race

Commercial Real Estate’s Race To Loan Maturity

by on May 25, 2011

Costar…

As a native of Indiana, every Memorial Day my attention turns to the “Greatest Spectacle in Racing,” the Indianapolis 500. However, as senior commercial real estate strategist with CoStar Group, I have my eyes set on another race — the one between maturing commercial real estate loans and the prices of the underlying properties securing those loans. And in that race, commercial real estate has recently been issued a yellow flag. In CoStar…

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Commercial Real Estate’s Race To Loan Maturity

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Why Medicare Will Be The Issue Of 2012

by Ryan Grim on May 25, 2011

Huffington Post…

WASHINGTON — The 2012 election found its defining issue on Tuesday night, with an insurgent Democrat upsetting a well-financed Republican in a deeply red district in New York state. The GOP paved the way for the Democrat’s victory by voting earlier this year to end the current Medicare program that guarantees health coverage to seniors and replace it with a voucher system that provides premium support for the elderly to purchase private health insurance. The Republican in the race, Jane Corwin, fully endorsed the GOP plan to alter Medicare, while the Democrat, Kathy Hochul, defended the social safety net. The race’s polling trends point to Medicare as the defining issue, while the conversation has played out on a national level. Former House Speaker Nancy Pelosi (D-Calif.) summed up the Democratic position: “We have a plan –- it’s called Medicare.” With some exceptions, Democrats have ranged from reluctant defenders of government spending to outright hawkish assailants of social funds. But nothing focuses the mind like political calculation, and the upset in upstate New York has sent a message so clear that not even the highest priced Democratic consultant could miss it. “Kathy Hochul’s victory tonight is a tribute to Democrats’ commitment to preserve and strengthen Medicare, create jobs and grow our economy. And it sends a clear message that will echo nationwide: Republicans will be held accountable for their vote to end Medicare,” Pelosi said in a statement after the election. The race began turning toward the Democrat when Corwin embraced the GOP’s Medicare plan in mid-April. The campaigns had already been communicating with voters, airing television spots for nearly a month. Corwin attacked Hochul on the airwaves in late March for having sought property tax increases and attempted to link Hochul to Pelosi, following the playbook Republicans applied with success during 2010. Hochul responded with a series of ads beginning in early April, but none mentioned Medicare. That changed on April 26 when the Hochul campaign began airing an ad that hit Corwin for saying “she would vote for the 2012 Republican budget that would essentially end Medicare,” that would have seniors “pay $6,400 more for the same coverage” and would “cut taxes for the wealthiest Americans.” WATCH : Just before Hochul’s television campaign shifted to Medicare, a Siena Research survey showed Corwin leading Hochul by a surprisingly narrow margin, 36 percent to 31 percent. But ten days later, an automated survey conducted by Democratic firm Public Policy Polling and sponsored by SEIU showed Hochul leading by four points (35 percent to 31 percent). And in the final week, two more surveys, one from PPP and one from Siena College, both showed Hochul leading by similar margins. Jef Pollock, Hochul’s pollster, told HuffPost that the numbers showed the Democrat winning among seniors and independents, two groups that broke heavily for Republicans in 2010. “This race was won, in a significant way, because of the disastrous decision by the GOP to dismantle Medicare as we know it,” he said. “Kathy Hochul was a great candidate. And credit is due to her for running a great race as well as credit to the campaign for making Medicare a central issue — that’s why Hochul was winning 74 percent of the voters who said that Medicare was the most important issue to them in the most recent Siena poll conducted just a few days ago,” he said. Steve Murphy, Hochul’s media consultant, argued that his candidate persuaded voters she was concerned about the deficit without needing to cut Medicare. “A Democrat in a competitive district can win on the Ryan budget and Medicare issue as long as they first demonstrate to voters that they are tough on spending and serious about the problem of rising deficits,” he suggested. “Five of our seven ads had a strong fiscal component, not just Medicare.” Democrats highlighted the serious money the Republicans put into the election. “Today, the Republican plan to end Medicare cost Republicans $3.4 million and a seat in Congress. And this is only the first seat,” said Rep. Steve Israel (D-N.Y.), head of the Democrats’ House campaign arm. House Republicans pinned blame for Corwin’s loss on a quirky third-party candidate, Jack Davis, who ran under the Tea Party despite an eclectic and sometimes liberal political past. “Republican Jane Corwin ran a hard-fought campaign against two well-funded Democrats, including one masquerading under the Tea Party name,” said Rep. Pete Sessions (R-Texas), head of the House GOP campaign operation. “Obviously, each side would rather win a special election than lose, but to predict the future based on the results of this unusual race is naive and risky.” American Crossroads, a GOP group that spent heavily in the race, said that the race indicates a resurgent Democratic party, whether the third-party candidate tipped it or not. “The debate over whether Medicare mattered more than a third-party candidate who split the Republican vote is mostly a partisan Rorschach Test,” said American Crossroad’s Jonathan Collegio. “What is clear is that this election is a wake-up call for anyone who thinks that 2012 will be just like 2010. It’s going to be a tougher environment, Democrats will be more competitive, and we need to play at the top of our game to win big next year.” The GOP can’t and won’t retreat from the Medicare valley it has occupied. “We know that bell can’t be un-rung, and we wouldn’t want to,” said a well-placed GOP aide. “We’re on the right side of history. If President Obama wants to be ‘the grown-up in the room,’ he’s going to have to grapple with grown-up problems. We have.” Indeed, the GOP has been doing plenty of grappling lately, but it’s been mostly with constituents and members of the party. Presidential candidate Newt Gingrich was browbeaten by his party for calling the Medicare plan “right-wing social engineering” and endorsing Paul Ryan’s budget, which includes Medicare reform as its signature component and has become a litmus test for candidates. At home, Republicans have faced hostile town halls with seniors questioning how they’ll be able to purchase private insurance with a voucher that doesn’t rise at the rate of health care costs. At a recent town hall, a constituent of Rep. Rob Woodall (R-Ga.) raised a practical obstacle to obtaining coverage in the private market within the confines of an employer-based health insurance system: What happens when you retire? “The private corporation that I retired from does not give medical benefits to retirees,” the woman told the congressman in video captured a local Patch reporter in Dacula, Ga. “Hear yourself, ma’am. Hear yourself,” Woodall told the woman. “You want the government to take care of you, because your employer decided not to take care of you. My question is, ‘When do I decide I’m going to take care of me?’” Sen. Chuck Schumer (D-N.Y.) pounced on the remark, telling the Washington Post that it typifies Republican ideology. Tuesday’s special election was held to fill the seat of Chris Lee, who resigned after topless photographs he sent of himself to a woman on Craigslist surfaced.

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Why Medicare Will Be The Issue Of 2012

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K Street Holding Cards On 2012 Primary

February 18, 2011

Many K Street insiders are close to several of the likely presidential contenders and are waiting to see who will officially jump into the race before showing their cards.

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

February 17, 2011

The federal bank regulator overseeing the nation’s largest lenders is pushing for a quick and modest settlement to the months-long federal and state probes into abusive mortgage practices, frustrating other federal agencies and state regulators and raising questions over President Barack Obama’s delay in naming a pro-consumer chief to head the agency. The Office of the Comptroller of the Currency, which oversees lenders like JPMorgan Chase and Bank of America, plays a key role in the ongoing investigations launched last September into improper foreclosure practices. The federal review involves the OCC and other bank regulators, as well as the Departments of Justice, Housing and Urban Development and the newly formed Bureau of Consumer Financial Protection. The 50-state probe involves state attorneys general and state bank regulators. But the OCC, known for its light-touch approach, is trying to come to a quick settlement with the banks it supervises, according to officials from multiple agencies involved in the investigations. The agency is negotiating an agreement that would cost the industry less than $5 billion in fines and mortgage modifications for troubled homeowners, including principal reductions, the officials said. Other agencies are pushing for something bigger. On Wednesday, Rep. Patrick McHenry, a North Carolina Republican, said during a House hearing on housing issues that he had heard the potential settlement would be in the “tens of billions range.” In 2008, state attorneys general reached an $8.4 billion agreement with just one company — Countrywide Financial — to settle predatory lending accusations. The money was used to aid distressed homeowners. The OCC is also trying to persuade mortgage companies that collect payments from borrowers, known as servicers, into adopting new standards in how they deal with homeowners. The agency has wide influence over the way banks service mortgages: It supervises firms that control nearly two-thirds of all home mortgages in the U.S., or more than 33 million loans totaling about $5.8 trillion. But officials said the OCC’s proposals give the institutions wide discretion, potentially undercutting their intent. The OCC is said to be rushing to settle in hopes of forcing the hand of other regulators on the federal and state level, weakening their efforts to extract a more meaningful resolution. The probes have cast a pall over the industry as bank executives have been forced to answer questions about the investigations posed by investors and analysts. The industry wants to put the whole matter behind it and move on. Officials at the Treasury Department and Federal Deposit Insurance Corporation have grown frustrated with the OCC’s efforts, people familiar with the matter said. State regulators conducting their own probe said they aren’t a part of the OCC’s seemingly lonely action. “Any statements or actions by the OCC at this point are on the agency’s own behalf and not in conjunction with the 50-state attorneys general,” Iowa Attorney General Tom Miller said in a statement. “Regardless of any federal action, we intend to fully pursue all state claims and remedies.” Spokesmen for the OCC didn’t respond to a request for comment e-mailed after regular business hours. State and federal officials are trying to reach a global settlement that will deter future abuses in the way mortgage servicers modify delinquent home loans and foreclose on homeowners, as well as levy penalties as a measure of restitution and force lenders to restructure distressed mortgages. The OCC’s efforts subvert the possibility of a unified settlement, officials said. In December, Federal Reserve Governor Daniel K. Tarullo said the federal review had found “significant weaknesses in risk-management, quality control, audit, and compliance practices as underlying factors contributing to the problems associated with mortgage servicing and foreclosure documentation.” “We have also found shortcomings in staff training, coordination among loan modification and foreclosure staff, and management and oversight of third-party service providers, including legal services,” he said. In the wake of the worst housing crisis in generations, consumer advocates, housing analysts and bank regulators have heavily criticized the industry’s performance. In addressing the recent controversies of improper foreclosures during a speech last November, Fed governor Sarah Bloom Raskin said procedural flaws like robo-signing and other efforts that cut corners are “part of a deeper, systemic problem.” She added that she was “gravely concerned.” “The complex challenges faced by the loan servicing industry right now are emblematic of the problems that emerge in any industry when incentives are fundamentally misaligned, and when the race for short-term profit overwhelms sustainable, long-term goals and practices,” Raskin said. “I believe that serious and sustained reform is needed to address the larger problems in mortgage servicing.” Tarullo said the “problems are sufficiently widespread that they suggest structural problems in the mortgage servicing industry.” “The servicing industry overall has not been up to the challenge of handling the large volumes of distressed mortgages,” he said in December. “It is clear that the industry will need to make substantial investments to improve its functioning in these areas and supervisors must ensure that these improvements occur.” But as of last week, nothing had changed, Raskin said in another speech. “These problems existed before November and as far as I can tell they remain unaddressed,” Raskin said. “How do I know this? Late last year, the federal banking agencies began a targeted review of loan servicing practices at large financial institutions that had significant market concentrations in mortgage servicing. The preliminary results from this review indicate that widespread weaknesses exist in the servicing industry.” “These deficiencies pose significant risk to mortgage servicing and foreclosure processes, impair the functioning of mortgage markets, and diminish overall accountability to homeowners,” she added. “I’m sure this has been said, but I’ll say it again because I have seen little to no evidence of improvement in the operational performance of servicers since the onset of the crisis in 2007.” Bank regulators will address the issue on Thursday during a Senate hearing. On Wednesday, Federal Housing Administration Commissioner David Stevens said that a settlement would come in the next month. Options include penalties against the nation’s largest banks, more mortgage modifications for borrowers, and the reduction of homeowners’ mortgage principal, he said. Stevens also touched on how regulators aren’t on the same page. “There’s two ways we can go about coming to a conclusion here,” Stevens said. “We can come up with one set of solutions, assuming the general findings are the same, or we can go individually. That process is being worked through right now.” The FHA chief added that the agencies would have to work together “to make this less disruptive in the market,” an acknowledgement that a massive principal write-down scheme would likely impair the nation’s largest financial institutions. The OCC’s actions in trying to derail a more substantial settlement raises questions over the Obama administration’s delay in nominating the agency’s next leader. Its last chief, John C. Dugan, stepped down in August after his five-year term ended, and joined Covington & Burling LLP, where he leads the firm’s financial institutions group. Dugan “advises clients on a range of legal matters affected by significantly increased regulatory requirements resulting from the financial crisis,” according to the firm’s Web site. One of his colleagues is Edward Yingling, who last year stepped down as president and chief executive officer of the American Bankers Association, the industry’s largest trade group. Consumer advocates pushed for the White House to nominate an outsider who was less connected to the OCC’s prior failures. The agency came under withering criticism for its lax oversight of the industry in a report published by the bipartisan, Congressionally-appointed Financial Crisis Inquiry Commission. Treasury Secretary Timothy Geithner picked Dugan’s former chief of staff at the OCC, John Walsh, as Dugan’s interim replacement. Obama has not yet named his successor. The nomination requires Senate approval. But Democrats lost six seats in the Senate in last fall’s election. The administration now faces an uphill battle to get a tough regulator in the role. ************************* Shahien Nasiripour is a business reporter for The Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

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Economist: ‘The Age Of American Predominance Is Over’

January 9, 2011

DENVER (By Mark Felsenthal): To hear a number of prominent economists tell it, it doesn’t look good for the U.S. economy, not this year, not in 10 years. Leading thinkers in the dismal science speaking at an annual convention offered varying visions of U.S. economic decline, in the short, medium and long term. This year, the recovery may bog down as government stimulus measures dry up. In the long run, the United States must face up to inevitably being overtaken by China as the world’s largest economy. And it may have missed a chance to rein in its largest financial institutions, many of whom remain too big to fail and are getting bigger. On the one hand, Harvard’s Martin Feldstein said he believes the outlook for U.S. economic growth in 2011 is less sanguine than many believe. First, the boost to growth from government spending will be drying up this year, he said. Renewal of expiring tax cuts is no more than a decision not to raise taxes, and the impact of one-year payroll tax cut is likely modest, he said. “There’s really not much help coming from fiscal policy in the year ahead,” he said. Woes from the dire situations of state and local governments may actually be a drag on growth, he said. Growth got a lift from a lower saving rate in 2010, but that probably will not last this year as households worried about an uncertain future return to paring back debt and socking more away, Feldstein added. Discouraging declines in home values mean there is less to save from, he said. “People are worried, so there’s a strong reason for precautionary saving,” he said. THE RACE IS ON On the other hand, there is the race with China and the dynamic Asian economies, including India. Most estimates put the size of the Chinese economy on par with the United States by the early 2020s, said Dale Jorgenson, also of Harvard. Jorgenson sees Asian emerging markets as the most dynamic in the world, eclipsing other emerging market contenders such as Brazil and Russia with steady growth over the next decade. “The rise of developing Asia is going to accompany slower world economic growth,” he said. The United States will need to come to terms with the fact that its prevalence in the world is fated to come to an end, Jorgenson said. This will be difficult for many Americans to swallow and the United States should brace for social unrest amid blame over who was responsible for squandering global primacy, he said. MIT’s Simon Johnson put it more bluntly, saying the damage from the financial crisis and its aftermath have dealt U.S. prominence a permanent blow. “The age of American predominance is over,” he told a panel. “The (Chinese) Yuan will be the world’s reserve currency within two decades.” Johnson said he believes the United States has failed to learn its lesson from the financial crisis and continues to implicitly back its largest financial institutions. “I’m concerned about the excessive power of the largest global banks,” he said. “Who are the government-sponsored enterprises now? It’s the six biggest bank holding companies.” To be sure, Raghuram Rajan, a former IMF chief economist now with the University of Chicago’s Booth School of Business, could still envision an ongoing U.S. leadership role. Nothing proceeds in a straight line, he said, and there are many pitfalls along the way even for dynamic Asian economies. “I would say the age of American dominance may be nearing an end. But America as the biggest mover will be in place for a long time,” he said. (Reporting by Mark Felsenthal; Editing by Maureen Bavdek) Copyright 2010 Thomson Reuters.

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Grant Cardone: Competition Breeds Failure and Mediocrity

January 7, 2011

Competition has proven itself to be a failed business concept. Those that follow and copy rather than lead and innovate are all but dead in today’s economy! Contrary to what you have been told, competition is not healthy and in fact breeds failure and mediocrity. Competition is for followers and imitators not leaders and innovators. Failing businesses, unemployment, factories closing, product demises and salespeople unable to hit their quotas are just a few examples of being competitive. Competing results in razor-thin margins, reduced stock values and leaves in its wake mediocre companies and second tier players who depend on prayer and bailouts for their futures. TWA, Circuit City, Blockbuster, ABC, CBS, NBC, Sears and Pontiac are just a few examples that competition is a failed business concept. Competition and individuals that spend their days mimicking what others are doing is reactive and suicidal. You have been convinced that competition is healthy, but healthy for whom? Great companies, great managers, greats sales people, and tomorrows leaders set the pace of the race — they don’t seek to compete but dominate! — Decide to dominate your sector and your market. — Do what your “competitors” will not do. — Be so ferocious in your actions that you are seen everywhere. The concept of competition is a like a cancer in business today with companies and individuals comparing themselves to what others are doing rather than what is possible. Competition has never made a company, country, product or an individual great! Competition is not an American theme but more a communist one. Greatness is achieved with the decision to be the leader in the space and dominate. Domination is the idea of controlling a space with such ownership that your supposed ‘competition’ cannot keep up and succumbs to follow. Pixar, Facebook, Apple, Netflix, and Southwest Airlines are examples of companies that dominate their spaces. The new business mantra is domination, not competition! Grant Cardone, NY Times Best Selling Author and Sales Training Expert

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Dr. Leslie Gaines-Ross: 8 Ways Reputations Will Change in 2011

December 30, 2010

As Weber Shandwick’s chief reputation strategist, I have decided to join the ranks of the end of the year palm readers and offer my predictions for the next year. Time and time again during the past twelve months, I have been asked to hold my finger up in the air and divine from whence come the changing winds of reputation. My head has filled with reputation-related ahahs and hunches. Now is my chance to let it all out. So here is my list of what to look for in 2011. 1. Hijacked Reputations: As increasingly more information gets leaked, mismanaged and corrupted via the Internet and otherwise, more and more companies will suffer as a result. Repairing such reputational damage will not be easy — what used to be 15 minutes of shame may now last forever on the Internet. The best antidote will be, as it always has been, being prepared beforehand to act quickly, decisively and transparently. 2. Reputation Recoverers Anonymous: The prevailing trend for 2011 will be reputation recovery. As the “stumble rate” increases (Weber Shandwick regularly measures this), so does the rate at which many companies will pick themselves up and rejoin the race. Trophies will increasingly be handed out to CEOs who lead their companies back from worse to first. In 2005, there were 455,000 search mentions of reputation recovery. Five years later, that number has soared to nearly 2, 500,000 mentions. Reputation rehab is a new industry to watch. 3. Reputation Warfare. Reputation warfare will expand and intensify. Enabled by the Internet and social media, individuals and small groups will continue to rise up and take greater control of reputations by slinging criticism, some valid, against companies and other entities. Adopting strategies on how to better leverage and counter these reputation insurgents will be essential (See my article on Reputation Warfare in Harvard Business Review for more insights). The release of confidential U.S. embassy cables via WikiLeaks is only the most conspicuous of these attacks. It will become apparent in the year to come that WikiLeaks was only the tip of the iceberg. 4. Online Reputation Revisionism. Further advances will be made in establishing a workable system of erasing or amending unfairly disparaged online reputations. One such particularly promising idea is likely to be at the forefront: a one-time only policy that grants social amnesty to young adults turning 21 who are about to enter the workforce. Google’s CEO Eric Schmidt hinted at the wisdom of this kind of social amnesia: “every young person one day will be entitled automatically to change his or her name on reaching adulthood in order to disown youthful hijinks stored on their friends’ social media sites.” The day will come, maybe not next year but soon, when a communally agreeable system of “social amnesia” will arise. We can expect increasing discussion in 2011 on what form that system will take, since the need for one is critical. 5. Ascendancy of Social CEOs: Chief executives will increasingly join the 21st century, expanding their use of various online channels to burnish their company reputations, including writing or participating in internal blogs, telling the company story at conferences and on corporate YouTube channels and being interviewed by journalists on online media channels. The socialization of CEOs has begun and will continue in 2011. 6. Reputation Blacklisting: List mania will continue to expand. Every day new rankings and league tables are born: best companies to work for, best companies to launch a career, best companies for hourly workers, best companies for C-level executives. These rankings help companies build and differentiate their reputations through third-party endorsements. In the year ahead, however, we can also expect the long overdue but inevitable reaction to such “best of” lists. Look for more reputation “blacklists” to sprout and then propagate – for example, worst companies for women to work for, worst companies for training and least socially responsible companies. 7. Reputation Risk Insurance: After a year of reputation scandals and downfalls, now would be the time for reputation risk insurance to firmly take hold. Several large insurance brokers already cover reputational damage as part of their directors’ and officers’ liability insurance (D&O) designed to shield board members from shareholder law suits. A more expansive reputation-based product is due that would compensate companies whose reputations have taken a hit whether offline or online and caused them to suffer declining sales, additional marketing and public relations expense and other reputational fallout. 8. The Corporate Brand Rises: In the next year, companies which own a portfolio of individual brands will focus more intensely on developing the reputation of the parent corporation, not just the individual brands. Consumers have access to a dizzying array of information. Even the most unsophisticated consumer can now easily identify the company standing behind any brand. If the parent company’s reputation is strong, known for treating its employees well, being transparent and sustainable, and having good leadership, consumers are more likely to make a purchase and then tell their friends about it. We will revisit these trends as next year closes and 2012 awaits us.

