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Ken Raske, Hospital Group CEO, Tops Lobbyist Bundling List

October 26, 2009

The Hill reports that the biggest fundraiser for Senate Democrats this fall also plays an influential role in the health care industry. Ken Raske, president and CEO of the Greater New York Hospital Association, has bundled $152,000 in donations for the Democratic Senatorial Campaign Committee during the month of September alone. Raske’s association spent more than $1 million lobbying Congress so far this year. The Hill also reports that Raske was one of three hospital representatives invited to the White House in May for a meeting with President Obama to discuss health care reform. The Hill also reports that Senate Majority Leader Harry Reid took in the most bundled contributions from lobbyists in the third quarter. Al Cardenas of the Tew Cardenas law firm took second place in lobbyist bundling for the third quarter. He took in $66,200 for Florida Gov. Charlie Crist. According to third quarter FEC reports, lobbyists and lobbyist-registered PACs also bundled checks for several other senators or Senate hopefuls. They raised $27,050 for Sen. Debbie Stabenow (D-Mich.), $23,450 for Sen. Barbara Boxer (D-Calif.) and $16,348 for Rep. Joe Sestak (D-Pa.), who is running for the Democratic nomination against Sen. Arlen Specter (D). Lobbyist bundling is the practice of fundraising by pooling from a large number of campaign contributors , political action committee and individuals , according to FEC rules. Donors can then funnel more money to campaigns than they could personally contribute under campaign finance laws. New lobbying ethics laws passed in 2007 require that semi-annual disclosure reports be filed for every two or more bundled contributions that exceed $16,000.

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The Most Expensive U.S. Colleges: SEE The 10 Biggest Tuition Bills

October 21, 2009

This fall, as unemployment surged and the economy continued to hurt, students at both public and private colleges across the country saw a significant increase in the cost of their education. And tuition at the priciest schools in America is simply staggering. Campusgrotto.com compiled a list of the 100 colleges with the highest price tags (hat tip to Consumerist ). (Note: The ranking adds the advertised cost of tuition with room and board, and doesn’t take into account how much the average student at each school actually pays after financial aid.) Sarah Lawrence College, a tiny liberal arts school, tops the list. Here are the top ten: 1. Sarah Lawrence College — $54,410 2. New York University — $51,991 3. The George Washington University — $51,730 4. Bates College — $51,300 5. Skidmore College — $51,196 6. Johns Hopkins University — $51,190 7. Georgetown University — $51,122 8. Connecticut College — $51,115 9. Harvey Mudd College — $51,037 10. Vassar College — $50,875 To see the full list, go to CampusGrotto . Get HuffPost Business On Facebook and Twitter !

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Harvard Bet on Interest-Rate Swaps Backfires, Costing School $500 Million

October 17, 2009

By John Lauerman and Michael McDonald Oct. 17 (Bloomberg) — Harvard University’s failed bet that interest rates would rise cost the world’s richest school at least $500 million in payments to escape derivatives that backfired. Harvard paid $497.6 million to investment banks during the fiscal year ended June 30 to get out of $1.1 billion of interest-rate swaps intended to hedge variable-rate debt for capital projects, the school’s annual report said. The university in Cambridge, Massachusetts, said it also agreed to pay $425 million over 30 to 40 years to offset an additional $764 million in swaps. The transactions began losing value last year as central banks slashed benchmark lending rates, forcing the university to post collateral with lenders, said Daniel Shore , Harvard’s chief financial officer. Some agreements require that the parties post collateral if there are significant changes in interest rates. “When we went into the fall, we had some serious liquidity management issues we were dealing with and the collateral postings on the swaps was one,” Shore said in an interview yesterday. “In evaluating our liquidity position, we wanted to get some stability and some safety.” Harvard sold $2.5 billion in bonds in the fiscal year, in part to pay for the swap exit, even as the school’s endowment recorded its biggest loss in 40 years, the report released yesterday said. This is the first time the university has detailed the cost of exiting its swaps. Further Pressure “Substantial losses” in Harvard’s General Operating Account, a pool of cash from which bills are paid, further put pressure on the school, the report said. The net asset value of the account fell to $3.7 billion from $6.6 billion during the fiscal year, according to the report. Harvard has typically invested a large portion of this operating account alongside the endowment, generating “significant positive investment results,” the report said. This year, the endowment’s losses hurt Harvard’s cash, according to the report. Swaps are a type of derivative where two parties agree to exchange payments tied to a financing, typically receiving a variable-rate for a fixed-rate payment. The terminated contracts include three tied to $431.7 million of bonds the university sold in 2005 and 2007, the annual report said. Unwinding Swaps From New York to San Francisco Bay, tax-exempt issuers have paid hundreds of millions of dollars to unwind bond-and-swap transactions officials initially said would cut borrowing costs. The deals fell apart when municipal-bond insurers, who backed much of the underlying debt, lost their AAA ratings in 2008 and interest rates, instead of climbing, plunged to record lows in the worst credit crisis since the Great Depression. The swaps are often pegged to Securities Industry and Financial Markets Association lending benchmarks or the three- month dollar London-Interbank Offered Rate, known as Libor . Libor closed yesterday at 0.28 percent, from a 10-year high of 6.89 percent on June 1, 2000. Yale University in New Haven, Connecticut; Georgetown University in Washington and Rockefeller University in New York have reported losses related to interest-rate swaps, in some cases prompting the schools to pay termination fees to end the contracts. Lawrence Summers The annual report provides new details on Harvard’s derivative-related losses. Many were entered into in 2004, said Harvard spokeswoman Christine Heenan . Lawrence Summers , director of President Barack Obama’s National Economic Council, was the university’s president at the time. White House spokesman Matthew Vogel declined to comment. Harvard Management Co., which administers the endowment, has been run since July 2008 by Jane Mendillo , former chief investment officer of nearby Wellesley College. She took over from Mohamed El-Erian , now chief executive officer of Pacific Investment Management Co., which oversees the world’s largest bond fund from Newport Beach, California. He succeeded Jack Meyer , who ran it for 15 years, in February 2006. Harvard’s loss “says that people don’t understand the complexity of the products they are buying and selling and that doesn’t begin and end with mortgage securities,” said Robert Doty , a municipal finance adviser at American Governmental Services in Sacramento, California. “It shows that with these products that are so highly complex, people are a long way from knowing as much about these products as they think they do,” he said. Financing Construction The Harvard swaps involved bonds sold to finance a medical research building, graduate housing, parking and a Center for Government and International Studies , according to reports from Moody’s Investors Service. They were also used to lock in rates for future bond sales for an expansion of the campus across the Charles River in Boston that has since been scaled back. Harvard had 19 swap contracts with New York-based Goldman Sachs; JPMorgan Chase & Co.; Morgan Stanley; Charlotte, North Carolina-based Bank of America Corp. and other large banks, according to a bond-ratings report by Standard & Poor’s released on Jan. 18, 2008. Harvard paid “a large termination fee, but within the range that we’ve heard about over the last year,” Matt Fabian , the senior analyst and managing director of Municipal Market Advisors in Westport, Connecticut, said in an e-mail. “There is a reason why, regardless of the issuer’s sophistication, there should be limits to their exposure to derivatives and variable rate bonds.” Harvard has frozen employee salaries, slowed hiring, cut staff and offered other workers early retirement as part of a cost-cutting program to compensate for losses in its endowment. The fund, which dropped to $26 billion in value over the fiscal year from $36.9 billion, paid 38 percent of the school’s bills during that time, the report said. Alumni Request The Faculty of Arts and Sciences, Harvard’s biggest unit, which includes its undergraduate school, is asking alumni and donors for more funds that can be used immediately and without restrictions to help close a projected $110-million deficit in its 2011 budget, Dean Michael Smith said in a recent speech. Current-use gifts rose 23 percent to $291 million from $237 million in fiscal 2008, the report said. Harvard might have paid less to escape the swaps if it held out for better terms, Fabian said. “A lot of issuers don’t have that kind of cash, and so they waited, and relied on their dealers’ patience and largesse to hold off terminating,” Fabian said. “If Harvard had waited, the cost of terminating may well have been lower, but they weren’t willing to take that risk.” To contact the reporters on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net ; John Lauerman in Boston at jlauerman@bloomberg.net .

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Harvard University Paid $500 Million to Exit Backfired Interest-Rate Swaps

October 16, 2009

By John Lauerman and Michael McDonald Oct. 16 (Bloomberg) — Harvard University, the world’s richest school, paid almost $500 million to investment banks to escape interest-rate swaps that backfired, according to the school’s annual report released today. Harvard paid $497.6 million during the fiscal year ended June 30 to get out of $1.1 billion of interest-rate swaps intended to hedge variable-rate debt for capital projects, the report said. The university in Cambridge, Massachusetts, said it also agreed to pay $425 million over 30 to 40 years to offset an additional $764 million in swaps. The swaps began losing value last year when benchmark interest rates fell in the global credit crisis, forcing the school to post collateral to the banks that sold the swaps, said Daniel Shore , Harvard’s chief financial officer. Harvard sold $2.5 billion in bonds, in part to pay for the swap exit, even as the school’s endowment recorded its biggest loss in 40 years, the Harvard annual report said. “When we went into the fall, we had some serious liquidity management issues we were dealing with and the collateral postings on the swaps was one,” Shore, who is also Harvard’s vice president for finance, said in an interview today. “In evaluating our liquidity position, we wanted to get some stability and some safety.” Swaps are a type of derivative where two parties agree to exchange payments tied to a financing, typically a variable-rate for a fixed-rate payment. The terminated swaps include three tied to $431.7 million of bonds the university sold in 2005 and 2007, the annual report said. To contact the reporters on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net ; John Lauerman in Boston at jlauerman@bloomberg.net .

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Reagan’s Role in Berlin Wall Collapse Overrated Says Meyer: Lewis Lapham

October 16, 2009

Interview by Lewis Lapham Oct. 16 (Bloomberg) — “Open Up!” shouted the crowds massing on the east side of Checkpoint Charlie, Cold War Berlin’s grim border crossing. It was Nov. 9, 1989. The panicky head guard dialed and redialed, vainly attempting to get instructions from the Interior Ministry. Earlier, a low-level bureaucrat had bungled a press briefing, implying East Germans were now free to travel after nearly 30 years, and here were thousands ready to go. At 11:17 p.m., the guard gave up. “Open up!” he ordered, and the gates swung open to freedom. Though American President Ronald Reagan is often credited with the fall of the Soviet Union, especially in the U.S., more crucial were the heroic stands taken by Eastern European leaders, among them Czechoslovakia’s Vaclav Havel , Poland’s Lech Walesa and the USSR’s Mikhail Gorbachev . I spoke with Michael Meyer , author of “The Year that Changed the World: The Untold Story Behind the Fall of the Berlin Wall” (Scribner), on the following topics: 1. Reagan: “Tear down this wall!” 2. Gorbachev, Freedom’s Wild Card 3. Hungary’s Hole in the Iron Curtain 4. The Great Escape 5. Dancing on the Wall To buy this book in North America, click here . ( Lewis Lapham is the founder of Lapham’s Quarterly and the former editor of Harper’s Magazine. He hosts “The World in Time” interview series for Bloomberg News.) To contact the writer on the story: Lewis Lapham in New York at lhl@laphamsquarterly.org .

