation.” DeMarco has consistently said his agency aims to protect taxpayers by making sure the firms have executives with the technical expertise to oversee more than $5 trillion in assets traded in global financial markets. “We need, in the conservatorship, there to be talented, capable professionals that continue to operate the day-to-day operations of these companies,” DeMarco told the panel. A Freddie Mac spokesman declined comment. WATCH (Reporting by Corbett B. Daly; Editing by Gary Hill) Copyright 2010 Thomson Reuters. Click for Restrictions .

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JPMorgan CEO: Bank Won’t Be ‘Goaded Into Doing Something Dumb’

February 15, 2011

NEW YORK (By Clare Baldwin) – JPMorgan Chase & Co Chief Executive Jamie Dimon said his bank will not be “goaded into doing something dumb” with its capital, even as it prepares an aggressive expansion in consumer and private banking over the next five years. Speaking at the bank’s annual investor day, Dimon said the bank is prepared to withstand any phasing out of mortgage financiers Fannie Mae and Freddie Mac, despite being one of the nation’s largest home loan providers. This is in part because it expects 2011 to be a year of growth for the bank, primarily through existing businesses but especially in Latin America and Asia, he said. Dimon, a Democrat, also downplayed persistent speculation he might leave the second-largest U.S. bank by assets to go into the political arena. “I’m not going into politics and I’m not opening a restaurant. I love what I do. I want to be here. I want to stay,” he said. Dimon added: “There are people here who can take my spot.” BRANCH BANKING GROWTH JPMorgan plans to will add at least 1,000 branches in the next three years and could add up to 2,000 within five years, said retail financial services Chief Executive Charlie Scharf. The bank said it expects “aggressive growth” in California and Florida in particular. It ended September with 5,172 U.S. branches, trailing Wells Fargo & Co’s roughly 6,500 and the nearly 6,000 that Bank of America Corp. operates. Scharf said branch expansion will largely be in areas where Chase operates now. He also said there were few attractive opportunities for Chase to grow by buying another bank. “When you look at our existing footprint, we know exactly who we’d be interested in and not interested in, and we know the same for out-of-footprint and it’s not a long list of names,” he said. “A lot of the smaller transactions that you see for us don’t seem to make a whole lot of sense.” JPMorgan significantly boosted its branch network in 2008 when it bought the banking business of Washington Mutual Inc, the largest U.S. bank or thrift to fail. CONCERNS Despite beating analyst estimates for fourth-quarter earnings, JPMorgan faces questions about declining trading volumes, its long-time ties to imprisoned Ponzi schemer Bernard Madoff, its foreclosure practices and pending financial regulation, which could crimp profits. Scharf addressed part of the regulation issue, saying JPMorgan stood to lose $1.3 billion of revenue from new regulations on debit card processing fees. Shares of JPMorgan closed up 28 cents, or 0.6 percent, at $46.82, compared with a 0.3 percent decline in the KBW Bank Index . Two months after investor days, shares of a bank have historically risen an average of 15 percent, according to a Barclays Capital research note published last week. (Writing by Ben Berkowitz and Jonathan Stempel; Editing by Gunna Dickson and Steve Orlofsky) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Accused Ponzi Schemer Stanford Heads To Prison Hospital

February 15, 2011

Allen Stanford, accused of a $7 billion Ponzi scheme, is on the way to a prison hospital to receive treatment for addiction to anti-anxiety medication and for psychiatric evaluation. Stanford, 60, is “in transit” from a Houston jail to another facility, according to the Federal Bureau of Prisons website’s inmate locator. U.S. District Judge David Hittner ruled last month that Stanford was not competent to stand trial and ordered him transferred to a medical facility within the federal prison system for treatment. At a January 6 hearing to discuss the matter, the prison hospital in Butner, North Carolina was mentioned as a place where Stanford could find treatment. Bernie Madoff, who confessed to leading the biggest financial fraud in history, is serving a 150-year prison sentence at Butner. Stanford’s lawyer, Ali Fazel, declined to comment, citing a gag order issued by Judge Hittner. The former billionaire became addicted to a powerful anti-anxiety medicine in prison. His lawyers also say he suffers from traumatic brain injury received after another prisoner slammed his face into a telephone, breaking a number of bones. Stanford has pleaded not guilty to a 21-count criminal indictment that charges him with a certificates-of-deposit scam run out of his offshore bank in Antigua. (Reporting by Anna Driver; Editing by Steve Orlofsky) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Regulator Defends Millions In Fannie, Freddie Legal Fees