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Marian Salzman: Mad as Hell–and Only Getting Madder

November 29, 2010

This is the first in a series of 12 posts expounding on the 2011 forecasts in the annual trends report from Salzman, president of Euro RSCG Worldwide PR and an internationally respected trendspotter. Despite the relatively peaceable environment abroad–there’s a successful coalition, for now, in the U.K., and Australians still appear confident despite debt problems–the U.S. in 2011 is going to flash even red-hotter than the map of the country at midterm elections. Temperatures at home are pushing up the mercury, and not because of global warming or climate change. It’s a trend that extends from politics to domestic life: Expect men at home to be angry at their wives, working women to express ire over being their household’s sole wage-earner, and everybody to be furious about taxes, privacy, individual freedoms and more. Ordinary Americans will have their feedback loops set on tantrum. We maybe haven’t seen so much anger since 1976 when Peter Finch, playing anchorman Howard Beale in Network , came in from the rain to exhort his audience to express themselves. (“I want you to get up right now and go to the window. Open it, and stick your head out, and yell, ‘I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!’”) Headlines show banks once again making billions (and well-connected bankers aren’t doing so poorly, either), while the middle class have lost savings, homes, health care, jobs, prospects. The millennials can’t find jobs. The poor have less faith than ever about staying in school (1.2 million Americans drop out ). Washington talks about solutions, but for many Americans, government itself plays out as the problem. Listen in on Rand Paul’s acceptance speech in Kentucky, the new purple-grass state. His chorus of ” Deliberate upon this ” had the ring of a schoolyard heavy premeditating a rumble at the noon bell. During the race, even MSNBC liberal pundit Chris Matthews flashed plenty mad at Paul’s opponent , Democrat Jack Conway, whose attempt to smear Paul with an anonymous source in the “Aqua Buddha” ad toppled as hard in the heartland as the statue of Saddam Hussein once did in Baghdad. On Twitter, AT&T users get really upset at how frequently iPhones drop their calls . AT&T’s SoMe strategy– mapping angry tweeters’ locations to try to restore service and confidence–is, depending on your point of view, either another noxious example of “eavesdropping” or a positive response to a negative. The Gap felt the blowback of contagious wrath on SoMe after it tried redesigning its logo. Even though business press critics called the company ” spineless ” for backing down, the detractors asking for the old Gap back–in droves on social and digital media–won. Don’t doubt it: Consumers are mistake-intolerant for brands and causes. As for what used to be called “customer satisfaction,” Frances Allen, EVP and CMO of Denny’s, offers that “insight” and “innovation” are among the few things you can do when they’re losing it. You can also plan ahead. Before the urge to attack strikes, brands must know what “insightful” means, from extracultural preferences to all-American nostalgia, and anticipate the defensive game plan. You don’t want to wind up with fingers pointing every which way, as Samsung did when its Lebanese ad agency FP7 Doha took a creative prize for a spot the client had never seen. The trouble started when the public saw it–a robed Jesus snapping a picture of a group of nuns–and went berserk. Anger, it turns out, just isn’t that easy to unstrand even by the most evolved among us. The Dalai Lama tweets that the energy of anger feels like progress but is “almost always unreliable,” as emotions go. It’s Buddhist theology that it’s possible to have compassion without attachment and anger without hatred. But don’t try telling that to Rep. John Yarmuth, a Dem whose win of a House seat in Kentucky he called ” bittersweet ” because of the flavor of the harsh language heaped on Nancy Pelosi and President Obama all year. What is sure is that anger is the color of the zeitgeist now, and anyone who isn’t tapping it risks appearing out of touch. When MSNBC network star Keith Olbermann got suspended without pay earlier this month for making three Democratic political contributions, including against Rand Paul, one gloating headline read: “Time to Feast on a Delicious Second Helping of Schadenfreude.” After Election Day, pundits on the right weighed in about Olbermann and MSNBC’s commentators, while other sites noted that the staff of some defeated Democrats had talked to grief counselors after the election–a soft touch seemingly tailor-made for the very angry to dis. Indeed, this emotion–anger–which has been analyzed by everybody from Sigmund Freud to 12-step gurus as sublimation of fear, anxiety or grief, doesn’t feel the need today to get deeply in touch with its masks. Like Bill Clinton trying to parse what “is” is, anger is the new “it.” And being angry makes for dynamics. Seth Godin has noted that angry people grab attention because they are interesting, and interesting people will get more air time for their angry message, helping them in turn set agendas and get elected. In the new movie Skyline , futuristic warmongers descending on Los Angeles first appear as so many dropping points of light. They’re robotic cyberwarriors, metal hulks that first dazzle, then destroy. How ’bout this new phrase: light-rippin’ mad! Back in Prohibition (the era for the new HBO series “Boardwalk Empire”), shrinks thought angry people should dispel their emotion at the piano, by banging out “The Devil’s Sonata.” Not having any was boardwalk boss Enoch Thompson (Steve Buscemi), who skipped go (and did not go directly to jail) by setting his childhood house (and bad memories) literally on fire. With the casualties of voter anger feeling the chill winds of Alaska, and the Tea Party steeping those enmities as one serious kind of ” flippin’ fun ,” look for a kinder, gentler era to become itself an object of public ire. I expect, in the personal sphere, we’ll see more and bigger cases of domestic violence and the faceless menace that is cyberstalking . Meanwhile, expect the political arena to roil ever hotter. Barack Obama’s cool, calming rhetoric hit the spot for many Americans in panic-stricken 2008. In retrospect, his no-drama persona appealed just long enough to get him elected, but now it’s very two years ago. Tomorrow: “Talk to the Hands”

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Donald Trump: ‘I Like’ Sarah Palin, ‘But I’d Take Her On’ In 2012

November 18, 2010

Real estate mogul Donald Trump says he’s thinking about running for president, saying “everybody’s ripping off the United States.” Trump tells ABC’s George Stephanopoulus in an interview he doesn’t actually want to run, but that he’s worried about the country’s future and thinks he could be the person to stand up to America’s rivals. He singled out China for criticism in the interview, accusing Beijing of manipulating its currency to gain unfair advantage of the United States in global trade competition. He has shown interest in the past in running for president, in both 1988 and 2000. But in the interview, Trump said, “I am thinking about things.” He said he expects to decide by June and said he’d likely run as a Republican if he enters the race. Last month, Trump communicated a similar message on the possibility he’d jump into the 2012 presidential mix. “I’m totally being serious because I can’t stand what’s happening to the country,” he explained during an appearance on Fox News. “I am being serious about it. I’ve been asked for years to do it. And I had no interest. This is the first time I am — at least I’m considering it.” On Thursday’s edition of GMA, Trump said “it could be fun” to mount a run for the White House because he’d “like to see some positive things happen for the country.” He also spoke out on the possibility of facing off against former Alaska Governor Sarah Palin , who signaled this week she’s seriously considering running for president in the next election cycle. “She’s very interesting,” explained Trump. “And don’t underestimate her. I mean, I see what she does. Do not underestimate Sarah Palin.” He added, “I would take her on. I like her, but I’d take her on.” WATCH:

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Vitaliy N. Katsenelson: Post-Steroid Economics

October 28, 2010

During the ’80s and ’90s, ignorance was bliss. The global economy was growing nicely, and analyzing it (or even paying attention to market cycles) seemed like a waste of time, as the economy came in only three flavors: good, great and awesome. Even if you misread the flavor, the downside was that you’d just make a little less money. Value investors prided themselves on being bottom-up-only analysts, focused on scrutinizing individual stocks, while top-down analysis — making investment decisions by looking only at the macro picture — became unfashionable, viewed as market timing. (I know the above statement may sound a bit over the top, but over the years I have read and listened to dozens of interviews with famous and successful investors who declared that they do bottom-up-only analysis and don’t pay attention to the economy.) Prolonged and virtually uninterrupted growth brought complacency, excesses, and debt. Bottom-up-only analysis worked until it stopped working, as investors discovered during the recent crisis that the global economy can come in additional flavors: bad, horrible, and downright nasty. Today the cost of misreading the economy is much higher. Two years ago the Great Recession waltzed in to the great surprise of homeowners, the Fed and the banks, and everyone discovered that house prices don’t always go up. The financial sector, the lifeblood of our economy, started to drown in the sea of bad debt. As the troubles in that sector began to spill into the real economy, the government felt it had no choice but to step in, and the bailouts and stimuli began. Today it is hard to take a walk through our economy and not meet a friendly Uncle Sam; he is everywhere. He’s buying long-term bonds and thereby keeping long-term interest rates artificially low. Since he took over the defunct (for all practical purposes) Fannie Mae and Freddie Mac, he is the U.S. mortgage market, because those organizations account for the bulk of mortgages originated. Of course, he is also on the hook for their losses. Our dear Uncle Sam rolls in style. He doesn’t know how to bail out or stimulate on the cheap. U.S. government debt (at least, the debt that is on the balance sheet) leapt from about 60 percent of GDP before the Great Recession to more than 100 percent in 2010. The party of over-leveraged consumers has been crashed by an over-leveraged government. To understand the consequences of the Great Recession, consider this analogy: The U.S. economy is like a marathon runner who runs too hard and pulls a hamstring, but finds himself with another race to run. So he’s injected with some industrial-strength steroids, and away he goes. As the steroids kick in, his pace accelerates as if the injury never happened. He’s up and running, so he must be okay. This is the impression we get, judging from his speed and his progress. What we don’t see is what is behind this athlete’s terrific performance: the steroids, or, in the case of our economy, the stimulus. Obviously, we can keep our fingers crossed and hope the runner has recovered from his injury, but there are problems with this thinking. Let’s address them one by one: • Serious steroid intake exaggerates true performance. Economic stimulus creates an appearance of stability and growth, but a lot of it is teetering on a very weak foundation of government intervention. • Steroids are addictive; once we get used to their effects, it is hard to give them up. When the first home-buyer tax credit expired, it was extended for anyone with the patriotic ambition to buy a house. It is hard to give up stimulus, because the immediate consequences are painful, but long-term gain has to be purchased by short-term discomfort. • The longer we use steroids, the less effective they are. Take Japan, which was on the stimulus bandwagon for more than a decade. With the exception of tripled government debt, Japan has nothing to show for its efforts; the economy is mired in the same rut it was in when the stimulus started. • Steroids damage the body and come with significant side effects. In the case of the economy, the side effects are higher future taxes and increased government debt, which brings on higher interest rates and thus below-average economic growth. The hopes that we’ll transition from government steroid injections back to an economy running on its own are overly optimistic. So what does this mean for investors? When we purchase a stock, we are buying a stream of future cash flows. By doing only bottom-up analysis, investors implicitly assume that external factors (the winds and hurricanes of the global economy) have no impact on these cash flows. That is a brave and careless assumption, especially in a post-steroid world. Instead, investors should take a more holistic approach, mixing bottom-up insights with top-down analysis. Follow me on Twitter

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Dave Johnson: Erie, PA Town Hall: "No Country Ever Went Broke Investing in Its Own People"

October 19, 2010

Last night’s “Keep It Made In America” Town Hall meeting was at the Bayfront Convention Center in Erie, Pennsylvania. Kyle Foust, Chairman of the Erie County Council welcomed the attendees and led off the Town Hall meeting, quoting Hubert Humphrey: “No country ever went broke by investing in its own people.” I recently spoke with a Tea Party member who did not know that it is government that builds the roads, airports, sewer systems, etc. that make up the infrastructure that is the foundation of our country’s ability to have companies at all. He actually thought that private companies do this, and that “government spending” just “takes money out of the economy.” Maybe this is why so many candidates in this election say that “government spending” is bad but will not say, no matter how hard they are pressed , what spending they plan to cut in their quest for “smaller government.” The Town Hall Following a Unitarian invocation by Rev Steve Aschmann, Scott Paul of the Alliance for American Manufacturing (AAM) — the organization that is putting on these “Keep It Made In America” Town Hall events — explained what AAM is about, strengthening manufacturing in this country. Scott gave the audience several facts about manufacturing: 74% of Tea Party supporters support more manufacturing, as do 82% of union members. 563,500 in Pennsylvania work in the manufacturing sector This is down from 864,000 in 2000 And represents a 35% cut in manufacturing jobs. Candidates Speak Two local House candidates spoke at this meeting. Mike Kelley, Republican candidate for Congress spoke first. “We can’t control unfair competition. Just make it fair, that’s all, make it fair. Enforce the rules. We play by the rules, other people don’t. Chinese currency.” Q: “Will you support buy American policies?” A: Who would not? Especially in taxpayer-funded projects. Q: “Hold China accountable?” A: The world has been waiting for America to take the lead. China has to be held accountable when they break the rules. Q: “Policies?” Competition, we never back away from competition. We need to get a national strategy in place. Taxes — need a VAT. Others all do it. (Note, Kelley’s answer is good for manufacturing. Short explanation: Other countries use a VAT to boost their manufacturing sector. Their manufacturers get a VAT rebate, but goods imported from the US do not, so in effect a VAT is a either a subsidy of their companies or a tariff on imports from us.) Next up was his opponent in the race, Congresswoman Kathy Dahlkemper: We need to get back to a manufacturing economy, to provide that good family-sustaining wage. How to keep it made in America, three points: 1) Close the loopholes, Republicans’s did not vote with us on this. My opponent has pledged, signed a pledge no to remove the tax advantages given to companies for moving factories out of the country and outsourcing American jobs. (Note see my post on this today.) 2) Stop China’s cheating. Everyone knows China cheats. The currency bill, voted for it, the Chamber of Commerce — that’s the national Chamber which is a very different thing from the local Chambers — is against it. We also have to stop China’s illegal trade practices and dumping (selling below cost to capture markets). 3) Invest in our domestic manufacturing base. The COMPETES act has passed the House, but Senate… Education. Raw materials — rare earth elements, China is saying they can get these IF they bring manufacturing to their country. We can produce them here, but don’t. Because China subsidizes, it is not profitable to start production here. The Panel This Town Hall’s panel of local experts: • Kenneth Boothe Jr., General Manager, Donjon Ship Builders • Reverend Jeffery Priscaro, St. Ann’s church • Ron Oliver, Community Labor Leader • Tim Ryan President, Apex Offshore Wind. • David J. Rosenberg, Head of Marketing, North America Gamesa Energy • Hillary Bright, Blue/Green Alliance Field Organizer. Priscaro — When people make things It create sjobsm, revenue, they buy houses, participate in economy. Ryan — Windmills, local wind turbines on old steel mill site, made in the US. Sun Ray project in Texas used GE wind turbines, GE Transport made the gearboxes. Gemasa, of Sain, has set up manufacturing near here. The Export/Import bank financing requires high local content. We need a national Renewable Energy Standard , then there is a tremendous opportunity for American manufacturing in wind energy. Oliver — the effect on people of losing job, moving, move in with mom, manufacturing is the heartbeat of America. Boothe — Donjon has recently gone from 13 employees, in 10 months have 118. 125 by end of year, 150 then up to 250. Bright — Labor and environmentalists share common goals Hadn’t recognized how intertwined manufacturing is with a healthy community, environment, wages, families, healthy communities. And healthy environment. The way we see America in future generations, manufacturing is key to recognizing that. Q: “Where are we going to get jobs? We need the infrastructure rebuilt, everything reconstructed. How?” Bright — AAM, others have recognized that one of the largest opportunities is in clean energy. The stimulus was a down payment. Opportunity at federal policy level like Renewable Energy Standard to create the market and the demand to get it going, otherwise we lose the race to countries like China. Oliver — We need to create the jobs here, the stimulus was using money to buy windmills made in China. Ryan — We need new power plants as well as wind energy power plants. National policy has been up and down up and down, industry can’t survive on federal programs that last 6 months or a year, we need national policy that looks at the next 20 years or so. Priest, we lost jobs because of legislation, we can gina jobs by legislation. Q: “What can we do to stop the leak of jobs from US?” Scott Paul: Stop tax breaks to ship jobs overseas. (Note — All pictures by Ike Gittlen, USW, with permission. Click any pic for enlargement, see the entire collection here .) This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF. Sign up here for the CAF daily summary .

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Video: Russia, Canada Vie for Arctic Resources as Ice Thins

September 23, 2010

Sept. 23 (Bloomberg) — Bloomberg’s Simin Demokan reports on the race between Russia, Canada and five other countries to secure rights to natural resources in the Arctic region as the polar ice thins.

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GOPers Line Up To Repeal Wall Street Reform

August 13, 2010

Last month Dino Rossi became the first Senate candidate in the country to call for the repeal of Wall Street reform. Now it’s clear he has plenty of conservative company on Capitol Hill. With Washington state’s primary Tuesday just a few days away, HuffPost asked around at the Capitol to see how Rossi, the Republican challenger expected to face Democratic incumbent Patty Murray in the general election, stacks up with sitting Republican Senators on financial reform. The verdict? When it comes to Wall Street reform, Rossi’s views fall in line with many top GOP leaders, though his views notably put him to the right of Sen. Jeff Sessions (R-Ala.). Rossi made headlines when he said on ABC/Washington Post’s “Top Line” program, “I think it should be [repealed]“, charging the Wall Street reform bill has “created six super banks and left Fannie [Mae] and Freddie [Mac], which were at the epicenter of the problem, out of the deal.” Democrats pounced on Rossi’s words, saying he is much too conservative for a state that leans left and arguing Rossi shows more loyalty to big banks than to Washington taxpayers. “Rossi seems to want to go back to the days when Wall Street ran roughshod over families resulting in the worst economic recession since the Great Depression,” DNC spokesman Frank Benenati said. And Democratic Senatorial Campaign Committee spokeswoman Deirdre Murphy said Rossi “is out of step with Washington values and not on the side of consumers in his state.” While Rossi may be out of touch with moderate constituents, he finds company on Capitol Hill in Sessions and Sens. George LeMieux (R-Fla.), and James Inhofe (R-Okla.) all of whom told HuffPost they would repeal the legislation or at least parts of it if given the opportunity. “Well yeah,” Inhofe told HuffPost when asked point-blank if he would repeal the legislation. “I’m not saying I can, but the answer is yes [I would].” LeMieux and Sessions both said they would repeal parts of it, though they offered few details. “Well, it has some things in it of value but overall I think it’s bad legislation,” Sessions told Huffpost. “So I guess I would favor legislation that would be on balance better than bad. I would repeal parts of it.” The new legislation regulates derivatives trading, and puts restrictions on proprietary trading and private equity investments through the Volcker Rule, and creates a Consumer Financial Protection Bureau. Senator Bob Corker of Tennessee, a top Republican player in the financial reform debate, denounced the Democrat-backed bill almost immediately telling reporters “at the end of the day this bill is going to limit credit availability and cause that credit availability to be more expensive.” And House Minority Leader John Boehner (R-Ohio) called for the repeal of the Wall Street reform legislation just minutes after it passed, saying the bill penalizes Main Street bankers for the crimes of a few on Wall Street. “I think it ought to be repealed,” Boehner told reporters at his weekly press conference. “I think the financial reform bill is ill-conceived. I think it’s going to make credit harder for the American people to get — clearly harder for businesses to get. And the fact that it’s going to punish every banker in America for the sins of a few on Wall Street, I think is unwise. On top of that, I think that it institutionalizes ‘Too Big To Fail’ and gives far too much authority to federal bureaucrats to bail out any company in America they decide ought be bailed out.” South Carolina Republican Lindsey Graham has long referred to the bill a “missed opportunity” to control spending and set priorities. And Sen. John McCain (R-Ariz.) was similarly underwhelmed, calling it “business as usual.” “No one can make a convincing argument that this legislation indeed prevents any institution from being “Too Big To Fail” — you can’t make that argument,” McCain told reporters shortly after the bill passed. Rossi is the preferred candidate of the National Republican Senatorial Committee. This year’s race is his third time running for higher office; his two previous bids against Gov. Christine Gregoire (D) in 2004 and 2008 were unsuccessful. Rossi is widely expected to be the Republican nominee, though Ron Paul and former Alaska Gov. Sarah Palin (R) have endorsed Rossi’s Republican rival, former Washington Redskins tight end Clint Didier. Rossi shrugged it off, saying: “We haven’t been seeking endorsements,” and adding that Palin endorsed Didier “three weeks before [he] even got in the race.” The real challenge however, will come from Murray, the state’s three-term incumbent. Watch Murray’s campaign ad slamming Rossi’s ties to Wall Street:

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‘WedLock’: Startup Now Selling ‘Divorce Insurance’

August 6, 2010

Divorce costs an arm and a leg these days. Estimates on the average price tag of splitting with your spouse range from $15,000 to $30,000 . So shouldn’t you be protected against the financial burden of divorce? SafeGuard Guaranty Corporation thinks so. The North Carolina-based insurance startup is selling a divorce insurance product called WedLock . (Yes, we enjoy that pun — h/t New York Times Bucks Blog) Each unit of WedLock costs $16 a month and provides $1,250 to cover expenses like divorce legal proceedings. Insureds can buy multiple units, and for every year their policy lasts, SafeGuard will throw in another $250 of coverage for each unit they own. Once a married couple un-ties the knot, policyholders simply send in their divorce papers and SafeGuard sends them cash. (To prevent spouses already planning a divorce from cashing in, SafeGuard requires at least 36 months from the effective date until spouses can claim the coverage.) Still not convinced you need divorce insurance? To help you make up your mind, SafeGuard provides a Divorce Cost Calculator and an even more ambiguous Divorce Probability Calculator that factors in such variables as your race, family income and history of depression or mental illness. After reviewing SafeGuard’s offer, feel free to add WedLock to your list of ‘types of insurance I don’t need’ .

