a-request-for

House Democrats Will Ban Earmarks for Companies in Election-Year Crackdown

by on March 10, 2010

By Brian Faler March 10 (Bloomberg) — House Democrats announced they are banning so-called earmarks for defense contractors, energy firms and other private companies in an election-year attempt to crack down on the much-criticized funding process. Lawmakers will also direct federal auditors to inspect five percent of projects awarded to nonprofit groups to guard against companies masquerading as such entities, said House Appropriations Committee Chairman David Obey and Defense Spending Subcommittee Chairman Norm Dicks in a joint statement. The two lawmakers estimated that companies received about 1,000 earmarks from Congress last year. Critics have singled out for attack the funding of such projects for companies, saying they amount to no-bid contracts to firms that often return the favor with contributions to lawmakers’ re-election campaigns. President Barack Obama echoed such criticism last year, calling such earmarks “the single most corrupting element in this practice.” Steve Ellis , vice president of Taxpayers for Common Sense , a Washington group that tracks projects, called today’s House announcement “a significant positive step forward” because “earmarks to for-profit entities are certainly ground zero for pay-to-play.” Deficit Issue The plan may help Democrats deal with concern among voters about rising federal spending and deficits , as well as a series of ethics-related inquiries involving Democratic lawmakers. Most earmarks benefit public or nonprofit organizations such as hospitals, police departments, universities and arts centers. Projects for profit-making entities tend to go to either defense contractors or energy companies. Obama’s proposals to crack down on earmarks ran into opposition on Capitol Hill, especially in the Senate, where lawmakers balked at more modest restrictions than announced by Obey, a Wisconsin Democrat, and Dicks, a Washington state Democrat. The announcement was praised by Representative Jeff Flake , an Arizona Republican who is a persistent critic of the earmarking practice. He called it a “good first step,” and said he hoped “Republicans take these restrictions a step further and impose a moratorium on all earmarks this year.” House Republicans are considering such a moratorium, said Majority Leader John Boehner , an Ohio Republican. A spokesman for Senate Appropriations Committee Chairman Daniel Inouye , a Hawaii Democrat, didn’t immediately respond to a request for comment. To contact the reporter on this story: Brian Faler  in Washington at   or bfaler@bloomberg.net .

Originally posted here:
House Democrats Will Ban Earmarks for Companies in Election-Year Crackdown

Tagged as: , , , , , , , , , , , ,

{ 0 comments }

Magic Johnson Is in Talks to Buy Ebony Magazine’s Owner Johnson Publishing

by on February 12, 2010

By Brett Pulley Feb. 12 (Bloomberg) — Earvin Magic Johnson , the Hall of Fame basketball player, is in talks to purchase Johnson Publishing Co., the publisher of Ebony and Jet magazines. “There have been discussions,” Eric Holoman, president of Los Angeles-based Magic Johnson Enterprises, said in an interview. “There’s no definitive agreement.” He declined to comment further. The 58-year-old publishing company’s Chicago headquarters would be included in the sale, a person with knowledge of the situation said. A purchase may require satisfying liens that have been placed on the building by one of the company’s creditors, said the person, who declined to be identified because the talks are private. Linda Johnson Rice , chairman and chief executive officer of Johnson Publishing, declined a request for an interview, said Wendy Parks, a spokeswoman for Johnson Publishing. Johnson Rice “has never talked to Magic Johnson with respect to his interest in buying” the company, Parks said. The former Los Angeles Lakers star would make the company a part of his Magic Johnson Enterprises, which includes partnerships with Starbucks Corp. , 24 Hour Fitness Worldwide Inc. and T.G.I. Friday’s Inc. , the person said. Advertising revenue at Ebony magazine declined 38 percent to $35.5 million last year on a 39 percent drop in ad pages, according to the Publishers Information Bureau. Johnson Publications, founded in 1942 by Linda Johnson Rice’s father, John H. Johnson, targets African-American readers and owns archives of photos documenting more than a half century of black life and culture. Magic Johnson Enterprises was founded by the former National Basketball Association player in 1987. To contact the reporter on this story: Brett Pulley in New York at bpulley@bloomberg.net

See the article here:
Magic Johnson Is in Talks to Buy Ebony Magazine’s Owner Johnson Publishing

Tagged as: , , , , , , , , ,

{ 0 comments }

Warren Buffett’s Berkshire Hathaway Loses Its AAA Rating

February 4, 2010

OMAHA, Neb. — Standard & Poor’s has followed through on its warning and lowered Berkshire Hathaway Inc.’s long-term credit rating Thursday as the Omaha firm readies to acquire Burlington Northern Santa Fe Corp. The ratings agency lowered Berkshire’s rating one notch to “AA+” from “AAA,” its highest designation. S&P also removed the ratings from CreditWatch, where they were placed with negative implications in November, and called the outlook stable. Berkshire Hathaway officials didn’t immediately respond to a request for comment. S&P said it expects a significant part of the cash portion to come from Berkshire Hathaway’s core insurance operations, and the $26.3 billion railroad purchase will reduce the liquidity of the company’s insurance operations. Shareholders of BNSF are scheduled to vote on the proposed acquisition Feb. 11. The deal is expected to close by Feb. 15. “The rating actions are based on our view that Berkshire’s overall capital adequacy, as well as that of its insurance operations, has weakened to levels no longer consistent with a ‘AAA’ rating and is not expected to return to extremely strong levels in the near term,” Standard & Poor’s credit analyst John Iten said in a statement. “Furthermore, we expect that the consolidated liquidity position of Berkshire will be reduced from extremely strong historical levels as a result of the acquisition.” In the ratings agency’s view, investment risk remains very high, “compounding the need for extremely strong capital and liquidity given potential investment volatility.” With the downgrade, just four U.S. industrial companies maintain S&P’s “AAA” rating: Microsoft Corp., Exxon Mobil Corp., Johnson & Johnson and Automatic Data Processing Inc. More than a dozen U.S. financial institutions, including the Knights of Columbus and New York Life Insurance Co., hold the highest designation. The acquisition of Burlington Northern Santa Fe, the nation’s second-largest railroad, would be the biggest ever for Warren Buffett’s Berkshire Hathaway investment company. Berkshire Hathaway, based in Omaha, Neb., owns a 22 percent stake in Burlington Northern and would buy up the rest under the deal. Berkshire shareholders last month approved splitting the company’s Class B shares 50-for-1 as part of the deal. The split will enable Berkshire to offer even small Burlington Northern shareholders Berkshire stock as part of the acquisition of the nation’s second-largest railroad. The stock split also made Berkshire’s Class B stock much more affordable, at roughly $69 per share, which is expected to increase Berkshire’s liquidity. The Class A shares, which remain the most expensive U.S. stock at more than $100,000, won’t be split. The Class A shares hold more voting rights than the Class B shares. Berkshire Hathaway also filed documents Thursday indicating that it plans to sell $8 billion of debt to finance the acquisition using a combination of fixed-rate and floating-rate notes of various maturities. The Class B shares fell $1.75, or 2.4 percent, to $72.61 in afternoon trading, losing 16 cents more in after-hours trading.