February 15, 2011

WASHINGTON — The federal regulator overseeing Fannie Mae and Freddie Mac stood by his approval of millions of taxpayer dollars for legal fees defending the housing giants and their executives after accounting scandals, telling angry House committee members on Tuesday that his agency was obligated to do so. Figures from the House Financial Services Committee’s oversight subcommittee show that since the government took over the two corporations in September 2008, taxpayers have provided $162 million defending them in civil lawsuits alleging fraud. That includes $24 million defending former Fannie Mae CEO Franklin Raines and two other Fannie executives, who left the company after accounting irregularities were revealed and were targets of civil suits. “I share the frustration” of lawmakers, said Edward J. DeMarco, head of the Federal Housing Finance Agency. But, he said, his agency was legally required to cover the payments. The hearing focused on a tiny portion of the $151 billion that Washington has used to prop up the two mortgage finance companies since taking them over as the housing market collapsed. Members of both parties are talking about scaling back or eliminating the two corporations, which have become symbols of squandered tax dollars at a time of mounting budget deficits. DeMarco did not rule out taxpayers eventually recovering the lawyers’ fees, should ongoing legal action result in a finding that the officials who were sued took actions that violated their duties to their company. But he said that at least for now, Fannie is required to cover the executives’ legal fees as long as their actions are considered reasonable. It is commonplace for companies to cover their executives’ legal expenses except in cases of wrongdoing. DeMarco said such coverage was necessary for Fannie to attract talented officials. Raines and the two others – former chief financial officer Timothy Howard and former controller Leanne Spencer – left Fannie and agreed to pay a $31.4 million settlement, but did not admit to wrongdoing. Fannie Mae paid a record $400 million settlement with federal regulators. “We’ve got a problem here,” Rep. Randy Neugebauer, R-Texas, chairman of the subcommittee, said of the federal expenditures. “We’re broke.” DeMarco and Fannie CEO Michael Williams, who also testified, said had Fannie withheld legal payments from the officials, they likely would have sued – which would have cost taxpayers additional legal expenses. “You guys don’t seem to get it,” said Massachusetts Rep. Michael Capuano, the subcommittee’s top Democrat, who told DeMarco his agency should have withheld the legal payments and risked a lawsuit. “The difference between this and everything else that’s ever happened is this is taxpayers’ money.” Ohio Attorney General Mike DeWine, leading the biggest of several lawsuits still pending against Fannie, said the company often brings 40 attorneys and paralegals to court sessions in a case that has dragged on for six years, with some lawyers earning over $600 per hour. Raines also uses numerous lawyers and 25 experts, he said. “What these defendants are doing is lawyering us to death” using taxpayers’ dollars, DeWine said.

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Phil Trupp: The Tipster Calls: Do You Take the Money and Run?

February 15, 2011

Your friend who works at ABC Company tells you that the company is about to be acquired for more than it’s worth by XYZ Company, and that the stock price of ABC is likely to double. You trust your friend’s tip because he’s an executive at ABC and he or she is doubling down on the buyout. Question: As a retail investor, what would you do based on your friend’s tip? Do you call your broker and buy up as much ABC as you can afford? Or do you betray your friend, contact the Securities and Exchange Commission and volunteer to be a wire-wearing whistle blower hoping to bag a big, fat reward? Like many Wall Street operators — especially if you’re a hedge fund manager — you have been given inside information, which translates into money and power. But now you’re faced with an ethical dilemma. You read the newspapers and financial blogs and you are well aware of two things: insider trading is illegal, and yet it is an often-used business model with a long and inglorious history. What exactly is insider trading? Basically, it is the practice of buying or selling stock or other assets by corporate officers, other insiders or ordinary investors on the basis of information that is not public and is supposed to remain confidential. Insiders can buy or sell stock based on information they report to the Securities and Exchange Commission, thus making the public aware of the good, bad or perhaps the ugly data on a company’s balance sheet. Reporting this information to the SEC presumably gives the average investor a break, a level playing field upon which to make informed decisions. Fair enough. But if you are a major player or a hedge fund magnet, giving ordinary investors a break isn’t your concern. To pull down those hefty hedge fund fees you need to offer an edge, and that edge often amounts to inside knowledge played close to the chest and out of public view. So if the “whales” of Wall Street constantly are in search of inside tips, despite the legal and ethical pitfalls, why shouldn’t you cash in on your friend’s possibly profitable tip? The February 13 edition of the Washington Post business section features a story by David S. Hilzenrath and Jea Lynn Yang headlined “The federal dragnet on Wall Street’s inside game” which explores the insider trading business model and the government’s all-out push to put a stop to it. Insider trading has grown in recent years, the reporters conclude. But is this a growing epidemic enhanced by digital technology and unique ways of tracing cons? Or has technology merely exposed a practice that has been at work for generations? My experience brings me down on the side of the latter. Wall Street is not the Land of the Fair Deal. Indeed, insider trading is a means of taking advantage of ordinary investors and making a killing in the dark. For example, those insiders privy to special, non-public knowledge can — and often do — sell investors stock that is teetering on the edge of the cliff. The insiders sell you on the upside while betting the farm on the inevitable collapse. For example, hedge fund billionaire John Paulson recently worked with Goldman Sachs to produce a derivative made up of bad mortgage loans. Paulson bet against this so-called Abacus package, knowing in advance that it was built to crash, while Goldman sold it to clients as a bullish move. Paulson made out big-time, as did Goldman, while unsuspecting investors took the fall. The Abacus scam made headlines in the wake of populist outrage directed at the 2008 market meltdown. It was a sexy example of greed and insiders feeding at the public trough. The Street shrugged it off. It was by all accounts business as usual. It now appears that the Obama Administration is determined to crack down on such insider deals. The Department of Justice (DOJ) is focusing on a wide circle of expert network firms which feed inside information to financial management companies, matching various company insiders to stock traders. Wall Street argues there’s nothing wrong with this practice, that it is part of due diligence. The trouble with this argument is that the public isn’t connected to the process and is often enough victimized by it. DOJ is now trolling for insiders willing to wear wires to help build cases against billionaire hedge funds and those who feed them insider information. If there is honor among thieves, DOJ is proving the opposite is true. If stock and bond traders can’t cash in using legal practices, they can always snitch and pick up whistle blower awards granted by regulators that are often equal to, and at times exceed, the bonuses given to top financial executives. So where do you come down on my initial question? Do you call DOJ or do you take your insider tip and run straight to your broker? Critics of insider trading say the “integrity” of the market depends on your answer. Yet these same critics are challenged to find — let alone protect — the integrity they are so eager to preserve.