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Blankfein Puts Mouth Where Goldman’s Profit Is: David Reilly

October 15, 2009

Commentary by David Reilly Oct. 16 (Bloomberg) — Every quarter, the same question bedevils Wall Street: What’s in the secret sauce that Goldman Sachs Group Inc. uses to make so much money? Yesterday was no different as Goldman reported third- quarter net income of $3.19 billion and more eye-popping bonus figures. Purported reasons for Goldman’s success range from the conspiratorial — its supposed grip on government and ability to trade ahead of clients — to the admirable, its top talent and a culture reminiscent of the old Wall Street partnerships. Usually missing from any list is an issue cited by Chief Executive Officer Lloyd Blankfein in an opinion piece this week: Goldman’s reliance on market discipline and its embrace of market-value accounting. This approach creates what Blankfein called an “essential early warning system” that allows the firm to better manage risk — and ultimately rack up outsized profits . Clearly there is more to it than that. Goldman has benefited tremendously from a winnowing of the competition with the fall of Lehman Brothers Holdings Inc. and others, along with a low-interest-rate environment that has helped it reap huge trading gains . And along with other big banks, it got a government lifeline that prevented a run on it and the financial system. Yet Goldman’s emphasis on market discipline played a big, and often unacknowledged, part in helping the firm sidestep the worst of the credit crunch. Odd Man Out Blankfein’s defense of market-value accounting is also notable because he and Goldman increasingly look like the odd man out on this issue. It is taken as a matter of faith among many bankers, regulators and legislators that the use of market-value accounting that relied on daily changes in asset prices exacerbated the financial crisis. They now are engaged in a campaign to roll back the use of market values wherever possible, or at least block moves to expand its use. “I see it differently,” Blankfein wrote in the Financial Times . “If institutions had been required to recognize their exposures promptly and value them appropriately, they would have been likely to curtail the worst risks.” “Instead, positions were not monitored, so changes in value were often ignored until losses grew to a point when solvency became an issue.” Blankfein also backed a project at the Financial Accounting Standards Board that may call on banks to eventually use market prices for things like loans. Keeping Mum If anything, you would expect Blankfein to keep mum on this issue since he and Goldman are trying to deflect criticism of big bonuses that come on the back of the taxpayer bailout. The fact that Goldman has set aside in 2009 almost $17 billion for bonuses and compensation fuels such resentment. Yet Blankfein publicly took a stance that in many ways puts him at odds with folks like the American Bankers Association , Federal Deposit Insurance Corp. Chairman Sheila Bair , Federal Reserve Governor Elizabeth Duke and the European Union. In doing so, he showed Goldman isn’t willing to back down from a long-held conviction. For that he deserves credit. Then again, he and Goldman have already profited from their stance. Goldman’s commitment to market discipline helped it move more quickly than others when the crisis began to unfold. It also is part of what pushes Goldman to protect, or hedge, its exposure to various markets and firms. That has led to charges that Goldman only survived the crisis because the government bailed out those on the other side of its trades, notably American International Group Inc. Going Down There’s an element of truth to that — every big financial firm may have gone down if AIG had failed just days after Lehman. Yet this ignores that Goldman rightly tried to protect itself in the first place. Goldman’s reliance on market values caused it to hit up AIG for collateral well before the firm had to be bailed out. That isn’t nefarious; it’s what Goldman should have been doing. AIG, on the other hand, stuck for too long to a mistaken belief that its own models, not market prices, were correct. If it had faced up sooner to the trouble the market was forecasting, the company might have tried to address its difficulties before it was too late. That wouldn’t have necessarily prevented its collapse, but the financial hole facing the government may have been smaller. Of course, just saying you use market prices isn’t enough. You have to do it. Telling Difference That is where Lehman and Goldman differed. While both said they adjusted their books to market values, Lehman seems to have carried hard-hit real-estate holdings at vastly inflated prices. That helped bring about its demise. That’s not to say Blankfein always walks his talk. While his article lauded transparency, Goldman continues to give investors just a bare-bones earnings release, omitting a full balance sheet or the detailed financial data banks usually provide. If JPMorgan Chase & Co. can give that kind of information , Goldman should be able to as well. Then there was yesterday’s comment by Goldman Chief Financial Officer David Viniar that the firm doesn’t have a too- big-to-fail guarantee from the government. That is ludicrous. Goldman is first among equals in the too-big-to-fail club. That said, Blankfein and Goldman, so widely reviled, merit some praise for preaching what they practice when it comes to market values. ( David Reilly is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: David Reilly at dreilly14@bloomberg.net

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Adam Hanft: I’d Like to Buy the World a Coke – And Slap It With a Big Fat Sugar Tax

October 15, 2009

In July 1971, Coca-Cola debuted a commercial that remains famous in the fizz of marketing history. Shot on a hill outside Rome, the spot — featuring a diverse group of winsome, cleaned-up hippies singing a pop song with a folky vibe — was a phenomenon. The spot was a clever way of tethering the mainstream Coke brand to the emerging counter-culture, and making it zeitgeist-worthy. And believe it or not, people genuinely loved the song and the message of global kumbaya. In fact, the song — re-recorded without any reference to Coke — became a #1 hit in the UK and #7 here. And in an early example of cause-marketing, The Coca-Cola Company donated its royalties to UNICEF. Today, the song has its own Wikipedia page. What more can we say? How times and tides have shifted in the last 39 years. Today, Coca-Cola has flipped from the right side to the wrong side of a movement. They are in the crosshairs of an upheaval that’s looking to demonize high-fructose beverages, and to blame our soaring health care costs and obesity epidemic on them. A movement that actually wants to slap a sin-and-slurp tax on every bottle to discourage consumption. Just this week, in a long feature story, NPR reported that “One idea that has been suggested is a junk food tax — and in particular, a tax on soda.” The story went on to say that “Public health advocates say drinking soda is directly linked to obesity, which is partly responsible for skyrocketing health care costs.” They reference a study conducted by the California Center for Public Health Advocacy, with UCLA, which found that “… regardless of income or ethnicity, adults who drink one or more sodas a day are 27 percent more likely to be overweight or obese.” How much money could a tax produce? In a much-quoted story from this month’s New England Journal of Medicine, Kelly Brownell director of Yale’s Rudd Center for Food Policy and Obesity, argues that a federal soda tax could generate $150 billion of ten years. Even worse for the hilltop crowd, Brownell invoked the “T” word: “Using a tax, much as has happened with tobacco, to try to change consumption patterns in a way that would benefit overall public health and provide a very much-needed revenue for programs, seems like a home run.” What’s scary for Coke is that this movement is feeding into two powerful forces. One is a general muscle-flexing by local officials, from mayors to Attorneys-General. Perhaps the most visible mover-and-shaker is Mayor Bloomberg of New York, who is often accused of Nanny Statism for his (successful) efforts to force fast-food companies to display calorie counts. Along with other aggressive nutritional interventions, Mayor Mike appears to be channeling Michael Pollan at times. In California, where menu ingredients can have longer histories than college application essays, Mayor Gavin Newsom is also trying to take the fizz out of Pepsi, Coke, and even uber-chic artisanal-esque manufacturers like Jones Soda. According to the San Francisco Chronicle, Newsom ha actually tagged soda as “…the new tobacco” and plans to “introduce legislation this fall that would charge a fee to retailers that sell sugary beverages.” The story reminds us that “Newsom would need voter approval to tax individual cans of soda and sugary juice, but only needs approval from the Board of Supervisors to levy a fee on retailers. His legislation would charge grocery stores like Safeway and big-box stores.” And it’s not limited to soda. Yesterday’s New York Times pointed out that Richard Blumenthal, the Connecticut Attorney General, has no patience with an industry-wide “Smart Choices” marketing campaign. They say he is “Raising the stakes in the battle over nutritional claims for packaged foods” by “investigating a national labeling campaign that promotes products like Froot Loops and mayonnaise as nutritionally smart choices.” Blumenthal sent blistering letters to Kellogg’s, General Mills and Pepsi in which he admonished them that he “was concerned that the program, called Smart Choices, was ‘overly simplistic, inaccurate and ultimately misleading.’” Beyond energized local entities feeling their organic oats, the second trend that should send tremors through Atlanta — if it isn’t already — is a shift in consumer consciousness from impunity to accountability. Increasingly, we are paying careful attention to the implications of what we buy. It’s more than the Great Recession that’s behind this. We’re looking at the long, winding cascade of effects from every purchase decision we make, from the carbon footprint of the jetted-in New Zealand lamb we buy, to the enviro-complexities of bottled water. Some of us are seriously taking up President Obama’s charge to take responsibility for our health. And younger consumers will rally to these efforts in numbers that are going to surprise everyone. Of course, there are contrarians rattling around. Newsweek has a piece this week which argues that personal responsibility is over-rated, that a tax on behavior is wrong-headed, that we need to focus on income and education to create a healthier population. From where I sit, though, the risks are great for the companies in the sugar-flavored water and sugar-flavored processed wheat business. I wouldn’t be surprised at all if local sugar-and-fructose taxes start appearing in city after city, as one politician after another races to jump on the bandwagon. Americans like to point the finger, and never at ourselves. Americans love an enemy, even if we once wanted to buy the entire world a bottle of it. We are frustrated and angry and need our daily demons. So for Coke, the early warnings from Gavin Newsom and the New England Journal could very well be the Real Thing.

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Robert Teitelman: Bruce Wasserstein 1947-2009

October 15, 2009

We do deals. Bruce Wasserstein did deals, a lot of them, in a career that’s already being called “legendary.” But for the most part, we didn’t see this “artist” of M&A at work; instead, the Bruce we knew was an enthusiast of the media and for journalism. It’s been said often enough, but Bruce came up with the idea for a national newspaper to cover deals. This was in the late ’90s, when you could still discuss starting newspapers and not get laughed at and M&A was setting record after record. After the great eruption of the ’80s, the fall of Drexel Burnham Lambert and the recession of the early ’90s, an M&A system had consolidated. It was a frothy era when the spirit to try new things and think new thoughts was in the ascendant. And this was Bruce Wasserstein. For anyone in financial journalism, the chance to work out the logic of a publication on dealmaking that sprang from the mind of Wasserstein was intriguing. In person, he made it even more so. By then Wasserstein was a famous guy, with an image that bordered on the caricature. His office soared high over midtown; down there tiny ice skaters crisscrossed the rink at Rockefeller Center. There were plastic tombstones everywhere, and copies of his book on M&A, Big Deal . He was a little rumpled. And when he talked he stared at the ceiling, swinging what appeared to be a stick. But what wasn’t evident in the clippings was his enthusiasm not just for this project, which he was utterly convinced would be a huge success although it still lacked a name or a single employee, but in the play of his own mind. He was not only self-evidently smart, and often slyly funny, he clearly loved to think — and to do it in public. And the former University of Michigan editor and Forbes intern liked to think about the media. Conversations with Bruce had to be absorbed and pondered. What was he getting at? What did he really mean? Sometimes, days later, you’d begin to put the pieces together. Sometimes, I’m not sure the pieces were meant for assembly. He would float ideas, and we learned to wait until they emerged again, and then a third time, before we knew he was serious. He seemed to get a kick out of it. He suddenly appeared at one meeting, sat down and spent an hour batting around names for the project. Deal Daily. Deal. Daily Deal. The Daily Deal. And then there was the tag line, which deserves an entire history. At another meeting, Chinese food suddenly arrived (years later, at Lazard, a waiter brought in egg creams for everyone). In a number of those sessions, he would launch into what I later realized was our version of the “Dare to be Great” speech: He had a whole theory of media that was built on being bold, and he would offer it up while the money folks went pale. He was never a meddler in editorial matters. He never slipped us scoops, gave us tips or leaks (sometimes I thought: too bad). In the early days, when we were desperately trying to get our feet beneath us, he would regularly call. My fear was that he would rip us for stories we had screwed up about the subject he knew best, M&A, and that we were still learning. But he didn’t. Instead, he would say, “Now forget that I’m the chairman, and pretend I’m just a reader. Have you ever thought of …” and he would rattle off often sensible ideas. Rarely did he criticize us for our ignorance or lack of sophistication (he certainly had opportunities); and never did he try to prospectively shape coverage, although he occasionally got pressure from colleagues and acquaintances. He was most concerned that we were fair, smart and credible, and he shrugged off the heat like an overcoat. Eventually, as he found other ways to spend his time (Lazard and New York magazine) and, I like to think, we improved, the calls from the ultimate reader petered out. But he was always there. He was remarkably patient, which certainly runs against his image. The Deal has had its ups and downs, and more than once our world threatened to melt away, but he remained as we continued to work out the complex logic of his little idea. When news of his death broke, someone out there in that media jungle tweeted that Bruce was the last great admirer of magazines. I’m not sure that’s really true — although they are rarer than they used to be. But he did seem to love them, to revel in the mechanics of the media and to consume journalism. I’m convinced it was a continuation of his delight in chasing his thoughts wherever they wandered. We’ll miss him. Robert Teitelman is the editor in chief of The Deal.