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Marty Zwilling: Who Is Getting Venture Capital Money This Year?

August 3, 2010

I’m a strong believer that investors invest in people, before they invest in a business plan, or an idea. But until now, I’ve never seen a study of exactly how that plays out for start-up founders for current venture-backed companies, specifically: race, age, experience and the number of founders per company. A new study, just published by CB Insights, titled Venture Capital Human Capital Report , summarizes these three characteristics for private early-stage Internet ventures funded in the US during the first six months of 2010. The significant findings include the following: Founders need to live in the right place. No surprises here. California (Silicon Valley), New York (NYC), and Massachusetts (Boston) are the places to be in the US for venture capital attention. Almost 80% of the funding handed out in the US consistently comes from these three locations. Whites and Asians lead the race. 87% of funded founders are white, which is not too far above the US population of 77% white. More notably, the second largest group receiving funding was Asians, at 12%, despite comprising only 4% of the population. All-Asian founding teams raise the largest rounds. Asian teams in California raised median funding rounds of $4.4M, significantly higher than the $3M raised by mixed or all-white founding teams. In other locations, the trend was more equal, even somewhat reversed in New York and Boston. Wunderkinds don’t have the magic touch. The average age of founding teams getting funded is in the Gen-X, 35-44 year age range. However, the highest median funding did go to those in age range 26-34 years old. Amazingly, no founding teams in the Gen-Y 18-25 year range received any funding in California. Experience does count. Fully 39% of founders funded were formerly CEOs or had founded prior companies. Other common previous roles were executives in Sales, Marketing, and Product Management, all suggesting that VCs back experience. More founders generally means more money. Overall the majority of companies have two or more founders, but over a third are led by one founder. More founders does not necessarily result in larger funding rounds, but the highest median funding generally goes to companies which have two or more founders. Going solo works better on the East Coast. Co-founder companies are the norm in California, but 40-50% of the start-ups in New York and Massachusetts have only one founder. In New York, these solo efforts even raised more money, with a median of $4M. If you don’t live in these corridors, don’t assume that you can simply incorporate in the state, or email your proposals there and be considered like a local. At minimum, you need to get an introduction from a local player, or better yet, set up a local office and network there. Investing is all about people-to-people relationships. If you are from outside the US, especially Asia, experts tell me that the focus is even more on relationships. George Wang, founder and chairman of the Beijing-based Chinese Professional Network (CPN), recommends that anyone from the West wanting to get involved in Chinese start-ups slow the pace down and “Spend six months and get to know the place and the people.” If you need funding, focus first on the human side of venture capital, before you rush to pitch your plan. The evidence confirms that from a funding perspective, a successful start-up is more about the right people being in the right place at the right time, versus the technology or solution.

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theGrio: BP’s New, Black Gulf Representative Talks Damage Control

June 30, 2010

Darryl Willis has recently emerged as the public face of BP. He is the VP of Resources for BP America and in charge of handling the legion of damage claims pouring into the oil company. This became glaringly apparent when a solemn, studious, and very sincere appearing Willis stared into a camera and declared that “I’ll be here in the Gulf for as long as it takes to get it right.” This is precisely what many believe BP’s gaffe-prone, CEO Tony Hayward couldn’t do. The ensuing commercial has become ubiquitous on television with Willis trying to assure that though BP can’t wipe away its horror of the past two months , it’s doing everything to make amends and that includes shelling out tens of millions to those hurt by the spill . A native of New Orleans, a geophysicist by profession, 20 years as a middle ranking BP executive, and lacking a British accent, Willis seems the ideal person to lead BP’s new PR offensive. But can he work miracles for BP and make things right in the Gulf? Is Willis’s rise to the top a cynical, play of the race card by a company that’s been hammered for its environmental and economic destruction , ineptness, public insensitivity, and dodges and evasions ? The skepticism about Willis and his actual role in BP damage control is a legitimate point of debate, and derision, by some African-Americans. But Willis makes clear that he’s no smiling face front man for the company and ticks off facts to back up the claim that he and BP will do what it takes to as he repeatedly told me “to make it right.” Willis tells much more in this theGrio exclusive. You be the judge. theGrio: What is the attitude of African-American fishermen, hotel and restaurant workers and owners in the Gulf that have been affected by the spill toward BP? Darryl Willis: I was at a town hall in Port Sulphur, a town north of Venice, Louisiana. It was a heated town hall. The participants were mostly African-American. They were concerned about being included in the settlement and the claims process. They also expressed concern about getting back to work, getting their boats back in the water. It was an opportunity for me to connect with the folks in the Gulf affected by the spill. It was an opportunity for me to make sure that we’re tapping into communities in a positive way. The key thing that we have to do is to keep listening to people. But there is frustration on the part of many African-Americans. Is there a sense among African-Americans in the region that they’re being excluded from the settlement and claims process? I don’t get that sense. However, African-Americans do want to be more visible in the process. But African-American claimants are walking into the claims centers with their documentation and leaving with payments for the damages. That gives me a sense of ease. But we want to engage local persons and businesses in the clean-up , repair process. How deeply affected were African-Americans by the spill? It has had a deep effect on those involved in the oyster, shrimp, and crab and the fisheries. The fact that they can’t get out on the water and make a living is where the frustration comes in. They thank BP for the checks. But they still want to get back to work and make a living. The best thing they say for us is to clean up the spill so we can get back out on the water. Have you been personally involved in the escrow fund set up negotiations? And how does it actually work? My talks have been with Kenneth Feinberg, President Obama’s appointed Oil Fund overseer. We’ve talked about distributing the payments . We’ve talked about how to make the process more efficient, speedy and transparent to local individuals and business claimants as well as transparent to local, state and federal agencies. We’ve talked about how to make the way we act with the community more consistent across the Gulf Coast. Ken said this is the first time that he’s gotten involved in a claims process that’s up and running. We’ve opened up 45 offices, written 40,000 checks, and paid out $130 million in claims. It takes 4 days on average for a claimant to get a check. For businesses, it’s taken 8 days. There’s still much skepticism about BP’s intentions and efforts? The proof is in the pudding. Since June 1 we’ve paid out $90 million in claims. Anyone who doesn’t believe that we’re trying to assist those that have been damaged by the spill we invite them to look at the data. When I got involved we had 7 adjusters. We now have more than 1000 adjusters, 170 phone answerers, and it takes six seconds to answer a call. We’re not perfect. But we’re trying hard to meet the needs of the people of the region. And we’re not afraid to write big checks . Is there a timetable for completing the claims and settlement process? There’s no timetable. As long as the oil spills there will be claims and we’ll pay them. How closely is the Obama administration monitoring the BP settlement and claims process? It’s being handled independent of BP and the government. We make daily reports to the Coast Guard on how many checks have been written, claims filed, phone calls received, and the average time for the pay-outs . You’ve emerged as the new face of BP. Who is Darryl Willis? I’m from New Orleans. I went to college and graduate school there. I went to work for BP 20 years ago as a geophysicist. When I was asked to play a part in the process I was determined to assert myself in how it was handled. I understand the pain and frustration of the spill and how it’s going to impact the folks in the Gulf Coast. I wanted to see that it would not be encumbered by bureaucratic red tape and as straightforward as one can make it to insure we got the money in their hands. This was personal to me. BP has been criticized for being evasive, denying media access, and not transparent. Will you change that? I will talk with anyone about how we’re trying to pay the claims and fix the problem. We at BP realize that this is an unprecedented spill, and we’re trying to get lots of things right, and we’ve also gotten some things wrong. If we don’t fix the problem and get all the things that we need to get right then we need to be held accountable. Everyone I know is determined to get it right.

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Obama Turns to Economy in Ohio to Highlight Administration’s Stimulus Jobs

June 18, 2010

By Kate Andersen Brower and Roger Runningen June 18 (Bloomberg) — President Barack Obama pivoted from the Gulf of Mexico oil spill back to the economy today with an emphasis on the jobs created by his administration’s $862 billion economic stimulus package. At a groundbreaking in Columbus, Ohio, for the 10,000th road project funded by the stimulus, Obama said improving the nation’s infrastructure is one of the keys to long-term prosperity. “If we’re going to rebuild America’s economy, then we’ve got to rebuild America, period, from the ports and the airways that ship our goods, to the roads and transit systems that move our workers and connect cities and businesses,” Obama said at the project site near the Nationwide Children’s Hospital . The president is seeking to remind voters of his efforts to revive the economy five months ahead November’s midterm elections. Republicans have criticized the stimulus legislation as a wasteful spending program that hasn’t fulfilled the administration’s promises on job creation. Unemployment in Ohio is 10.7 percent, one percentage point higher than the national average. While the Federal Reserve’s regional business survey showed last week that the economy expanded in all the central bank’s districts in April and May for the first time in more than two years, job growth has lagged. Initial jobless claims increased by 12,000 to 472,000 in the week ended June 12, Labor Department figures showed yesterday. ‘Summer of Recovery’ “The economy is still lousy,” Transportation Secretary Ray LaHood told reporters before today’s trip. “We want to put the message out: This is going to be the summer of recovery.” LaHood, who traveled with the president to Ohio, said the project being highlighted today is expected to create more than 300 new jobs and is one of 462 transportation projects in Ohio funded by $1.1 billion in stimulus money. The work being done under the stimulus will “pay dividends to our communities for generations to come,” Obama said. “While the recovery may start with projects like this it can’t end here.” In a report to the president released yesterday, Vice President Joe Biden said the government has spent $620 billion from the stimulus and created or saved between 2.2 million and 2.8 million jobs. He predicted jobs created or retained by the end of 2010 will number “at least” 3.5 million. Republican Critics “We have created over 17,000 jobs in the last month” in Ohio, Republican state auditor Mary Taylor , a candidate for lieutenant governor, told reporters on a conference call today before Obama arrived. “But it’s an important fact to note that 16,800 of those jobs created were government jobs.” The White House is kicking off a six-week focus on scores of public works projects under way across the nation and into the election season. “This summer a lot more people are going to be working on highways, building clean water projects, weatherizing homes, and — and they’ll be drawing paychecks that they wouldn’t have otherwise drawn,” Biden said at a briefing yesterday that was part of the administration’s focus on the stimulus. The economy will be a top issue in the November elections that will determine which party controls the House and Senate. The Columbus area is represented in the House by freshman Democrat Mary Jo Kilroy . She was elected in 2008, the first Democrat to represent the district since 1982, according to the Almanac of American Politics. The non-partisan Cook Political Report rates her race against Republican former state Senator Steve Stivers as a toss-up. “There’s a feeling of disenchantment, disillusionment, discouragement — a feeling that no politician is going to be able to do much to turn the situation around,” Paul Beck , a political science professor at Ohio State University in Columbus, said of voter sentiment in the state. “Until the private sector really turns around you’re not going to have a big surge of jobs,” said Beck. Still, Beck said, “the stimulus money has been very important to Ohio, it’s prevented wrenching cutbacks in Ohio.” To contact the reporters on this story: Kate Andersen Brower in Columbus, Ohio at kandersen7@bloomberg.net ; Roger Runningen in Washington at rrunningen@bloomberg.net

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Fiorina, Whitman, Lincoln Among Winners as 12 U.S. States Hold Primaries

June 9, 2010

By Patrick O’Connor and Catherine Dodge June 9 (Bloomberg) — Voters in 12 states delivered a mixed message as a Democratic senator in Arkansas survived a primary challenge, two former chief executive officers captured Republican nominations in California and a Tea Party activist won a race in Nevada to challenge the leader of the U.S. Senate. Senator Blanche Lincoln of Arkansas dodged an anti- Washington wave that swept two fellow senators out of office earlier this year. Former Hewlett-Packard Co. Chief Executive Carly Fiorina won the Republican Senate primary in California and former eBay Chief Executive Meg Whitman prevailed in the gubernatorial primary to oppose Democrat Jerry Brown . In Nevada yesterday, Republicans chose Sharron Angle , a Tea Party favorite, as their Senate nominee. She will run against Senate Majority Leader Harry Reid , a top Democratic target for Republicans in November’s general election. In South Carolina, Republicans Nikki Haley and U.S. Representative Gresham Barrett will meet in a June 22 runoff to determine the party’s nominee for governor after neither won at least 50 percent of the vote in a four-way race. Haley, a state representative who faced allegations of extramarital affairs in the campaign’s closing days, had 49 percent of the vote with all precincts reporting, according to the Associated Press. Barrett had 22 percent. Lincoln Victory In Arkansas, Lincoln led Lieutenant Governor Bill Halter 52 percent to 48 percent with 99 percent of the precincts reporting, the AP said. Lincoln will face Republican U.S. Representative John Boozman in November; polls have shown her trailing him. Lincoln avoided the fates of Utah Republican Senator Bob Bennett and Pennsylvania Democratic Senator Arlen Specter , who were denied renomination this year. “She beat some pretty long odds” in winning the runoff, said Jennifer Duffy , senior editor at the nonpartisan Cook Political Report in Washington. “The biggest loser is labor,” which spent millions to defeat the two-term senator, Duffy said. “Your message is loud and clear — that Washington needs to work for us, for us in Arkansas,” Lincoln told supporters. Fiorina Against Boxer In California, Fiorina won the right to oppose Democratic Senator Barbara Boxer . Fiorina beat former U.S. Representative Tom Campbell, 57, an economist who served five terms in Congress. “California is in crisis,” Whitman told supporters in Los Angeles. “We certainly cannot save California’s future by repeating the failures of the past.” “We have just seen the two Republican candidates for governor stage a billionaire’s demolition derby,” Brown told supporters in Los Angeles. “They both say they want to run the state like a business but they set a national record for excessive spending.” “This is going to be the contest of the insiders, the corporate insider versus the political insider,” said Jack Pitney , who teaches politics at Claremont McKenna College in Claremont, California, before the vote. “Whitman is going to talk about restraining the growth of government, but the question is going to be whether Jerry Brown can harness the public reaction against corporate misconduct and turn it against Whitman.” Surveys show the political environment becoming more toxic for incumbents. Gallup Poll A Gallup Poll conducted May 24-25 found that 60 percent of registered U.S. voters would rather vote for a House candidate who has never served in Congress, compared with 32 percent who said they favored a candidate with some congressional experience. In the same survey, the Princeton, New Jersey-based polling firm found that 50 percent of registered voters wanted to re- elect their own member of Congress, one of the lowest numbers since 1993. The poll’s margin of error was plus or minus 4 percentage points. Lincoln, 49, has been a target for Republicans and some Democrats since last year. Organized labor helped recruit Halter, also 49, to run against her because she opposed unions’ top legislative priority, a measure to ease union-organizing requirements, and because of her support for free-trade agreements. As the election approached, opponents in both parties scrutinized her Senate votes. Republicans blasted her for backing initial versions of President Barack Obama ’s health-care bill, while some Democrats bristled that she voted against the measure that cleared Congress in late March. Union Money Unions poured money and people into the contest. During a June 6 appearance on CNN’s “State of the Union,” Lincoln said Washington-based unions had spent about $10 million in the last three months trying to unseat her. Working American, an AFL-CIO offshoot, spent $1.3 million on the race, according to the Federal Election Commission. Lincoln touted her clout as chairwoman of the Senate Agriculture Committee and a provision she added to the pending financial-markets overhaul bill that would force commercial banks to wall off their swaps-trading desks. She had raised more than $9 million by May 19, according to the Center for Responsive Politics, almost three times the $3.4 million Halter raised. She also campaigned with former President Bill Clinton , who served 12 years as governor of Arkansas. Anti-Washington Mood The anti-Washington mood that imperiled Lincoln figured prominently in Nevada’s Republican race. The state has the highest home foreclosure rate in the country and the second highest unemployment rate behind Michigan. Angle, a former state legislator with a record of opposing tax increases, benefited from support from Tea Party adherents. Also backing her and paying for ads in the race was the anti-tax Club for Growth. As Angle, 60, surged ahead in the final polls before yesterday’s vote, her two main foes in a 12-candidate race, former Nevada Republican Party Chairwoman Sue Lowden and Las Vegas businessman Danny Tarkanian , sought to raise concerns about her electability against Reid, 70. With all of the vote counted, Angle had 40 percent, Lowden 26 percent and Tarkanian 23 percent, AP said. The Republicans spent much of their campaign treasuries on their primary campaigns, a factor that could aid Reid. “It looks good for Harry Reid,” said David Damore, an assistant political science professor at the University of Nevada at Las Vegas. The Republicans have “already spent all their money, and they’re cutting each other up,” he said. California Results In California, Fiorina, 55, and Whitman, 53, faced the first tests of their political careers. Each won handily. With all precincts reporting, Fiorina led Campbell, her closest opponent, 56 percent to 22 percent, AP reported. Whitman defeated Steve Poizner , the state’s insurance commissioner, 64 percent to 27 percent in an eight-candidate race with all of the vote counted. Fiorina was confident enough in the primary result that she had turned her attention to the general election fight with Boxer, 69, already airing a television spot that attacked Boxer, the chairwoman of the Senate Environment and Public Works Committee, for calling climate change “one of the very important national security issues we face.” Boxer’s campaign responded by assailing Hewlett-Packard’s business practices when Fiorina was CEO. Candidate Funding Whitman funded her campaign with $71 million of her own money, state records show. She spent part of her campaign treasury rebutting attacks by opponents, who ran ads that featured circling vultures to criticize Whitman’s ties to Goldman Sachs Group Inc. Brown, 72, previously served as California’s governor from 1975 to 1983. California’s unemployment rate reached 12.6 percent in April, the nation’s third-highest. Economic unease among voters and concern about expanding government put Boxer, a three-term incumbent, at risk of losing in November, said the Cook Political Report’s Duffy. “Voters seem to be in the mood for some change right now, even in a state as Democratic as California,” Duffy said. In other results yesterday, U.S. Representative Bob Inglis was forced into a runoff in South Carolina’s Republican primary. He will face Trey Gowdy , an official in Spartanburg County, on June 22. Gowdy led Inglis 39 percent to 28 percent with all precincts counted, according to AP. An Inglis loss in the runoff would make him the third House member to be defeated in a primary this year. Democrat Alan Mollohan of West Virginia, a 14-term incumbent, was defeated in a May 11 vote and Republican Parker Griffith of Alabama, a freshman lawmaker, lost a June 1 primary. In Georgia, Republican Tom Graves , 40, won a special election for an open U.S. House seat. To contact the reporter for this story: Patrick O’Connor in Washington at Poconnor14@bloomberg.net

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Peter Baugher: A Bad Day for Politics, but a Good Day for Law

June 3, 2010

Yesterday was day one of the Blagojevich trial. Illinois politics, often ethically challenged, appears to be winning the race to the bottom. With the last governor in jail, and former Governor Blagojevich facing charges of racketeering, mail fraud, attempted extortion, and bribery, Illinois’ “pay to play” political system will be on trial as much as the Blagojevich brothers. What makes this circumstance worse, is that systemic corruption has undermined and distracted attention from the substantive problems facing all state governments: budget deficits, programs that don’t work, out of line pension and health care obligations, underfunding of education and important public services. The most debilitating tax we pay is not the income tax or the sales tax. It is the corruption tax levied on every Illinois citizen by a succession of out of control politicians. So it was a bad day for politics. But it is a good day for law. Faced with public crimes, our legal system is again providing redress. An independent prosecutor is forcing our former top state official to account for his conduct. The trial will take place in an independent federal court, presided over by a judge with a lifetime appointment who cannot be removed for political reasons. The case will be heard by a jury drawn from residents throughout the metropolitan area: Men and women who received a jury summons in the mail, asking them to report to 219 South Dearborn Street in Chicago, to help decide this and other cases important to our community. The jurors will hear evidence — testimony from witnesses who will tell their stories, then be questioned by attorneys for both the Government and the defendants. And former Governor Blagojevich will have his opportunity to speak, if he chooses. If he elects not to testify, the Government cannot criticize his silence. It is the Government’s responsibility to prove that he broke the law, not his duty or legal burden to prove his innocence. The Constitution guarantees that he can remain silent if he wishes. And Judge Zagel will enforce that right. The next three months will offer plenty of spectacle. There will be low points. The trial is likely to inform us — in some ways we might just as soon not know — how our state government has been run. But it is also likely remind us that no one stands above the law, and that we are all responsible, as citizens, jurors, lawyers and judges for making our collective enterprise run fairly and honestly. And that reminder makes yesterday a good day.