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Bernanke: I’d Defend Financial Crisis Decision To My ‘Deathbed’

February 15, 2011

“I will maintain to my deathbed, that we made every effort to save Lehman, but we were just unable to do so because of a lack of legal authority,” Bernanke said, referring to the 2008 failure that intensified a crisis that Bernanke said was the worst in history, according to an 89-page transcript of the interview by the Financial Crisis Inquiry Commission.

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Lucy P. Marcus: Future Proofing the Boardroom: Grounding and Stargazing

February 14, 2011

The role of modern corporate boards is the juxtaposition of grounding and stargazing. Grounding is about making sure that the company fulfills all of its legal requirements, manages its risks properly, and does business in a responsible way. It is about all of the vital things we associate with board oversight tasks in corporate governance, compliance and corporate risk. But with that comes an equally and perhaps even more important role: grounding needs to be complemented by stargazing. This is where a board demonstrates its mettle in making sure that their organization is ready and able to expand its horizons, to strive to achieve more and stretch itself to become the robust and resilient business that is capable of responding effectively to the unknowns in its future. Stargazing should be a big component of the strategic work that a board does. Both grounding and stargazing require asking questions, looking beyond the obvious and the comfortable, and actively engaging with the organization. The emphasis these days seems to be on the tick-boxing of risk management. In speaking with fellow board members from around the world and across a wide variety of sectors, I’ve found that concern for risk exposure coupled with a desire not to appear too meddlesome and the time commitments required to do the job properly means that they sometimes leave too little time room for discussions of strategy. This is a real loss for organizations of all sizes, as part of the purpose of having independent directors with a broad range of skills is to draw on the knowledge and understanding around the table and the broader perspective they bring to help propel the organization to new heights. Grounding is a big part of the vital role of directors -0 ensuring that companies are managing their risk, fulfilling their requirements, “playing by the rules”, and being good corporate citizens. But even when fulfilling that role, strategy needs to play a part. In every audit committee and compensation committee, there must be room for considering what the company can do to push itself that much further to achieve more, and better, things for all its stakeholders. Most importantly, getting the balance right between the two functions of grounding and stargazing helps to ensure that the company is doing what it needs to future proof itself, and it requires board members who can think outside the box and who also know when to get back in the box. Note: This was originally published on the Marcus Ventures website and on CSRWire .

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Ecuador Court Orders Chevron To Pay $8 Billion

February 14, 2011

LAGO AGRIO, Ecuador (Reuters/Victor Gomez) – A court in Ecuador’s Amazon jungle has ordered Chevron to pay $8 billion in a closely-watched environmental lawsuit, but the U.S. oil company rejected the ruling as “illegitimate”. The highly controversial case has triggered related legal action in U.S. courts and international arbitration and is being monitored by the oil industry for precedents that could lead to other large claims. In a statement on Monday, Chevron did not give any figure from the ruling by the court in Lago Agrio. But Pablo Fajardo, a lawyer for the plaintiffs, said the court had ordered Chevron to pay more than $8 billion damages. The lawsuit had originally demanded $27 billion. The U.S. oil company said it would appeal the decision. “The Ecuadorean court’s judgment is illegitimate and unenforceable,” Chevron said in a statement. Residents of Ecuador’s Amazon region have said that faulty drilling practices by Texaco, which was bought by Chevron in 2001, caused damage to wide areas of jungle and harmed indigenous people in the 1970s and 1980s. (Additional reporting by Santiago Silva in Quito, Alexandra Valencia and Hugh Bronstein in Bogota, writing by Patrick Markey in Bogota) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Robert Gates: Pentagon Willing To Settle For Smaller Budget

February 14, 2011

WASHINGTON — The Pentagon can live with a smaller budget this year than the Obama administration originally requested, but the total – not counting war costs – cannot be less than $540 billion, Defense Secretary Robert Gates said Monday. That is about $9 billion less than the White House first requested. Gates said that Congress’ failure to pass a 2011 budget – five months into the fiscal year – is forcing the Pentagon to stick to last year’s lower spending level. Those limits, he said, could turn into a crisis if they are not fixed soon. Gates met with key lawmakers for lunch Monday, but he said it’s not clear yet what they will do on the 2011 budget. Laying out the 2012 defense budget, Gates said he is seeking enough money to maintain 98,000 U.S. troops in Afghanistan, despite the Obama administration’s insistence that it will begin to gradually withdraw forces this July. Gates said that while it’s a certainty that the troop level will come down, it made more sense to request stable funding because the administration doesn’t know yet how many troops they will need. Military leaders say the troop reduction will be based on the security situation in Afghanistan. The 2012 budget request includes about $118 billion for the wars in Iraq and Afghanistan. That amount is substantially less than the 2011 request of about $160 billion, largely due to the ongoing withdrawal of forces from Iraq. The 2012 budget also provides $12.8 billion to train and equip the Afghan security forces, which maintains the training at current levels. Officials have said they need more than the current goal of 305,600 army and police, but the budget provides no additional money to support any growth in the training program. There are currently about 270,000 Afghan security forces, and Afghan President Hamid Karzai is expected to announce his next target for growth in coming weeks. The U.S. and NATO have pressed other nations to provide training, but they are still short about 740 trainers. Gates spoke to reporters while presenting the administration’s defense spending plan for 2012, which begins October 1. He also warned that he will pursue all potential legal moves to eliminate funding for the alternate engine for the F-35 Joint Strike Fighter. Cutting the extra engine, he said, will save $3 billion over the life of the program.