Read the full article →

UAW Wages Campaign Against Ford to Protest Raises for White-Collar Workers

January 22, 2010

By Keith Naughton (Corrects to 12 months in last paragraph.) Jan. 22 (Bloomberg) — The United Auto Workers, which gave up bonuses and cost-of-living increases at Ford Motor Co. last year, is waging a campaign against the carmaker to protest reinstatement of raises and benefits for salaried employees. UAW Vice President Bob King , nominated as the union’s next president, is asking all 41,000 of Ford’s hourly U.S. workers to file a “policy grievance” against the company for restoring raises, 401(k) matches and tuition assistance to white-collar employees, said Mark Caruso, president of a union local in Saline, Michigan. King has said he protested directly to Ford. “We’re disappointed that Ford Motor Co. would give back these take-aways to the salaried folks and not to us,” said Nick Kottalis, president of the Dearborn, Michigan, truck unit of UAW Local 600. “They’re violating the policy that called for equity of sacrifice in the modifications we passed in 2009.” Ford’s hourly workers agreed in March to give up annual bonuses, cost-of-living increases and some unemployment benefits that the company said would save $500 million in annual labor costs. Ford, the only major U.S. automaker to avoid bankruptcy, posted a surprise $997 million third-quarter profit last year after losing a record $14.7 billion in 2008. “This sends a signal that people are angry; it’s a warning,” said Harley Shaiken , labor professor at the University of California at Berkeley. “Ford understands the importance of good relations with the union. I suspect the company will be in the position to redress something, whether restoring something to hourly workers or rescinding something to salaried workers.” Added Concessions Rejected The Dearborn-based company told employees it wouldn’t grant raises last year, and said it suspended tuition assistance in 2008 and 401(k) matches last year. In November, 70 percent of Ford’s production workers and 74 percent of skilled trades rejected additional concessions that included a six-year ban on some strikes and a freeze on entry- level wages until 2015. Reached by telephone, Marcey Evans, a Ford spokeswoman, declined to comment. Christine Moroski, a UAW spokeswoman, didn’t immediately respond to a request for comment. Mark Fields , Ford’s president of the Americas, told the company’s 17,000 U.S. salaried workers in a Dec. 10 memo that they would be eligible for merit raises in 2010 and the company would resume matching 401(k) retirement savings for as much as 5 percent of base pay. “The members are tired of being the only one taking concessions,” Caruso said. “We’d like some equality of sacrifice.” Ford shares fell 66 cents, or 5.9 percent, to $10.52 at 4 p.m. in New York Stock Exchange composite trading. The stock has climbed fourfold in the past 12 months. To contact the reporter on this story: Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net

Read the full article →

Kraft Said to Be Nearing $19.7 Billion Cadbury Takeover After Raising Bid

January 18, 2010

By Zachary R. Mider Jan. 19 (Bloomberg) — Kraft Foods Inc. is close to an agreement to buy Cadbury Plc after raising its offer 9 percent to about 12 billion pounds ($19.7 billion) to overcome months of resistance by the U.K. chocolate maker, three people with knowledge of the matter said. Kraft is offering 840 pence a share, including 500 pence of cash and the rest in stock, said the people, who declined to be identified because the talks are private. Cadbury would be allowed to pay its holders an additional 10-pence dividend, the people said. Kraft’s previous bid valued Cadbury at 769 pence a share, below Cadbury’s closing share price of 808 pence yesterday. Kraft Chief Executive Officer Irene Rosenfeld increased her bid after more than four months of pressure from Cadbury and its investors to boost the original offer, first disclosed in September. A purchase would create a company with about $50 billion in annual sales, adding Cadbury’s Trident gum and Creme Eggs to Kraft’s Oreo cookies, Toblerone chocolate and Tang powdered drinks. “850 in total, however they do it, would be acceptable to us,” said Jeffrey Scharf , president of Scharf Investments in Santa Cruz, California. His firm holds about 760,000 Cadbury shares. Scharf said he thought enough Cadbury shareholders would be likely to accept a bid at that level for Kraft to succeed. As recently as Jan. 14, Cadbury called Northfield, Illinois-based Kraft an “unfocused conglomerate” with businesses in “unappealing categories.” Kraft had to raise its bid to at least 850 pence to stand a chance of capturing Cadbury, a survey of nine Cadbury shareholders showed. Price Discipline The companies may make a joint announcement on a combination as early as tomorrow, the person said. Trevor Datson , a spokesman for Uxbridge, England-based Cadbury, and Michael Mitchell , a Kraft spokesman, declined to comment. The BBC reported the talks between the companies yesterday. Hershey Co., which had been considering a bid for Cadbury, is unlikely to top Kraft’s offer, people familiar with the matter said. Kirk Saville , a spokesman for the Pennsylvania- based candy maker, declined to comment. Rosenfeld vowed to be disciplined on the price for Cadbury. Billionaire investor William Ackman last week joined Warren Buffett , Kraft’s biggest shareholder, in saying Kraft risks diminishing the merits of a Cadbury takeover by issuing too much stock to pay for it. Buffett’s Stake Kraft has informed Buffett of the revised deal with Cadbury, one of the people said. Buffett didn’t immediately return a request for comment sent to his assistant, Debbie Bosanek . Buffett’s Berkshire Hathaway Inc. said in a Jan. 5 statement it may support a Cadbury takeover if it concludes that the final offer “does not destroy value for Kraft shareholders.” Kraft advanced 46 cents to $29.58 in New York Stock Exchange composite trading on Jan. 15. Based on that price, the original hostile offer of 300 pence in cash and 0.2589 Kraft share is more than 60 percent stock. Cadbury shareholders have the option to substitute as much as 60 pence of shares with cash. Kraft shares didn’t trade yesterday because of a holiday in the U.S. Earlier this month, Kraft said it would sell pizza brands including DiGiorno and Tombstone to Nestle SA and use proceeds from the $3.7 billion deal to boost the 300 pence cash component of its bid by the optional 60 pence. Kraft has until today under U.K. law to modify its offer, and until Feb. 2 to gain acceptance from a majority of Cadbury investors. “Kraft provides some strength in the U.S. that Cadbury doesn’t have, and Cadbury provides some strength internationally that Kraft doesn’t have,” said Don Yacktman , founder of Yacktman Asset Management Co., which holds Kraft shares. On Nov. 9, Cadbury Chairman Roger Carr said the company’s board “emphatically rejected this derisory offer.” In a Jan. 12 defense document, Cadbury said the Kraft offer was worth 12 times Cadbury’s 2009 earnings before interest, tax, depreciation and amortization, while comparable deals in the industry valued the businesses at 14.3 times to 18.5 times. To contact the reporter on this story: Zachary Mider in New York at zmider1@bloomberg.net