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Hatoyama Regrets Japan Coalition Split Over Base as Approval Rating Drops

May 30, 2010

By Sachiko Sakamaki and Takashi Hirokawa May 31 (Bloomberg) — Japan’s Prime Minister Yukio Hatoyama said he regretted the departure of a minority party in his coalition, as new polls showed rising discontent with his government less than two months before parliamentary elections. The Social Democratic Party yesterday left the government after Hatoyama fired leader Mizuho Fukushima from his Cabinet for refusing to endorse his agreement with the U.S. to relocate a Marine base within Okinawa. The move reduces the Democratic Party of Japan -led coalition’s majority in the upper house ahead of elections for half the chamber’s seats set for July. “It’s regrettable that the Social Democrats left the government,” Hatoyama told reporters today outside his office in Tokyo. “Unfortunately, there was a fundamental disagreement in regard to national security.” Hatoyama’s popularity has plunged since the DPJ’s landslide August victory in the more powerful lower house, with voters disenchanted over campaign finance scandals and his vacillating over where to move the Futenma Marine Air Base. Three polls released today showed his approval rating at or below 20 percent and six in 10 voters think he should quit. “This is a blow but it may be temporary because there’s another month until the race starts,” said Hirotada Asakawa , a Tokyo-based independent political commentator. “It’s already expected that the DPJ cannot gain a majority and the party will need a new coalition framework.” Voter Discontent Hatoyama’s favorability rating fell to 19 percent from 24 percent three weeks ago, while his disapproval rating was at 75 percent, the Yomiuri newspaper said today. The Asahi newspaper said his approval rating was at 17 percent, while the Mainichi newspaper put it at 20 percent. Almost 60 percent think he should quit over the base issue, the Yomiuri and Mainichi said. None of the polls, all of which were taken over the weekend, gave a margin of error. “We must get over this by holding on to our convictions,” Hatoyama said today. “I will do what I can to regain people’s trust.” Half of the 242 upper-house seats are at stake in the July balloting. The DPJ and its other junior partner, the People’s New Party , have 122 legislators, and losing that majority could slow Hatoyama’s legislative goals of increasing social welfare spending while aiming to cut the world’s largest public debt. The U.S. and Japan agreed on May 28 to most parts of an existing plan to relocate the Futenma base on the island to the Henoko coastal area. Hatoyama has repeatedly apologized for breaking a campaign pledge to transfer the facility off of Okinawa. The island, 950 miles (1,530 kilometers) south of Tokyo, houses 75 percent of the American bases and more than half of the 50,000 U.S. troops stationed in Japan to provide for the country’s defense under a 50-year-old security treaty. The U.S. pushed Japan to uphold a 2006 agreement to move Futenma within Okinawa by 2014, as part of a $10.3 billion plan that would also transfer 8,000 Marines to Guam. The people of Okinawa want it moved elsewhere, citing increased crime, pollution and noise. To contact the reporters on this story: Takashi Hirokawa in Okinawa at thirokawa@bloomberg.net ; Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net

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EBay’s Whitman Hurt in California Governor’s Race by Goldman, Immigration

May 24, 2010

By Michael B. Marois and William Selway May 25 (Bloomberg) — Meg Whitman , the former EBay Inc. executive who’s seeking the Republican nomination to succeed Arnold Schwarzenegger as California’s governor, has seen her lead in polls evaporate over her ties to Goldman Sachs Group Inc. and her stand on illegal immigration. Whitman, 53, has spent $68 million of her own money in the race only to have her support among likely Republican voters plunge 23 points since March in her race with state Insurance Commissioner Steve Poizner , according to a poll by the Public Policy Institute of California released May 19. Poizner, who was paid $1 billion by Qualcomm Inc. for his cell-phone technology company in 2000, has plowed $24 million of his own into the Republican race. “He’s been hitting her pretty hard on two issues in particular, Goldman Sachs and illegal immigration,” said Dan Schnur , a former Republican strategist who heads the Jesse M. Unruh Institute of Politics at the University of Southern California in Los Angeles. “In different ways, both have hurt her greatly with the party’s base. You’d still have to consider her the favorite for the nomination, but it’s no longer a foregone conclusion.” The race narrowed as Poizner stepped up attacks, accusing Whitman of profiting from pornography, supporting Barack Obama ’s immigration amnesty and failing to vote in past elections. Democrats Join At the same time, Democrats poured money into the race, highlighting Whitman’s position as a former director of Goldman Sachs, the world’s most profitable investment bank, and capitalizing on public anger over Wall Street’s role in a recession that sent the state unemployment rate to 12.6 percent. “You’ve basically got the campaign of Steve Poizner and the Democratic Central Committee doing everything they can to prevent Meg Whitman from becoming the nominee,” said Allan Hoffenblum , a former Republican consultant who publishes books on California political races. Democrats “don’t want Meg Whitman to be the nominee,” Hoffenblum said. “They think they can beat Steve Poizner.” From March through May, Whitman’s lead over Poizner slid from 50 percentage points to 9, according to polls of 2,003 adult residents by the nonprofit, nonpartisan Public Policy Institute, based in San Francisco. Whitman, EBay’s former chief executive officer, held a 38 percent to 29 percent advantage over Poizner in a survey taken from May 9 to May 16. That’s down from 61 percent to 11 percent in March. One-third of likely voters remain undecided, the institute found. Whitman’s early lead was a sign of her ability to use her cash to develop name recognition with voters, said Barbara O’Connor, the director of the Institute for the Study of Politics and Media at California State University, Sacramento. Now, she said, Poizner’s “back from the dead.” Advertising Blitz With just two weeks before the election, Poizner and Whitman have intensified advertising aimed at bolstering their conservative credentials. Poizner, 53, who’s made illegal immigration a central issue, seized on Whitman’s statement that she opposes a new law in Arizona that requires local police to determine the immigration status of anyone suspected of being in the country without proper documentation. Poizner also accused Whitman of making money from pornography because she ran EBay at a time when the online auction site developed a porn and sex-paraphernalia business. “That’s Meg Whitman: From Goldman Sachs deals to porn, it’s all about the money,” says a voice in one of Poizner’s television ads . “Meg Whitman — bad judgment, wrong values.” Insurance Commissioner Whitman, a first-time candidate, says Poizner failed to roll back the size of government during his time as state insurance commissioner. She also said he flip-flopped on support of California’s landmark global-warming law that business groups say will push companies and jobs out of the state. Poizner voiced support for the law in 2006, though he now says he supports a ballot measure to suspend it. “We’ve aggressively defined him as a liberal and using his own record against him,” Rob Stutzman , a Whitman adviser. “We’ve been very focused in defining Meg as the fiscal conservative.” Whitman wasn’t available for an interview yesterday, said her press secretary, Sarah Pompei. The Poizner campaign is seeking to capture anti- establishment sentiment to topple Whitman, whose supporters include former Governor Pete Wilson and ex-Vice President Dick Cheney , said Jarrod Agen , a spokesman. ‘Striking Distance’ “We’re in striking distance now,” Agen said. “The last two weeks will really decide this thing.” Agen said Poizer wasn’t available for an interview yesterday. The contest contrasts with the Democratic primary, in which Attorney General Jerry Brown , 72, is running for the governor’s nomination without serious opposition. That’s left Brown, who was governor from 1975 to 1983, unscathed as he heads toward the general election in a state where Democrats overshadow Republicans, 45 percent to 31 percent. As of mid-March, Brown had $14 million on hand for the general election, records show. California’s election battle follows the worst fiscal crisis since the Great Depression, which led Schwarzenegger and lawmakers to raise taxes and slash spending on schools and health care. Schwarzenegger, a Republican, can’t run again because of term limits. Legislators are now struggling to erase a $19 billion budget deficit through June 2011, a gap that threatens to drain California of its cash and has left it with the lowest credit rating among U.S. states. Concern Among Republicans There’s concern in Republican circles — and delight among Democrats — that the primary election may alienate Latino voters and leave either victor tarnished, said Hoffenblum, the former Republican consultant. That could pave the way for Brown’s victory, he said. “For a Republican to win statewide in California it’s always an upset — this is a Democratic seat,” he said. “For a Republican to win, they have to have a superior candidate, a superior campaign, and it has to be adequately financed. You don’t get elected statewide in California by bashing immigrants, illegal or otherwise.” To contact the reporters on this story: Michael Marois in Sacramento, California, at mmarois@bloomberg.net ; William Selway in San Francisco at wselway@bloomberg.net

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Cuomo, Lazio Share Goal of Cutting New York State’s Agencies, Nypirg Says

May 23, 2010

By Mark Tannenbaum May 24 (Bloomberg) — Andrew Cuomo , the Democratic New York attorney general running for governor, shares a goal of restructuring government with Republican candidates Rick Lazio and Carl Paladino by slashing state agencies, the New York Public Interest Research Group said. Cuomo declared his candidacy this weekend with an agenda that includes reducing agencies, authorities and commissions by 20 percent. Lazio , a former congressman, and Paladino, a Buffalo businessman, say they too intend to reduce agencies, according to Nypirg’s review of candidate websites. Cuomo’s entry into the race comes as lawmakers in the state capital of Albany prepare to vote for the eighth consecutive week on emergency spending bills to keep the government running while they remain divided over a $9.2 billion budget gap for the year that began April 1. “It’s now clear that reforming Albany will be at the top of the 2010 election agenda,” Nypirg, a nonpartisan consumer group that advocates for open government and ethics rules, said in an e-mailed press release May 22. “It’s easy to promise reform, but it’s hard to achieve.” Suffolk County Executive Steve Levy , 50, another candidate for the Republican nomination in a state where Democrats outnumber Republicans by almost 2-to-1, doesn’t include cutting agencies as one of the “key reforms” on his website, Nypirg said. Ethics and Redistricting All four candidates have announced initiatives on ethics reform as well as independent redistricting after the 2010 Census, according to Nypirg’s report. “Unlike everything else, that’s an issue that has to be acted on,” Blair Horner , the Albany-based legislative director at Nypirg, said of redistricting in a phone interview. New York Democrats and Republicans will hold primaries in September to pick their candidates prior to the general election in November. Cuomo, 52, who announced his candidacy May 22, had been the Democrats’ unofficial standard bearer since February when Governor David Paterson abandoned his campaign amid an ethics inquiry. The candidate held a rally outside the old Tweed Courthouse in lower Manhattan, named for the 19th century political boss who built it. “The chronic dysfunction of Albany metastasized into the corruption of Albany, and it was a bipartisan affliction,” he said. “Unfortunately Albany’s antics today could make Boss Tweed blush.” Best-Financed As the best-financed and most popular New York official in public opinion polls, Cuomo entered the race as front-runner in the nation’s third most-populous state. Cuomo ruled out any tax increase. The state, he said, faces a “financial emergency,” requiring it to cap spending increases at 2 percent and freeze state worker salaries. Lazio, 52, has proposed capping property taxes. Levy has recommended spending- and property-tax caps similar to what Paterson has suggested, which Cuomo endorsed in his campaign announcement. Paladino, 63, also calls for lowering taxes and spending. Cuomo’s probes into alleged collusion among health insurers, abuses by student-loan companies and executive bonus practices have pushed his job approval rating to at least 68 percent in every Quinnipiac University poll since June 2008, the highest of any statewide official. Ahead in Polls A poll released May 11 by the Poughkeepsie, New York-based Marist Institute for Public Opinion reported Cuomo’s approval rating at 64 percent. In the same poll, Cuomo led Lazio 65 percent to 25 percent. He was ahead of Levy, who switched from his former Democrat affiliation to seek the Republican nomination, 63 percent to 25 percent. Cuomo led Paladino 67 percent to 22 percent. Cuomo reported $16.1 million in campaign funds to the state Board of Elections as of Jan. 15. Among the Republican candidates, Levy had $4.1 million and Lazio reported $637,000 . Lazio, in an e-mailed statement, said Cuomo “has been a central figure in Albany for thirty years, and bears responsibility for the worst four years in the history of New York government. Why should we give him another four?” Levy said it was he, not Cuomo, who first proposed wage freezes, spending and property-tax caps and non-partisan redistricting. “It is important that voters remain cognizant of who has been the leader in advancing these ideas,” he said. To contact the reporter on this story: Mark Tannenbaum in New York at mtannen@bloomberg.net .

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Psychoanalyzing The Relationship Between Obama And Wall Street

May 22, 2010

Thirty-eight hours after Scott Brown’s smack-upside-the-head victory in the race for Ted Kennedy’s former Senate seat, Barack Obama took the podium in the Diplomatic Reception Room at the White House. … In the wake of Brown’s win, the prospect of passing health-care reform — and the rest of Obama’s first-term agenda — suddenly seemed dim. So the president had decided to pursue the obvious, logical course: He had decided to change the subject.

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Mike Lux: Loosening the Iron Grip of Corporate Power

May 8, 2010

Slowly and tentatively, in fits and starts yet with gradually gathering momentum, the iron grip that big corporate interests have on the throat of our democracy is loosening a little. Credit card companies got needless delays in the implementation of last year’s reform bill, but they were forced to live with the outlawing of several of their most egregious practices. The insurance companies stripped the public option and some other great things out of health reform, but would have much preferred no bill at all, and certainly not one with new regulations and expectations about pre-existing conditions, lifetime caps, and recissions. The student loan industry got an outright smackdown which will result in more money for student loans. Now Wall Street is in a wild fight on the floor of the Senate, and Senators are either deserting them on major issues like auditing the Fed and consumer protection, or else Senators are having to make very uncomfortable votes on the big bankers’ behalf. Progressives who want to rein in Wall Street’s power are losing on some important issues, but we are making our mark on this bill, and setting the stage for future fights. Check out Simon Johnson’s brilliant post on the vote to break up the banks, suggesting that while they won this round, they may be facing their Waterloo soon. He points out that as things like Greece continue to happen that unravel the world financial situation further, that it will become harder and harder for the defenders of the big banks to hide. Although our side lost the vote, getting over half the Democrats, the Majority Leader, the 2nd ranking member of the leadership, and the ranking Republican on the Finance committee to all vote with us on a bill to fundamentally restructure the financial system was a pretty big deal. With Senators now all on the record as to whether they support the big banks or not, we have a lot of potential to do some damage in the coming elections. Even when we lose, we are getting these issues aired and getting people on the record. That’s all to the good. Let me throw a couple of electoral examples into the mix. Take Delaware, a pretty strongly Democratic state where a locally popular Republican congressman, Mike Carper, is a heavy favorite to win an open seat. He voted against breaking up the big banks. If the Democratic candidate Chris Coons makes this big issue in a pretty working class state, maybe Carper’s easy victory gets a little- or even quite a bit- harder. Or take an old home state of mine, Iowa, where voters have a very deep populist streak in them (see Harkin,Tom). Grassley, the ultimate incumbent insider, ranking member and former chair of the Finance committee, voted for letting the 6 biggest banks continue to own the equivalent of 63% of our GDP. Roxanne Conlin is a crusading lawyer who has made her living going after corporate malfeasance. Grassley is favored in this race, but his vote makes things a lot more interesting, especially for a strong populist like Roxanne. Moving on to the issue of auditing the Federal Reserve. Yes, Sanders compromised on the issue. But most observers following the issue see this as a solid compromise, not a cave-in: we got something real out of the deal in terms of looking at what went down over the last few years. And the House language they go into conference on is very strong. Rumor has it that Geithner is still trying to figure out how to unravel this deal, so we can’t take anything for granted, but we have the momentum on this issue, and winning on it would be a very big deal. We’re winning so far on the consumer protection agency; we’re making progress on derivatives. It is the progressive amendments that have the wind at their back right now. Look, I don’t want to overstate this. This bank bill has some serious weaknesses in it, and with the Brown-Kaufman bank break-up amendment failing, it still doesn’t solve the most central failing of our banking system. On health care and other issues, progressives have had our share of truly bitter and disappointing defeats. But progressive populist economics and a political strategy of challenging special interest corporate power is gaining traction right now. A citizen movement is bubbling up through the barriers of special interest concrete in our nation’s Capitol that is not driven by tea party anti-government fervor, but by the hopes of regular folks who believe we can take our country back. Let’s keep building on our momentum. Cross-posted at OpenLeft.com You can read all of my work on financial reform, health care and other topics at my home blog, OpenLeft.com .

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Cameron Leads as Polls Suggest First U.K. Minority Government Since 1974

May 6, 2010

By Robert Hutton May 6 (Bloomberg) — Britain votes today in an election that polls show may produce no parliamentary majority for the first time since 1974, leaving the fate of Prime Minister Gordon Brown and Conservative David Cameron with the Liberal Democrats. Four polls released last night showed Cameron’s Conservatives winning the popular vote and the most seats, while short of a majority. The outcome will turn on the almost two in five voters who polls showed were undecided in the final days and about 150 swing districts out of a total 650. The gap in support between Cameron and Labour Party leader Brown in the latest polls — about 8 percentage points — is little changed from April 6, the day the premier called the election. Backing for Liberal Democrat leader Nick Clegg surged after the first televised debate, upending the race. “People who know anything about campaigns have always been doubtful about whether individual events mattered very much,” said Philip Cowley , professor of politics at Nottingham University. “But the TV debates made a difference.” Concerns by economists that a hung Parliament may roil markets because it would be too weak to fix Britain’s finances have receded this week. The pound has strengthened against its most-active counterparts and gilts are rebounding as traders bet that whichever party takes power will deliver a plan to reduce the deficit. The pound fell 0.5 percent against the dollar and was at $1.5023 at 8:25 a.m. in London. It advanced to the strongest in nine months against the euro, to 84.87 pence. Budget Cuts With the economy recovering from its longest recession on record, Brown said Cameron’s call for budget cuts this year risked renewed contraction. They also differed on regulating the financial industry, with Cameron expressing a willingness to tax banks unilaterally and Brown saying a levy had to be global. At the same time, Clegg’s emergence and his challenge to Cameron and Brown — he said in the first of three debates that they “sound exactly the same” — deflected their focus on cutting Britain’s record budget deficit as they grappled with his surge. The Institute for Fiscal Studies said April 27 that Labour had specified just 13 percent of the cuts necessary to reduce the deficit, the Conservatives 18 percent and the Liberal Democrats 26 percent. “It would have been a very brave politician who came out and told the voters the straight truth,” said Steven Fielding , director of the Center for British Politics at Nottingham University. “So they didn’t.” Exit Polls Polling stations opened at 7 a.m. in 649 out of the 650 districts across the country. The vote in a Yorkshire seat held by the Conservatives has been delayed until May 27 because of the death of a candidate. When voting ends at 10 p.m., exit polls will give the first indications of the outcome. The full result won’t be known before tomorrow afternoon. The Conservatives had 35 percent support in a YouGov Plc poll for The Sun newspaper, unchanged from the previous day. Labour had 28 percent, down 2 percentage points, and the Liberal Democrats had 28 percent, up 4 points. YouGov questioned 6,483 people May 4 and yesterday. No margin of error was provided. That voting pattern would yield 278 seats for Cameron’s party in the House of Commons, 261 for Labour and 82 for the Liberal Democrats, according to the forecasting formula used by the British Broadcasting Corp . Nine-Point Lead A Populus survey for the Times of London put Cameron’s lead over Brown at 37 percent to 28 percent, with the Liberal Democrats at 27 percent. That would give the Conservatives 295 seats, Labour 249 and the Liberal Democrats 78 seats. An ICM poll for the Guardian showed 36 percent of respondents backing the Conservatives, with Labour at 28 percent and Clegg’s party at 26 percent, giving the Conservatives a lead in seats of 283 to 253. A ComRes Ltd. Poll found 37 percent backing Cameron’s party, 28 percent supporting Brown’s and 28 percent for Clegg’s. That would give the Conservatives 299 seats and Labour 233. “It’s been very exciting for those involved, but the polls seem to be returning to where they were at the start,” Fielding said. Time for Talks Labour has governed Britain since 1997, when Tony Blair unseated John Major , ending the Conservatives’ 18-year run that began with Margaret Thatcher ’s election. Brown, Blair’s finance minister, replaced his boss in June 2007. If the election produces no clear winner, parties will begin negotiating tomorrow to see who can form a government. Depending on how close the result is, this process could take more than a week. Parliament isn’t due to sit until May 18, to give time for negotiations. Cameron, 43, warned against a hung Parliament, saying a vote for the Liberal Democrats would allow Brown to retain power. Some Labour ministers, including Business Secretary Peter Mandelson , have not ruled out a coalition with the Liberal Democrats. Clegg, 43, said it would be “preposterous” for Brown, 59, to stay in office if Labour finishes third in the popular vote. That scenario is made possible by the vagaries of the British electoral system. The uneven distribution of party support across the country means the Conservatives need at least a 10 percentage-point lead over Labour in the popular vote to gain a majority of seats in this election, according to Colin Rallings and Michael Thrasher of Plymouth University’s Elections Unit. Brown remains prime minister until it is clear he can’t form a government, at which point he would submit his resignation to Queen Elizabeth II and advise her on whom she should summon to try to form one, likely in that situation to be Cameron. To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net .