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Japan Falls Behind China As World’s Number 2 Economy

February 14, 2011

TOKYO (By Tetsushi Kajimoto and Leika Kihara) – Japan’s economy shrank slightly in the final quarter of 2010 but analysts expect a recovery this year as stronger exports to China and other parts of fast-growing Asia offset persistently weak domestic demand. The data confirmed Japan lost its place to China last year as the world’s second-largest economy and highlighted Tokyo’s increasing reliance on its giant neighbor, which buys nearly a fifth of Japan’s exports. Gross domestic product (GDP) shrank 0.3 percent in the October-December period from the previous quarter, slightly less than a 0.5 percent fall expected by markets but still the first contraction in five quarters. That translated into an annualized contraction of 1.1 percent, with analysts largely blaming the weakness on a temporary hit to consumption after the September expiry of government incentives to buy low-emission cars. The data showed Japan’s economy was the weakest among major rich nations, compared with annualized growth of 3.2 percent in the United States in the same quarter. European data due out on Tuesday is expected to show slight growth in the 17-nation euro zone. “The data confirms that the economy entered a lull on a downturn in private consumption, but recent monthly economic indicators such as output and exports show it is unlikely that the lull will be prolonged,” said Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute. “The economy will continue to depend on external demand for growth, as domestic demand is likely to be capped by subdued income growth and the anticipated negative impact from the expiry of subsidies for energy-efficient electrical appliances.” CHINA THE NEW NO.2 The latest GDP figures confirmed analysts’ estimates that China pulled ahead of Japan in 2010 as the world’s second-biggest economy behind the United States on a seasonally unadjusted, nominal dollar basis, at $5.8786 trillion against $5.4742 trillion. Economics Minister Kaoru Yosano said Japan needed to make the most of China’s growth to boost its own fortunes, as it increasingly relies on demand from its Asian neighbor. “The fact that China’s economy is booming is welcome news for Japan as a neighboring country,” Yosano told reporters after the release of the data. “We want to deepen the amicable economic relationship between Japan and China.” Japan’s shipments to mainland China accounted for 19.4 percent of its overall exports last year, making it the No.1 destination for Japanese goods, followed by the United States at about 15.4 percent. The signs of an export-led recovery prompted the government to upgrade its economic assessment last month and dampened expectations of any imminent monetary easing by the Bank of Japan. BOJ policymakers meeting this Monday and Tuesday may see no immediate need to ease policy further through an increase of asset purchases and may instead focus on assessing the strength of the recovery. While recent data showed exports and industrial output rose more than expected in December, a pick-up in the corporate sector is seen unlikely to spill over to personal consumption, which makes up about 60 percent of GDP. Capital expenditure rose 0.9 percent from the previous quarter, slower than the 1.5 percent pace of gains in July-September. Analysts said the increase in capital spending may not lead to stronger consumer spending as companies remain reluctant to boost wages due to fierce global competition, and as workers put a higher priority on job security than wage hikes. The roll-back of government incentives for purchases of energy-efficient household electronics in December will also weigh on private consumption, which fell 0.7 percent from the previous quarter after a 0.9 percent increase in July-September. External demand, or net exports, shaved 0.1 percentage point off GDP, with the yen’s spike to a 15-year high against the dollar during the period hurting exports. BOJ STANDS PAT As the economy remains mired in stubborn deflation, the BOJ is in no position to roll back its comprehensive easing anytime soon. That is in stark contrast with policymakers in other parts of Asia, Europe and elsewhere where the focus is shifting from supporting sustainable recoveries to controlling inflation. China raised interest rates last week for the second time in just over six weeks and further policy tightening is expected from Beijing in the coming months, raising the prospect of a slowdown in Chinese demand for everything from imported electronics to construction equipment and cars. Nissan Motor Co, Japan’s No.2 automaker, raised its annual profit and sales forecasts last week as its big drive into emerging markets such as China pays off. But with Japan’s domestic demand expected to remain weak, a heavy reliance on exports to fuel recovery is expected to pose a risk if external demand stumbles. “Risks from overseas economies and currency moves need to be closely watched,” Economics Minister Yosano said, noting that financial markets were also monitoring the government’s ability to enact legislation in a divided parliament. Highlighting concerns about prolonged political paralysis, a Kyodo news agency survey showed support for Prime Minister Naoto Kan’s government had fallen below 20 percent, a level where some premiers have been nudged out of power in the past. (Editing by Edmund Klamann and Kim Coghill.) Copyright 2010 Thomson Reuters. Click for Restrictions .

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GE Makes Big Move Into Oil Business