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Ron Paul, Alan Grayson Ask Senate To Postpone Bernanke Confirmation

October 7, 2009

Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.) have asked Senate Banking Committee Chairman Chris Dodd (D-Conn.) to postpone the confirmation of Ben Bernanke for a second term as chairman of the Federal Reserve. Paul and Grayson want the Fed to open itself up to public scrutiny before the Senate confirms Bernanke. “We are writing to ask you postpone the confirmation of Ben Bernanke until the Federal Reserve releases documentation that will allow the public and the Senate to have a full understanding of the commitments that the Federal Reserve has made on our behalf,” the letter says. The letter calls out the Fed for its role in the Wall Street bailout. “Today, big banks are being bailed out and have a substantially lower cost of capital through an implicit government backstop even as Americans themselves are seeing their pay cut,” the letter says. “This lower cost of capital — at government expense — coupled with increased scarcity of credit is resulting in the banks recapitalizing by charging American consumers higher credit costs, including record overdraft fees and much higher credit card rates.” House Financial Services Committee chairman Barney Frank (D-Mass.) predicted in August that the House would pass Paul’s legislation to audit the Fed this fall. Grayson sparred with Bernanke at a hearing in July. The Florida lawmaker laughed in Bernanke’s face during an exchange in which the Fed chairman said “I don’t know” in response to a question about what foreign central banks do with $550 billion in loans from the Fed. Here is the letter: SenateLetteronBernankeNomination – Get HuffPost Politics On Facebook and Twitter!

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China Celebrates 60 Years of Communist Rule With Beijing Parade

October 1, 2009

By Bloomberg News Oct. 1 (Bloomberg) — The People’s Republic of China marked its 60th anniversary today with a parade through the heart of Beijing aimed at showcasing the country’s rising power and shoring up the Communist Party’s prestige at home. About 200,000 people took part in the celebration, including President Hu Jintao , former President Jiang Zemin and members of the ruling Politburo Standing Committee who watched from the rostrum of Tiananmen — the Gate of Heavenly Peace. It was there, on Oct. 1, 1949, that Mao Zedong declared the communists’ victory in a civil war. China was “able and confident in playing its global role,” Hu said in a speech, in which he vowed that the country would seek “peaceful reunification” with Taiwan. The island has been ruled for much of the past 60 years by the Nationalists, who fled there following their defeat at Mao’s hands. Hundreds of missiles and tanks and thousands of soldiers from the world’s largest standing army paraded down Chang’an Avenue through Tiananmen Square following Hu’s speech. Hu, 66, wearing a black high-collared suit similar to one worn by Mao, had earlier reviewed the troops from an open-topped Red Flag limousine, yelling out “Hello comrades” and “Comrades it’s been hard on you.” Overhead, 151 military aircraft, including J-10 fighter jets , flew past in 12 formations. Hu and his fellow leaders are celebrating China’s newfound prominence on the global stage. China now produces in a day the equivalent of a year’s output five decades ago, and is poised to surpass Japan as the world’s second-largest economy by 2010. The Communists, who lifted 300 million citizens from abject poverty and raised the country’s international influence, must now meet increasing demands for domestic freedom and accountability. ‘Show-Off’ The celebration “is a show-off to beef up confidence in, and support to, the regime,” said Huang Jing , visiting professor at the National University of Singapore’s Lee Kuan Yew School of Public Policy. “Serious questions need to be asked how such a show of strength can translate into” transparency and tolerance for “ethnic, cultural and religious diversity.” About 80,000 children in Tiananmen Square spelled out the Chinese characters for “national celebration” with red and gold placards to begin the celebration. Later, the placards read “obey the Party’s command” and “serve the people.” The People’s Liberation Army displayed 52 types of new weapons, including unmanned aerial vehicles and aircraft with advance-warning radar. Five thousand soldiers marched through the square, past portraits of Mao and Sun Yat-Sen , Republican China’s first president after the fall of the Qing Dynasty in 1912. Nuclear Strike Among the new weapons, according to China Central Television, was a cruise missile called the Long Sword. As a battery of Dongfeng (East Wind) intercontinental ballistic missiles on mobile carriers drove by, the CCTV commentator reminded viewers that China abided by a pledge never to make a first nuclear strike. The parade also included a flotilla of 60 parade floats bedecked with flowers and digital displays showcasing six decades of China’s political, scientific, technological and economic achievements. Among those were floats with portraits of Mao, Deng Xiaoping , a leader who died in 1997, as well as Jiang and Hu. Each were accompanied by recordings of their famous speeches, and thousands of marchers surrounding the floats carried banners trumpeting catchphrases such as “implement and carry out scientific development.” ‘Three Represents’ Liang Xiaopeng, 20, was among the students escorting Jiang’s float touting the 83-year-old former leader’s “Three Represents” doctrine, which helped legitimize members of the business class in Chinese socialist theory. “Today China showed its might, and that makes me very proud,” said Liang, a student at Beijing Printing College who wants to stay in Beijing and work for a publisher. The celebration was an opportunity for the government to showcase its achievements to the country’s 1.3 billion people. CCTV’s broadcast of the event telecast preparations of the parade, complete with marching soldiers, jets and tanks, with the theme of Disney Co.’s “Pirates of the Caribbean” in the background. A commentator extolled the economic achievements of the People’s Republic in the minutes before the parade began. Police kept most of Beijing’s 3.8 million private cars off of the roads today, and restricted access to the city center. South of Di’anmen Street, which bisects the inner city from east to west, police armed with machine guns blocked cars from heading toward Tiananmen Square this morning. 14th Parade The PLA parade is the 14th since the army emerged victorious in the 1949 civil war against the Kuomintang, or Nationalist Party, which now governs Taiwan. Economic growth and rising global influence have come at the cost of domestic expression. Opposition to Communist Party rule is banned while dissent, including the 1989 student demonstrations in Beijing’s Tiananmen Square, is crushed. As many as 800 million Chinese, 60 percent of the population, still live in the countryside , and rapid development has left millions of them behind. Still socialist in name, China has a wider income gap than Taiwan and South Korea have now, or had during their export-led industrializations. The gaps are made wider by the spread of corruption. Graft has reached into the senior ranks of officials, with those convicted including the former parliamentary vice chairman Cheng Kejie and Shanghai party chief Chen Liangyu . Ethnic Tensions Even as Tiananmen Square is festooned today with 56 columns representing the country’s biggest ethnic groups, many Uighurs and Tibetans say they see China as an empire diluting their indigenous cultures. The worst riots in six decades broke out in the past two years in Tibet and the Uighur’s homeland of Xinjiang, two provinces on China’s western fringe, spurred by income gaps along ethnic and religious fissures. The world’s most populous nation has also become the largest consumer of commodities and one of the biggest energy users. China last year passed the U.S. as the biggest emitter of greenhouse gasses, and widespread pollution of its atmosphere and waterways is rarely checked by public opposition. The smog that enveloped Beijing for three days before today’s parade lifted overnight and the parade took place under clear blue skies. — Michael Forsythe , Eugene Tang . With assistance from William Bi in Beijing. Editors: John Brinsley , Ben Richardson . To contact Bloomberg staff on this story: Michael Forsythe in Beijing +8610-6649-7580 or mforsythe@bloomberg.net

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Yvette Kantrow: Doom, the rerun

September 29, 2009

Like Top 10 lists and year-end retrospectives, anniversary stories are a convention of journalism that just won’t go away. So last week we were forced to endure an avalanche of coverage dedicated to re-enacting, re-analyzing, re-reporting, but mostly, regurgitating the fall of Lehman Brothers Holdings Inc. one year after the fact. The media has deemed Lehman’s failure to be the official start of the financial crisis, despite the cataclysmic events that preceded it, including not only the implosion of Bear Stearns Cos., but the government takeover of Fannie Mae and Freddie Mac just a week earlier. Funny how there were no anniversary stories commemorating that landmark event. With a few exceptions, the Lehman coverage consisted of the usual anniversary fare, from the pedestrian where-are-they-now stories to the handwringing what-have-we-learned pieces. (Answer: Not much.) The New York Times gave over a chunk of its op-ed page to former Lehmanites weighing in on the firm’s last days — “I was robbed first by Ben Bernanke, the Federal Reserve Chairman, and Henry Paulson, the former Treasury secretary,” whined one embittered Lehman employee — while CNN boasted of landing an interview with Alan Schwartz, the last Bear CEO. It seems any fallen Wall Street bigwig will do. Lehman’s Dick Fuld, however, remained largely out of view, except on Reuters, where reporter Clare Baldwin staked out his vacation home in Ketchum, Idaho. “Dick Fuld gave me a hug,” began Baldwin’s account of meeting the ex-Lehman chief, who told her that for legal reasons, he couldn’t talk about the events of last Sept. 15. Too bad. At least that would have been something new. As Slate’s Jack Shafer complained about Sept. 11 anniversary stories: “In its most naked form, the anniversary article makes no attempt to advance the story or deepen the collective understanding of the selected anniversary event.” In the case of Lehman’s anniversary, we’ll lodge another complaint: Many of the pieces were authored by journalists who have written or are writing books on the financial crisis. Are their pieces simply promos for their books? Or are their books just longer versions of their anniversary pieces? Where does the marketing end and the journalism begin? There was David Wessel, author of “In Fed We Trust: Ben Bernanke’s War on the Great Panic” on the front page of The Wall Street Journal last Monday arguing that the Fed deserves credit for preventing catastrophe last fall. Want more? Buy the book. At The Times, Joe Nocera, who is working on a crisis book with Bethany McLean, posited that Lehman’s death provided the political will needed to save the economy at large. Nocera also starred in a video on The Times’ Web site retelling the story of Lehman’s collapse, as if we had all just landed from Mars and needed to be filled in. His co-stars: Gretchen Morgenson and Andrew Ross Sorkin, whose own crisis book is scheduled for release next month. Newsweek, meanwhile, commemorated Lehman’s failure by excerpting an upcoming book on J.P. Morgan Chase & Co. CEO Jamie Dimon by Duff McDonald, who profiled Dimon for New York magazine after the Bear deal. And then there’s Lawrence McDonald, the former Lehman vice president who penned an “insider account” of the firm’s fall. He showed up on “The NewsHour with Jim Lehrer” to once again blame it all on Fuld and his private elevator. Needing to get away from all this, we happily retreated into James B. Stewart’s epic anniversary piece in The New Yorker, “Eight Days: The battle to save the American financial system.” (Good thing Roger Lowenstein changed his upcoming crisis book from “Six Days That Shook the World” to “The End of Wall Street.”) Stewart interviewed everyone from Bernanke to Timothy Geithner to Paulson to provide a clinical, behind-the-scenes account of what happened the week Lehman died. He tells his readers off the bat that “memories inevitably have been colored by hindsight and efforts to shade the truth, to affix blame and claim credit,” but his narrative is both highly credible and highly readable. Finishing the piece, you can’t help but wonder what’s left for all those upcoming books to say — a feeling that only deepens when you realize that some of those nearly-instant tomes were completed in about the same amount of time that it took Stewart to craft a 20,000-word magazine story. We suppose the books can offer insight or perspective that we haven’t heard before, but we’re not hopeful. After all, we’re already sick of hearing about Fuld’s damn elevator. Yvette Kantrow is executive editor of The Deal .