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Brazil Debt Spreads Narrower Than Russia for First Time in 2010 on Greece

May 6, 2010

By Veronica Navarro Espinosa May 6 (Bloomberg) — Brazil’s benchmark borrowing costs slid below Russia’s for the first time this year as investors bet the South American country is less at risk of contagion from the Greek debt crisis than Eastern European nations. Brazilian dollar bonds yielded 2.18 percentage points more than U.S. Treasuries yesterday, compared with 2.19 percentage points for Russia, according to JPMorgan Chase & Co.’s EMBI+ index. Brazilian yields last were below those on Russian debt, which is rated one level higher by Standard & Poor’s and two by Moody’s Investors Service, on Dec. 21. “Brazil offers a safe haven for investors that are concerned about market volatility and contagion related to Greece,” said David Bessey , who helps manage more than $10 billion of emerging-market debt at Prudential Financial in Newark, New Jersey. “It’s not obvious to me that the distortion couldn’t last for a long time given what’s going on in Eastern Europe.” Investors view Brazilian debt as safer than Russian bonds after S&P’s rating cuts of Greece, Portugal and Spain last week threatened to crimp growth in Europe. Russia’s gross domestic product will expand 4 percent this year, the Economy Ministry forecasts. Growth in Latin America’s biggest economy, by contrast, will surge to 6.1 percent this year, according to a central bank survey of analysts published this week. Default Risk     It costs 0.43 percentage point more to protect Russian bonds against default for five years than Brazilian debt, the biggest gap since Feb. 26, according to data compiled by CMA DataVision. Russia is ranked BBB by S&P, the second-lowest investment grade level. Brazil is rated BBB-. The South American country’s swaps are also less expensive than Bahrain, which is rated A, or four levels higher, as well as South Africa, two steps higher. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. Russia’s bond yield spread over U.S. Treasuries widened 18 basis points, or 0.18 percentage point, yesterday while Brazil’s spread climbed 12 basis points. The yield premium on developing- nation debt overall swelled 15 basis points to 2.95 percentage points, the widest in two months. Brazilian bonds yielded 41 basis points more than Russian debt on April 20. Buying Opportunity? The increase in yields to levels higher than both Brazil and Indonesia, rated three notches lower than Russia by Standard & Poor’s, will create a buying opportunity for Russian debt, said Cornel Bruhin , who manages a $280 million emerging-market fund at Clariden Leu AG in Zurich. “The Greece story was just the initiator for a correction in risk markets and Russia bonds will eventually recover very strongly once the correction is over,” he said. Bruhin said he may be ready to buy Russia’s 2020 bonds once the yield has risen another 15 basis points. Russia’s economy is recovering from its worst recession since the Soviet Union collapsed in 1991 as oil rallies. The government’s 2010 budget is based on crude oil averaging $58 a barrel, compared with $80 a barrel so far this year. Russia is more dependent on exports to European countries, while Brazil’s economic growth is driven by domestic demand, said Paul Biszko , an emerging-market analyst at RBC Capital Markets in Toronto. ‘Under Siege’ “The perception of risk has changed,” Biszko said. “These problems in Europe are sustainability problems, longer- term problems. Russia in terms of trade, financial linkages, is much closer to the euro zone than Brazil is.” Investors should buy Latin American currencies if concern about contagion from the Greek financial crisis continues to put Eastern Europe and its currencies “under siege,” Guillaume Tresca , an emerging-market strategist at Credit Agricole CIB in Paris, wrote in a note to clients yesterday. “Since the current issue is seen as a pure European debt problem, it should mean that Latin American countries are less affected,” Tresca wrote. The real dropped 1.7 percent to 1.7951 per dollar yesterday. The decline pared its rally over the past three months to 4.7 percent, the second-best performance among emerging-market currencies after the Malaysian ringgit. The Hungarian forint, Polish zloty and Czech koruna plunged more than 2 percent against the dollar yesterday, leaving each of them down at least 6 percent in the past three months. Brazil Elections The yield on Brazil’s overnight interest-rate futures contract due in January fell six basis points yesterday to 11.13 percent. Shareholders of Rossi Residencial SA , Brazil’s third- biggest homebuilder, approved the sale of as much as 500 million reais of bonds due May 2015, according to a regulatory filing. Brazil’s bonds may slump as the October vote to replace President Luiz Inacio Lula da Silva nears, RBC’s Biszko said. Former Cabinet Chief Dilma Rousseff and former Sao Paulo Governor Jose Serra are the main contenders in the race to succeed Lula, whose second term concludes at year-end. “The market is priced for no noise and a very stable process,” Biszko said. “There could be some not necessarily market friendly comments coming from them as we get closer to the elections.” Brazil’s dollar debt returned 2.4 percent this year, beating the 2.2 percent gain in Russian bonds, according to JPMorgan. Emerging-market bonds overall are up 3.1 percent. Concern about the spreading of Greek debt crisis pushed the average yield on emerging-market bonds to 6.51 percent from a record low of 6.18 percent on April 15, persuading Czech Republic, Albania and Indonesia to delay planned debt sales. Russia sold $5.5 billion of bonds on April 22, its first international issue since defaulting in 1998. Swelling supply has caused the country’s debt to underperform, Prudential’s Bessey said. The yield on the 5 percent bonds due in 2020 has jumped 47 basis points since the offering to 5.55 percent. “The heightened amount of supply has made a difference,” Bessey said. “Russia priced the deal without a lot of concession to investors.” To contact the reporters on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net

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U.K. Polls Point to Hung Parliament With Five Days Until General Election

May 1, 2010

By Gonzalo Vina May 2 (Bloomberg) — Conservative leader David Cameron maintained a lead over Gordon Brown’s Labour Party in opinion polls today that suggested no party will win an outright majority in the U.K. general election to be held in five days. Three polls published today by YouGov Plc, ComRes Ltd and ICM Ltd indicate Cameron would fall short of an overall majority in the House of Commons. A poll of marginal seats by ICM Ltd in the News of the World suggested Cameron could scrape a majority of four with the support of Unionist parties in Northern Ireland, leaving him free to govern without relying on Liberal Democrat leader Nick Clegg after the May 6 election. “If the polls stay as they are, Mr. Cameron, with or without the help of Mr. Clegg, will walk into Downing Street within less than a week,” Business Secretary Peter Mandelson , a key Labour adviser, said in a statement yesterday intended to motivate party activists in the final stage of the race. Brown’s campaign to get Labour re-elected for a fourth successive term suffered blows last week after polls showed he was beaten in the final televised campaign debate and he was forced to apologize for calling a supporter “bigoted.” He lost the backing of three publications in two days, including the Guardian which had backed his party in every vote since 1983. The YouGov poll for the Sunday Times newspaper today showed support at 35 percent for the Conservatives, the Liberal Democrats at 28 percent and Labour at 27 percent. That suggests Cameron would win 285 seats in Parliament, Brown 243 and Clegg 90 seats, YouGov said. The pollster interviewed 1,483 voters online on April 30-May 1. It gave no margin of error. No Majority A total of 326 seats is needed for a majority. An ICM Ltd poll for the Sunday Telegraph said the Conservative Party’s support increased by three points since April 27 to 36 percent, Labour increased one point to 29 percent while the Liberal Democrats dropped three points to 27 percent, ICM Ltd. ComRes Ltd for the Sunday Mirror and Independent on Sunday said support for Cameron had increased by two points to 38 percent, while support for Labour slipped one point to 28 percent and by the same amount for the Liberal Democrats to 25 percent. ComRes interviewed 1,019 adults on April 30 and May 1. A separate survey of marginal electoral seats by ICM Ltd for the News of the World newspaper said Cameron will scrape a four seat majority in the House of Commons with the support of the unionist parties of Northern Ireland. The pollster interviewed 1,001 adults in 96 seats where Labour has a majority of between four and 10 percentage points over the Conservatives on April 28-29. Hung Parliament The prospect of a hung parliament, the first since 1974, may unsettle investors concerned that a government would be too weak to fix Britain’s record budget deficit. The pound has fallen about 5 percent against the dollar so far this year as the opinion polls pointed increasingly to a political stalemate. In a letter published today, business leaders threw their support behind Cameron, saying a coalition between Brown and Clegg would be “totally disastrous” for companies. It’s the third such letter from company bossed endorsing Conservative policies. Directors of 110 start-ups including Omnifone, Ariadne Capital and Telecity Group Plc said Brown had increased red tape and taxes on companies and that Clegg’s plans to increase capital gains tax would hurt investment. Cameron’s Conservatives are the only party that would “nurture and encourage business,” the leaders said in a letter released to the media today. ‘Perfect Storm’ “The prospect of a Lib-Lab coalition would be a perfect storm for business,” Rob Lewis, executive chairman of Omnifone said in an interview. “A hybrid of their policies would create a very rough ride for British entrepreneurs. It’s very concerning.” The past week was one Brown would prefer to forget. On the eve of the April 29 debate, he was heard calling a Labour voter a “bigoted woman” after an encounter in the northern English town of Rochdale and later apologized to her and to his supporters. “I have personally paid this heavy price for a mistake that I made,” Brown told the Daily Telegraph in an interview published yesterday. “Sometimes you say things in the heat of the moment, sometimes you pay a very heavy price for those things.” The Guardian The Guardian, which called for Brown to step down in June last year when he faced a cabinet rebellion, yesterday endorsed the Liberal Democrats. It’s the first switch from Labour since the party led by Michael Foot campaigned for unilateral nuclear disarmament, nationalization of industries and withdrawal from the European Common Market, a precursor to the European Union. “Invited to embrace five more years of a Labour government, and of Gordon Brown as prime minister, it is hard to feel enthusiasm,” the Guardian said in an editorial. “The Liberal Democrats have for some time most closely matched our own priorities and instincts.” The London-based Times newspaper yesterday said it was endorsing the Conservatives for the first time since 1992 a day after the Economist magazine said it was ditching Labour for Cameron’s party. In its editorial , the Times blamed Brown for losing Labour its support, arguing he had “squandered the boom” and would put the economic recovery in peril. “Cameron has shown the fortitude, judgment and character to lead this country back to a healthier, stronger future,” the Times said. “It is time, once again, to vote Conservative.” To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

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U.K. Polls Point to Hung Parliament With Five Days Until General Election

May 1, 2010

By Gonzalo Vina May 2 (Bloomberg) — Conservative leader David Cameron maintained a lead over Gordon Brown’s Labour Party in opinion polls today that suggested no party will win an outright majority in the U.K. general election to be held in five days. Three polls published today by YouGov Plc, ComRes Ltd and ICM Ltd indicate Cameron would fall short of an overall majority in the House of Commons. A poll of marginal seats by ICM Ltd in the News of the World suggested Cameron could scrape a majority of four with the support of Unionist parties in Northern Ireland, leaving him free to govern without relying on Liberal Democrat leader Nick Clegg after the May 6 election. “If the polls stay as they are, Mr. Cameron, with or without the help of Mr. Clegg, will walk into Downing Street within less than a week,” Business Secretary Peter Mandelson , a key Labour adviser, said in a statement yesterday intended to motivate party activists in the final stage of the race. Brown’s campaign to get Labour re-elected for a fourth successive term suffered blows last week after polls showed he was beaten in the final televised campaign debate and he was forced to apologize for calling a supporter “bigoted.” He lost the backing of three publications in two days, including the Guardian which had backed his party in every vote since 1983. The YouGov poll for the Sunday Times newspaper today showed support at 35 percent for the Conservatives, the Liberal Democrats at 28 percent and Labour at 27 percent. That suggests Cameron would win 285 seats in Parliament, Brown 243 and Clegg 90 seats, YouGov said. The pollster interviewed 1,483 voters online on April 30-May 1. It gave no margin of error. No Majority A total of 326 seats is needed for a majority. An ICM Ltd poll for the Sunday Telegraph said the Conservative Party’s support increased by three points since April 27 to 36 percent, Labour increased one point to 29 percent while the Liberal Democrats dropped three points to 27 percent, ICM Ltd. ComRes Ltd for the Sunday Mirror and Independent on Sunday said support for Cameron had increased by two points to 38 percent, while support for Labour slipped one point to 28 percent and by the same amount for the Liberal Democrats to 25 percent. ComRes interviewed 1,019 adults on April 30 and May 1. A separate survey of marginal electoral seats by ICM Ltd for the News of the World newspaper said Cameron will scrape a four seat majority in the House of Commons with the support of the unionist parties of Northern Ireland. The pollster interviewed 1,001 adults in 96 seats where Labour has a majority of between four and 10 percentage points over the Conservatives on April 28-29. Hung Parliament The prospect of a hung parliament, the first since 1974, may unsettle investors concerned that a government would be too weak to fix Britain’s record budget deficit. The pound has fallen about 5 percent against the dollar so far this year as the opinion polls pointed increasingly to a political stalemate. In a letter published today, business leaders threw their support behind Cameron, saying a coalition between Brown and Clegg would be “totally disastrous” for companies. It’s the third such letter from company bossed endorsing Conservative policies. Directors of 110 start-ups including Omnifone, Ariadne Capital and Telecity Group Plc said Brown had increased red tape and taxes on companies and that Clegg’s plans to increase capital gains tax would hurt investment. Cameron’s Conservatives are the only party that would “nurture and encourage business,” the leaders said in a letter released to the media today. ‘Perfect Storm’ “The prospect of a Lib-Lab coalition would be a perfect storm for business,” Rob Lewis, executive chairman of Omnifone said in an interview. “A hybrid of their policies would create a very rough ride for British entrepreneurs. It’s very concerning.” The past week was one Brown would prefer to forget. On the eve of the April 29 debate, he was heard calling a Labour voter a “bigoted woman” after an encounter in the northern English town of Rochdale and later apologized to her and to his supporters. “I have personally paid this heavy price for a mistake that I made,” Brown told the Daily Telegraph in an interview published yesterday. “Sometimes you say things in the heat of the moment, sometimes you pay a very heavy price for those things.” The Guardian The Guardian, which called for Brown to step down in June last year when he faced a cabinet rebellion, yesterday endorsed the Liberal Democrats. It’s the first switch from Labour since the party led by Michael Foot campaigned for unilateral nuclear disarmament, nationalization of industries and withdrawal from the European Common Market, a precursor to the European Union. “Invited to embrace five more years of a Labour government, and of Gordon Brown as prime minister, it is hard to feel enthusiasm,” the Guardian said in an editorial. “The Liberal Democrats have for some time most closely matched our own priorities and instincts.” The London-based Times newspaper yesterday said it was endorsing the Conservatives for the first time since 1992 a day after the Economist magazine said it was ditching Labour for Cameron’s party. In its editorial , the Times blamed Brown for losing Labour its support, arguing he had “squandered the boom” and would put the economic recovery in peril. “Cameron has shown the fortitude, judgment and character to lead this country back to a healthier, stronger future,” the Times said. “It is time, once again, to vote Conservative.” To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

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Janet Tavakoli: President Obama: Bring Back Black

April 25, 2010

William K. Black, a regulator during the dark days of the Savings & Loan Crisis, gave the most sensible testimony about the financial crisis heard in Washington so far .* Fraud thrives and spreads in a regulatory free, highly paid, criminogenic environment. Cheaters prosper driving honesty out of the market. “Firms such as Citigroup and Merrill Lynch [and others] were able to create complex securities backed by recklessly underwritten [often fraudulent] mortgages, knowing that they could pass the risk along to someone else who had less information about the underlying loans. [The] $62 trillion credit derivatives market allowed Wall Street to lend without having confidence in the men and women it lent to. Wall Street hedged away the risk of lending and in the process undermined the entire system.” Confidence Game: How a Hedge Fund Manager Called Wall Street’s Bluff , P. 295, Christine Richard, (Wiley, 2010). It’s time to bring back Black and resolute regulators like him. Our proposed “financial reform” bill is a sham, and the health of our society and our economy is at stake. (” William Black Warns That Financial Reform Bill Won’t Stop the Wall Street Crime Wave ,” Dan Froomkin, HuffPo , April 21, 2010) Failed Regulators Are Still in Charge Our financial “investigations” aim to miss. First, the media writes breathless articles portraying Washington’s financial “investigators” as “tough.” Each new commission is billed as our “Pecora” moment. The “investigators” hire teams of staffers who badger people like me for charity with insightful questions like: “What’s a CDO?” Treasury, Federal Reserve, and Wall Street notables loudly complain about “unfair” and “harsh” investigators. Then everyone marches to the Hill where the committee pelts Wall Street executives with verbal marshmallows. Here are just four examples: The FCIC: Phil Angelides, Chairman of the Financial Crisis Inquiry Commission, had Robert Rubin, Citigroup’s former senior advisor (also former Treasury Secretary under President Bill Clinton, and former Co-Chair of Goldman Sachs), and Chuck Prince, former CEO of Citigroup, in the palm of his hand. He failed to question them about Citigroup’s sales of complex CDOs and a $200 million loan to the failed Bear Stearns hedge funds, even though it was public information and a classic situation for securities fraud. (” Congress’s FCIC Nearly Nailed Citigroup Executives to the Wall–Then Blew It ,” Tavakoli, HuffPo , April 8, 2010) The SEC: The SEC filed a recent complaint of alleged fraud in a civil lawsuit against Goldman Sachs . The complaint did not mention that Goldman may have used the subprime mortgage-linked security at issue to unload other complex bonds it created. The complaint strikes me as an SEC publicity stunt. Wall Street banks had deep ties (and often ownership) with corrupt mortgage lenders and created phony securities that funded loan fraud. Corrupt finance–enabled by the SEC’s multi-year failures–amplified the problem. The SEC (rating agencies, and more) behaved as collaborators, and now they seem to want credit for bringing one seemingly incomplete complaint against a sapling, while the forest fire rages on. (” Abacus Might Have Had Other Benefits for Goldman ,” Matt Goldstein, Reuters , April 23, 2010, ” Goldman Sachs: Spinning Gold ,” Tavakoli, HuffPo , April 7, 2010. Senate’s Permanent Subcommittee on Investigations – “Trial by Email”: The leak of Goldman’s emails suggests that shorting as a hedge is the same thing as betting against clients. (” Blankfein E-Mail Shows Firm Profited Betting Against Mortgages ,” Christine Harper, Bloomberg , April 24, 2010.) It’s not necessarily so.** Even if facts show it is true, there is a much bigger issue. Wall Street banks bet against our entire society when they created and sold phony securities that fueled fraudulent mortgage lending. That activity was profitable for some firms (Goldman) and unprofitable for others (Lehman, Citigroup, Merrill Lynch, and more). Yet in every case, it was control fraud. CEOs and bankers grew rich while the financial institutions that employed them often imploded. The agents of the fraud prospered while American society and the American economy were massively damaged. (” Wall Street’s Fraud and Solutions for Systemic Peril , ” Tavakoli, TSF , September 29, 2009) TARP “Investigations”: Intentionally or otherwise, the TARP Inspector General’s November 17 “SIGTARP” Report appeared to be evasive action or just plain whitewash. Ten days before that particular SIGTARP report was released I disclosed key information that the SIGTARP report didn’t even mention. With better access, a budget, a mandate, greater staff, and more time, the “investigator,” did a poor job, yet is lauded in much of the media and in Washington as “tough.” After damaging facts become public, SIGTARP “catches up.” It’s an embarrassment. (” Goldman’s Undisclosed Role in AIG’s Distress ,” Tavakoli, TSF , November 10, 2010.) I urge the President to play the race card–the human race card. The Founding Fathers sought to protect the Republic from this tyranny of private interests. This was meant to be a place where all members of the human race have a fair opportunity to thrive. These show trials and faux ‘investigations” distract us from the real job of reform and protect Wall Street’s interests. It’s time to bring back Black–or regulators like him–and truly give us our “Pecora” moment. * Statement by William K. Black , Associate Professor of Economics and Law, University of Missouri – Kansas City before the Committee on Financial Services, United States House of Representatives regarding ” Public Policy Issues Raised by the Report of the Lehman Bankruptcy Examiner .” April 20, 2010 ** When banks sell short, it is often to hedge their risks. Sometimes hedges result in a net loss, and sometimes they result in a profit. Some hedge fund ethically sold short shares in companies with sham-based-accounting earnings. Short sellers were often the only people sounding the alarm as Pershing Square head Bill Ackman did with bond insurer MBIA. Christine Richard’s just released book, Confidence Game (Wiley, 2010) is the gripping account of how he tried in vain for years to get regulators to listen. Meanwhile MBIA, at first an apparently healthy company, was a financial mirage and within a few years the “AAA” rated company sank like a stone. Short sellers were not responsible for the death of Lehman Brothers. My book on the meltdown, Dear Mr. Buffett (Wiley, 2009) is exculpatory evidence for anyone who shorted the stock or bought puts on the shares of Bear Stearns, Lehman, Merrill Lynch, Citigroup (and more) prior to the financial crisis. This type of short selling is very different from shorting a healthy company and spreading false rumors. It is also different from selling short while withholding damaging information.