February 14, 2011

(By Megan Davies): General Electric Co (GE.N) is to buy a unit of British energy services firm John Wood Group (WG.L) for about $2.8 billion, the latest move by the largest U.S. conglomerate to boost its presence in oil services. GE’s acquisition John Wood’s well support division raised hopes of more deals in the oilfield services sector, where GE has recently been an active buyer of assets. GE, which is buying the unit through its oil and gas business, in December agreed to buy Britain’s oil drilling pipemaker Wellstream Holdings Plc for $1.3 billion. That followed a 2008 deal to buy pressure control equipment company Hydril for $1.1 billion and a 2007 deal to buy privately held oil and gas field equipment maker Vetco Gray. The U.S. company has said it could spend up to $30 billion on takeovers in the coming years as CEO Jeff Immelt renews GE’s focus on heavy manufacturing after reaching a deal to sell its media unit and scaling back the GE Capital finance arm. John Wood said it intends to return cash of no less than $1.7 billion to shareholders, helping to boost the company’s shares by 14.6 percent to 657 pence at 0921 GMT on Monday, their highest ever level. “We definitely think they John Wood got an attractive price. It was considerably more than what we were expecting,” said Royal Bank of Canada analyst Todd Scholl. “I would expect that, based on this valuation all of the oilfield services stocks would trade higher. The space certainly is very hot from an M&A perspective. We wouldn’t be surprised to see more deals.” Shares in oil services firm Petrofac (PFC.L) traded up 3.1 percent while London-listed pump and valve-maker Weir Group (WEIR.L), which has an oil field services division, rose 5 percent, with the latter helped by speculation that German conglomerate Siemens (SIEGn.DE) could be interested in it. GE said the John Wood unit acquisition would allow it to tap fast growing demand for enhanced oil recovery from mature oil fields. “Five years ago, drilling and production in GE did not exist,” John Krenicki, CEO of GE Energy said in a telephone interview. “Over the last five years we’ve built it up to be an industry leader.” He said that GE expects the deal to be ‘slightly accretive’ in 2011 assuming it closes by the end of the second quarter. Krenicki doesn’t anticipate more deals in the medium term in the specific area of drilling and production, but said there could be deals elsewhere. “Specific to this space — drilling and production — we think we have got what we needed for the medium term,” Krenicki said. “But the rest of the energy portfolio has capability to do more and we’ll look for things that make sense.” UNLOCKING PUZZLE Wood Group’s Well Support division is comprised of three business platforms — electric submersible pumps (ESPs), pressure control and logging services. GE said that deployment of electric submersible pumps are one of the most effective methods of enhancing production. “If you look at world oil production today, about two-thirds comes from 300 giant wells that are depleting about six percent a year,” said Krenicki. “Of those giant wells, only about one third of the oil has been extracted — for lots of reasons – cost, technology, difficulty. And world oil demand is to grow about 20 million barrels per day over the next decade.” “We know that these (electric submersible pumps) are the key to unlock this puzzle,” Krenicki said. John Wood said earlier in February it was looking into the possible sale of the well support unit. Sources previously told Reuters the company had put the division on the block and had hired Credit Suisse (CSGN.VX) to advise on the sale. Chief Executive Allister Langlands told reporters on Monday that John Wood would use some of the funds to pay for its purchase of oil production services company PSN, which it bought for $955 million in December, and added that the company will also look to make more acquisitions. “We’d like to expand our engineering business in Brazil, we’d like to grow our brownfield support business in Canada so those will be two areas that we continue to look at,” he said, adding that no deal was imminent. GE said on Sunday that Wood Group’s board intends to unanimously recommend the deal to its shareholders. It is expected to close later in 2011, GE said. (Additional reporting by Sarah Young; Editing by Dhara Ranasinghe and Erica Billingham) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Judge Read Khodorkovsky Verdict Against His Will, Assistant Says

February 14, 2011

MOSCOW — The assistant to the judge who convicted oil tycoon Mikhail Khodorkovsky said Monday that the judge did not write the verdict and read it against his will in the Moscow courtroom. Judge Viktor Danilkin found Khodorkovsky guilty in December of stealing oil from his own oil company and extended his prison term through 2017. The judge’s assistant, Natalya Vasilyeva, who is also the spokeswoman for the court, said the verdict was imposed upon the judge when it became clear that his own ruling would not please the top Russian officials behind the politically driven case. “Danilkin began to write the verdict. I suspect that what was in that verdict did not suit his higher ups, and therefore he received another verdict, which he had to read,” Vasilyeva said in an interview broadcast on the cable television channel Dozhd and printed in the online news portal Gazeta.ru. Danilkin issued a brief statement Monday saying he was “convinced that the assertion by Natalya Vasilyeva was nothing more than slander.” Prime Minister Vladimir Putin has been seen as the driving force behind the unrelenting legal attack on Khodorkovsky, who has been imprisoned since 2003. Shortly before the verdict was announced, Putin called Khodorkovsky a thief and said he should stay in prison. Vasilyeva’s claim appeared to be a public acknowledgment of what many observers of the trial had assumed. During the 20-month trial, Danilkin had given the impression that he was seriously considering the merits of the case and often joined the defense lawyers and audience in laughing at the prosecutors’ gaffes. He treated Khodorkovsky with respect and allowed current and former government officials to testify in his defense. But when he began reading the verdict – a summary of the trial that took him four days to get through – it was immediately clear that whatever hopes there had been for leniency were gone. He rarely raised his eyes while speed reading through the hundreds of pages. Khodorkovsky’s mother put it bluntly, saying: “They must have tortured him to get him to say what he did.” The defense lawyers said much of the verdict was copied from the indictment and the prosecutors’ final arguments.

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Candy Charity Scandal? Ex-Hershey Official Claims Corruption