Read the full article →

Faith Group To Lead ‘Exodus Of Our Money From Bank Of America’ (VIDEO)

January 14, 2010

A network of religious community organizers is calling for its members to pull their money out of Bank of America after the bank failed to meet their demands during negotiations on Tuesday evening in Antioch, Calif. “Just as Moses led the children of Israel out of Egypt, it is time to lead an exodus of our money from Bank of America,” said Rev. Mario Howell, pastor of Antioch Church Family, according to a statement. “It is time to go to a bank which will serve us.” The faith-based divestment effort is separate but parallel to the “Move Your Money” campaign. People Improving Communities through Organizing, a coalition with over 1,000 member congregations across the country, threatened to launch the divestment campaign if Bank of America officials did not agree to their demands, which included a 90-day moratorium on foreclosures. Other groups, including the SEIU and the NAACP, joined PICO at the negotiating table with bank officials. “Bank of America had nothing — no new ideas or proposals to offer to keep families in their homes and end the suffering in our communities,” said PICO’s Rev. Lucy Kolin, who led the negotiations, according to the statement. “We offered them a clear statement of the bottom line: Keep people in their homes. Do no harm. Put in place a moratorium so that Bank of America can get its act together and stop hurting our families and our communities. We went into this meeting willing to be hopeful, but we were disappointed.” A Bank of America spokesman told HuffPost on Tuesday that a foreclosure moratorium would be unnecessary because the bank doesn’t foreclose on a homeowner eligible for a modification under the Obama administration’s Home Affordable Modification Program. “In fact, blanket moratoriums put properties at risk, particularly if the property is vacant, and can interfere with the process of reselling properties at market values that could assist with the recovery of local housing markets,” said the spokesman. But PICO maintains that Bank of America has been foreclosing on eligible homeowners and even people current on their payments: “In Texas, Bank of America foreclosed on a family that was current on their payments,” said PICO in a statement. “The family discovered this mistake when they returned from work to find they were locked out of their home.” A Texas homeowner is suing Bank of America for mistakenly foreclosing on a property the bank did not own, according to a report from the Galveston County Daily News . PICO said that it is asking the Treasury Department to investigate and impose penalties on Bank of America and other banks it says are failing to comply with the administration’s modification program. Treasury did not immediately respond to a request for comment from HuffPost. Congregants prayed and listened to speeches while Tuesday’s meeting took place. “We will fight till we can’t fight no more,” said Rev. Howell. “We don’t want just one or two to get a modification, we want everyone to have a modification! We want everybody to have a new loan! We want everybody to stay in their home!” WATCH video of Howell’s bank-bashing sermon as Tuesday’s negotiations wrapped up:

Read the full article →

Lehman Liquidator Marsal Breaks Legal Tradition by Making Investment Bets

January 13, 2010

By Linda Sandler Jan. 13 (Bloomberg) — Bryan Marsal , whose Alvarez & Marsal firm has been paid more than $200 million so far to liquidate bankrupt Lehman Brothers Holdings Inc. , is proposing instead to invest in discounted loans on a gamble he can make more money that way for creditors and himself in the next five years. Marsal, acting as Lehman’s chief executive officer, wants to buy $3.5 billion in loans and mortgages, according to court filings. He proposes to pay $1.4 billion for the debt. A bankruptcy judge will review the proposal today in New York. “In most cases, a bankrupt company that is not planning on emerging as a going concern would see its assets liquidated,” Marsal said in an interview. “Had the assets of the Lehman estate been disposed of in a fire-sale liquidation, we would have realized maybe $10 billion to $20 billion.” By taking more time, he might recover $40 billion to $50 billion, he said. The more money Marsal brings in to Lehman’s bankrupt estate, the more its creditors can recover — and the more his New York-based restructuring firm will make in bonuses. The firm’s contract with Lehman entitles it to a bonus of 0.175 percent of all amounts above $15 billion recovered for unsecured creditors. That’s capped at 25 percent of the fees A&M gets for dismantling Lehman, according to court documents. Based on fees collected so far, the bonus cap would be $50 million. Lehman and its affiliates had $16.3 billion in cash on Nov. 30, according to a December filing in U.S. Bankruptcy Court in Manhattan. Creditors currently are claiming as much as $830 billion from the estate, Marsal said. Lehman, once the fourth-largest investment bank, said it foundered because of deteriorating subprime and structured investments. It filed the biggest U.S. bankruptcy in September 2008 with mostly unsecured debts of $613 billion. Goal: $50 Billion Marsal said he is “trying to clean up the errors and duplicates” in creditor claims and aims to raise as much as $50 billion from Lehman’s real estate, banking and other assets in the next three to five years. By buying loan participations and mortgages from Lehman’s German bank affiliate, insolvent Lehman Brothers Bankhaus, Lehman is enhancing its ability to sell the good loans as they recover, and to work out the bad loans, he said. The commercial and real estate participations range from development lending to a Japanese five-year term loan, filings show. Marsal said the investment involved “purchases of parts of the loan” that Lehman earlier shared with the affiliate, not a new venture “from scratch.” ‘Marsal’s job is not to take risks and speculate in a financial casino,” said Lynn LoPucki , a professor of bankruptcy law at the University of California, Los Angeles and Harvard. “That’s the ‘Masters of the Universe’ syndrome that got the country in trouble in the first place. The bankruptcy code doesn’t give him authority to speculate in assets with creditors’ money.” Creditors Support Lehman’s creditors support the purchase proposal, though they had initial misgivings. “It cannot be disputed that the transactions are extraordinary — both in terms of dollar amount and because liquidating debtors-in-possession are seeking authority to acquire assets,” said Lehman’s official committee of creditors in a Dec. 30 court filing. While Marsal is betting on higher prices later, creditors said the loans’ value “remains subject to market risk.” “Prior to conducting its diligence, the committee was dubious of the merits and propriety of the transaction envisioned,” they said in the filing. The bankruptcy judge will decide if the risk is worth taking, given the possible return. Marsal said he has no “crystal ball” to predict the future. “Do I know what tomorrow will bring? No. But the creditors were given the option of a fire sale or longer orderly wind-down of the assets, and they chose the latter because of the superior recovery prospects,” he said. Uranium Precedent Marsal showed his investment instincts earlier by hoarding uranium cake he found on Lehman’s books on a bet that prices for the commodity would rise. At about $40.50 per pound in April 2009, the stockpile of as much as 500,000 pounds was valued at $20 million. Uranium oxide concentrate or yellowcake was $44.50 a pound, Roswell, Georgia-based UxC Consulting Co. said in Jan. 11 report. Lehman has been raising cash at the rate of $1 billion a month by selling assets and aims to increase cash in the coming year by $500 million a month, he said. “Our hope is that the liquidity in the market will continue to improve and we can accelerate the liquidation process, including the Bankhaus loans,” Marsal said. His firm’s maximum 25 percent bonus is unusual for a liquidator, said Seton Hall University School of Law professor Stephen Lubben in Newark, New Jersey. In 2007, Alix Partners had to give up a $5 million success fee it sought on top of $25.6 million in professional charges while winding down futures- trader Refco Inc. Marsal’s company’s bonus has survived court scrutiny so far, although the firm withdrew a request for $2.5 million of it upfront, according to court filings. Fourteen months into the bankruptcy, Lehman had paid its bankruptcy advisers $533.5 million, with $202.4 million going to Alvarez & Marsal from September 2008 through Nov. 30, 2009, according to a December report in bankruptcy court. The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan). To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net ;