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Merkel, Free Democrats Start Talks as Tension Looms

September 28, 2009

By Tony Czuczka and Leon Mangasarian Sept. 28 (Bloomberg) — Chancellor Angela Merkel and the pro-business Free Democratic Party begin talks today on forming Germany’s next government amid disagreements over taxes and labor regulations. Merkel, whose Christian Democrats had their lowest score since World War II, stuck to her party program of waiting until 2011 to cut taxes. Free Democratic leader Guido Westerwelle pressed for faster and deeper tax relief and more deregulation of the labor market. “It’s clear that our compass in these negotiations is our party program,” Westerwelle told reporters in Berlin today, fresh from steering his party to its best result in modern German history. He said he’ll push “with full determination” for as much of the program as possible to be accepted. Merkel, 55, and Westerwelle, 47, will hold their first post-election talks in Berlin later today, when they will seek to bridge their differences. Merkel said she aims to complete the negotiations within a month and have a new government in place by Nov. 9, when Germany marks the 20th anniversary of the fall of the Berlin Wall . “We want to do this quickly,” Merkel said at a separate press briefing. “We put forward our platform in the election and naturally we’re not going to depart from it.” Germany’s deteriorating finances overshadow the coalition- building. Merkel’s administration will borrow a record 329 billion euros ($482 billion) in 2010 as it boosts spending to speed economic recovery. Tax-Cut Differences The forecast was made in June by Social Democratic Finance Minister Peer Steinbrueck and takes no account of 35 billion euros in tax cuts sought by the FDP. Merkel’s tax pledge amounts to 15 billion euros over her four-year term. Merkel will also have to try to merge the platform of her bloc, which includes the Bavarian Christian Social Union, with demands by the FDP a simpler tax system comprising just three brackets: 10 percent, 25 percent and 35 percent. “Merkel should be under no illusion: this alliance will only happen thanks to the FDP’s strong showing,” Tilman Mayer, head of Bonn-based Institute for Political Science, said in an interview. “Westerwelle will make his voice heard in coalition talks and demand a good deal of what the FDP’s been pushing for in the campaign.” Afghan Friction Afghanistan, where Germany has about 4,200 troops as part of NATO forces, is another point of potential friction. Westerwelle, the probable foreign minister replacing Frank- Walter Steinmeier , has accused Merkel’s former government with the Social Democrats of providing too few trainers for Afghan security forces. Westerwelle wants to end the mission “as quickly as possible,” Der Spiegel magazine cited him as saying in an interview last month. That’s a more urgent tone than Merkel, who said Sept. 8 that Afghan forces must make “enough progress in the next five years to allow international troops to steadily reduce their role.” German defense suppliers such as Duesseldorf-based Rheinmetall AG “could be seen negatively” because “a strong FDP within the government may mean earlier-than-expected withdrawal of troops from Afghanistan,” UBS Investment Research analyst Sven Weier said in a note today. Hiring and Firing The FDP’s campaign call to give German business more leeway to fire workers also goes further than Merkel’s party. Firing rules currently apply for companies with more than 10 employees and the FDP wants to raise the threshold to more than 20 employees. “That’s a highly contentious, highly emotive subject,” Holger Schmieding , chief European economist at Bank of America- Merrill Lynch in London, said in an interview. Merkel and the FDP will probably look for other ways to change labor laws, he said. While Merkel and the FDP agree on extending the lifespan of German nuclear plants beyond the planned closure by about 2021, the FDP probably will resist her call to impose new burdens on utilities that operate the plants to promote renewable energy, Claudia Kemfert , chief energy analyst at the Berlin-based DIW economic institute, said in an interview. IG Metall, Germany’s biggest labor union, warned of wider public opposition to plans to return to nuclear power. ‘Fierce Conflict’ Merkel and Westerwelle’s parties faces “a fierce conflict with workers and unions if they call into question matters of social welfare, labor rights and the nuclear phase-out,” Hartmut Meine , an IG Metall regional director and a board member at Volkswagen AG and Continental AG, told reporters in Hanover. Merkel’s Christian Democratic bloc won 33.8 percent in the elections to the 622-seat lower house of parliament, according to provisional complete results. The Social Democrats had 23 percent, a drop of 11.2 percentage points from 2005, the biggest decline for any party in postwar history. The anti-capitalist Left Party won 11.9 percent and the Greens 10.7 percent. “Merkel can’t expect her coalition partner to slot into its historic role as the junior mascot,” Hans-Juergen Hoffmann , managing director of Berlin-based polling company Psephos , said in an interview. “The FDP will have none of that. It’s the kingmaker of Merkel’s new coalition.” To contact the reporters on this story: Leon Mangasarian in Berlin at lmangasarian@bloomberg.net ; Tony Czuczka in Berlin at aczuczka@bloomberg.net .

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Tram Nguyen: A Bit of a Break from the Big Banks

September 25, 2009

Sometimes, the threat of regulation actually works. This week, JPMorgan Chase and Bank of America both announced changes to their overdraft fees — an established, if somewhat nefarious, bank practice that has increasingly come under fire during this recession. For years, banks have charged hefty fees for “overdraft protection,” raking in billions of dollars in revenue as a result of confusing and manipulative policies that can leave a customer owing hundreds in penalties for tiny over-drawn amounts. The banks kept claiming that covering overdrafts was a service customers wanted (even though many don’t even know it exists or how it works), and that practices like processing the highest expenses first were meant to help customers get their largest, most important bills paid on time — instead of actually draining their accounts and tricking them into going over the balance. But these days, that dog won’t hunt. More and more Americans from the rapidly-eroding middle class are becoming low-balance account holders — traditionally the “LMI” (low to moderate income) segment of working poor folks and people of color that financial institutions have long ignored with impunity. The political environment may be changing as a direct correlation to the level of financial pain being felt. In the face of rising consumer outcry and outrageous story after story reported in the media, legislators and regulators finally found the political will to make some moves. Rep. Carolyn Maloney and Sen. Christopher Dodd recently revived efforts to restrict overdraft protection to “opt-in” only, while the Federal Reserve let it be known a few weeks ago that it planned to do the same. Chase and BofA were smart to get ahead of this curve with a preemptive strike on overdraft before the financial regulatory debate resumes in Washington this fall. But in reality, the reforms they made, while welcome, don’t go that far in protecting consumers. Besides an “opt-in” and processing transactions chronologically instead of by amount, banks also need to alert customers at their ATM if the pending transaction will result in an overdraft and accompanying fee. As well, they should provide “point of sale” notification by having debit cards be declined if the purchase amount will go over the limit, just like with credit cards. According to a survey by the California Reinvestment Coalition (CRC), all of California’s big banks — Bank of America, Bank of the West, Citibank, Union Bank of California, U.S. Bank, Washington Mutual (now Chase), and Wells Fargo — have similar overdraft policies that turned presumably free checking accounts into high-cost, short term loans for customers with low balances. With two of the biggest banks now modifying this exploitative practice, we hope a glimmer of competition will actually encourage other banks to do the same and better. CRC and our allies have been trying to change banks’ bad practices for years. This isn’t the first time Chase or BofA have heard consumer complaints about overdraft, but this is the first time they felt sufficiently motivated to do something about it. Congress, the White House, and regulatory agencies should take note: the credible threat of regulation drives change. Public pressure needs to build if ordinary Americans are going to get more than a small break from the banks.

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J. Richard Stevens: Add NSF Fees to the List of Commercial Banking Reforms

September 24, 2009

Wednesday, the New York Times published a story announcing that two commercial banks, Chase and Bank of America, were preparing to reduce the fees that occur when a customer’s balance becomes negative. Anyone who runs a month-to-month family budget knows that in recent years many commercial banks have slowly adjusted account policies in ways that increase their revenue from fees. In the spirit of full disclosure, my wife and I used to hold accounts at Bank of America. In 2006, we became alarmed at the contents of a series of policy notices we received, and eventually canceled our accounts in 2007 after experiencing the “snowballing effect” in which a $7 overdraft and a delayed deposit credit resulted in more than $200 in bank fees and charges. We opened an account with Wells Fargo, largely because friends who bank there suggested the bank was more customer-centric than some of the other larger banks. But the Wells Fargo experience proved similar (and in fact, given this morning’s announcements, WF might be less hospitable to its customers than Bank of America and Chase). My current concern involves the insufficient funds policy on a customer’s checking account, but I’ll return to that momentarily. The September 9 NYT article by Ron Lieber and Andrew Martin, ” Overspending on Debit Cards Is a Boon for Banks ,” featured Wells Fargo. Peter Means, a 59-year-old graduate student from Colorado, cited a case in which Wells Fargo charged him $238 for seven transactions, each less than $12. This is the “snowball effect” in action: one transaction exceeds the balance of an account, and each subsequent bank fee makes it more difficult for an account holder to return the balance to positive numbers. And, as numerous customers have pointed out (check out an entry posted on Complaints.com from the fall of 2006 or even the muckraking site Wells Fargo Watch ), deposits and credits are often delayed at least 24 hours for verification, whereas debits and charges are posted within the same transaction day, exacerbating the snowball effect and delaying efforts to repair the damage to one’s account. Ron Lieber wrote a follow-up article explaining why this practice began and why it’s not likely to change in the near future. Add to this mix changes concerning the ordering of transaction reports. According to Hagens Berman Sobol Shapiro, the firm launched a suit against Wells Fargo in Seattle for its practice of ordering daily transactions from largest to smallest (which effectively maximizes bank fees, because smaller charges that might have otherwise been covered are calculated last. Overdraft fees are assessed per transaction, not by the amount a customer overspends). Similar suits have been filed against Wachovia, though this practice appears fairly standard among commercial banks. I called Bank of America customer service after the announced implementation of this policy. The individual with whom I spoke claimed that the policy change was geared to better serve the customer (the standard argument is that a customer would want to cover larger expenses like mortgage payments and car payments, rather than have them returned). I asked at the time what data had been collected from customers concerning this preference (I am, after all, a social scientist and am always interested in survey and focus group methodology), but the representative could only cite vague claims of customer requests. I repeated this exercise recently with Wells Fargo, specifically requesting, as a customer, that my account clear smaller transactions first. The customer service representative I spoke to again cited the policy’s intent to “serve the interests of our customers” and explained that “the computers” could not be reconfigured to handle my account differently. As I said, my small contribution to the laundry list of concerning bank practices involves the non-sufficient fund (NSF) fee policy changes. As anyone who’s ever bounced a check knows, banks and commercial retailers both charge penalty fees for writing a check that exceeds one’s available funds. The new policy change involved the reporting mechanism. When a retailer is informed that a transaction failed to clear the customer’s bank account, the standard practice is to submit the check for payment again, to make sure the problem is not due to a banking error. Only when a second failure is reported will many retailers take the next step of contacting the customer to rectify the situation. What has changed at commercial banks like Wells Fargo is the manner in which NSF fees are applied to checks. Currently, a customer is charged an NSF fee for each attempt a retailer makes to deposit a customer’s check into their account. In effect, this means that a $10 check that does not clear a customer’s account will most likely accrue multiple NSF fees, at least $70 from the bank in addition to the $25-35 the retailer will charge the customer. Unlike debit card transactions, which are pre-approved at the moment of transaction, customers who bounce a check typically face around $100 in fees per transaction, as well as the original amount of the transaction no longer honored. The same deregulation that led to the recent financial upheaval on Wall Street would appear to be at least partly responsible for these recent policy changes. With a wider portfolio of increasingly leveraged assets, it’s understandable why most commercial banks have altered their policies to generate more revenue. What isn’t understandable is why these alterations are framed as having the customer’s interests at heart.