February 11, 2011

HARRISBURG, Pa. — A former official involved with the multibillion-dollar charitable trust that controls the Hershey candy company is claiming in a court filing that board members used the trust’s considerable assets to pad their bank accounts and treat themselves to luxury hotel stays, limousine rides and free golf. That official, Robert Reese, was fired Thursday by the Hershey Trust Co., the bank that manages the charity’s money. Reese, a former top executive at the Hershey Co. candy company for 25 years, is the grandson of the man who started Reese’s candy, which Hershey’s bought in the 1960s. Most recently, Reese had served as a board member and the trust’s president. The trust’s letter of termination accused Reese of recommending and approving the inclusion of the IRAs in the company’s common fund, despite being advised that the practice violated securities laws – an allegation that Reese appeared to blame on the board. Reese’s allegations come four months after the state attorney general’s office said it was investigating transactions by the Hershey Trust, although the office has not specified which transactions. In a brief interview Thursday, the 60-year-old Reese declined to say why he decided to go public with the allegations now and steered questions back to the school for underprivileged children that the trust benefits. “What’s important here is not me,” Reese said. “It is the Milton Hershey School and School Trust.” Reese detailed his accusations of misuse of power in a document he filed Tuesday in Dauphin County Orphans Court. In a separate filing Thursday, he named 12 current and former Hershey Trust board members, including chairman LeRoy S. Zimmerman, a former attorney general of Pennsylvania and a longtime friend of newly elected Gov. Tom Corbett, who was the attorney general last fall when the office revealed its investigation. Zimmerman did not immediately return a message left at his Harrisburg law office Thursday evening. A trust spokeswoman released a statement saying the board had received word of Reese’s first filing Wednesday. It came after Reese learned he had not been re-elected to the board for another term, the statement said. “The Hershey Trust Co. board has received this petition and takes its fiduciary duties very seriously,” it said. “We will review these matters and respond appropriately.” The Hershey Trust oversees more than $7 billion in assets, including Hershey Entertainment & Resorts Co., operator of Hersheypark and the Hotel Hershey, and the controlling stake in the candy company begun more than a century ago by Milton S. Hershey. Reese said the Hershey Trust board members voted themselves exorbitant salary increases in recent years, boosting them from $35,000 in 2002 to as much as $130,000 last year. The trust bought a financially troubled golf course, partly owned by then-Hershey CEO and trustee Richard H. Lenny, and directed millions of dollars in upgrades to the Hotel Hershey, even though the $70 million cost was opposed by the hotel’s financial management, Reese said. Board members went on to golf for free at the course and stay for free at the hotel, while occasionally traveling by limousine and in first-class airline seating, he said. The trust has defended the golf course’s purchase as a valuable buffer, but Reese said the trust performed no financial analysis to justify the $12 million price, triple the course’s appraised value. A trustee, who was unnamed in the filing, hosted a political party fundraiser at the former home of Milton Hershey, High Point, which is owned by the trust, and a trust subsidiary catered the event without the political party committee paying any cost, Reese said. The trust or one of its subsidiaries also paid a government-relations consulting company partly owned by a son-in-law of a trustee hundreds of thousands of dollars without substantial evidence that the charity got its money’s worth, Reese said. In 2006, the trust allowed individual retirement accounts into its common funds, which financially and personally benefited a trustee, although the trustee had been advised that it was against federal securities regulations. Legal costs exceeded $11 million in money indirectly owned by the charity, Reese said. Reese, who was general counsel of the candy company when he retired from it in 2002, joined the trust as a director in 2008 to advise the board on a potential merger with Cadbury PLC. The board elected him president in 2009. ___ Information from: The Philadelphia Inquirer, http://www.philly.com

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Financial Crisis Panel Withholding 200-300 Interviews

February 11, 2011

The Financial Crisis Inquiry Commission, created by Congress to investigate and report on the causes of the market meltdown late last decade, won’t publicly release its full 2009 interview with Federal Reserve Chairman Ben S. Bernanke, a commission spokesman said. The FCIC is withholding records when there is “legal or proprietary information in those interviews that meant they could not be made public,” or no audio, transcript or summary exists, Tucker Warren, the FCIC’s spokesman, said after the panel yesterday released more than 300 witness interviews. He declined to elaborate on Bernanke.

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Consumer Sentiment Hits 8-Month High

February 11, 2011

NEW YORK (By Leah Schnurr) – U.S. consumer sentiment rose to an eight-month high in early February, boosted by recent tax cuts and optimism about the labor market, but consumers were less sanguine about the economy in the longer term. A separate report on Friday also suggested stronger consumer activity as the U.S. trade deficit widened slightly more than forecast in December to its highest level in four months. Consumers expect to see improvement in the economy and job market this year, but the recovery was still anticipated to fall short and worries about inflation and its effect on wages weighed, according to the latest consumer surveys from Thomson Reuters and the University of Michigan. Consumer confidence was also boosted by the recent package of tax cuts and improved personal finances. The preliminary February reading for the overall index on consumer sentiment came in at 75.1, up from 74.2 in January. It was the highest level since June 2010 and was roughly in-line with the median forecast of 75 expected by economists polled by Reuters. “Further proof that the U.S. economy is rebounding at a stronger pace than expected. It’s been reflected in virtually all recent data outside of inflation data,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York. The survey’s barometer of current economic conditions jumped to 86.8, the highest level since January 2008, while the gauge of consumer expectations slipped to 67.6 from January’s 69.3. “While consumers are becoming more optimistic about current conditions, they remain wary about stretching that optimism beyond the immediate future given continued headwinds in the labor market and overseas,” Omair Sharif, an economist at RBS, wrote in a note. Concerns over inflation have been creeping up lately as commodity prices rise and on jitters that strength in the economy will force the Federal Reserve to hike interest rates sooner than expected. Nonetheless, the Fed is largely viewed as maintaining its accommodative policy for some time. The survey showed the one-year inflation expectation was unchanged at 3.4 percent, the highest rate since the fall of 2008. The five-to-10-year inflation outlook also was unchanged at 2.9 percent. U.S. Treasuries touched session highs following the data as some worried about the long-term outlook, though markets were more focused on news Egypt’s president had bowed to relentless pressure from a popular uprising and stepped down. The December trade deficit grew nearly 6 percent to $40.6 billion as the average price for imported oil leapt to its highest level since October 2008. Overall imports of goods and services were also their highest since October 2008, in a sign consumers and businesses are spending more as the economy picks up steam. A separate survey of forecasters showed the U.S. economy and jobs market are expected to grow more strongly in the first quarter than previously expected. The Federal Reserve Bank of Philadelphia’s survey of 43 professional forecasters sees the economy growing at an annual rate of 3.6 percent in the current quarter, up from the estimate of 2.4 percent three months ago. Though employment remains one of the biggest challenges for the economy, there have been signs the job market recovery is continuing, if not gaining speed. In another positive sign, a measure of future U.S. economic growth rose to a 39-week high in the latest week, according to the Economic Cycle Research Institute, an independent forecasting group. (Additional reporting by Caroline Valetkevitch and Steve Johnson in New York and Doug Palmer in Washington; Editing by Andrea Ricci) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Switzerland Freezes Mubarak’s Assets