Read the full article →

Ford Said to See Volvo Sale as Likely to China’s Geely, May Get $2 Billion

December 22, 2009

By Keith Naughton, Ola Kinnander and Cathy Chan Dec. 23 (Bloomberg) — Ford Motor Co. , seeking to unload its unprofitable Volvo unit, will announce today that talks with Zhejiang Geely Holding Group Co. have progressed to the point where a sale is likely, a person familiar with the matter said. Ford, which named China’s Geely its “preferred bidder” for Volvo on Oct. 28, also will lay out an estimated timeline for completing the sale in a statement to be issued today, said the person, who asked not to be identified because the details aren’t public yet. John Gardiner , a Ford of Europe spokesman, didn’t immediately respond to a request for comment. Volvo was put on the block a year ago as Ford finishes shedding overseas luxury brands to focus on its namesake division. Geely is offering about $2 billion, less than one- third what Dearborn, Michigan-based Ford paid for the Swedish unit a decade ago, people familiar with the bid have said. Ford has been making progress to resolve sale issues such as protection of intellectual property, a person familiar with the talks has said. Geely, China’s second-largest private automaker, hopes to gain insights into Western vehicle development and manufacturing through Volvo, people familiar with the negotiations have said. “Ford has integrated Volvo into their platforms and a lot of technology, like safety technology,” said John Wolkonowicz , an analyst at IHS Global Insight of Lexington, Massachusetts. “Why prop up China with your technology when you know they’re going to become a major competitor someday?” Geely is seeking Chinese government support for the Volvo acquisition, two people familiar with the discussions have said. The company has hired German-based Roland Berger Strategy Consultants for advice on restructuring, the people said. Geely Automobile Holding Ltd. is the listed unit of Li Shufu’s Geely Group. Zhejiang Geely, owned 90 percent by Li and 10 percent by his son, is the ultimate holding company for the group. Yuan Xiaolin , a spokesman for the holding company, wasn’t immediately available to comment. To contact the reporters on this story: Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net ; Ola Kinnander in Stockholm at okinnander@bloomberg.net ; Cathy Chan in Hong Kong at kchan14@bloomberg.net

Read the full article →

Citigroup Stake Sale by Treasury May Follow Bank of America’s TARP Payback

December 3, 2009

By Matt Townsend and Dakin Campbell Dec. 3 (Bloomberg) — The U.S. is closer to selling its 34 percent stake in Citigroup Inc. now that Bank of America Corp. is repaying bailout funds, and PNC Financial Services Group Inc . and Wells Fargo & Co. may be the next lenders to pay back taxpayers, Deutsche Bank AG analysts said. “We believe these announcements may imply that a sale of the government stake in Citi is closer to happening, which we would view as a positive for Citi shares,” Deutsche Bank analysts Matt O’Connor and Robert Placet in New York wrote in a note to clients today. Citigroup shares, down 39 percent this year, were little changed at $4.09 today. The government already missed an opportunity to sell part of its stake in Citigroup when the New York-based lender climbed to $5 on Oct. 14, said Chris Kotowski , an analyst at Oppenheimer & Co. in New York, who rates the shares “market perform.” “There was a clear market window in mid-October and I’m stunned the government didn’t tap it,” Kotowski said. “Everybody could have declared victory. The government could have said we made money on this and we’ve begun privatizing Citi again. Citi could say they were making progress and getting out from government control gradually.” Citigroup received $45 billion in capital injections under the Troubled Asset Relief Program last year. In September, the Treasury Department converted $25 billion of the bailout funds into common shares, giving it the 34 percent voting stake in the New York-based lender. Citigroup spokesman Stephen Cohen declined to comment today. O’Connor, the Deutsche Bank analyst, rates Citigroup “buy” and has a “hold” rating for Wells Fargo and PNC. ‘Shareholder-Friendly’ Wells Fargo may not see repayment as an imperative, John McDonald , an analyst at Sanford C. Bernstein & Co., wrote in a report. With a business model less constrained by TARP requirements and an opportunity to “organically” earn the capital to repay in the next few quarters, the bank may take its time, wrote McDonald, who rates Wells Fargo shares “outperform.” Chief Executive Officer John Stumpf has said the company plans to repay the bailout funds it received in a “shareholder- friendly way.” Spokeswoman Julia Bernard didn’t reply to a request for comment today. Bank of America, the nation’s biggest lender, will repay TARP using $26.2 billion of “excess liquidity” and $18.8 billion from the sale of securities, according to a statement yesterday. Wells Fargo received $25 billion of TARP funds and PNC took $7.58 billion. PNC spokesman Fred Solomon said the bank intends to redeem TARP, also in “a shareholder-friendly way,” by the end of 2010, subject to regulatory approval. To contact the reporters on this story: Matt Townsend in New York at mtownsend9@bloomberg.net ; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