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Harvard, NYU Law Students Left Hanging as Big Law Firms Slash Job Offers

September 23, 2009

By Cynthia Cotts Sept. 23 (Bloomberg) — Many students entering their final year at top law schools including Harvard and New York University haven’t landed the full-time jobs they would normally have claimed by now, firms and school officials said, a reflection of the shrinking demand for legal services. The stark reality of the legal marketplace was illustrated by yesterday’s 2010 job offers by Skadden, Arps, Slate, Meagher & Flom LLP , the highest-grossing U.S. law firm. It projected a 50 percent cut in summer hiring, said Howard Ellin , the recruiting partner for Skadden. The firm hired 225 students this summer and plans to hire less than half that for summer 2010. The number of first-round interviews for second- and third- year Harvard Law School students fell 20 percent this year, Mark Weber , assistant dean for career services, wrote in an e-mail, adding that it’s too early to predict how many will get second interviews. At NYU , interviews plunged this school year compared with last, with callbacks for second interviews dropping “dramatically,” said Irene Dorzback, dean of career services. “When I was at NYU 10 years ago, top-performing students got an average of 25 callbacks,” Jonathan Cole, a senior associate at Orrick, Herrington & Sutcliffe LLP , said in an interview last week on the Greenwich Village campus. “Today, they’re lucky if they get 10.” When it comes to getting a job, he said, “no one is taking anything for granted.” Traditionally Hire A law degree typically takes three years to obtain. Law firms traditionally hire students for summer internships after their second year of school, then offer them jobs beginning after graduation the following year. Large U.S. firms are delaying start dates for 2009 and 2010 graduates, and hiring fewer students for next summer and beyond. The job crunch is likely to affect the class of 2011 as well, said James Leipold, executive director of the Association for Legal Career Professionals . “We expect to see more students taking non-legal jobs in industry,” Leipold said in an interview. “We expect to see more students taking jobs at small and medium-sized law firms or launching solo practices right out of law school.” The collapse last year of San Francisco-based Thelen and Heller Ehrman LLP , as well as New York-based Thacher Proffitt & Wood, is contributing to the drop in recruiting, Dorzback said. In July, San Francisco-based Orrick and Philadelphia-based Morgan, Lewis & Bockius LLP canceled plans to hire law students next summer, citing diminished demand for legal services. DLA Piper LLP , the 11th-highest-grossing U.S. law firm, is deferring full-time start dates of first-year associates, originally scheduled for this fall, until January. Year’s Wait This summer’s interns who are offered jobs won’t start for at least a year, in January 2011 or January 2012, according to an internal memo at the firm. When Dorzback learned about the canceled summer programs, she invited Orrick and others to offer job-seeking help to the school’s 500 potential 2010 graduates. Orrick’s Cole said last week that he was busy all day conducting one-on-one mock interviews and career sessions. “These are top students at a top school,” said Cole, of Orrick’s project finance group in New York. “They all have callbacks, but no one is swimming in offers.” While bigger firms are cutting back, some smaller firms haven’t reined in their recruiting. Kasowitz Benson Torres & Friedman LLP , a New York firm with more than 300 attorneys, made offers to all 16 student associates this summer and asked them to start full-time next September, said Aaron Marks , a partner. Highest Revenue Kasowitz Benson, which specializes in complex litigation, reached its highest revenue ever in 2008 and expects 2009 revenue to be the same, managing partner and founder Marc Kasowitz said in an interview. “It feels wonderful” to have a job lined up, Lucienne Pierre, a Kasowitz hire in her third and last year at Cornell University Law School , wrote in an e-mail. At Cornell, in Ithaca, New York, many third-year students’ plans remain up in the air, according to Pierre. They either didn’t receive job offers from the firms where they worked over the summer, the firms haven’t made offers or the offers came with deferred start dates. As a result, she said, many are looking for clerkships and public-interest jobs. Leo Rakitin, a second-year law student at NYU, is still looking for a summer job for next year. “I’m keeping an open mind,” Rakitin said last week when he showed up for a practice interview with Cole. 110-Lawyer Firm Rakitin worked this summer at Davis & Gilbert LLP , a 110- attorney New York firm that represents clients in marketing, advertising and media. The firm’s summer class consists of about two-thirds first-year law students and one-third second-year students. It makes full-time job offers to the latter at the end of the summer, and asks its first-year students to work elsewhere after their second year, said Michael Lasky, litigation co-chairman at Davis & Gilbert. “We have not had to cut back on our summer program or our on-campus interviews,” Lasky said in an interview. “If you are strategically focused, you can do a lot of good things and prove yourself to be recession-immune.” To contact the reporter on this story: Cynthia Cotts in New York at ccotts@bloomberg.net .

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Justine Henin Follows U.S. Open Winner Kim Clijsters in Return to Tennis

September 22, 2009

By Danielle Rossingh and James Neuger Sept. 22 (Bloomberg) — Justine Henin will end her retirement from the women’s tennis tour after 16 months to try to win Wimbledon, the only major title the former No. 1 ranked player hasn’t won. “Once the flame is lit, it is never extinguished,” Henin, 27, said today on RTL television in her native Belgium. The seven-time Grand Slam champion plans to return to competition in January in Australia, where the 2010 Australian Open will start Jan. 18 in Melbourne. Henin quit the sport in May 2008 while ranked No. 1, saying she wanted “a new start” in life. Before her retirement, Henin won 41 career titles, including four French Opens, two U.S. Opens and one Australian Open. She was a two-time runner-up on Wimbledon’s grass courts, won the season-ending WTA Tour Championships back-to-back and clinched the singles gold at the 2004 Athens Olympics. “Justine is one of the great champions in the history of women’s tennis, and we, along with millions of her fans around the globe, are thrilled with her announcement today,” Stacey Allaster , chairman and chief executive officer of the WTA Tour, said in an e-mailed statement. Henin is following in the footsteps of Kim Clijsters . Clijsters, a former world No. 1 in the WTA rankings, made one of the sport’s greatest comebacks by winning the U.S. Open Sept. 13. That was a month after she ended a two-year retirement during which she got married and had a baby girl. Clijsters is the first mother to capture a major title since Evonne Goolagong Cawley won Wimbledon in 1980. Henin wants to Wimbledon, the only major that’s eluded her, her long-time coach Carlos Rodriguez told RTL. Hunt for Wimbledon “One of the reasons she’s coming back is for the fourth title,” Rodriguez said. “I’ll do all I can to help her get there.” Rodriguez said he had initially been “surprised” Henin was contemplating a return to the women’s tour. “She made this decision after a lot of thinking,” he said. “We’ve been through difficult moments and happier moments.” Belgian media had been speculating for weeks that Henin would return. “Justine Henin Will Also Start a Second Career,” Flemish newspaper Het Laatste Nieuws headlined on its Web site earlier today. The newspaper also said Belgian tennis is once again living “a fairytale” after Clijsters won the U.S. Open while another Belgian, Yanina Wickmayer , made the semifinals of the year’s final major. Clijsters was received by thousands of fans at Brussels Airport last week. Belgian broadcaster RTBF reported last week that Henin had ordered 14 new rackets, the same number she used on the WTA Tour. Exhibition Matches The return of Clijsters and Henin is seen as positive news for the WTA Tour , which has been lacking strong rivalries and a dominant leader since Henin quit the sport. Since then, five women have held the top spot, while current No. 1 Dinara Safina of Russia has yet to win a major. Speculation about a possible return mounted after Henin announced she’d play two exhibition matches in Charleroi and Dubai in December against 10th-ranked Flavia Pennetta of Italy and two other Tour players. She also recently pulled out of a play she was supposed to perform in this fall, according to Belgian newspaper Vers L’Avenir . Henin refused to answer questions about her tennis career at a Unicef press conference in Brussels during the U.S. Open. As a Unicef ambassador, Henin visited Cambodia this summer to learn more about the organization’s infant-immunization program. Tennis Academies During her time away from the WTA Tour, Henin worked at her tennis academies, hosted a music show on Belgian television and starred in a reality show. She told reporters during a visit to Roland Garros in May that she had no plans to return to the tour. In May last year, Henin said walking away from the sport was “a relief, a new page is opening up.” She cited the physical and emotional demands of the tour’s 11-month season, the longest in professional sports. Henin retired after an emotional year and her most successful season. She won 10 of the 14 events she entered in 2007, including the French and U.S. Opens. Henin skipped the Australian Open that year after separating from her husband, Pierre-Yves Hardenne, and patched up her relationship with her estranged father, sister and two brothers. Henin was 12 when her mother died. “It’s the first time I’ve gone back on a major life decision,” she said in the broadcast interview. “I know myself better today and maybe that’s my strength.” In a sport increasingly dominated by tall power-hitters like Serena and Venus Williams and Maria Sharapova , the 5-foot-5 Belgian stood out with a game that was built around her backhand — a one-handed stroke that blistered opponents — and mental toughness. To contact the reporter on this story: Danielle Rossingh at the London sports desk at drossingh@bloomberg.net ; James Neuger in Brussels

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Emma Coleman Jordan: Passive Bank Directors Pose Systemic Risks

September 22, 2009

Inattentive regulators, swashbuckling CEO’s, greedy mortgage originators and misinformed borrowers have all been identified as contributing factors to the financial panic after the fall of Lehman Brothers a year ago. Each of these players did indeed make an important contribution to the meltdown and panic a year ago. But passive directors, especially those serving on the boards of systemically important firms have remained largely exempt from regular public criticism. I recently reviewed the boards of the top 17 recipients of TARP money. My research report for the Center for American Progress: A Fair Deal For Taxpayers, Public Directors Are Necessary to restore Trust and Accountability at Companies Rescued by the U.S. Government found that an amazing 92% of the directors who were in place before the financial crisis of 2008 are still in place. http://www.americanprogress.org/issues/2009/09/public_directorships.html This fact alone is cause for concern. How can directors who approved the decisions that led to the crisis be relied upon to steer a successful passage out of the turmoil? More importantly, how can they be expected to provide innovative leadership in the difficult post-crisis environment. The enforcement spotlight is now turning to the directors of large interconnected or systemically important financial firms. Three inquiries have focused on the role of Bank of America directors in the decision to acquire Merrill Lynch in December of last year. Andrew Cuomo, NY Attorney General, Judge Ned Rakoff of the NY Federal District Court , and Congressman Ed Towns, Chair of the House Government Oversight and Accountability Commitee have all sought to compel Bank of America to reveal more detail about which officers or directors approved the required disclosures First, last Friday, Andrew Cuomo, New York Attorney General, served subpoenas on 5 directors of Bank of America, members of the Audit Committee, as a part of his continuing probe of the failure to disclose to investors $8.98 billion of Merrill losses and 5.6 billion dollars of Merrill bonuses that emerged during the last quarter, just before the merger was approved by shareholders on December 5, 2008. The Wall Street Journal quotes Cuomo as asking whether the directors ” were misled, or were they little more than rubber stamps for management’s decision making.” Federal Judge Jed Rakoff, rejected the SEC settlement of its enforcement action against Bank of America for failure to disclose the bonuses. Rakoff wrote: B of A executives “effectively lied to their shareholders.” B of A was the recipient of 45 billion dollars in federal bailout money, the $3.6 billion in bonuses it paid out to executives was money “from Uncle Sam,”. Rakoff rejected the settlement, ordered a trial no later than February first in his courtroom and concluded that the settlement “does not comport with the most elementary notions of justice and morality.” Chairman Edolphus Towns has also been investigating the details of the Merrill Lynch acquisition. Most recently, Towns, gave B of A a noon deadline, which they missed, to deliver a response to his questions about attorney client communications. This effort to pierce the shield of attorney client privilege to determine whether securities or financial regulations were violated, is unusual, although not completely unheard of. Now that Bank of America directors are under the glare of the national spotlight, will the directors at other systemically important banks get the message: Wake up. http://http://www.americanprogress.org/issues/2009/09/pdf/public_directors.pdf

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Diane Francis: China jitters