February 11, 2011

ZURICH, Feb 11 (Reuters) – Switzerland has frozen assets that may belong to Hosni Mubarak, who stepped down as president of Egypt on Friday after 30 years of rule, the foreign ministry said. “I can confirm that Switzerland has frozen possible assets of the former Egyptian president with immediate effect,” spokesman Lars Knuchel said soon after Mubarak bowed to 18 days of mass protests. “As a result of this measure any assets are frozen for three years.” He did not say how much money was involved or where it was. Assets belonging to Mubarak’s associates would also be targeted so as to limit the chance of state funds being plundered, the ministry said. Mubarak and his associates would be prevented from selling or otherwise disposing of property, notably real estate. In recent years, Switzerland has worked hard to improve its image as a haven for ill-gotten assets. It has also frozen assets belonging to Tunisia’s former president Zine al-Abidine Ben Ali, ousted by popular protests last month, and Ivory Coast’s Laurent Gbagbo, who has refused to step down after an election which the outside world says he lost. (Editing by Mark Trevelyan) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Trade Gap Widens In Dec, Swells 33 Pct In 2010

February 11, 2011

WASHINGTON (Reuters) – The U.S. trade deficit widened in December to its highest level in four months, the U.S. government said on Friday in a report that also showed the annual trade gap expanded nearly 33 percent in 2010 as imports from China hit record levels. The December trade deficit grew nearly 6 percent to $40.6 billion, just slightly higher than a consensus estimate of Wall Street analysts as the average price for imported oil leapt to its highest level since October 2008. Overall imports of goods and services were also their highest since October 2008, in a sign that consumers and businesses are spending more as the U.S. economy picks up steam. Exports of goods and services were the highest since July 2008, the month that they hit their peak before beginning a precipitous drop caused by the global financial crisis. U.S. goods exports to China grew to a record $10.1 billion in December and also were a record $91.9 billion for the year. But that strong finish was swamped by record U.S. imports from China of $364.9 billion for the entire year, which pushed the closely watched trade gap with that country to a record $273.1 billion. Rising oil prices also helped widen the U.S. trade deficit in 2010. The average price for imported oil jumped to $74.66 per barrel, from $56.93 in 2009. Imports of consumer goods and foods, feeds and beverages also set records in 2010. Overall, U.S. imports of goods and services grew 19.7 percent in 2010 to $2.33 trillion dollars. U.S. exports grew 16.6 percent to $1.83 trillion, a pace that if maintained would allow the United States to reach President Barack Obama’s goal of doubling exports by 2013. U.S. exports of services, industrial supplies, consumer goods and petroleum all set records. The strong services performance pushed the U.S. trade surplus for services to a record $148.7 billion in 2010. (Reporting by Doug Palmer, Editing by Andrea Ricci) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Ron Ashkenas: Why Integrity Is Never Easy

February 10, 2011

Browse through the mission, vision, or value statements that corporations post on their websites, and you’ll notice that almost every company includes a statement about integrity . And if you Google the following examples, you’ll find that many companies use these stock phrases: “We combine integrity with excellence…” “We act with integrity in all we do.” “We hold honesty and integrity as our guiding principles.” “We are proud of the integrity, sincerity and transparency our employees demonstrate every day.” Morally upright statements, right? But have you ever wondered why they are needed in the first place? After all, integrity should be the basic building block for doing business: Nobody wants to get involved with a company that lies, cheats, and tricks its customers ; nor do people want to work for a company (or a manager) that is dishonest and disingenuous with employees. In other words, integrity should be a given , without the need to trumpet its existence. As one senior executive said to me, “Integrity is a threshold characteristic for our people — if they don’t have it, they aren’t here.” Yet it’s not that simple, for two reasons: First, is the innate human ability to rationalize behavior. For example, if you ask high school students whether or not it is right to cheat, most will say that cheating is wrong. Yet research suggests that as many as 95% of such students admit to having engaged in some form of cheating. Most of the time, this involves a specific incident where the students had to make a choice. In hindsight, the students justify the choice as “not really cheating,” “no big deal,” or something that “everyone else does.” In other words, they rationalize their situational behavior, and this way they can still consider themselves to be honest. The reality is that all of us (and not just students) face integrity-based choices on a regular basis. Do we tell customers about all of the warts on our products? Do we reveal everything to a prospective buyer during due diligence? Is it acceptable to hide certain aspects of our background in a résumé? What’s considered a legitimate expense on a business trip? How much of billable time is really devoted to a client? How honest should I be when giving feedback to my boss or subordinate? None of these situations have clear answers — and no corporate policy can cover every contingency. As a result, no matter what choice we make, we can convince ourselves that it was made with integrity. And that leads to the second reason why integrity is so difficult: Everyone defines integrity differently. Falsifying information to one person might be considered an acceptable business practice to another. This is further exacerbated by differences in culture — for example in some business cultures people are expected to openly do favors for each other, while in other cultures those favors would be considered bribes. The power of rationalization and the difficulties of definition reveal integrity as a subject that is neither easy nor simple. That’s why solely relying on compliance functions, policies, rules, and audits — the integrity police — is usually inadequate. These mechanisms guard against gross and clearly illegal violations of integrity standards, but they do not deal with the integrity choices that we face every day. These choices require personal judgment. In some ways the value statements about integrity are meant to remind us that integrity is not just a corporate responsibility, but a personal one as well. If you are a manager, you can apply these values by setting aside time with your team to share integrity dilemmas and choices and discuss the thinking behind individuals’ decisions. Make sure these meetings take place in a “safe” environment, where people can openly share their thoughts. If you hold these discussions regularly, you’ll gradually get beyond the rationalizations and develop more common definitions of what is acceptable and what is not — which is the essence of an integrity culture. What’s your experience with making integrity more than just a word in your company’s mission statement? Cross-posted from Harvard Business Review