Read the full article →

GM’s Saab Asks Sweden to Relax Terms of Rescue Funding, Union Leader Says

November 27, 2009

By Ola Kinnander and Niklas Magnusson Nov. 27 (Bloomberg) — Saab Automobile , offered for sale by General Motors Co. , asked Sweden’s government to relax the rules of state rescue loans and provide funding, a union chief said. Should the government agree, Saab wants it to inform GM before the U.S. company reviews the unit’s future at a board meeting on Dec. 1, Paul Aakerlund , head of the Swedish carmaker’s IF Metall labor union, said in an interview today. Saab is seeking a buyer after Koenigsegg Group dropped a takeover bid on Nov. 24, saying it had run out of time to do the deal. Beijing Automotive Industry Holding Co., Merbanco Inc. and Renco Group Inc. have since made approaches, according to two people familiar with the situation, and Aakerlund said state aid might persuade GM to keep Saab going until a purchaser is found. “It would be an incredibly big plus if the government sends that signal to GM,” he said in the interview in Trollhaettan, where Saab is based. “Somewhere even the government realizes there is a possibility to do this, and while it requires a decision by parliament, that could be done in an afternoon.” Voice-mail and e-mail messages left for Chris Preuss , a GM spokesman, weren’t immediately returned. The Swedish government has been criticized by workers, opposition politicians and residents in Trollhaettan — where 7,000 jobs may be lost if Saab fails — for not doing enough to help the unprofitable unit, which needs a buyer to ramp up output and start selling its first new model in seven years. Sweden’s Help Sweden unveiled a 28 billion-krona ($4 billion) aid package for its automotive industry last December that aimed to secure jobs, ease access to funding and push fuel-efficient vehicles. The plan included 5 billion kronor in rescue loans, 3 billion kronor for research, and credit guarantees of 20 billion kronor. The government hasn’t received an application for rescue money from Saab, only a request for state guarantees for a 400 million-euro ($598 million) European Investment Bank loan, Industry Ministry spokesman Frank Nilsson said by phone today. The two means of support in any case can’t be combined as rescue loans are only given to unhealthy companies, which would be disqualified from EIB funding, said Nilsson. While the government “will have a constructive discussion” with Saab and GM about the loans, “essentially, this is about Saab needing a new owner,” he said. ‘Completely Unrealistic’ Aakerlund said a requirement for rescue loans to be paid back within six months is “completely unrealistic” and that the rules could be relaxed under European Union law in order to extend the repayment period. Sweden has so far spent only 60 million kronor of the 28 billion-krona package, with the money provided to Powercell Sweden AB, in which Swedish truckmaker Volvo AB is the largest owner, to develop fuel-cell technology. “What was the point of getting it approved by parliament if they weren’t going to use it?” said Social Democrat leader Mona Sahlin , whose three-party alliance would win power if an election was held today, according to polls. “Sweden is the country that has done the least in Europe.” Prime Minister Fredrik Reinfeldt and Industry Minister Maud Olofsson have said that the’ve no mandate to use taxpayers’ money to build cars and that the state will not take over Saab. “If you try to support fundamentally non-competitive businesses, you will spend a lot of tax money and still see the jobs disappear,” Reinfeldt said Nov. 25. Sahlin said the collapse of Saab would cost 2 billion kronor in higher government costs and lower income, not counting the impact on parts suppliers and the wider automobile industry. To contact the reporters on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net ; Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

Read the full article →

Rep. DeFazio: Fire "Timmy" Geithner

November 18, 2009

Rep. Peter DeFazio called for the firing of President Barack Obama’s top two economic aides on Wednesday for pursuing a recovery plan skewed too heavily towards Wall Street’s favor. The Oregon Democrat told MSNBC’s Ed Schultz that he was dismayed with the administration’s lack of focus on job creation and insisted it was time to dismiss both White House economic adviser Larry Summers and Treasury Secretary “Timmy Geithner.” “We think it is time, maybe, that we turn our focus to Main Street — we reclaim some of the unspent funds, we reclaim some of the funds that are being paid back, which will not be paid back in full, and we use it to put people back to work. Rebuilding America’s infrastructure is a tried and true way to put people back to work,” said DeFazio. “Unfortunately, the President has an adviser from Wall Street, Larry Summers, and a Treasury Secretary from Wall Street, Timmy Geithner, who don’t like that idea,” he added. “They want to keep the TARP money either to continue to bail out Wall Street…or to pay down the deficit. That’s absurd.” Asked specifically whether Geithner should stay in his job, DeFazio replied: “No. “Especially if you look back at the AIG scandal,” he added, “and Goldman and others who got their bets paid off in full…with taxpayer money through AIG. We channeled the money through them. Geithner would not answer my question when I said, ‘Were those naked credit default swaps by Goldman or were they a counter-party?’ He would not answer that question.” DeFazio said that among he and others in the Congressional Progressive Caucus, there was a growing consensus that Geithner needed to be removed. He added that some lawmakers were “considering questions regarding him and other economic advisers” — though a petition calling for the Treasury Secretary’s removal had not been drafted, he said. “[Obama] is being failed by his economic team,” DeFazio concluded. “We may have to sacrifice just two more jobs to get millions back for Americans.” Neither the White House or the Treasury Department immediately returned a request for comment. Visit msnbc.com for Breaking News , World News , and News about the Economy

Read the full article →

Few Earmarks For Bridge Repairs After Minnesota Collapse

November 12, 2009

Amid the national hand-wringing after the Minnesota bridge collapse of 2007, members of Congress earmarked 10 times more money for new transportation projects than for bridge repair, according to a new report by the U.S. Public Interest Research Group. In the transportation appropriations bill for fiscal 2008, approved just months after the I-35 bridge collapse killed 13 people, members of Congress included more than 700 earmarks worth $574 million in Federal Highway Administration spending. Seventy-four of those earmarks sent just under $60 million to bridge repair — even though one out of every four bridges in the United States needs work, according to a 2009 report by the American Society of Civil Engineers. The total amount earmarked for the federal highway program “could have been used to bring approximately 20 structurally deficient bridges per state or two bridges per Congressional district into a state of good repair,” says PIRG’s report. The good-government group attributes the lack of earmark funds for deficient bridges entirely to elected representatives’ insatiable hunger for campaign cash. “In a political system in which elected officials must raise huge sums of campaign contributions from major donors to win reelection, spending may be skewed toward road widening and new highway projects favored by developers, road builders and other interests,” says the report, co-authored by PIRG’s Lisa Gilbert and John Krieger. “Deferring maintenance to build new capacity may seem senseless — much like a family with a leaky roof who instead builds a new addition — but it makes sense in Congress if money and politics favor those choices.” Using data from the Center for Responsive Politics, PIRG reports that “highway interests from the construction and transportation industry” contributed $80 million to federal campaigns during the 2008 election cycle. Sen. Charles Schumer (D-N.Y.) is one senator who doesn’t seem to have put his money where his mouth was after the I-35 collapse, at least according to a review of earmarks in the transportation bill by the Huffington Post. ”For too long, the federal government has focused on building new bridges at the expense of fixing old ones, and now we are living with the consequences,” Schumer said in August 2007, according to the New York Times . ”Robbing Peter to pay Paul is no way to keep America’s drivers safe.” Schumer’s name appears on a dozen earmarks worth $10 million for various transportation projects in New York, only one of which involved fixing up an old bridge. His office did not immediately respond to a request for comment from the Huffington Post. State legislators in Albany joined a rally on Tuesday to draw attention to the state’s aging bridges after the Crown Point Bridge was deemed unsafe and shut down. The New York Department of Transportation has estimated that 1,526 bridges will be deficient within the next five years. Schumer’s remark about the federal government’s spending priorities did not refer to earmarks, but U.S. PIRG’s report calls them a “clear demonstration of the influence and prioritization of members of Congress, because their project requests circumvent agency review.” “Earmarking is kind of the one place where members of Congress actually choose” where money goes, said transportation policy expert Mark Stout in an interview with HuffPost. Stout, who lent his expertise to the report, spent 25 years working for the New Jersey Department of Transportation. “I’ve spent a lot of time in the weeds and in the mechanics of the funding of the industry.” In their report, U.S. PIRG did not call out any specific members of Congress but they did have some sharp words for the entire Mississippi delegation, one of several to designate zero earmarks to old bridges: “The delegation from Mississippi,” the report says, “secured funding for 19 earmarked projects at a cost of $29,414,000, and despite having a backlog of over 3,000 structurally-deficient bridges in the state, none of their earmarks went to bridge repair.” U.S. PIRG’s report, titled “Greasing the Wheels,” is available here .