September 7, 2009

Asia suffered jitters last week as the world hurtles toward the traditionally dangerous fall season for stocks. On September 4, the Financial Times plastered across its front page a photo of riot troops in full gear ready to repel protesters in China’s troublesome province of Urumqi. That is a remote northwestern province where China’s hugely dominant Han ethnic people do not dominate. Violence there in July cost about 200 lives and this week upset Han groups demanded the resignation of the local Community Party boss. This was followed by concern in another remote region involving protests by Chinese peasants and the sudden departure of Google’s China CEO as the government tightens censorship on the Internet. Welcome to China Tremors, a growing market and media phenom thanks to the fact that the Middle Kingdom taken its place with the world’s most important economies. Not just China either There were also small seismic shocks, such as the overthrow of Japan’s ruling elite with a socialistic, untested party that pledges to get out from under America’s hegemony. Then there’s always the nagging concern about North Korea with its ailing, lunatic leader and his unknown succession plans. That’s the bad news. But that’s also the good news because transparency has never been greater in the region. China – third largest GDP in the world – is now exceedingly open as reporters, citizen journalists, photographers and bloggers beam its tremors and jitters to the rest of the world. Put another way, ten years ago it would have been unthinkable that a journalist could have shot a scene in Urumqi, much less that Chinese would demand the head of a Communist big shot. China 2.0 Welcome to burgeoning democracy and transparency in China, which brings with it more shivers among the world’s investors, blips in the price of bullion and angst in policy-making corridors everywhere. The fact is that China is important but so are others. And its retreat from a boom and bubble in its markets isn’t all that bad for the rest of the world. Europe and the United States are beginning to feel pulses, marking an end to a scary recession, while China’s disproportionate stimulus plan kept growth respectable and must now, obviously, be reined in somewhat. Thus the stock market’s retreat of 22% in August and more in early September. China also has overcapacity, collapsed export sales and is more sensitive than any other economy to commodity fluctuations, which have been on the rise due to fundamentals. So market investors in China responded by selling due to fears that authorities will curb bank lending and impose restrictions on imports to reduce industrial overcapacity. Analysts also pointed to lingering worries about a flood of new shares in the market. Gold bugs love China jitters China worries, as usual, also contributed to increasing gold prices in August, along with America’s appetites to overspend and undertax. Gold prices are also helped by aggressive buying which is now official policy in China and Russia as the U.S dollar is debased through frightening deficits and political rigamordis. Much depends on China but it’s far from the only game in town. As it manages its expansion and the expectations of its massive population, it’s important to remember that it is roughly the same economic size as Germany and Canada and only one-fifth as big as Japan and the U.S. We live in interesting times and this fall should be a whopper. Diane Francis blogs at Financial Post

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Jill Schlesinger: Cash for Clunker Sequel: Dump the Pump

August 28, 2009

Given the success of “Cash for Clunkers,” the government will introduce a sequel that one observer called ” Dollars for Dishwashers “. That’s not really the name, but it’s better than “Clunkers, Part Deux”. It’s reported that Uncle Sam will fund a $300 million program via the stimulus plan that will allow you to swap energy-sucking appliances for new ones that carry that ” Energy Star ” seal of approval. If car dealers thought that getting paid was hard, the sequel plans to allow each state to get in on the act. In other words, while in NY, your air conditioner might fetch a $200 rebate, in Wyoming, it may only get you $150. The Department of Energy wants to focus on ten categories of appliances, but states could petition for an expansion of that list. The rebates are likely to be $50-$200 per appliance. After hearing about this and then the Toys-R-Us “Cash for Kiddie Clunkers,” I started to feel left out. How about a program for women who need new, more efficient shoes for the fall season? Under the “Dump the Pump” program, we’ll trade in our beat up, bull market Manolo Blahniks for more sensible, recession-style flats. For every pair of shoes that we trade, I’m thinking we should get a $50 rebate. The struggling retailers will love it and we would be helping to reduce the cost of podiatry care. It’s just a thought… Image by Flickr User Scalleja , CC 2.0

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Video: Survey Says – Market Rally Coming to End

August 28, 2009

Investors Will Get Big Shock This Fall – Interview with TrimTabs Investment Research CEO Charles Biderman (Bloomberg News)

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U.K. August House Prices Rise at Fastest Pace Since 2006, Nationwide Says

August 27, 2009

By Svenja Oâ€™Donnell Aug. 27 (Bloomberg) — U.K. house prices rose at their fastest pace in more than 2 1/2 years in August as low interest rates spurred demand and a lack of property for sale underpinned values, Nationwide Building Society said. The average cost of a home climbed 1.6 percent, the most since December 2006, to 160,224 pounds ($260,000), the mortgage lender said in a statement today. Economists predicted an increase of 0.5 percent, according to the median of 17 forecasts in a Bloomberg News survey . From a year earlier, prices fell 2.7 percent. The Bank of England this month kept the benchmark interest rate at 0.5 percent and extended its asset-purchase program to pull Britain out of its worst recession in a generation. Todayâ€™s report adds to evidence the housing market may be stabilizing. â€œEven though house prices remain high relative to earnings, the fall in interest rates has improved the affordability of mortgages for those looking to buy a home,â€ Martin Gahbauer, Nationwideâ€™s chief economist, said in the statement. â€œThe fall in debt servicing costs has meant that fewer homeowners are under immediate financial pressure to sell.â€ The August increase in house prices was the fourth in succession, leaving them 3.2 percent higher than at the end of 2008, according to Nationwide. In the three months through August, they rose an average of 3.3 percent from the previous period, the most since February 2007. House prices are still down 14.4 percent from their peak in October 2007, the mortgage lender said. Mortgage Approvals Britainâ€™s six biggest banks approved more home loans in July, a sample from the Bank of Englandâ€™s lending panel showed on Aug. 20. U.K. mortgage approvals rose in July to the highest level since February 2008, the British Bankersâ€™ Association said this week. Recent house price increases may â€œbecome difficult to sustainâ€ if efforts to spur economic growth are successful and lead the U.K. central bank to raise interest rates in the future, Nationwide said. â€œAt the moment, a rise in interest rates is probably still some way off,â€ Gahbauer said. â€œHowever, the eventual exit from exceptionally loose monetary policy could make the recovery in the housing market bumpier than some might expect after the last few months of price increases.â€ The economic slump is also keeping a lid on workersâ€™ pay. The median pay award in the country was for a 1 percent increase in the three months to July, Incomes Data Services said in a separate report today. The report was based on a survey of 75 settlements covering more than 500,000 employees. To contact the reporter on this story: Svenja Oâ€™Donnell in London at sodonnell@bloomberg.net .

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U.K. House Prices Increase at the Fastest Pace Since 2006, Nationwide Says

August 27, 2009

By Svenja Oâ€™Donnell Aug. 27 (Bloomberg) — U.K. house prices rose at their fastest pace in more than 2 1/2 years in August as low interest rates spurred demand and a lack of property for sale underpinned values, Nationwide Building Society said. The average cost of a home climbed 1.6 percent, the most since December 2006, to 160,224 pounds ($260,000), the mortgage lender said in a statement today. Economists predicted an increase of 0.5 percent, according to the median of 17 forecasts in a Bloomberg News survey . From a year earlier, prices fell 2.7 percent. The Bank of England this month kept the benchmark interest rate at 0.5 percent and extended its asset-purchase program to pull Britain out of its worst recession in a generation. Todayâ€™s report adds to evidence the housing market may be stabilizing. â€œEven though house prices remain high relative to earnings, the fall in interest rates has improved the affordability of mortgages for those looking to buy a home,â€ Martin Gahbauer, Nationwideâ€™s chief economist, said in the statement. â€œThe fall in debt servicing costs has meant that fewer homeowners are under immediate financial pressure to sell.â€ The August increase in house prices was the fourth in succession, leaving them 3.2 percent higher than at the end of 2008, according to Nationwide. In the three months through August, they rose an average of 3.3 percent from the previous period, the most since February 2007. House prices are still down 14.4 percent from their peak in October 2007, the mortgage lender said. Mortgage Approvals Britainâ€™s six biggest banks approved more home loans in July, a sample from the Bank of Englandâ€™s lending panel showed on Aug. 20. U.K. mortgage approvals rose in July to the highest level since February 2008, the British Bankersâ€™ Association said this week. Recent house price increases may â€œbecome difficult to sustainâ€ if efforts to spur economic growth are successful and lead the U.K. central bank to raise interest rates in the future, Nationwide said. â€œAt the moment, a rise in interest rates is probably still some way off,â€ Gahbauer said. â€œHowever, the eventual exit from exceptionally loose monetary policy could make the recovery in the housing market bumpier than some might expect after the last few months of price increases.â€ The economic slump is also keeping a lid on workersâ€™ pay. The median pay award in the country was for a 1 percent increase in the three months to July, Incomes Data Services said in a separate report today. The report was based on a survey of 75 settlements covering more than 500,000 employees. To contact the reporter on this story: Svenja Oâ€™Donnell in London at sodonnell@bloomberg.net .

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Swine Flu May Infect Half of Population in U.S., Kill 90,000, Study Says

August 24, 2009

By Tom Randall Aug. 24 (Bloomberg) — Swine flu may infect half the U.S. population this year, hospitalize 1.8 million patients, and lead to 90,000 deaths, according to a report by White House advisers. Thirty percent to 50 percent of the countryâ€™s population will be infected in the fall and winter, according to the â€œplausible scenarioâ€ outlined in todayâ€™s report by the Presidentâ€™s Council of Advisers on Science and Technology. As many as 300,000 patients may require treatment in hospital intensive care units, filling 50 percent to 100 percent of all beds available to those facilities, the study said. To contact the reporters on this story: Tom Randall in New York at trandall6@bloomberg.net ;

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`Dummy’ Russian Day-Traders Whipsawing Micex Signal Buy to BlackRock, F&C