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GE Faces SEC Review After Paulson Says Immelt Told Him of Debt Struggles

April 16, 2010

By Joshua Gallu and Jesse Westbrook April 16 (Bloomberg) — The U.S. Securities and Exchange Commission is reviewing General Electric Co. ’s 2008 disclosures after ex-Treasury Secretary Henry Paulson said the firm told him at the peak of the financial crisis it struggled to sell debt. “The SEC has requested information about our September 2008 statements ,” GE spokeswoman Anne Eisele said yesterday, responding in an e-mail to questions from Bloomberg News. “We are fully cooperating with them and are entirely confident our disclosures were accurate.” In his book “On the Brink: Inside the Race to Stop the Collapse of the Global Financial System,” Paulson says he discussed GE’s problems selling commercial paper with Chief Executive Officer Jeffrey Immelt during a phone call on Sept. 8, 2008, and in person on Sept. 15, the day Lehman Brothers Holdings Inc. filed for bankruptcy. GE said in a Sept. 14 memo to investors that its corporate debt programs “remain robust.” The SEC is responsible for making sure companies adequately disclose material information to investors and has the authority to sanction firms for violations. SEC spokesman John Nester declined to comment. Asked if he agreed with Paulson’s account of the conversations in September 2008, Immelt said he “does not believe they discussed having problems” with GE’s commercial paper, Eisele said in February. Author’s Notes Michele Davis , a spokeswoman for Paulson, in February referred to the author’s notes of his book, which cites his reliance on memory rather than transcripts or notes to write the account. Davis didn’t respond to an e-mail sent after normal business hours. “Now here was Jeff telling me that GE was finding it very difficult to sell its commercial paper for any term longer than overnight,” Paulson writes in his book of the Sept. 15 conversation. “The fact that the single-biggest issuer in this $1.8 trillion market was having trouble with its funding was startling.” Fairfield, Connecticut-based GE, the world’s biggest maker of jet engines, power-plant turbines and medical-imaging equipment, reports earnings today. To contact the reporters on this story: Joshua Gallu in Washington at jgallu@bloomberg.net ; Jesse Westbrook in Washington at jwestbrook1@bloomberg.net

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Cameron Poll Drop Means Pressure on Him to `Deliver’ in First U.K. Debate

April 14, 2010

By Kitty Donaldson and Robert Hutton April 15 (Bloomberg) — Prime Minister Gordon Brown and Conservative David Cameron meet tonight in a televised debate that injects a novel element into U.K. politics and gives them a chance to reshape the closest election campaign since 1992. Neither Brown, described as “charismatic” by only 2 percent of respondents in a poll this month, nor Cameron has enough support to win a majority in the May 6 vote, surveys show. Cameron, who in September 2008 held a lead of as much as 28 percentage points during Britain’s longest recession since World War II, has failed to keep it in double digits this year. “The tightening of the polls over the past week puts an awful lot of pressure on Cameron to deliver,” said Andrew Hawkins , chairman of ComRes Ltd., whose latest poll put the gap at six points. “It needs to be the performance of his life.” While Brown and Cameron are used to sparring in the House of Commons, a televised debate, a staple of U.S. campaigns since 1960, has never featured in the U.K. Tonight’s debate, which also includes Liberal Democrat leader Nick Clegg , will be followed by two more on April 22 and April 29. “This is a turning point in British politics,” said Ivor Gaber , professor of political reporting at London’s City University. “It’s now inconceivable that we would ever have another election without debates.” Clegg Bounce The man with the most to gain may be Clegg, 43. He’s getting equal treatment with the other two leaders, helped by laws that require broadcasters to treat all parties fairly during an election. “Clegg is the one with most to win,” said Charles Pattie, a geography professor at the University of Sheffield . “Cameron and Brown have something to be nervous about, as both could do quite a lot of damage to themselves.” After months of negotiations between the parties and the broadcasters, 76 rules have been agreed on for the three 90- minute sessions. The audience, selected by pollsters ICM Ltd. to be politically balanced and to ask the questions, will be allowed to applaud only at the start and end. The debates have changed the shape of the campaign. Brown has spent the past two nights at his “debate camp,” the Radisson Hotel in Leeds, 40 miles (65 kilometers) from Manchester in northern England, where tonight’s event will take place. Helping him prepare is Michael Sheehan , who worked with Bill and Hillary Clinton . Campbell Plays Cameron In rehearsals, Alastair Campbell , the communications chief of Brown’s predecessor Tony Blair , has been playing the part of Cameron, while an aide pretends to be Clegg. The team in the room includes Business Secretary Peter Mandelson and election coordinator Douglas Alexander . For both Cameron and Brown, wardrobe advice comes from their wives. Samantha Cameron is a professional designer, and Sarah Brown founded a public relations firm. Cameron has prepared with his culture spokesman, Jeremy Hunt , playing the part of Clegg, while immigration spokesman Damian Green portrayed Brown. “Both Brown and Cameron have ‘Jekyll and Hyde possibilities’, character pluses and potential flaws which may be highlighted,” said Pattie, who specializes in electoral behavior. “Cameron needs to be normal and accessible, but also needs to be seen as prime ministerial, not lightweight.” Personalities Polls on personalities point to a reason for the closeness of the race as the U.K. emerges from the longest and deepest economic recession since World War II. A survey by YouGov Plc on April 11-12 found Brown, 59, described as “charismatic” by 2 percent of respondents and “a natural leader” by 4 percent, to Cameron’s 42 percent and 25 percent. When it came to sticking to his beliefs and being good in a crisis, Brown scored 36 percent and 20 percent, twice the 18 percent and 9 percent garnered by Cameron, 43. “We know that people loathe Brown and think it’s time for a change, but they’re not particularly sold on Cameron being that change,” YouGov pollster Anthony Wells said. A ComRes poll for broadcaster ITV News and The Independent newspaper yesterday put the Tories on 35 percent and Labour on 29 percent. The Liberal Democrats got 21 percent. Should that play out, the Conservatives would be 40 seats short of a majority, according to an e-mail from ComRes. A separate YouGov poll for The Sun put the Conservatives ahead by 41 percent to 32 percent, still probably not enough for an outright win. Labour and the Tories are targeting about 150 voting districts that they have identified as so-called swing seats, ones not traditionally dominated by one party and with everything to play for. That’s 23 percent of a total of 650. The Undecided Half the people likely to watch the debates said they could influence how they vote, according to the poll by ComRes. Public indecision has made it the tightest race since 1992, when the Conservatives under John Major won a fourth straight election after convincing voters that Labour wasn’t equipped to guide the economy through a recovery. In a less tightly controlled debate on March 29 between finance spokesmen, it was the Liberal Democrat Vince Cable who scored the most laughs and applause from the audience. That show earned Channel Four 1.8 million viewers, almost doubling the audience it would receive on a regular Monday night, a spokeswoman for the television channel said. The BBC’s long- running soap opera Eastenders, aired at the same time as the debate, scored 9.4 million viewers. David Chapman, landlord of The Albion pub in Hackney, north London, will screen the debate live. “It definitely wasn’t a commercial decision to show the debates,” said Chapman, 60, who has run the hostelry for 13 years. “I’m not sure how many people will come. It may even attract fewer punters.” To contact the reporters on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net ; Robert Hutton in Leeds, England, at rhutton1@bloomberg.net .

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Cameron Poll Drop Means Pressure on Him to `Deliver’ in First U.K. Debate

April 14, 2010

By Kitty Donaldson and Robert Hutton April 15 (Bloomberg) — Prime Minister Gordon Brown and Conservative David Cameron meet tonight in a televised debate that injects a novel element into U.K. politics and gives them a chance to reshape the closest election campaign since 1992. Neither Brown, described as “charismatic” by only 2 percent of respondents in a poll this month, nor Cameron has enough support to win a majority in the May 6 vote, surveys show. Cameron, who in September 2008 held a lead of as much as 28 percentage points during Britain’s longest recession since World War II, has failed to keep it in double digits this year. “The tightening of the polls over the past week puts an awful lot of pressure on Cameron to deliver,” said Andrew Hawkins , chairman of ComRes Ltd., whose latest poll put the gap at six points. “It needs to be the performance of his life.” While Brown and Cameron are used to sparring in the House of Commons, a televised debate, a staple of U.S. campaigns since 1960, has never featured in the U.K. Tonight’s debate, which also includes Liberal Democrat leader Nick Clegg , will be followed by two more on April 22 and April 29. “This is a turning point in British politics,” said Ivor Gaber , professor of political reporting at London’s City University. “It’s now inconceivable that we would ever have another election without debates.” Clegg Bounce The man with the most to gain may be Clegg, 43. He’s getting equal treatment with the other two leaders, helped by laws that require broadcasters to treat all parties fairly during an election. “Clegg is the one with most to win,” said Charles Pattie, a geography professor at the University of Sheffield . “Cameron and Brown have something to be nervous about, as both could do quite a lot of damage to themselves.” After months of negotiations between the parties and the broadcasters, 76 rules have been agreed on for the three 90- minute sessions. The audience, selected by pollsters ICM Ltd. to be politically balanced and to ask the questions, will be allowed to applaud only at the start and end. The debates have changed the shape of the campaign. Brown has spent the past two nights at his “debate camp,” the Radisson Hotel in Leeds, 40 miles (65 kilometers) from Manchester in northern England, where tonight’s event will take place. Helping him prepare is Michael Sheehan , who worked with Bill and Hillary Clinton . Campbell Plays Cameron In rehearsals, Alastair Campbell , the communications chief of Brown’s predecessor Tony Blair , has been playing the part of Cameron, while an aide pretends to be Clegg. The team in the room includes Business Secretary Peter Mandelson and election coordinator Douglas Alexander . For both Cameron and Brown, wardrobe advice comes from their wives. Samantha Cameron is a professional designer, and Sarah Brown founded a public relations firm. Cameron has prepared with his culture spokesman, Jeremy Hunt , playing the part of Clegg, while immigration spokesman Damian Green portrayed Brown. “Both Brown and Cameron have ‘Jekyll and Hyde possibilities’, character pluses and potential flaws which may be highlighted,” said Pattie, who specializes in electoral behavior. “Cameron needs to be normal and accessible, but also needs to be seen as prime ministerial, not lightweight.” Personalities Polls on personalities point to a reason for the closeness of the race as the U.K. emerges from the longest and deepest economic recession since World War II. A survey by YouGov Plc on April 11-12 found Brown, 59, described as “charismatic” by 2 percent of respondents and “a natural leader” by 4 percent, to Cameron’s 42 percent and 25 percent. When it came to sticking to his beliefs and being good in a crisis, Brown scored 36 percent and 20 percent, twice the 18 percent and 9 percent garnered by Cameron, 43. “We know that people loathe Brown and think it’s time for a change, but they’re not particularly sold on Cameron being that change,” YouGov pollster Anthony Wells said. A ComRes poll for broadcaster ITV News and The Independent newspaper yesterday put the Tories on 35 percent and Labour on 29 percent. The Liberal Democrats got 21 percent. Should that play out, the Conservatives would be 40 seats short of a majority, according to an e-mail from ComRes. A separate YouGov poll for The Sun put the Conservatives ahead by 41 percent to 32 percent, still probably not enough for an outright win. Labour and the Tories are targeting about 150 voting districts that they have identified as so-called swing seats, ones not traditionally dominated by one party and with everything to play for. That’s 23 percent of a total of 650. The Undecided Half the people likely to watch the debates said they could influence how they vote, according to the poll by ComRes. Public indecision has made it the tightest race since 1992, when the Conservatives under John Major won a fourth straight election after convincing voters that Labour wasn’t equipped to guide the economy through a recovery. In a less tightly controlled debate on March 29 between finance spokesmen, it was the Liberal Democrat Vince Cable who scored the most laughs and applause from the audience. That show earned Channel Four 1.8 million viewers, almost doubling the audience it would receive on a regular Monday night, a spokeswoman for the television channel said. The BBC’s long- running soap opera Eastenders, aired at the same time as the debate, scored 9.4 million viewers. David Chapman, landlord of The Albion pub in Hackney, north London, will screen the debate live. “It definitely wasn’t a commercial decision to show the debates,” said Chapman, 60, who has run the hostelry for 13 years. “I’m not sure how many people will come. It may even attract fewer punters.” To contact the reporters on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net ; Robert Hutton in Leeds, England, at rhutton1@bloomberg.net .

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Sinopec Agrees to Buy ConocoPhillips’s Stake in Syncrude for $4.65 Billion

April 12, 2010

By Edward Klump April 13 (Bloomberg) — China Petroleum & Chemical Corp. agreed to pay ConocoPhillips $4.65 billion for its stake in Syncrude Canada Ltd. , a higher price than analysts expected as Asia’s biggest refiner seeks access to overseas petroleum reserves. Sinopec, as the Beijing-based company is known, will buy about 9 percent of oil-sands producer Syncrude, Houston-based ConocoPhillips said today in a statement. China joins South Korea, Japan and India in the nations’ quest to secure overseas resources to drive their economies. The International Energy Agency on March 12 raised its forecast for fuel-demand growth in developing countries, led by China and India, to 41.2 million barrels a day and cut its prediction for Europe and the U.S. The price Sinopec paid for Syncrude surpassed by $650 million the high end of an estimate by Macquarie Securities of the assets’ worth, said Jason Gammel , an analyst in New York with the firm. “What it reflects is China’s insatiable appetite for resource accumulation overseas, not to mention the fact that Beijing has a pretty big checkbook,” said Pavel Molchanov , an analyst with Raymond James in Houston who rates ConocoPhillips at “underperform” and doesn’t own any of its shares. Molchanov said he thought the stake would fetch about $4 billion. ConocoPhillips, the third-largest U.S. oil company, said in October it planned to sell $10 billion of assets over two years to help cut debt. Oil sands are deposits of bitumen, an extra-heavy oil that must be treated for use in refineries to produce gasoline and diesel fuels. Fuel Demand The Syncrude deal shows that the Chinese are putting prices on resources out of line with their economic value, said Mark Gilman , an analyst at the Benchmark Co. in New York who has a “hold” rating on ConocoPhillips shares and owns none. “You don’t need a degree in rocket science to come up with the fact that this is more than twice its economic value,” he said of the Syncrude transaction. Spending by Chinese companies on mining and energy acquisitions reached a record $32 billion last year. State-controlled PetroChina won approval from the Canadian government in December to buy a stake in Athabasca Oil Sands Corp.’s MacKay and Dover oil-sands projects for C$1.9 billion ($1.9 billion). China Petrochemical Corp., Sinopec’s parent, bought Calgary-based Addax Petroleum Corp. for C$8.3 billion last year to add oil reserves. Sinopec said on March 29 it will pay $2.5 billion to buy a stake in an Angolan field from its parent to boost crude-oil production. Asset Race In the race for assets, Indian companies typically won’t overpay, said Robbert Van Batenburg at Louis Capital Markets in New York. “While China is willing to pay anything for an oil asset, the Indians won’t because corporate interest determines,” he said. The Chinese economy grew 10.7 percent in the fourth quarter, the fastest pace since 2007, and is forecast by the United Nations to advance about four times more quickly than the U.S. this year. China, the world’s largest energy consumer behind the U.S. , relied on imports to meet more than half of its oil needs last year. The country’s dependency on imported crude will continue to rise, PetroChina Chairman Jiang Jiemin said last month. Annual domestic oil production is unlikely to exceed 200 million tons by 2020 while demand may increase to about 600 million tons by then, according to Jiang. Conoco Debt Debt at ConocoPhillips, the third-largest U.S. oil company, ballooned after Chief Executive Officer Jim Mulva agreed to buy Burlington Resources Inc. in December 2005, the day before gas prices hit a record at $15.78 per million British thermal units. The deal closed for a purchase price of $36 billion in 2006. Mulva said in March that he expects half of the company’s planned $10 billion in asset sales to be completed this year. ConocoPhillips said the sale of the Syncrude stake, which requires Canadian and Chinese government approvals, is expected to close in the third quarter. Canadian Oil Sands Trust is the lead partner in Fort McMurray, Alberta-based Syncrude with a 36.7 percent interest. Other partners in the venture include Imperial Oil Ltd., Suncor Energy Inc., Murphy Oil Corp., Nexen Inc. and Nippon Oil Corp.’s Mocal Energy Ltd. Credit Suisse Group AG and Osler, Hoskin and Harcourt advised ConocoPhillips. Deutsche Bank AG was financial adviser to Sinopec. ConocoPhillips rose 64 cents, or 1.2 percent, to $55.96 at 4:01 p.m. in New York Stock Exchange composite trading. American depositary receipts of Sinopec dropped 93 cents, or 1.1 percent, to $84.93. Exxon Mobil Corp., based in Irving, Texas, and Chevron Corp., based in San Ramon, California, are the largest U.S. oil companies. To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net

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Steve Parker: Weekend auto, racing radio shows

April 9, 2010

Join us Saturday at 11am Pacific /2pm Eastern for THE CAR NUT SHOW and Sunday at 5pm Pacific/8pm Eastern for WORLD RACING ROUNDUP on www.TalkRadioOne.com! It’s just us and it’s all LIVE! Steve Parker’s The Car Nut Show Saturday starting at 5pm Pacific Warren G. Harding was the first President to ride in and drive a car. Here he is shown in a 1921 Packard Twin Six…a true American classic The Beverly Hills Concours d’Elegance! One of the great classic and collectible car shows in the US happens tomorrow at Greystone Mansion in Beverly Hills. And I’m walking there! We’ll be talking live on today’s show with one of the top officials of the event, go over the cars and the celebrities involved and generally make you jealous if you don’t live in Southern California. Plus Toyota is fined $16.4 million by the US government and GM might make a profit this year! The call-in number is: 213-291-9410. Steve Parker’s World Racing Roundup Sunday starting at 5pm John Force, perennial NHRA Funny Car champion NASCAR, F1, IndyCar and NHRA drag racing all happen this weekend and next and we’ll have all the results and prognostications. Plus — Off Road Racing! We’ll have one of the country’s off road racing experts – Charlene Bower — and get up-to-date info on the race Dr. Hunter S. Thompson covered in his classic Fear and Loathing in Las Vegas, the Mint 400 (Johnny Depp played Thompson in the film version; Benicio del Toro his ‘attorney’). It’s gonna be a fun one so come by and hang! The call-in number is: 213-291-9410. Join in! Podcasts of the shows are available one-hour-or-so after the live programs’ conclusion. That’s this Saturday at 11am Pacific and 2pm Eastern and Sunday at 5pm Pacific/8pm Eastern on www.TalkRadioOne.com!

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Sudan’s Opposition Parties Announce Election Boycott Amid Rigging Charges

April 1, 2010

By Maram Mazen and Nicole Gaouette April 2 (Bloomberg) — Sudan’s opposition parties announced a boycott of Sudan’s elections this month, accusing Sudanese President Umar al-Bashir ’s government of rigging the first multiparty vote in 24 years. “The consensus today decided to boycott these elections,” which includes presidential, parliamentary and governors’ seats, the opposition parties’ spokesman, Farouq Abu Eissa, told reporters in Khartoum yesterday after a meeting of that various political groups. “The parties decided to reject and boycott this incomplete and distorted elections,” Mariam al-Mahdi, a spokeswoman for the Umma northern opposition parties, told reporters. The announcement followed days of discussions among the opposition parties on the April 11-13 elections. Earlier yesterday, most presidential challengers decided to withdraw from the race because of concerns the vote is rigged in Bashir’s favor, al-Mahdi said. The decision raised U.S. concerns about the vote’s credibility. “Nine presidential candidates met today, and most of them decided they will withdraw from the presidential election,” al- Mahdi said, without naming all their parties. Al Umma Reform and Renewal party presidential candidate Mubarak al-Fadil also said in a text message that most of the candidates were quitting the race. U.S. ‘Troubled’ “We’re troubled by any decision that reduces the competitiveness and credibility of these elections, but the situation is very fluid,” State Department spokesman Philip J. Crowley said in a briefing in Washington yesterday after the announcement that presidential opponents were withdrawing. The U.S. special envoy for Sudan, Scott Gration , is in the country meeting with officials and opposition parties and “actively working on these issues,” Crowley said. The elections for Sudan’s presidency, parliament and state governorships will take place this month, five years after the Sudan People’s Liberation Movement signed a peace deal with the government, ending a 20-year civil war between the Muslim north and the south, where Christianity and traditional religion dominate. Sudan pumps 480,000 barrels of oil per day and ranks as sub-Saharan Africa’s third-biggest crude producer, according to the BP Statistical Review of World Energy. Most of that is pumped in the south. The SPLM, which governs the semi-autonomous region of Southern Sudan , announced this week it was withdrawing its presidential candidate and boycotting the polls in the western region of Darfur. Elections Commission The opposition parties have accused the National Elections Commission of being biased in favor of Bashir’s National Congress Party. They have also called for a new commission to be set up and the voters’ list to be revamped. “Our parties until today have been and still are getting unlimited harassments from authorities,” Abu Eissa said. “We have decided to boycott the elections on all levels,” Neimat Malik, member of the Communist party’s political bureau, said by phone. Al-Mahdi of the Umma party said some of the parties will announce their final position within 24 hours after consultations within their ranks. She said the candidates could re-enter the presidential race if the government took steps to ensure a free and fair election. “They said they can review their position if there are steps taken to correct the current situation,” she said. Popular Congress Party leader Hassan al-Turabi , who helped Bashir seize power in a 1989 coup, said earlier yesterday that his party would participate in the election. The U.S., Britain and Norway yesterday called on Sudan’s government and political parties to address allegations of intimidation, harassment and other safety concerns to clear the way for the vote. “We urge all parties in Sudan to work urgently to ensure that elections can proceed peacefully and credibly in April,” the countries said in an e-mailed statement. To contact the reporter on this story: Maram Mazen in Khartoum via Cairo at mmazen@bloomberg.net ; Nicole Gaouette in Washington at ngaouette@bloomberg.net

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Harvard Twins Who Sued Facebook Now Take on Cambridge in 156th Boat Race

April 1, 2010

By Danielle Rossingh April 1 (Bloomberg) — Cameron and Tyler Winklevoss took on Facebook Inc. as Harvard students when social networking was still new. Now, they’re taking on one of the oldest challenges in sports. The 28-year-old identical twins from Greenwich, Connecticut, will row for Oxford University in the 156th edition of the Boat Race against Cambridge . The crews will meet on the 4.25-mile (6.8-kilometer) course through west London in two days. The six-foot-four Olympians were selected for the Oxford boat after a seven-month training and selection regime. They took exams for their MBA degree last week. Neither Oxford nor Cambridge allows their students to forgo their studies because of the race, which is sponsored by back-office service provider Xchanging Plc . “It’s a pretty full-on schedule,” Tyler Winklevoss said in an interview on London’s Putney Embankment, where both teams will start in front of 250,000 spectators on the banks. The twins’ boat, which includes rowers from Britain, Ireland, the Netherlands, Germany and Canada, is expected by bookmakers to win. William Hill Plc says Cambridge is the 7-4 underdog, with the Dark Blues 1-3 to be victorious. That means a successful $3 wager on Oxford would return $1 and the original stake. Long Days The Cambridge crew, which includes four Britons, two Americans and three Canadians, last won in 2007. Last year, the Light Blues lost by 3½ boat lengths. Tyler Winklevoss said their days start around 6:30 a.m. with indoor training, followed by lectures for 3½ hours. The afternoon brings more exercise, ending at 6 p.m. “And then eat, study, sleep,” said Tyler, a right-hander who plays the drums. The brothers, who are enrolled at Christ Church college in Oxford, England, were introduced to rowing by an Irish coach when they were 15. They were U.S. national pairs champions in 2005 and 2007. They won a gold medal in the eight boat at the 2007 Pan American Games and finished sixth in the coxless pairs final at the 2008 Beijing Olympics. “It is a doable schedule,” said Cameron Winklevoss , the left-handed of the twins who plays the guitar. “But certain things have to give, like perhaps a social life, or meeting up with your friends once in a while. That takes a bit of a beating.” The addition of overseas students such as the Winklevoss twins to the race adds to the prestige of the event, former oarsmen say. ‘A Spectacle’ “It raises the interest,” said Telecom Plus Chief Operating Officer Andrew Lindsay , who was the president of the Oxford boat in 1998 and won an Olympic gold two years later in Sydney, Australia. “If you didn’t have foreign people coming, you wouldn’t have such a high standard. As a spectacle for the public, it’s much more interesting.” The discipline needed to be successful in a physically demanding sport has helped the brothers in their legal dispute with Facebook, they said. They founded ConnectU as Harvard students in 2003, and hired Facebook founder Mark Zuckerberg to help build the dating Web site. The brothers sued him in 2004, saying Zuckerberg had stolen their idea for the company. They accused him of delaying the ConnectU project while secretly building Facebook. Millionaires The dispute was settled in 2008 for $65 million in cash and Facebook shares, according to San Francisco-based newspaper The Recorder. The paper wrote in February 2009 that details of the settlement had been accidentally disclosed in a marketing brochure for the law firm that had represented the brothers in the past. Facebook, the largest social networking site, was valued at $11.5 billion in a new index created by SharesPost Inc., a marketplace for trading in private companies, in March. “We don’t think too much about what we would do differently,” Tyler said, when asked about the lawsuits. “We’re still ongoing with that saga. But I think you just have got to fight for what you believe in is right and stay true to that, and be willing to stick it out. It’s a lot like rowing in some ways.” The future may be a combination of both rowing and business for the Winklevoss brothers. They may return to London for the 2012 Olympics . ‘New Challenges’ “We have a high level of curiosity, and we’re always looking for new challenges,” Cameron said. “That might be a combination of rowing and business in the near term. Perhaps a little more school. At some point, you have to hang the oar up and after that, we’ll probably look for the next challenge. Maybe some kind of start-up.” Last year, Oxford beat Cambridge to win the title for a fourth time in five years. Cambridge leads the series 79-75. There has been one tie in the competition, which started in 1829 when a Cambridge student wrote to an Oxford friend proposing a race. “We’ve clearly invested a lot of effort and time into the whole process,” Cameron said, when asked what it would mean if Oxford won. “It would be great if we could have a good day Saturday.” To contact the reporter on this story: Danielle Rossingh on the Putney Embankment in west London through the London sports desk at drossingh@bloomberg.net