Read the full article →

SAC Said to Tell Investors an Internal Review Found No Suspicious Trading

November 10, 2009

By Katherine Burton and Saijel Kishan Nov. 10 (Bloomberg) — SAC Capital Advisors LLC, the hedge- fund firm run by Steven Cohen , reviewed its buying and selling of stocks cited in the Galleon Group LLC insider-trading cases and found nothing suspicious, according to one of its investors. SAC, which oversees $14 billion, also told the investor that neither it nor any employees had received subpoenas related to the cases. Clients have contacted the Stamford, Connecticut- based firm since prosecutors said last week that a former SAC portfolio manager agreed to plead guilty and cooperate with their probes, said the investor, who asked not to be identified because the information is private. “SAC has a built and maintained AAA-grade infrastructure, including compliance,” said Ron Geffner , a lawyer at New York- based Sadis & Goldberg LLP, whose clients include hedge funds. Geffner, who isn’t representing SAC, said it was understandable that the firm would review the trading. The former employee, Richard Choo-Beng Lee , worked at SAC from 1999 to 2004, according to the information filed by prosecutors that details the charges against him. He left to join New York-based Stratix Asset Management LLC, founded by former SAC traders Ian Goodman and Richard Grodin . Investigators are expected to examine trading at SAC, the Wall Street Journal reported Nov. 7, citing people familiar with the matter. Jonathan Gasthalter , a spokesman for SAC, declined to comment. In return for helping the government, Lee won’t be further prosecuted for any insider trading he may have committed at SAC or Stratix, according to his Oct. 8 plea agreement. The deal also covers his time at Spherix Capital LLC, the San Jose, California-based firm he co-founded in 2007 with Ali Far after Stratix closed. He sought a job at SAC this year after shutting Spherix in March, a person familiar with the matter said. Quadrum Subpoena Far, 47, is also cooperating after pleading guilty. He’s a former portfolio manager at Galleon. Neither Grodin nor Goodman has been accused of wrongdoing. The firm Grodin started after Stratix, Quadrum Capital Management LLC, has been subpoenaed. A subpoena is a request for information and doesn’t imply wrongdoing. Twenty people have been charged in the insider-trading case since the Oct. 16 arrest of Raj Rajaratnam , founder of New York- based Galleon. The government has said the defendants netted $53 million in illegal trades going back as far as 2006 and covering about a dozen stocks. Stocks cited by prosecutors include Advanced Micro Devices Inc., Google Inc., Intel Corp., International Business Machines Corp. and Hilton Hotels Corp. To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net ; Saijel Kishan in New York at skishan@bloomberg.net

Read the full article →

U.S., EU Ask WTO to Probe Chinese Export Curbs on `Critical’ Raw Materials

November 4, 2009

By Jennifer M. Freedman Nov. 5 (Bloomberg) — The U.S. and the European Union requested a World Trade Organization investigation of China’s restrictions on exports of raw materials used by the steel and chemical industries. The complaint says China uses special taxes intended to discourage the export of 20 metals or chemicals as a way to keep them inexpensive and available to domestic manufacturers. Officials from the U.S. and the EU, along with Mexico, asked the WTO yesterday to determine the legality of the curbs on materials that are “critical” to manufacturers and workers, the U.S. Trade Representative’s office and the EU said in separate statements . The materials, including coke, bauxite and manganese, are used by the steel, aluminum and chemicals industries. Trade tensions between China and the U.S. and the EU have grown as the economic crisis crimps exports and sparks job cuts. China is the 27-nation EU’s second-biggest trading partner. China also passed Canada to become the largest source of U.S. imports in 2007. The request to the WTO was made more than four months after the U.S. and EU filed a request for consultations at the Geneva- based WTO, setting off a period of discussions with China aimed at resolving the dispute. The EU, the U.S. and Mexico, which filed a request for talks on Aug. 21, “tried to resolve this issue through consultations, but did not succeed,” said Debbie Mesloh , a USTR spokeswoman in Washington. Hurting Competition Export restrictions, which have multiplied in recent years because of surging prices for raw materials, discourage companies from being more productive and competitive, according to the European Commission, the EU’s trade authority. Such curbs drive up prices and choke off supplies of raw materials, which affects a broad range of finished products including airplanes, semiconductors, detergent and steel, the commission says. “China’s restrictions on raw materials continue to distort competition and increase global prices, making conditions for our companies even more difficult in this economic climate,” European Trade Commissioner Catherine Ashton said in a statement. The nation is either a major supplier or the only source of the materials at issue, according to the EU. China, the world’s fastest-growing major economy and biggest consumer of metals, has defended its policy. The measures are designed to protect the environment and natural resources and are “in accordance with WTO rules,” the government said on June 24. Measures and Products The panel requested yesterday focuses on a specific batch of measures and products, said the EU, adding that “further legal action cannot be ruled out if these concerns are not effectively addressed.” Trade volume between China and the EU grew to more than 326 billion euros ($484 billion) last year. The industries in the EU that are potentially affected by the Chinese restrictions represent about 4 percent of the bloc’s industrial activity and a half-million jobs. Trade between the U.S. and China expanded to $408 billion last year. U.S. steelmakers and unions have ramped up their complaints of China this year, arguing that cheap government loans, tax rebates and grants give manufacturers an unfair advantage. After filing a WTO case in 2007 against Chinese tax breaks, which the U.S. argued was another subsidy, China agreed to drop them. The WTO’s dispute settlement body will consider the request for the establishment of a panel at its Nov. 19 meeting, the USTR said. To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