August 21, 2009

By Yuriy Humber and Laura Cochrane Aug. 21 (Bloomberg) — After a Swiss fund manager lost most of Larisa Dolgikhâ€™s savings last year, she began buying and selling stocks from her Moscow home. Now â€œthere are days when I donâ€™t get up from the computer,â€ she said. Dolgikh, 41, an interior designer who also mediates family disputes for extra income, is part of a growing number of novice day-traders who are helping make Russian shares the worldâ€™s most volatile. This yearâ€™s six-fold surge in non-institutional trading helped push swings on the Micex to twice the level of Brazilâ€™s Bovespa, data compiled by Bloomberg show. Thatâ€™s a buy signal to BlackRock Inc. , Templeton Asset Management and F&C Asset Management. More buyers and sellers makes it easier to profit at a time when shares on the benchmark Micex Index are the cheapest among emerging stock markets valued above $20 billion, fund managers said. Shares of OAO Sberbank , Russiaâ€™s biggest lender and Dolgikhâ€™s first buy, change hands every 10 days on average versus 77 days for HSBC Holdings Plc , Europeâ€™s largest bank, Troika Dialog and Bloomberg data show. â€œWe like volatility because it gives us opportunity,â€ said Sam Vecht , an emerging-market equities fund manager in London for BlackRock, which oversees $1.4 trillion. â€œWe recognize the markets we invest in can be volatile. We just have to time our entry and exit points.â€ Rising Volumes Enticed by the marketâ€™s steepest seven-month rise since 2006, almost 630,000 individuals had trading accounts as of July. They generated $1.3 billion in average daily volume in June, or 27 percent of the total for Russian shares across all exchanges, up from $220 million, or 15 percent, in January, data from Micex and Troika, Russiaâ€™s oldest investment bank, show. The change has caught the attention of Russian regulators, who attempted to reduce volatility last September by banning short selling for eight months after the market fell 47 percent in four months and lost more than $500 billion. â€œThe increased number of retail investors on the market calls for certain changes in regulating speculative trades, spot, marginal, and short sales, as well as greater efforts to raise general financial literacy,â€ said Vladimir Milovidov , the head of the Federal Service for Financial Markets , in an e-mail response to questions. The agency â€œis actively pursuingâ€ such proposals, he said. Internet Bubble Regulators also plan to more than triple to 35 million rubles ($1.1 million) how much capital brokerages must have on hand, a move aimed at wiping out â€œdubious fly-by-nightâ€ operations, Milovidov said on state television Aug. 14. Day trading in the U.S. helped create the Internet-stocks bubble that sent the Nasdaq Composite Index down 78 percent from March 10, 2000 through Oct. 9, 2002. The trend also concerns Sberbankâ€™s brokerage, which boosted accounts by 12 percent this year and allowed online trading in July, said Andrey Golikov , who runs the service from Moscow. The firm doesnâ€™t lend money to clients to invest. â€œWe perfectly understand how volatile the Russian market is today and what risks this carries,â€ Golikov said. â€œUnfortunately, a large number of our population which is not well educated in financial matters will make losses.â€ Yulia Kotlyarova, 29, started trading in June 2008, investing 300,000 rubles while on maternity leave from her job as a financial director for a beauty salon and dentistry chain outside Moscow. Her plan was to make money â€œover a month or twoâ€ and then cash out. Georgia War It didnâ€™t work out that way. The Micex tumbled 65 percent in the second half of 2008, nearly double the fall of the MSCI World Index of developed market stocks. Russiaâ€™s five-day war in August with Georgia and oilâ€™s plunge from a record $145 a barrel to $34 triggered what BNP Paribas SA data show was a $300 billion August-to-March cash exodus from the worldâ€™s biggest energy-exporting nation. This year, the Micex has rallied 71 percent, the second- steepest gain among benchmark indexes for the worldâ€™s 30 biggest markets, posting its largest monthly increase in nine years in May. The measure remains 24 percent lower than a year ago. By increasing volatility, the influx of day traders creates more opportunities for more experienced investors to profit, said Mark Mobius , executive chairman for Templeton in Singapore, in an e-mail. Over the past 60 days, the Micex has been the most volatile of 71 benchmark stock indexes worldwide, as measured by the relative rate at which the price of a security moves up and down, Bloomberg data show. The measure of 60-day volatility climbed to a reading of more than 52 this week from last yearâ€™s low of 18, and has averaged 30 in the five years ending with 2007. The same measure for Brazilâ€™s Bovespa index dropped to a two-year low of 25 on Aug. 14. Since its inception in 1997, the Micex has been more volatile than the MSCI Emerging Markets Index of stocks in 22 nations for all but five months ending January 2008. Low Prices Volatility â€œenables us to buy at unusually low prices and sell at unusually high prices,â€ said Mobius, who oversees $25 billion at Templeton. The firm had 6.8 percent of its investments in Russian stocks in June, up from Januaryâ€™s 5.9 percent, he said. The increase in individual speculators is a reason to be wary of Russian stocks, said James Beadle , chief investment strategist at Pilgrim Asset Management in Moscow. Day traders â€œappear to provide liquidity, but not sustainable liquidity,â€ he said. Russiaâ€™s economy provides another reason: Itâ€™s struggling to recover with oil prices at less than half their 2008 peak and a surge in non-performing loans to more than 5 percent of total in June from 2.8 percent in January. The economy shrank a record 10.9 percent in the second quarter. It may contract 5 percent this year and grow 6 percent next year, Troika forecast July 2. â€˜Opportunistic Tradeâ€™ â€œRussia has become a low-conviction, opportunistic trade for many investors, leading to big swings on the upside and downside,â€ said Curtis Butler , chief investment officer for $400 million in emerging-market equities at Lombard Odier & Cie., in a phone interview from New York. Butler has converted Lombard Odierâ€™s Russia and Eastern Europe fund to a Europe, Middle East and Africa fund in May and cut Russian holdings to 25 percent, below the 30 percent weighting of the fundâ€™s benchmark index . Shares on the Micex trade at about 8 times profits, up from 3.7 at the start of year and less than the MSCI Emerging Markets indexâ€™s 18, Bloomberg data show. Benchmark indexes in China, Brazil and India trade near 32, 24 and 18 times earnings, respectively. â€˜Liquidityâ€™ â€œWe like the valuationsâ€ in Russia, said Jeff Chowdhry , who oversees $1.8 billion as London-based head of emerging- market equities at F&C Asset Management and has been â€œoverweightâ€ the countryâ€™s stocks for six months. â€œWe like Sberbank because there is liquidity in the system,â€ along with consumer stocks, he said. By focusing on day traders, privately-held ZAO Finam has become the biggest broker by trading volume on the Micex exchange. It aimed at individuals after Russiaâ€™s 1998 default because â€œthere was virtually no one covering retail,â€ said Victor Remsha , who founded Finam in 1994 when he was 24 and is its chairman. Now Russiaâ€™s largest banks, including Sberbank, are ramping-up retail brokering businesses. Finam hosts seminars, some free, on stock investing in 86 Russian cities, Kazakhstan and Germany, attracting 25,000 people last year, double 2007â€™s attendance. â€˜Headless Speculatorsâ€™ Elena Belyaeva, 45, taught one of the Finam classes in central Moscow this month. She said she started looking at the U.S. market as a hobby around the time communism collapsed in the late 1980s after watching â€œ Wall Street ,â€ starring Michael Douglas. â€œMost students think the market owes them something,â€ Belyaeva said. â€œOur task is to make them aware of the risks and turn them from headless speculators to investors.â€ Artur Kroitor, 42, attended the class. He quit his job as vice president at a food trading and industrial company in April to become a trader. He got the investing bug after converting his former employerâ€™s rubles into dollars â€œon a hunchâ€ last August, just before Russiaâ€™s currency started a 33 percent tumble, making the company 7 million rubles. He hasnâ€™t bought shares yet because â€œI want to learn how to drive first before I hit the highway,â€ Kroitor said. â€œThe family doesnâ€™t understand what Iâ€™m doing. They think Iâ€™ll just play around, get it out of my system, and then get a real job.â€ Dolgikh, the interior designer, said she started trading because she no longer trusted financial firms to safeguard her money and Finam offered the lowest trading fees. Since her first trade in March, she has increased her investments to 1.2 billion rubles from 150,000, posting a profit of about 110,000 rubles. â€œIâ€™m new to this; Iâ€™m a dummy,â€ said Dolgikh. â€œIâ€™m not really a financier or a businesswoman through and through, but Iâ€™m curious how money works.â€ Price fluctuations donâ€™t scare her. â€œWhen world markets are volatile, thatâ€™s when you can make money,â€ she said. To contact the reporters on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net ; Laura Cochrane in London at lcochrane3@bloomberg.net

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Supreme Court To Hear Case On Executive Pay

August 17, 2009

Last summer, Richard A. Posner, a federal appeals court judge, issued a surprising and prescient dissent. Executive pay is out of control, he said, and the marketplace cannot be trusted to rein it in. The Supreme Court will hear the case, Jones v. Harris Associates, this fall, as anger over huge bonuses paid to the executives of failing firms continues to grow.

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Obama Campaign Ad Firms Now Reaping Cash to Pitch Health-Care Overhaul

August 14, 2009

By Timothy J. Burger Aug. 15 (Bloomberg) — Two firms that received $343.3 million to handle advertising for Barack Obama â€™s White House run last year have profited from his top priority as president by taking on his push for health-care overhaul. One is AKPD Message and Media , the Chicago-based firm headed by David Axelrod until he left last Dec. 31 to serve as a senior adviser to the president. Axelrod was Obamaâ€™s top campaign strategist and is now helping sell the health-care plan. The other firm is Washington-based GMMB Campaign Group , where partner Jim Margolis was also an Obama strategist. This year, AKPD and GMMB received $12 million in advertising business from Healthy Economy Now , a coalition that includes the Washington-based Pharmaceutical Research & Manufacturers of America , known as PhRMA, that is seeking to build support for a health-care overhaul, said the coalitionâ€™s spokesman, Jeremy Van Ess . Hiring Obamaâ€™s campaign advisers makes sense, said Julius Hobson , a senior policy adviser in the Washington office of the St. Louis-based law firm, Bryan Cave LLP . â€œIf youâ€™re in support of the president, then you use the people he used,â€ said Hobson, 61, who teaches a graduate course in lobbying at George Washington University in Washington. Coalition HENâ€™s other members , according to its Web site, are the AARP , the biggest advocacy organization for retirees; the Advanced Medical Technology Association ; the Business Roundtable ; Families USA ; the Service Employees International Union , all based in Washington, and the American Medical Association based in Chicago. PhRMA represents 28 drugmakers, including New York-based Pfizer Inc. and London-based GlaxoSmithKline Plc . Larry Grisolano , a partner at AKPD, said his firm and GMMB are splitting the fees on the $12 million campaign, though neither firm would specify its take. In an e-mail, Margolis declined to comment. Grisolano said an interview that the firmâ€™s history with Obama made it â€œkind of a logical place to goâ€ for the health- plan ad work. â€œWe were one of the presidentâ€™s ad firms, and so we have familiarity with how he spoke about health care during the campaign, what his viewpoints were on health care during the campaign,â€ he said. â€œAnd so I think if youâ€™re interested in reform, we bring some valuable insight in that regard.â€ Firmsâ€™ Fees Last year, the Obama campaign paid $2.77 million in consulting fees to AKPD and $340.53 million to GMMB to produce and place ads, Federal Election Commission records show . Firms such as GMMB typically receive a low-to-mid single-digit percentage of ad spending as their fee for an account of that size, said Glenn Totten , a Democratic political consultant. Axelrod was president and sole shareholder of AKPD from 1985 until he sold his interest after Obamaâ€™s victory, government records show. The firm owes Axelrod $2 million, which itâ€™s due to pay in installments beginning Dec. 31. Axelrodâ€™s son, Michael , still works there. He didnâ€™t return a phone call. The firmâ€™s Web site continues to feature David Axelrodâ€™s work on the Obama campaign. Ben LaBolt , a White House spokesman, said Axelrod â€œsold his ownership stake in the firm before the administration began.â€ Grisolano, 45, said AKPD has had no contact with Axelrod â€œwith regard to the Healthy Economy Now work.â€ He said he works with Axelrod, 54, on â€œstrategy and researchâ€ for the Democratic National Committee. â€˜Weâ€™re the Bestâ€™ â€œWe get business for the same reason anyone else would get business: because weâ€™re the best ones to do it,â€ Grisolano said. At the White House, Axelrodâ€™s role in the health-care debate ranges from Sunday talk show appearances to meetings with House and Senate lawmakers. Van Ess said HEN is now dormant. PhRMA and three other members of HEN, plus the Washington-based Federation of American Hospitals , have created another coalition, Americans for Stable Quality Care , which last week announced a new $12 million ad campaign to promote health-care overhaul. GMMB and AKPD are also working on the new coalitionâ€™s ads. Phil Singer , spokesman for the new group, said in an e- mail that the members of HEN who joined the Stable Quality Care effort â€œwere happy with the work the media firms did for that group and naturally turned to them to help advise and consult this new effort.â€ PhRMA senior vice president Ken Johnson said decisions on ad spending would be tailored to details of the House and Senate bills that emerge in September. â€œAbsolutely no decisions have been made,â€ Johnson said. â€œAny discussion about what we are or arenâ€™t going to do this fall would be wildly speculative.â€ Johnson declined to say if AKPD or GMMB would work on the campaign or how much additional funding PhRMA might provide for groups such as HEN. â€œTrust me, all the Democratic consultants who work for us claim to have close ties to the White House,â€ Johnson said. To contact the reporter responsible for this story: Timothy J. Burger in Washington at tburger2@bloomberg.net .