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PetroChina Plans $60 Billion in Energy Acquisitions Abroad, Chairman Says

March 28, 2010

By Bloomberg News March 29 (Bloomberg) — PetroChina Co. will spend at least $60 billion in the next decade on overseas acquisitions to power the world’s fastest-growing major economy, challenging Exxon Mobil Corp. and BP Plc in the race to control oil and gas fields. “Ten years ago, PetroChina was a state-owned oil company, but now we have a goal of becoming an international, integrated energy company,” Jiang Jiemin, chairman of the world’s largest company by market value, said in a March 25 interview, where he announced the investment plan. Beijing-based PetroChina spent almost $7 billion in the last year to buy refineries and reserves in Australia, Canada, Singapore and Central Asia. The expansion pits PetroChina against Irving, Texas-based Exxon, which agreed to pay about $30 billion for U.S. gas producer XTO Energy Inc. in December. “Every five, 10 years or so, you’ll get the occasional $30 billion deal, but this is at least $6 billion every year and that’s significant for any major oil company,” said Neil Beveridge , an analyst at Sanford C. Bernstein Ltd. in Hong Kong. “This puts PetroChina on par or exceeding some international oil majors in spending.” Exxon is counting on gas to provide the bulk of its future growth with the acquisition of XTO Energy as well as new developments from the South Pacific to the Celtic Sea. BP, vying with Royal Dutch Shell Plc as Europe’s biggest oil company, paid at least $8.3 billion to acquire assets over the past 12 months. Spending by Chinese companies on mining and energy acquisitions reached a record $32 billion last year. PetroChina spent between $2 billion and $3 billion annually in the past five years, so the planned investment “is clearly a step up,” Beveridge said. Arrow Purchase Petrochina shares fell for a fifth day in Hong Kong on March 26 following the $3.2 billion purchase of Arrow Energy Ltd. last week. The Brisbane-based company extracts gas locked in coal formations. The decline highlighted concerns about potentially low returns. Investors want to see PetroChina acquire oil and gas resources that are plentiful and cheap to extract, Beveridge said. “Investors want to see growth at the company, but there may be concern growth is put above high returns,” he said. Longer-term investors are betting on PetroChina’s success, driving the shares up 40 percent in the last 12 months. That beat the 38 percent gain in BP and well outperformed the 3.1 percent decline in Exxon. The Arrow deal would help PetroChina develop the country’s coal-bed methane reserves that may be as much as 38 trillion cubic meters, said Jiang, 54. The Chinese company plans to boost its annual output capacity of the fuel to 4 billion cubic meters within five years, Jiang said. That could be 20 percent of China’s coal-bed methane output by 2015, which may reach 20 billion cubic meters by then, according to Sun Maoyuan, chairman of China United Coalbed Methane Co., a unit of China National Coal Group Corp., Nov. 2. Overseas Target PetroChina wants half its oil and gas to come from abroad by 2020, Jiang said in Hong Kong. The company, more than 80 percent owned by the state, currently gets less than a tenth of its production from overseas . The energy explorer and refiner plans to produce 400 million metric tons of oil and gas a year by 2020, Jiang said, without stating which countries are favored for investment. Purchases will be largely funded by the company’s cash flow and earnings, he said. “We aren’t going to operate in every oil-producing country,” said Jiang, who was elected as chairman in May 2007. “It’s not the more you eat, the better. You will suffer from indigestion if you eat too much.” Political Risk Politics is the biggest risk PetroChina faces in its expansion, Jiang said, without elaborating. Domestic rival Cnooc Ltd. dropped an $18.5 billion offer for El Segundo, California-based Unocal Corp. in 2005, the biggest overseas acquisition attempted by a Chinese company at the time. The offer met resistance from U.S. lawmakers on grounds the takeover would threaten national security. Cnooc hadn’t sought a majority stake in any overseas deal until this year when it agreed to buy half of Argentina’s second-largest oil producer Bridas Corp. for $3.1 billion. “Tell those who care about PetroChina, PetroChina will never ever be a threat to anybody,” said Jiang, previously a vice governor of Qinghai province in China’s far west. Russian Gas China wants to triple the use of gas to about 10 percent of energy consumption by 2020 to reduce use of coal. The country plans to import 68 billion cubic meters of the cleaner-burning fuel a year from Russia through two pipelines, Jiang said. That’s about 80 percent of China’s gas production last year. PetroChina’s parent, China Nationals Petroleum Corp., has been in talks with Russia on gas imports for more than a decade and has made “good progress” over the past two years with an initial pricing agreement signed at the end of 2009, Jiang said. The company will focus on its oil and gas business and won’t invest in renewable energy including wind and solar for now, Jiang said. “PetroChina is definitely among the key players globally now in the hunt for resources overseas,” Beveridge said. “It’s increasingly apparent that the international oil majors can no longer call all the shots.” — John Duce and Wang Ying in Hong Kong. Editors: Ryan Woo , Peter Langan . To contact the reporter on this story: Wang Ying in Hong Kong at ywang30@bloomberg.net ; John Duce in Hong Kong at Jduce1@bloomberg.net

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Malaysia Targets State Asset Sales, Fewer Race-Based Policies, Najib Says

March 24, 2010

By Frederik Balfour and Susan Li March 24 (Bloomberg) — Malaysian Prime Minister Najib Razak said he’ll keep rolling back policies that favor the country’s biggest ethnic group and sell stakes in state companies to lure investment and boost the stock market. “Whether we will do away completely with affirmative action is something we have to consider very carefully,” Najib said in an interview in Hong Kong yesterday, referring to policies introduced to address the perceived domination of the economy by ethnic groups that arrived during Britain’s colonial rule of the country. “Affirmative action will be more market friendly, more transparent and will be more merit-based.” Najib plans to outline his policies to boost investment and sustain a recovery in Southeast Asia’s third-largest economy next week in a plan dubbed the “new economic model.” Growth may expand more than 5 percent this year after entering a recession last year, he said. If Najib shows the political will to cut back on affirmative action and government subsidies, “he can bring back confidence that at least his leadership recognizes what needs to be done to tame the deficit as well as to bring back fiscal prudence and discipline,” said Ibrahim Suffian , director of the Merdeka Center , an independent research institute near Kuala Lumpur. “The majority of the people, Malays included, agree that these policies need to be restructured so that it becomes more needs-based rather than ethnic-based.” ‘Second Wave’ A “second wave of privatization” is underway that will boost liquidity in the local stock market, Najib said. “There are a number of companies belonging to the government that can easily be privatized and there are tracts of land we can put out in terms of open bidding system,” he said, without naming any firms. The government last year eased rules that forced publically traded companies to set aside 30 percent of their equity to ethnic Malays, who form the majority of the population. A sovereign global bond is “under serious consideration,” he told reporters earlier in the day, without specifying the timing, size, or currency denomination of the potential issue. Najib’s ruling National Front, headed by the  United Malays National Organization , adopted a race-based system known as the New Economic Policy in 1971. Since taking office last April, Najib has rolled back decades-old protectionist policies, opening up service industries to foreign investors and easing rules on ethnic-Malay ownership in companies. Race relations are a political tinderbox in Malaysia, where rioting between Malays, who make up about 53 percent of the population , and ethnic Chinese following elections in 1969 left hundreds dead. While that violence was unparalleled, there have been intermittent flare-ups involving Indians demanding more rights in 2007 and more recently, religious tensions between Christians and Muslims over the use of the word ‘Allah.’ Anwar Opposition leader Anwar Ibrahim , who has campaigned to end affirmative action to reduce corruption, said in a March 11 interview that Najib wasn’t “serious” about ending the race- based policies. Najib said last week Malaysia’s economy can expand as much as 6 percent in 2010. The country’s central bank will release its official economic forecast today at 6 p.m. in Kuala Lumpur. The economy may expand 5.5 percent this year after shrinking 1.7 percent in 2009, according to the median estimate of seven economists surveyed by Bloomberg News. The government said in October that gross domestic product would expand 2 percent to 3 percent in 2010. Policy makers raised interest rates for the first time in almost four years on March 4, joining nations from Australia to India in withdrawing monetary stimulus as Asia leads a recovery from the global slump. Recovery Malaysia emerged from its first recession in a decade last quarter on recovering demand for exports such as Sime Darby Bhd . palm oil and Unisem (M) Bhd . semiconductors. Najib’s trade minister said March 2 overseas sales may increase as much as 7 percent, more than a previous forecast of 3.5 percent. The ringgit has climbed 3.1 percent against the dollar this year, the third-best performer among 10 Asian currencies outside Japan, as Asia’s recovery drew funds to the region and Malaysia moved ahead of most of its neighbors in raising borrowing costs. To contact the reporter on this story: Frederik Balfour in Hong Kong at fbalfour@bloomberg.net

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Mercedes Bets `Old Man’ Car Image Ends With Schumacher’s Formula 1 Return

March 16, 2010

By Alex Duff and Chris Reiter March 16 (Bloomberg) — Mercedes-Benz scored a publicity coup by luring Michael Schumacher out of retirement to race for its new Formula One team. It might backfire if he can’t keep up with drivers a generation younger. At 41, the seven-time champion is the oldest driver in the series at a time when Mercedes needs to shake off an “old man’s car” image, says Simon Empson , managing director of U.K. auto retail Web site Broadspeed.com. Schumacher, after three years of retirement, finished sixth at the season’s opening race in Bahrain two days ago. Daimler AG’s Mercedes is seeking to recover from a 10 percent sales slide in 2009 and lower the average age of its customers. Some 38 percent of clients in its biggest market of Germany are older than 60, according to a Credit Suisse report in June, and it’s targeting younger drivers with four new compact cars that will start being released next year. In championship betting on Web site Bwin.com, Schumacher is rated below four drivers led by Ferrari’s Fernando Alonso , 28, and Red Bull’s Sebastian Vettel , 22. “If I was running Mercedes I would be more interested in hiring Vettel,” said Jez Frampton , chief executive officer of New York-based brand consultant Interbrand. “He has a bigger future.” Germany’s Vettel, whose team is backed by energy drink maker Red Bull GmbH, finished second last season and helped to lift television ratings on Germany’s RTL television channel by 57 percent to 3.4 million, the highest since Schumacher’s retirement in 2006. Schumacher’s comeback hasn’t led to the purchase of more commercials during races as companies weigh the effect of his return, said Cordelia Wagner, a spokeswoman for RTL’s advertising unit. Teams Pull Out Mercedes, which also hired 24-year-old driver Nico Rosberg , is betting on Formula One as other carmakers exit and the company’s unions complain about the spending. Bayerische Motoren Werke AG, Toyota Motor Corp. and Honda Motor Co. quit in the last 18 months because of slumping car sales. Renault SA sold most of the stake in its team to Luxembourg fund Genii Capital. Stuttgart, Germany-based Daimler said in November it would relinquish its 40 percent stake in the McLaren team to buy a 75.1 percent stake in last year’s champion Brawn with Abu Dhabi’s Aabar Investments PJSC. The move was objected to by Erich Klemm , Daimler’s top union official, who described Formula One as a “circus” after leading protests against cost cuts. Mercedes will cut spending on the series to 60 million euros ($82 million) in two years, partly by cutting 50 of the team’s 400 staff in 2011, team spokesman Wolfgang Schattling said by telephone from Stuttgart, without disclosing its current outlay. ‘Perfect Fit’ It is “indispensable” the team is successful to make the investment work, said Joachim Schmidt , Mercedes’s executive vice president for sales and marketing in Stuttgart. Schumacher said he “can live very well” with his sixth-place finish in Bahrain, adding that Mercedes will make progress. Alonso won the race over Ferrari teammate Felipe Massa . Schumacher is the oldest driver in Formula One since Nigel Mansell raced at age 42 in 1995. The series’ oldest driver was Louis Chiron, who raced at 58 in 1958. Schumacher “fits perfectly” with Mercedes’s brand, said Florian Martens , a Daimler spokesman. People in their 30s who grew up idolizing the seven-time champion are now looking at making their first premium car purchase, Martens added. ‘Coup of Decade’ Signing Schumacher is “the coup of the decade” in terms of publicity, said Mark Jenkins, a business strategy professor at Cranfield University in Bedfordshire, England. It’s tying Mercedes to Schumacher’s racing career, which began with the German carmaker and reached its peak with Ferrari. “There is a history there and Mercedes has effectively captured the value of it,” Jenkins said. “I can’t see a strong downside.” In Germany, a 177,000-euro gull-wing SLS sports car that Schumacher is promoting in a television advertisement almost sold out in the country even before it goes on sale on March 27, according to Mercedes executive Schmidt. Daimler declined to provide sales figures. Mercedes drivers are 55.6 years old on average in German- speaking Europe, compared with 45.6 years for BMW and 47 for Audi, according to a July 2009 study by Heidelberg, Germany- based research firm Sinus Sociovision . “Younger customers are important because if they have a good experience with the brand they’re likely to stick with it, while with older customers there reaches a point when they’ve purchased their last car,” said Stefan Bratzel , director of the Automotive Center at the University of Applied Sciences in Bergisch Gladbach, Germany. “Mercedes doesn’t have a good image with younger drivers. It’s one of its biggest problems.” If Schumacher trails younger rivals it will set back its efforts to change that, Bratzel said. “The Formula One involvement is a fine line,” Bratzel said. “If Schumacher isn’t successful, it doubles the damage.” To contact the reporters on this story: Alex Duff in Madrid at aduff4@bloomberg.net . Chris Reiter in Berlin at creiter2@bloomberg.net .

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India’s Stalled Arms-Buying System Leaves Its Military Outgunned by China

March 11, 2010

By James Rupert March 12 (Bloomberg) — India, which has tripled its defense spending in a race against China’s military buildup, is having trouble converting the funding into weapons and equipment its military says are urgently needed. The government in five years has canceled two tenders for artillery guns, a contract for ammunition propellant and two helicopter tenders, together worth at least $4 billion. No contract exceeding $100 million has been awarded through competitive bidding in at least 23 years, said military analyst V.K. Kapoor . Defense Ministry spokesman Sitanshu Kar said he couldn’t immediately identify the last such deal. India’s “military capacity and preparedness are being reduced because of the inadequacy of the procurement process,” said Uday Bhaskar , director of the National Maritime Foundation , a New Delhi research institute on strategic issues. The military’s upgrading is “on hold and its obsolescence is increasing.” The cancellations have disrupted attempted weapons sales by Textron Inc.’s Bell Helicopter unit in Fort Worth, BAE Systems Plc and South Africa’s Denel Ltd. Bhaskar said they have hurt troop readiness along more than 4,200 kilometers (2,600 miles) of Himalayan frontiers , where India has fought three full-blown wars with Pakistan and one with China. India took 20 years to negotiate a 2004 contract for jet trainers, even as 157 pilots died in three decades of jet fighter crashes blamed partly on inadequate training craft. Obsolete Weapons The Defense Ministry, which wields the world’s 10th-largest military budget, has surrendered 3 percent to 9 percent of its announced budget in each of the past seven years because it couldn’t spend all the money allocated for arms, according to a January report by the New Delhi office of accounting firm KPMG and the Confederation of Indian Industry . Half of India’s weapons are obsolete, the report said. China has almost quadrupled its official defense spending since 2000 to $78 billion for fiscal 2011, 7.5 percent more than in the previous year. India will spend $32 billion on defense this year, triple its 2000 outlay and 4 percent more than in fiscal 2010. India has bought no artillery for more than 23 years, a period during which the government has sought to buy more than 1,500 155 mm guns for use mainly along the Pakistani and Chinese borders. Such guns were used to defeat Pakistan in a 1999 conflict at Kargil in Kashmir; India would have had too few had that fight grown into a full-scale war, said Kapoor, who is also a retired army lieutenant general. Howitzer Delays India’s military is adequately prepared on its borders and will benefit from an accelerating modernization program, Minister of State for Defense M.M. Pallam Raju said at a conference with defense companies in New Delhi on Feb. 16. “In the past five years we have created a faster, more transparent procurement process,” he said. That process is being tested as India’s air force conducts flight trials in the world’s biggest fighter-jet purchase in 15 years. Chicago-based Boeing Co. , Lockheed Martin Corp. and four European builders are vying under a 2007 tender to sell India 126 warplanes worth $11 billion. India is expected to sign a separate deal for 29 naval MiG- 29 fighters during this week’s visit by Russian Prime Minister Vladimir Putin . John Giese , a spokesman for Bethesda, Maryland-based Lockheed, called the fighter tender “one of the most challenging competitions in the history of fighter aviation.” Given the complexity, “the competition has been very efficient, transparent and professionally managed,” Boeing spokeswoman Mary Ann Brett said in an e-mail. European Competitors Lockheed and Boeing are competing with Paris-based Dassault Aviation SA , Stockholm-based Saab AB , European Aeronautic, Defense & Space Co. , which has headquarters in Paris and Munich, and Moscow-based OAO United Aircraft Corp . While the military says rules last amended in November let it sign a contract within 20 to 34 months, it is too early to judge their effectiveness, said Gurpal Singh, a deputy director general for the industry federation in New Delhi. The air force asked the government in 1983 to order advanced jet trainers because pilots taught mainly in subsonic jets were losing control of supersonic MiG-21 fighters that were more than three times faster. Political and bureaucratic battles under 11 prime ministers added to the delays before BAE Hawk jets were purchased. India’s main political blocs — led by the Congress Party and the Bharatiya Janata Party (BJP) — have fought over arms buying since 1987. Indian newspapers reported then that Swedish artillery builder Bofors, now a unit of London-based BAE, bribed officials to buy its guns. The scandal scuttled most of the deal and helped drive the Congress government of Prime Minister Rajiv Gandhi to defeat in 1989 elections. Reviewing Deals India was still seeking artillery in 2004 when Congress was elected, and halted bidding as it reviewed defense deals under the previous BJP administration. When police investigated Pretoria-based Denel for paying illegal commissions in winning a 2002 army order for rifles, the government blacklisted the state-owned company. Four more foreign companies were barred from defense contracts last year, after the Central Bureau of Investigation said they were being investigated on suspicion of bribery. That forced Singapore Technologies Engineering Ltd. out of the race, leaving London-based BAE as a single vendor and prompting officials to halt the tender. To contact the reporter on this story: James Rupert in New Delhi at jrupert3@bloomberg.net .