Read the full article →

Berkshire’s Reduced Burlington Breakup Fee Shows Buffett Confident in Deal

November 3, 2009

By Andrew Frye and Zachary R. Mider Nov. 4 (Bloomberg) — Berkshire Hathaway Inc. , the holding company that agreed to buy Burlington Northern Santa Fe Corp. , accepted a lower-than-usual breakup fee in a sign Warren Buffett expects to complete his biggest takeover. Berkshire will receive $264 million if Burlington, the biggest U.S. railroad, cancels the agreement, according to a filing yesterday. That’s less than 1 percent of the deal’s value including net debt and compares with the 2 percent to 3 percent that is typical of these deals, said Elizabeth Nowicki , a professor at Tulane University Law School . “Berkshire recognizes there’s a very, very small chance Burlington is going to have the desire or the opportunity to back out,” Nowicki , who is a former mergers and acquisitions lawyer at New York-based Sullivan & Cromwell LLP, said in an interview. “In this difficult economy, I doubt the Burlington board is going to have other bidders wanting to acquire them.” Buffett, who built Berkshire over more than four decades, is taking on debt and spending the company’s cash as the economic crisis curbs expansion at some U.S. firms. Berkshire agreed to pay $26 billion for the 77.4 percent of Fort Worth, Texas-based Burlington it didn’t already own and assume $10 billion in net debt. “I don’t think anyone has the firepower to do this deal” besides Berkshire, said Paul Howard , an analyst with Janney Montgomery Scott LLC’s Langen McAlenney division in Hartford, Connecticut. “Maybe a foreign entity, but the U.S. government is not going to let that happen.” Higher Takeover Fees The two non-governmental takeovers this year bigger than Burlington’s included termination fees of 3.1 percent and 2.6 percent. Pfizer Inc.’s $64 billion agreement to purchase Wyeth carried a termination fee of as much as $2 billion, and Schering-Plough Corp. would pay Merck & Co. $1.25 billion if it backed out of their $47 billion deal. Buffett, Berkshire’s chief executive officer , didn’t respond to a request for comment left with his assistant Carrie Kizer . Law firm Cravath Swaine & Moore LLP advised Burlington, and Munger Tolles & Olson LLP was Berkshire’s legal adviser. The Burlington agreement gives Buffett the “elephant”- sized acquisition he said he’s been looking for to deploy accumulated earnings from Berkshire’s insurance units and investments. It marks a shift from Buffett’s strategy in the recession of drawing down Omaha, Nebraska-based Berkshire’s cash hoard, valued at more than $24 billion at the end of June, to finance firms including Goldman Sachs Group Inc. and Harley- Davidson Inc. whose funding costs rose last year. ‘A Pound of Flesh’ Buffett’s Burlington purchase “is a much more traditional deal than his extracting a pound of flesh for liquidity” in the financing deals, said Justin Fuller , a partner at Midway Capital Research & Management who runs the buffettologist.com Web site. “He buys a traditional business and holds it forever.” Buffett, the world’s most celebrated investor, bought General Reinsurance Corp. in 1998 for more than $17 billion and expanded into power production with the purchase of MidAmerican Energy Holdings Co. Last year, he bought Marmon Holdings Inc., a collection of more than 100 businesses, from the Pritzker family. Berkshire previously purchased car insurer Geico Corp. and luxury plane-leaser NetJets Inc. Burlington was profitable every quarter for at least a decade and remains shielded from competition by its rail network. Buffett built Berkshire into a $150 billion company buying firms that he deems to have durable competitive advantages. The railroad, with pretax income of $3.37 billion on revenue of $18 billion last year, would be Berkshire’s second- largest operating unit by sales. Berkshire’s McLane unit, which delivers food to stores and restaurants by truck, earned $276 million on revenue of $29.9 billion in 2008. Berkshire’s largest business overall is insurance. To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net ; Zachary R. Mider in New York at zmider1@bloomberg.net .

Read the full article →

Barclays, BNP Paribas May Have $300 Million Losses From K1, Warrant Shows

October 30, 2009

By Karin Matussek and Jann Betinga Oct. 30 (Bloomberg) — Helmut Kiener , the K1 Group hedge- fund firm founder arrested earlier this week, may have duped Barclays Plc out of as much as $240 million and BNP Paribas SA out of $60 million, according to the warrant for his arrest. Kiener may have used $220 million from Barclays contrary to agreements with funds in the group, according to the arrest warrant issued by a court in Wurzburg, Germany. The money is “for the most part” gone, according to the document obtained by Bloomberg News. A separate deal with Barclays generated about $20 million of management fees for Kiener, according to the document. K1 Group is at the center of an international criminal investigation after saddling banks, which also include JPMorgan Chase & Co. and Societe Generale SA, with about $400 million of losses, people with knowledge of the probe said. European and U.S. authorities are investigating whether K1, which manages funds of hedge funds, deceived the banks to inflate investments, according to the people, who declined to be identified because the investigation isn’t public. Kiener was arrested on Oct. 28, and the court in Wurzburg yesterday ruled he must remain in custody. A spokeswoman for Munich-based law firm Lutz Libbertz, which represents Kiener, said his lawyers will file a request for release. She said the firm will comment in detail on the allegations later. BNP suffered losses from a $60 million investment starting in April 2007, according to the warrant. Kiener may have also deceived BNP when receiving management fees, the warrant said, without specifying an amount. BNP Paribas’s spokeswoman Carine Lauru declined to comment on the amount. BNP Paribas has said it’s cooperating with authorities. Barclays Capital spokesman Daniel Hunter declined to comment. Calls to the court and to prosecutors in Wurzburg seeking comment weren’t answered. To contact the reporter on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net .

Read the full article →

Debtors’ Revolt: Bank Of America Cuts Deal With Another YouTuber

October 9, 2009

Got a gripe with Bank of America? Put it on YouTube. Ben Frasier of Douglas, Ore. said in a YouTube video that he wouldn’t make any more payments on a $30,000 personal line of credit unless Bank of America would let him settle up with a lump sum. Bank of America wasn’t interested in the offer when Frasier made it over the phone. But after he made his demand publicly , and it received some media attention , Bank of America made an offer that Frasier is happy with. The video-sharing website has become an effective complaint department for angry customers willing to put their faces to a declaration of “debtors revolt!” Ann Minch of Red Bluff, Calif., did it first in September , when she refused to pay a credit card debt unless Bank of America lowered her rate. After her story went viral, Bank of America agreed to her demand . And Darren Bryant of Pensacola, Fla., won attention from the bank within four hours of “going YouTube” after he wasted 20 hours calling the bank to no avail. Another person uploads a “debtors revolt” rant against Bank of America and other big banks almost every day . Frasier said that because of an unexpectedly high interest rate, he paid $8,000 but dented the $30,000 loan’s principal by only $1,500. He said in his video that he wanted pay Bank of America $23,000 and call it even. After some negotiation over email, a Bank of America agent made the following offer on Thursday: Based on the new payment amount from you of 15,134.78 and the credits to that account that I stated below, it would leave a remaining balance on the account of roughly $12,215.00. I would then be able to set that amount to a 60 month payoff term and an interest rate of 8.99%. The new payment on that amount for the 60 months would be roughly $260.00. Frasier replied that he would accept the offer as soon as he saw it on paper. He told the Huffington Post he’s happy with the deal, though he thought the way he got it was ridiculous. “In terms of YouTube, it was a very effective mode of communicating with them,” Frasier told the Huffington Post on Friday. “You have to go someplace unsecure to tell your story where everybody knows pretty much who you are, everybody knows the details. You’d think you could do that on Bank of America’s website. It’s an incredible website. Unfortunately, you just don’t command the attention you do on YouTube.” Bank of America did not immediately respond to a request for comment from the Huffington Post, but a spokeswoman previously said, “Our associates talk to millions of customers every day and we work very hard to help them. It is more likely that we can work with them when they call us directly to resolve their issues.”