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Ron Ashkenas: Why Integrity Is Never Easy

February 10, 2011

Browse through the mission, vision, or value statements that corporations post on their websites, and you’ll notice that almost every company includes a statement about integrity . And if you Google the following examples, you’ll find that many companies use these stock phrases: “We combine integrity with excellence…” “We act with integrity in all we do.” “We hold honesty and integrity as our guiding principles.” “We are proud of the integrity, sincerity and transparency our employees demonstrate every day.” Morally upright statements, right? But have you ever wondered why they are needed in the first place? After all, integrity should be the basic building block for doing business: Nobody wants to get involved with a company that lies, cheats, and tricks its customers ; nor do people want to work for a company (or a manager) that is dishonest and disingenuous with employees. In other words, integrity should be a given , without the need to trumpet its existence. As one senior executive said to me, “Integrity is a threshold characteristic for our people — if they don’t have it, they aren’t here.” Yet it’s not that simple, for two reasons: First, is the innate human ability to rationalize behavior. For example, if you ask high school students whether or not it is right to cheat, most will say that cheating is wrong. Yet research suggests that as many as 95% of such students admit to having engaged in some form of cheating. Most of the time, this involves a specific incident where the students had to make a choice. In hindsight, the students justify the choice as “not really cheating,” “no big deal,” or something that “everyone else does.” In other words, they rationalize their situational behavior, and this way they can still consider themselves to be honest. The reality is that all of us (and not just students) face integrity-based choices on a regular basis. Do we tell customers about all of the warts on our products? Do we reveal everything to a prospective buyer during due diligence? Is it acceptable to hide certain aspects of our background in a résumé? What’s considered a legitimate expense on a business trip? How much of billable time is really devoted to a client? How honest should I be when giving feedback to my boss or subordinate? None of these situations have clear answers — and no corporate policy can cover every contingency. As a result, no matter what choice we make, we can convince ourselves that it was made with integrity. And that leads to the second reason why integrity is so difficult: Everyone defines integrity differently. Falsifying information to one person might be considered an acceptable business practice to another. This is further exacerbated by differences in culture — for example in some business cultures people are expected to openly do favors for each other, while in other cultures those favors would be considered bribes. The power of rationalization and the difficulties of definition reveal integrity as a subject that is neither easy nor simple. That’s why solely relying on compliance functions, policies, rules, and audits — the integrity police — is usually inadequate. These mechanisms guard against gross and clearly illegal violations of integrity standards, but they do not deal with the integrity choices that we face every day. These choices require personal judgment. In some ways the value statements about integrity are meant to remind us that integrity is not just a corporate responsibility, but a personal one as well. If you are a manager, you can apply these values by setting aside time with your team to share integrity dilemmas and choices and discuss the thinking behind individuals’ decisions. Make sure these meetings take place in a “safe” environment, where people can openly share their thoughts. If you hold these discussions regularly, you’ll gradually get beyond the rationalizations and develop more common definitions of what is acceptable and what is not — which is the essence of an integrity culture. What’s your experience with making integrity more than just a word in your company’s mission statement? Cross-posted from Harvard Business Review

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CPAC Chief Tied To Fannie Mae, Foreclosure Mill

February 10, 2011

WASHINGTON — The new head of the American Conservative Union, the group which hosts the annual Conservative Political Action Conference , has ties to the ongoing controversy surrounding fraud in the foreclosure process. New ACU leader Al Cardenas is a partner in the law firm of Tew Cardenas LLP, which is currently defending “foreclosure king” David Stern, whose own law office is at the center of a major Florida investigation into foreclosure fraud. Mortgage companies hire the Law Offices of David J. Stern, frequently referred to as a “foreclosure mill,” to handle their foreclosure paperwork for them. Stern’s employees have testified that the office was a hotbed for illegally robo-signed foreclosure documents, with some employees churning out 1,000 improperly signed documents every day. Although Stern has long been reviled by Florida anti-foreclosure attorneys, his business practices were brought to national attention by a major Mother Jones profile last August . The Florida Attorney General’s office released a presentation on foreclosure fraud late last year, including testimony from a Stern employee. Stern’s attorney is Jeffrey Tew, another partner in the Tew Cardenas law firm. Both Cardenas and Stern have longstanding connections with mortgage giant Fannie Mae. Cardenas served on Fannie’s board of directors from 1985 to 1990, then worked as a lobbyist for the firm well into the presidency of George W. Bush. Fannie Mae named Stern to its exclusive attorney network in 1998 — a lucrative position that helped Stern land an enormous amount of foreclosure processing business. Fannie named Stern “Attorney of the Year” in both 1998 and 1999. Calls to the ACU to determine what work, if any, Cardenas did for Stern, were not returned.

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