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California Will Discontinue Issuing IOUs for State Operations in September

August 13, 2009

By Michael B. Marois and William Selway Aug. 13 (Bloomberg) — California will stop using IOUs to pay its bills in early September, lifting a burden on businesses, taxpayers and municipalities that received $2 billion of the registered warrants instead of cash as the recession pushed the most-populous U.S. state toward insolvency. Controller John Chiang said the use of IOUs will stop on Sept. 4, pending approval by a panel of state finance officials, and the state would begin redemptions a month ahead of schedule. State Treasurer Bill Lockyer said he plans to sell $1.5 billion of notes by Aug. 28 to meet cash needs, followed by $10.5 billion of such short-term loans in mid-September. Lawmakers enacted a revised budget last month that closed Californiaâ€™s $24 billion deficit and paved the way for the state to borrow money. â€œAlong with short-term loans that are routinely obtained in the fall, this spending plan should provide sufficient cash to meet all of Californiaâ€™s payment obligations through the fiscal year,â€ Chiang said in a statement. California , with the worldâ€™s eighth largest economy , issued IOUs for the past six weeks to pay for everything from tax refunds to health-care clinics and to avoid missing payments on items, such as bonds, deemed a priority under state law. Californiaâ€™s largest banks, including Bank of America Corp. and JPMorgan Chase & Co., stopped accepting the IOUs last month, straining businesses in a state thatâ€™s among the hardest hit by the nearly two-year-long recession. â€˜Bankrupt Vendorâ€™ Gloria Freeman, president of a medical staffing company, Staff USA Inc., said before Chiangâ€™s announcement that the end of the IOUs will have little immediate effect on her business. Based in Rocklin, California, the company fired five of its 12 administrative employees because of the IOUs, she said, and anticipates that her payments will be delayed by backlogs, as they were after prior budget battles. â€œIâ€™m stuck with the warrants and the fact that theyâ€™re not going to pay for a long period of time even once they do get this straightened out,â€ she said. â€œYouâ€™re basically dealing with a bankrupt vendor.â€ The use of IOUs drew speculators who offered to buy them at a discount on Internet sites before they even arrived in the mail. The U.S. Securities and Exchange Commission moved to halt such trading by advising that the IOUs were securities akin to bonds, confining the market to registered brokers. Reluctant to Sell SecondMarket Inc., a New York brokerage that arranges trading in hard-to-sell assets such as auction-rate securities, tried to foster trading in IOUs. None were ever executed because sellers didnâ€™t want to take less than face value, in part because of the chance that California could redeem them early, as the state is now planning to do, said Mark Murphy, a company spokesman. â€œSeller are, with good reason, reluctant to sell for less than par — or 100 cents on the $1 — if the state turns around and says â€˜weâ€™ll redeem them now,â€™â€ he said. California began issuing the securities on July 2 as politicians remained deadlocked over revising the budget through June 2010 to compensate for a plunge in tax collections. The stalemate was resolved on July 28, when Republican Governor Arnold Schwarzenegger signed a package of bills that cut spending to schools, prisons and welfare programs — and imposed accounting maneuvers and other one-time changes — to balance the books. Borrowing Costs Narrow The scope of the deficit and funding crisis rattled investors, as credit-rating companies downgraded Californiaâ€™s bonds and investors demanded higher returns to compensate for the risk of holding them. With passage of the revised budget, the premium demanded by investors has eased and officials are reviving plans for the short-term note sale — needed to pave over temporary mismatches between spending and revenue — that they previously said would be too costly. The difference between a 10-year California bond and a top- rated municipal security was as high as 1.71 percentage points on July 1. The spread slipped to 1.16 percentage points yesterday, the lowest since April 24. The controller has issued about 327,000 IOUs worth $1.95 billion since July 2. The registered warrants were set to mature in October and pay an annualized interest rate of 3.75 percent. To contact the reporters on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net ; William Selway in San Francisco at wselway@bloomberg.net .

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Obama Meets Calderon, Harper as North America Braces for Swine Flu Rebound

August 9, 2009

By Roger Runningen and Nicholas Johnston Aug. 9 (Bloomberg) — President Barack Obama leaves today for a summit with his counterparts from Mexico and Canada as all three nations brace for a rebound of the deadly H1N1 swine flu, which may threaten cross-border commerce. The two-day meeting in Guadalajara among Obama, Mexican President Felipe Calderon and Canadian Prime Minister Stephen Harper is to include talks on easing trade friction, dealing with the recession, battling drug crime and paving the way for climate talks later this year. A pressing topic is the return of the pandemic flu, which emerged in Mexico earlier this year. â€œEverybody recognizes that H1N1 is going to be a challenge for all of us and there are going to be people getting sick in the fall and die,â€ John Brennan , Obamaâ€™s deputy national security adviser, said. Officials are concerned that a widespread outbreak of the H1N1 virus as the regular flu season gets under way in the Northern Hemisphereâ€™s fall may disrupt airline schedules and slow cross-border imports and exports. All three countries still are being battered by the recession, and economics defines the relationship among them. Canada and Mexico are the U.S.â€™s first- and third-largest trading partners, generating more than $950 billion of imports and exports last year. Canada and Mexico account for 28 percent of all U.S. trade . Common Strategy At the North American Leaders Summit , Obama, 48, Calderon, 46, and Harper, 50, will focus on joint strategies for coordinating medical information, stockpiling vaccines and reviewing distribution plans to â€œminimize the impact and severity,â€ Brennan said at an Aug. 6 White House briefing. For the rest of the agenda, â€œthe real test is whether they can get past the photo opportunity,â€ said Robert Pastor , co- director of the Center for North American Studies at American University in Washington. The administration is downplaying expectations. â€œWe donâ€™t expect to announce anything big coming out of this weekend,â€ White House spokesman Robert Gibbs said at a briefing on Aug. 7. One trade irritant on the table will be access to U.S. highways for Mexican truckers. Congress in March ended a pilot program that allowed Mexican trucks to deliver to the U.S. everything from fresh fruit to auto parts. Lawmakers, with pressure from unions and American firms, cited complaints that Mexican trucks posed a safety hazard. Retaliation Mexico said the ban violated the North American Free Trade Agreement and imposed $2.4 billion in retaliatory duties on U.S. goods including cosmetics, fruit, meat and soft drinks . About 150 companies and trade groups, including Caterpillar Inc ., Smithfield Foods Inc ., PepsiCo Inc . and Wal-Mart Stores Inc ., say the tariffs are hurting sales, profit and jobs. The group wrote to Obama on Aug. 6 demanding a resolution. â€œItâ€™s a stone in the shoe,â€ Arturo Sarukhan , Mexicoâ€™s ambassador to the U.S., said in Washington. Calderon hopes for a resolution â€œby the end of the year,â€ he said. Mike Froman , deputy national security adviser for international economics and former Citigroup Inc. executive, said the administration is â€œworking with Congress to address safety concernsâ€ in ways that are consistent with the trade accord. Another source of friction among the countries is a section of the $787 billion economic stimulus program that requires the use of American-made parts or equipment in such projects as highways and bridges. Protectionism â€œThe Buy America restrictions are one example of growing protectionism in the U.S.â€ that comes during a recession, Jay Myers , chief executive of the Canadian Manufacturers and Exporters trade group, said in an Aug. 6 interview from Ottawa. The provision has prevented companies like Ipex Inc ., a Toronto-based pipe manufacturer, or Hayward Gordon Ltd., a pump and engineered-systems manufacturer in Halton Hills, Ontario, from taking part in infrastructure projects generated by the stimulus. Froman said Obama would work with Canada and other trading partners â€œto see if we can mitigate the impact on trade.â€ On battling drug cartels, Obama is offering political support to Calderon who, in the face of growing criticism, has used Army troops to patrol city streets to try and stem violence. Almost 10,000 people have been killed in drug-related murders in Mexico over the last 18 months. The U.S. supports Mexicoâ€™s war on drugs through the Merida Initiative, a three-year, $1.1 billion package of aid to Mexico that includes helicopters, intelligence sharing, and police training. Accelerated Aid Calderon will urge Obama to â€œtry to streamline the pipelineâ€ and quicken the arrival of assistance, Sarukhan said. The Mexican government â€œwould like to see it accelerated,â€ he said. On climate change and energy issues, the three countries are seeking a unified agenda that â€œcan lay the foundation for a broader agreementâ€ in such areas as low carbon-growth plans, technology cooperation and developing trading in carbon markets, Froman said. That will set up their approach to a United Nations conference on climate change in December. Obama is more popular in Mexico and Canada than President George W. Bush , which means â€œitâ€™s going to be a lot easier for them to cooperate on issues,â€ said James Blanchard , former U.S. ambassador to Canada under Democratic President Bill Clinton â€œThey wonâ€™t be worried about being criticized for trying to work with him.â€ To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net Nicholas Johnston in Washington at njohnston3@bloomberg.net

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Make REO Properties Work for You

August 7, 2009

… RISMEDIA, August 8, 2009-As the real estate market continues to change, it is crucial … nation rids itself of the inventory of distressed homes, home prices will continue to fall …

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Make REO Properties Work for You

August 7, 2009

… RISMEDIA, August 8, 2009-As the real estate market continues to change, it is crucial … nation rids itself of the inventory of distressed homes, home prices will continue to fall …

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Anant Raj to invest Rs 450 cr to buy land for housing projects

August 2, 2009

New Delhi (PTI): Taking advantage of the fall in property prices, real estate firm Anant Raj Industries plans to invest Rs 450 crore to acquire a land bank, which it would use for developing low-cost housing in north India. The Delhi-based firm

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Germany Asserts Right to Reject Buyer for GM’s Opel Unit, Risking Clash

July 29, 2009

By Tony Czuczka and Andreas Cremer July 29 (Bloomberg) — Germanyâ€™s government asserted its right to reject any buyer for General Motors Co .â€™s Opel unit, increasing the risk of trans-Atlantic friction as Chancellor Angela Merkel seeks to protect jobs before September elections. A successful bid needs the backing of Germanyâ€™s federal government and the four German states where Opel has plants, because without German aid â€œthe sale is not sustainable,â€ Ulrich Wilhelm , Merkelâ€™s chief spokesman, told reporters in Berlin today. â€œAn agreement by GM with one of the two remaining investors would not be enough,â€ Wilhelm said.

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Islamic Finance Key to Asia’s Economic Revival, Kuwait Finance House Says

July 29, 2009

By Katrina Nicholas July 29 (Bloomberg) — Islamic finance will play a central role in reviving Asian economies as investors look to emerging markets to deliver higher returns than the U.S. and Europe, according to Kuwait Finance House . Demand for investments backed by tangible assets like power plants and property grew after banks outside of Asia were hit hardest by the global financial crisis, Baljeet Grewal , managing director of the second-biggest Islamic bankâ€™s research unit, said in a phone interview from Kuala Lumpur yesterday. â€œIslamic finance is no longer on the periphery and so any crisis which impacts the global economy will of course impact it,â€ Grewal said

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El Nino May Ease Worst Texas Drought in 90 Years, Cut Florida Storm Risks

July 29, 2009

By Shruti Date Singh July 29 (Bloomberg) — The return of an El Nino climate pattern to the Pacific Ocean may relieve the worst Texas drought in 90 years and may reduce the threat of hurricanes ravaging orange groves in Florida. El Nino, characterized by warming waters in the Pacific, â€œcould bring reliefâ€ in the fall and winter to Texas, where farms are suffering from the lack of rain , the National Weather Service said July 16. The El Nino will last through the Northern Hemisphere winter and into 2010, presaging winter storms in the Southwest and a reduction in Atlantic hurricanes, the U.S

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Mark Miller: Vanishing Social Security COLA Adjustment Will Squeeze Some Seniors

July 27, 2009

The Great Recession is about to squeeze retirees where it hurts: the monthly Social Security check. By law, Social Security passes along an annual cost of living adjustment — or COLA — to recipients. The increase is tied to a broad measure of inflation in the economy, and a year hasn’t gone by since Social Security was created in the 1930s without a COLA. But consumer prices have been flat or falling this year due to the sinking economy.

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Pelosi Predicts Obama’s Health-Care Overhaul `Will Win’ in U.S. House Vote

July 26, 2009

By Kristin Jensen July 26 (Bloomberg) — House Speaker Nancy Pelosi said she will pass legislation to overhaul the U.S. health-care system through her chamber even after days of discord and delays. â€œWhen I take this bill to the floor, it will win,â€ Pelosi said on CNNâ€™s â€œState of the Unionâ€ program aired today. She said she is â€œabsolutely positively notâ€ worried about disagreements in her own Democratic Party.

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Mark Weisbrot: Trade Adjustments and Stimulus Packages in the Global Recession and Recovery

July 24, 2009

Global trade flows and the economic stimulus policies of individual national economies will play an important role in the recovery from the current global recession. This is especially true of the world’s two largest economies, the United States and China. The U.S

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Exelon Quixotic Quest for Takeovers Likely Undeterred After Failed NRG Bid

July 22, 2009

By Jordan Burke July 22 (Bloomberg) — Exelon Corp. , the largest U.S.

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Pablo Triana: The Nobel Crisis

July 20, 2009

Everyone and their brother know that we are immersed in a variety of, familiarly-named, crises: the credit crisis, the mortgage crisis, the subprime crisis, the banking crisis, the derivatives crisis, the ratings crisis, the capitalism crisis, the hedge fund crisis, the regulation crisis, the bonus crisis. But, quite possibly unbeknownst to many, there is another category to add to the list

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