Read the full article →

Buffett Calls Purchase of Hog-Products Firm CTB `Lucky Day’ for Berkshire

October 6, 2009

By Andrew Frye Oct. 6 (Bloomberg) — Warren Buffett , who as chief executive officer of Berkshire Hathaway Inc. has overseen more than $50 billion in acquisitions , said the 2002 purchase of farm-products provider CTB Inc. was “a lucky day.” “We’re going to own CTB forever,” Buffett told employees of the Milford, Indiana-based agricultural-services firm. “The operational results, the acquisitions that you’ve made, everything has exceeded my expectations.” CTB, which sells feeders and stalls under the PigTek and Chore-Time Hog brands, has expanded abroad since the Berkshire takeover by buying businesses in Israel, Germany and the Netherlands. Chief Executive Officer Victor Mancinelli, who convinced Buffett to buy the firm seven years ago, is making “excellent returns,” according to the Berkshire annual letter to shareholders published this year. “Over the next 100 years we’re going to have some bad farm years and we’re going to have some bad years in the economy,” Buffett said in the address, which was posted on CTB’s Web site and labeled September. “But just look at the progress we’ve made over time. And I hope you’re doing more of the same.” Buffett, 79, has responded to the U.S. recession by cutting manufacturing jobs and closing facilities. He oversees businesses ranging from insurance and ice cream to corporate jets and power plants. Profit from the firm’s “other manufacturing” units, such as CTB, paint-maker Benjamin Moore and apparel company Fruit of the Loom, fell 18 percent to $1.68 billion in 2008. Buffett didn’t respond to a request for comment sent in an e-mail to assistant Carrie Kizer . CTB’s Earnings Berkshire’s acquisition of CTB was valued at $177 million, according to Bloomberg data. Six years later, in 2008, the unit produced pretax earnings of $89 million, Buffett said in the annual letter. CTB bought six companies in the interim, including Swine Services Specialists Inc. and Porcon group of Deurne, the Netherlands. Buffett built Berkshire into a $150 billion company by buying businesses like auto insurer Geico Corp. and stocks including Coca-Cola Co. that he believes have competitive advantages and enduring brand popularity. He said in the address to employees that he refused an initial proposal to bid for CTB, reversing his decision only after Mancinelli made a trip to Omaha, Nebraska, where Berkshire is based. “Boy was that a lucky day for Berkshire,” Buffett said. “I spent a little time talking to him and I knew that he was the right guy and CTB was the right company.” To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net .

Read the full article →

WellPoint Subsidiary Fights Maine Over Big Rate Hike (VIDEO)

October 5, 2009

Anthem Blue Cross and Blue Shield in Maine, a subsidiary of WellPoint, the nation’s largest insurer, wanted the state to approve an average rate hike of 18.5 percent on its policyholders. Maine rejected the increase and now the insurer is fighting for the hike in court. Robert Greenwald’s Brave New Films is taking aim at Anthem’s rate reach in the latest installment of his “Sick for Profit” series. The video, posted below, is a slick pitch for pitchfork-style outrage. It notes how much WellPoint pays its CEO ( $9.8 million ) and how much of its policyholders’ premiums it spends on lobbying ( $9.5 million ). WellPoint’s subsidiary in Maine says it needs the rate increase to guarantee a 3 percent profit margin. “The only justification for this lawsuit is just pure greed,” says Ali Vander-Zanden of the Maine People’s Alliance in the video. And the Maine attorney general’s office seems to buttress that argument — in a Sept. 23 filing, in response to the insurer’s claim that raising premiums is necessary for the financial health of the company, the AG says Anthem is perfectly profitable. In its filing, Anthem said it had lost $3.7 million on its individual insurance products over the past five years. The AG says Anthem has made $5.4 million from individual consumers over the past two years, and points out that Anthem paid $75.7 million in dividends to WellPoint in 2008, $40.4 million in 2007, and $35.6 million in 2006. And its executives paid themselves pretty well, too. “In 2006, Anthem executive compensation in Maine for its nine highest-paid employees totaled over $4.3 million, averaging almost $500 thousand per executive,” the AG’s filing says. “This included total base salaries of nearly $1.6 million, bonuses in excess of $835 thousand, and all other compensation of over $1.9 million (which may include payouts under multi-year long term incentive plans, sales incentives, severance, and the exercises of stock options granted in prior years.) … During 2006-2008, the three-year average executive compensation for Anthem’s top nine employees remained at nearly $500,000.” The attorney general points out how much Mainers already pay: “In addition to the average annual premium of approximately $6,000 paid by Maine consumers to Anthem in 2008, these same individuals paid their own health care costs below the deductible. The average deductible as $7,250 in that year, and is projected to grow to an average of $7,570 in 2009… That means the average policyholder would have to incure a total cost of more than $13,000 in premium and deductibles, prior to becoming eligible to receive any health benefits under the policy.” The filing states that with the rate increase, Anthem’s 12,000 policyholders in Maine “would have paid an additional $12 million in annual premium for the same level of benefits.” Oral arguments are expected in November. An Anthem spokesman has not yet responded to a request for comment from the Huffington Post. Here’s the video from Brave New Films:

Read the full article →

Obama Tells Students With Political Ambitions to `Be Careful’ on Facebook

September 8, 2009

By Julianna Goldman and Kate Andersen Brower Sept. 8 (Bloomberg) — President Barack Obama has some counsel for youngsters who want to grow up and be president: be careful what you post on Facebook and other Internet outposts. Obama offered, what he called some “practical political advice” to a 9th grader at Wakefield High School in the Washington suburb of Arlington, Virginia, who asked how he too could become President one day, saying that “when you’re young, you know, you make mistakes and you do some stupid stuff.” “I want everybody here to be careful about what you post on Facebook, because in the YouTube age whatever you do, it will be pulled up again later somewhere in your life,” Obama said. “That’s number one.” His remarks preceded a speech to students at the high school that was broadcast to schools across the country, in which he urged them to “get serious” about their studies and take responsibility for their own success. Representatives from Palo Alto, California-based Facebook Inc. did not immediately respond to a request for comment. The social networking tool that was founded in 2004, has more than 250 million active users, with more than 30 million of them posting status updates at least once a day, according to Facebook’s website . In the question-and-answer session with the 9th grade class, which wasn’t broadcast, Obama said he’s heard stories about Facebook postings hindering job applicants. “I’ve been hearing a lot about young people who, you know, they’re posting stuff on Facebook, and then suddenly they go apply for a job,” Obama said to laughter. To contact the reporters on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net ; Kate Andersen Brower in Arlington, Virginia, at Kandersen7@bloomberg.net

Read the full article →

Stanford Asks Judge to Let New Lawyers Argue for Unfreezing of Some Assets

August 4, 2009

By Andrew Harris Aug. 4 (Bloomberg) — Financier R. Allen Stanford, indicted on charges of running a $7 billion fraud, asked a federal judge in Houston to let his new attorneys from Patton Boggs make a request for access to his frozen assets to pay legal fees. To contact the reporter on this story: Andrew M Harris in Chicago at aharris16@bloomberg.net

Read the full article →