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Daimler Plans to Double `Green Technology’ Spending, Development Head Says

March 3, 2010

By Chris Reiter March 3 (Bloomberg) — Daimler AG ’s Mercedes-Benz unit, the world’s second-largest maker of luxury cars, plans to nearly double investment on “green” technology to take on BMW in the race to offer electric vehicles. Stuttgart, Germany-based Mercedes intends to spend 1 billion euros ($1.4 billion) in each of the next two years to develop batteries and fuel-saving engines, Thomas Weber , Daimler’s development chief, said today in an interview at the Geneva auto show. Annual spending averaged at about 567 million euros over the past three years. The expanded research budget “shows that we’re continuing to give gas,” said Weber. “It shows that we have the commitment, not just to build show cars, but to bring hybrids, electric vehicles into large scale production.” The “green” spending in 2010 and 2011 is part of Daimler’s plans to increase overall research and development budget, which amounted to 4.2 billion euros in 2009, Weber said. To contact the reporter on this story: Chris Reiter in Geneva via creiter2@bloomberg.net

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George Mitrovich: The Return of Alan Simpson

March 2, 2010

Alan Simpson tells a story. He’s walking through an airport when a man comes up and says, “Has anyone ever told you, you look like Alan Simpson?” “Yes”, Simpson replies. The man says, “Doesn’t that make you mad?” The former Republican U.S. Senator from Wyoming has been appointed by President Obama to co-chair the National Commission on Fiscal Responsibility and Reform. The nation’s deficit crisis requires wisdom for the future, a future imperiled by two wars, the disastrous economic policies of the Bush administration, and Obama’s own uncertainties. Clearly the White House believes the new commission can rise to the challenge and provide the direction so desperately needed. Alan Simpson is an inspired appointment. Among decent men and women he’s one of the most beloved and respected figures in American politics. He possesses one of life’s greatest gifts, the gift of humor; the ability to make others laugh — and by that gift Alan Simpson is unrivaled. When he walks into a room people begin to smile. Within minutes you just know he will have you convulsed in laughter. I mean, if you have a choice of gifts, wouldn’t you choose that? But Simpson is more than a funny man. He’s terrifically smart and insightful. He demonstrated during his 18 years in the Senate an ability to work across the aisle, earning the high regard of other senators. He also evidenced a compassion for his colleagues, independent of party. Democrats from Ted Kennedy to Joe Biden to Barney Frank tell of Simpson’s extraordinary kindness, standing by them in difficult personal moments — from a scandal in Frank’s case to a health crisis in Biden’s. If you know him none of this would surprise you; it is who he is. Simpson’s decision to leave the Senate, giving up a seat he might have held the rest of his life, was occasioned by various factors, but his loss to Trent Lott in the GOP’s leadership contest in 1996, was surely a contributing factor. He had been the Republican whip in the senate for 10 years. He was number two behind Bob Dole of Kansas, but Simpson did the heavy lifting. The difference between Alan Simpson becoming leader of the Republicans in the senate in 1995 and Trent Lott was one vote. If you think one vote is irrelevant, remember the GOP lost one of its best senators ever, because every vote counts. And by that one vote the senate and the GOP would see sweeping changes; the emergence of Kentucky’s Mitch McConnell as party leader — and from those changes the senate would emerge a paralyzed body. Lott’s tenure was abruptly halted when he made the mistake of testifying to the greatness of Strom Thurmond, a white racist senator from South Carolina. You remember Storm, don’t you? The Dixiecrats presidential candidate in ’48, who just happened to have bedded a black woman and became the father of a multi-racial child; but somehow that was never mentioned in his campaign commercials; the only thing ‘ol Strom and Thomas Jefferson ever had in common (a multi-racial child not campaign commercials). One of the stories about Simpson seldom referenced involves his friendship with George Herbert Walker Bush, the 41st president of the United States. Both Simpson and Bush were sons of fathers who served in the U.S. senate. Simpson’s father was Millard of Wyoming, and Bush’s was Prescott of Connecticut. Their friendship, which began at a young age, would grow into a close relationship — more personal than political. (If you think that’s a silly statement, then you are way too cynical.) When Bush 41 became the Republican nominee in ’88 he offered Simpson the vice presidency. But Simpson declined. He did so because he believed his pro-choice stance, and other progressive positions he had taken, including criticism of veterans who abused the system, would sink Bush’s candidacy. George Herbert Walker Bush would then turned to a little known senator from Indiana by the name of Dan Quayle. Would Simpson on the GOP ticket have compromised the ticket? No, most assuredly not. The Republicans would have been out of options because there was no chance they were going to vote for the Democratic nominee, Mike Dukakis, “that liberal” from Massachusetts; nor would they have sat out the race, so great was their fear of Dukakis — the guy who “let” Willie Horton out on parole. Remember? By such decisions history turns – and the presence of Quayle on the ticket and his subsequent election as vice president would further drive the GOP to the right, accelerating in time the demise of a once vital political party. The party of Lincoln, T.R., and Eisenhower was done, finished; a new era in the annals of America politics and governance would evolve — and the nation’s greatness would diminish before our very eyes. (It’s not all the GOP’s doing; the Democrats are hardly guiltless.) Those with long memories will recall an ugly moment in Simpson senate career. It occurred during the hearings into Clarence Thomas’ qualifications to be a Supreme Court justice. With Anita Hill testifying before the Judiciary Committee Simpson said something he would regret and his family would give him hell over. Some liberals, who can be as unforgiving as those on the right, still hold that against Simpson; but if that’s you, you probably should take a long look into the mirror to see if you find imperfections staring back. Can Simpson’s return to the corridors of power in Washington change our present political dynamic? Can Barack Obama’s reaching all the way to Cody, Wyoming, and asking Simpson to come back, help resurrect a two party system that actually works for the American people and the nation’s future? I don’t know the answer to that. But Alan Simpson and the commission will have my prayers, and I hope yours as well. You say you don’t believe in prayer. Okay, but trust me when I tell you, you had better believe in something because where this nation is presently headed is a place no one wants to go.

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Cameron Faces `Real Fight’ Against Brown in U.K. Vote as Poll Lead Slumps

March 1, 2010

By Robert Hutton and Kitty Donaldson March 1 (Bloomberg) — David Cameron said he faced a “real fight” to unseat British Prime Minister Gordon Brown after a survey gave his opposition Conservative Party its smallest poll lead over Labour in more than two years. Hours before Cameron addressed a party rally in Brighton on England’s South coast yesterday, a YouGov Plc poll put Brown in position to keep his job, while leading a minority Labour Party administration after elections he must hold by June. “It’s probably a rogue poll, but the Conservative lead is shrinking,” said Anthony Wells of YouGov. “The Conservatives have had a bad month in terms of strategy and campaigning. They’ve had lots of little policies that everyone ignored. And positive economic figures help Brown.” The tightening of the race in the past month as the economy exited recession suggests the U.K. may have its first minority government since 1974. A Parliament without a majority party may hamper efforts to cut the U.K.’s record deficit. Brown says deficit cutting before next year would undermine economic growth, while Cameron has attacked Brown over increasing debt . The pound dropped to $1.5078 as of 10:20 a.m. in London, from $1.5238 at the end of last week. It weakened to as much as $1.5097, the lowest level since May 14. Sterling depreciated to 90.49 pence per euro from 89.46 pence. “The political development added to the negative sentiment about the pound,” said Audrey Childe-Freeman , a senior currency strategist at Brown Brothers Harriman Ltd. in London. “You will need a government with a strong majority to push ahead with reforms that the U.K. needs.” ‘Real Choice’ Cameron said he wanted his party to focus voters’ minds on “a real choice — Labour or Conservative, Gordon Brown or me.” “They don’t hand general election victories and governments on a plate to people in this country,” Cameron said. “This election was always going to be a real fight for our party.” Brown focused on crime and policing in a speech today, promising tougher penalties for lower-level offenses and disorder. He challenged the Conservative Party’s view that British society is “broken” and sought to use its opposition to closed-circuit television cameras and a DNA database as evidence that the party is made up of privileged people out of touch with the majority of the population. Night Bus Home “I know some people think CCTV is excessive but they don’t have to take the night bus home,” Brown said in his speech in Reading, west of London. “I know the hard-working majority will never be able to live in a gated community or hire a private security firm.” YouGov’s daily survey gave the Conservatives the support of 37 percent, down 2 percentage points, and Labour the backing of 35 percent, up two. The uneven distribution of votes across districts means this would leave Labour with the most seats, though about nine short of a Parliamentary majority, said the Sunday Times , which published the poll. Brown can choose when to call the election, which must be held by June 3. The poll was the latest in a series over the past month showing the Conservative lead over Labour narrowing from about 10 points, where it had stayed for most of the last year. Revised growth figures for the final quarter of 2009 released last week showed the economy expanding 0.3 percent, up from the 0.1 percent previously reported. After the speech, Ian Withers, a Conservative Party member from London who was in the hall, said in recent weeks the party had been “confused” by attempts to follow the news agenda. Cameron sharpened his message in his speech, he said. ‘Salesman’s Pitch’ For the Labour Party, Work and Pensions Secretary Yvette Cooper described Cameron’s speech as “a vacuous salesman’s pitch.” William Hill Plc cut its odds of Labour being the largest party after the election, paying out 4 pounds for every 1 pound bet, down from 8 pounds. The bookmaker also reduced the odds against Brown remaining prime minister after the election, to 9/2, down from 7/1. “We all know that the British people have still got some big questions that we’ve got to answer,” Cameron said. He urged his audience to “demonstrate that we’ve got the leadership, we’ve got the values, we’ve got the ambition to make this country great again.” The poll contained some good news for the Conservatives. It found 40 percent say that Cameron “has the character to be an effective prime minister,” against 28 percent saying the same for Brown. The Labour leader has faced scrutiny on the issue since extracts of a book by journalist Andrew Rawnsley suggested he was violent toward aides. The Mail on Sunday newspaper obtained a tape of a Brown aide describing how the prime minister had once shoved him aside in a fury, apparently contradicting a denial from Brown last week. YouGov interviewed 1,436 adults online on Feb. 25 and 26. No error margin was given. To contact the reporters on this story: Robert Hutton in Brighton, England, at rhutton1@bloomberg.net ; Kitty Donaldson in Brighton, England, at kdonaldson1@bloomberg.net .

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Canada Faces Russia in Olympic Hockey Quarterfinals

February 24, 2010

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

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Steve Parker: Auto racing – NASCAR’s Disaster at Daytona

February 20, 2010

What Bill Clinton said about Yasser Arafat – “He never misses an opportunity to miss an opportunity” -also applies to NASCAR. Whether it’s the fact that NASCAR Sprint Cup (and next year the Nationwide Series) is now nothing more than a spec series where cheating has become the secret to success, whether it’s not choosing NASCAR’s first successful African American racer, Wendell Scott, to be in their “first class” of legends at the new NASCAR Museum in Charlotte or whether it’s providing a track surface which will not fall apart for the most important race of the year which kicked off the new decade for the sport, NASCAR has a definite penchant for too often being on the wrong side of any opportunity to make itself look good to a national audience. Last Sunday’s Daytona 500 took over six hours to complete, a race which normally runs three to four hours. Why? Because the track started coming apart and the race had to be stopped – red-flagged – for over two hours while track workers tried to make repairs. Oh, sure, there was a great finish to the race with the universally-liked Jamie McMurray winning his first Daytona 500 (he has the pole for this Sunday’s race at California Speedway) but how many people stuck around their TVs to watch Daytona’s end? While I enjoyed my extended nap at home, as I’m sure millions of other viewers did, there are sports car events which run six hours and are called “endurance races”. That certainly describes this year’s Daytona 500. Drivers including Tony Stewart and Dale Earnhardt, Jr. have talked about the boredom of the middle part of any long race, so NASCAR should imagine what those laps are like to we home viewers. Pure tedium at 190mph, and whoever thought such a thing possible? During one red flag period, at least one driver, Kyle Busch, fell asleep in his parked race car waiting for the green flag to come out again. When a red flag is thrown (which stops the race) the clocks stop running, so in fact NASCAR was able to claim the actual race ran just over three hours. Hooey. Here’s what really rankles me: In the month before the Daytona 500, there were thousands of laps run on the track, maybe tens of thousands. The racing season opened with the 24 Hours at Daytona sports car race, much of it, not unusually, in the rain this year. Then NASCAR took over the track for their couple of weeks of events. There were two qualifying races by Sprint Cup cars for the 500. And the hundreds of laps of practice leading to those. There were thousands of laps of practice, qualifying and actual racing for the ARCA Series, the Nationwide Series and the Camping World Truck Series. There were countless practice laps for the Sprint Cup cars as well as qualifying. And NASCAR wants me to believe that with all those laps, there was absolutely no problem with the track? No problem until NASCAR’s Super Bowl? Ridiculous. My guess? They knew there were potential problems, but NASCAR hoped they could skate by one more year on a track which was last repaved in 1978. NASCAR would rather ask viewers to watch an over six hour race than have it appear there might be something wrong with their legendary race track. Well, they gambled…and lost, big-time. And probably lost a lot of first-time viewers tuning into the race to see what NASCAR is all about. Have to hand it to the FOX announcers – they filled all that time as best they could, and with absolutely nothing negative said about NASCAR (you don’t bite the hand…). The only driver who complained publicly was Dale Earnhardt, Jr. Demonstrating his family’s virtual ownership of the track and the sport, he said, “If they’d a repaved it when I told ‘em too, it’d be perfect by now.” Only Junior has the juice to make a comment like that with no one from NASCAR saying anything to him about it. This Sunday, it’s a 500-miler at Auto Club Speedway in Fontana, CA, about 70 miles and several universes, cultures, languages and lifestyles east of downtown Los Angeles. It’s a two-mile track built by Roger Penske, a twin of his track in Brooklyn, MI. The weather report calls for rain Friday night (and it was raining as I wrote this late Friday in Los Angeles), and heavy rain Sunday. But maybe NASCAR (and especially we fans) are catching a break – that rain is not supposed to start until late afternoon, but predictions for these Pacific winter storms are reliably unreliable. NASCAR has been criticized for years for starting their season during the rainiest part of the year in many areas of the country, almost guaranteeing a few rained out events. But they’ll take their chances in California and across the country until the generally dry summer, because there is money to be made and NASCAR and its track owners haven’t exactly been raking it in the past year or so. Let’s see how NASCAR handles this one. And the next.

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Steve Parker: Automotive on-line radio shows this weekend

February 19, 2010

Saturday 2-20-10 Steve Parker’s The Car Nut Show on www.TalkRadioOne.com LIVE at 11am Pacific time. The convoluted Toyota story gets straightened out for you by Steve on the show. Find out how he predicted these kinds of electrical and other problems years ago. Tesla, the California electric car-maker, loses three executives in a plane crash. How will this affect the company? The Sixty Second Road Test covers the 2010 Cadillac CTS Sport Wagon…and YOUR phone calls at 213-241-4353. Sunday 2-21-10 Steve Parker’s World Racing Roundup on www.TalkRadioOne.com LIVE at 5pm Pacific time. Last week’s Disaster at Daytona will be talked about, while we’re expecting a rainout of today’s race at California Speedway. Rain’s scheduled in Southern California from Friday night through Monday at least. What is NASCAR thinking? The Danica Patrick phenomenon keeps rolling along while it appears her Nationwide team owner, Dale Earnhardt, Jr. might finally have the race car under him which he so sorely deserves. And the next-generation Indycar, getting rave reviews and severe complaints will be covered, too. Plus YOUR phone calls at 213-341-4353.

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Simon Johnson: The Struggle for Power at the Heart of Europe

February 19, 2010

Cross-posted from The Baseline Scenario Given recent maneuverings around European Central Bank (ECB) appointments and the obvious discomfort of Mario Draghi — he carries the Goldman Sachs connection now like other people carry albatrosses — the German financial-industrial complex seems to regard Axel Weber as a “done deal” to become the new ECB president. Such an assumption is premature. Mr. Weber, as long standing head of the Bundesbank and general German economic maestro (including, quietly, on fiscal issues), is due to face his own round of questioning — if you listen carefully, you can hear southern Europeans sharpening their arguments, and with good reason. There are six important and difficult subject areas for Mr. Weber. Who was asleep at which wheel when Deutsche Bank was allowed to become one of the most leveraged banks in the world, betting and losing heavily on subprime mortgages — among other things? What exactly was Mr. Weber’s involvement in the Hypo Bank debacle ? Germany likes to claim that it can regulate large banks effectively — and there is no reason to limit their size. To the rest of us, it seems like Germany can’t even regulate and control relatively small banks. Why does Germany continue to resist sensible proposals to increase capital requirements on banks (both at the deputy minister level and through the r elentless lobbying of Josef Ackermann )? The presumption among their closest allies is that this is to hide losses – and general government culpability — in the mismanagement of German public banks ( Landesbanken ). Why is it reasonable to hold up the entire G20 process (and the BIS, etc), at a technical level, for what is essentially a broad form of political cover-up? Why have the full results of European bank stress tests never been published ? Is this because of large current and likely future losses on the balance sheets of financial institutions that fall within Mr. Weber’s remit? German officials are keen to criticize the southern periphery of the eurozone, but let’s face it – eurozone monetary policy was highly procyclical (exaggerating the boom and the bust, e.g., in Spain), and regulators looked the other way as northern/core banks extended credit to the Mediterranean and East European neighbors. The upside benefited German exporters; the downside is now being laid entirely at the door of “profligate” nations. Is this entirely fair and reasonable? As Mr. Weber aspires to European-level leadership, here is the big issue. Is it his intention to manage the currency zone to suit the preferences of the core nations (i.e., Germany), while letting those on the periphery be whipped around by policies that are not suited for them? Is there anything at all that he and others take as lessons from recent experience? More broadly, Germany and Mr. Weber have been central in building a version of the Bretton Woods fixed exchange rate system within Europe. The entire burden of adjustment is placed on deficit countries (talk to Greece); it is considered beyond the pale to even suggest that German fiscal policy may be too tight, that Germany needs to expand domestic demand, or — heaven forbid — that Germany’s intention to export its way back to growth (with a current account surplus, in their view) is not exactly a model of enlightened economic leadership. On top of this, and unlike Bretton Woods, there is no mechanism for adjusting exchange rates within the currency union. Given what we have learned in the past two years, is this still such a bright idea? With Draghi damaged and the Weberian model so open to question, look (or hope) for dark horses to emerge in the race for the ECB. And don’t make the mistake of thinking that you don’t care. The broader European economy accounts for around 1/3 of world GDP, depending on how you count it. The President of the European Central Bank is the preeminent policy maker in this space. If the growth prospects for this area remain dismal while European banks stay loosely supervised (our Axel Weber baseline), expect even more destabilizing capital flows into emerging markets – and into the United States.

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Weber Clear Frontrunner to Succeed Trichet as ECB President, Survey Shows

February 15, 2010

By Jana Randow and Christian Vits Feb. 15 (Bloomberg) — Germany’s Axel Weber leads the race to succeed Jean-Claude Trichet as president of the European Central Bank and Portugal’s Vitor Constancio is likely to be his deputy, a survey of economists shows. Of 27 economists in the Bloomberg News survey, 24 said Weber will be chosen to replace Trichet, whose term ends on Oct. 31 next year. Only three picked Italy’s Mario Draghi , Weber’s main rival for the job. Twenty economists said Constancio will succeed Lucas Papademos as vice president when his term expires on May 31 this year. Euro-region finance ministers are due to vote on the vice president post today. Jockeying for the ECB presidency has already started as governments across the 16-nation euro region grapple with a fiscal crisis that has prompted investors to question the sustainability of the monetary union. Installing Weber at the ECB’s helm next year would give Europe an outspoken inflation fighter who has stressed the need for fiscal discipline to protect the euro. “Weber has a very strong personality and will definitely give the euro a very powerful and visible face,” said Laurent Bilke , a former ECB economist now at Nomura International Plc in London, who expects Bundesbank President Weber to win. “He’s a recognized economist and will make a difference. Under him, the ECB may even grow in its international stature.” Weber’s Influence Weber, 52, has sped to the top of European policy making. Like Federal Reserve Chairman Ben S. Bernanke , he is a former academic. He joined the Bundesbank as president from the University of Cologne in 2004 after a scandal over hotel expenses forced predecessor Ernst Welteke to resign. Weber quickly established himself as one of the most influential of the ECB’s 22 Governing Council members, often pre-empting policy shifts and moving currency and bond markets with his comments. He landed on Trichet’s so-called “Black List” last November by revealing the ECB would tighten its lending to banks. The remarks breached ECB protocol that major announcements be made by the president and also came within a week of a council meeting, when officials are supposed to refrain from commenting on policy. Weber is perceived by economists as one of the ECB’s toughest inflation-fighting “hawks” because of the emphasis he places on curbing risks to price stability . Hawks and Doves If Constancio wins the ECB vice presidency, he would strengthen Weber’s chances by lending balance to his ticket. Constancio, Portugal’s central bank chief, is known as a “dove” who pays more attention to economic growth. Between them they would also ensure representation from northern and southern Europe at the top of the ECB. Luxembourg’s Yves Mersch and Belgium’s Peter Praet are also on the ballot for the vice presidency. If finance ministers pick Mersch, who like Weber has a reputation as an inflation hawk, Draghi’s chances of replacing Trichet would rise. Draghi, 62, left Goldman Sachs Group Inc. to become governor of the Italian central bank in January 2006. He replaced Antonio Fazio , who resigned after a criminal investigation was opened into his handling of Italian bank mergers. A former economics professor like Weber, Draghi chairs the Financial Stability Board and has pushed for limits on bankers’ pay and stronger capital requirements. A spokesman for Italian Prime Minister Silvio Berlusconi said last week that the government backs Draghi for the ECB job. ‘Neck and Neck’ German Chancellor Angela Merkel has won French President Nicolas Sarkozy’s support for Weber’s candidacy, German magazines Spiegel and WirtschaftsWoche reported this month. “It will be a neck-and-neck race,” said Holger Sandte , chief European economist at WestLB Equity Markets in Dusseldorf, who expects Draghi to win. “Policy makers probably want someone who’s a bit more diplomatic than Weber,” he said, adding the ECB “resides in Frankfurt and it’s pretty much designed in a German way.” Germany, Europe’s largest economy, hasn’t held a major European policy position since Walter Hallstein led the Commission of the European Economic Community from 1958 to 1967. It didn’t put up a candidate when the ECB’s first president was picked in 1998, pushing instead for Wim Duisenberg of the Netherlands in exchange for the ECB being headquartered in Frankfurt, Germany’s financial capital. The decision on Trichet’s successor “ultimately comes down to politics,” said Nick Matthews , senior economist at Royal Bank of Scotland Group Plc in London, who believes Weber will prevail. “I would imagine the argument that ‘it’s Germany’s turn’ is being used in the discussion.” Musical Chairs Whoever takes over from Trichet, the ECB’s six-member Executive Board may need to be reconfigured to ensure one country doesn’t dominate it. With Juergen Stark and Lorenzo Bini Smaghi , Germany and Italy are already represented on the board. Economists said one of them will probably have to step down before his term expires to make way for Weber or Draghi and avoid giving either country too much weight in the ECB’s decision making. “Stark will be upgraded to Bundesbank president,” said Carsten Brzeski , senior economist at ING Group in Brussels, who believes Weber will win the race. “Stark is a good Prussian. He’s dutiful and does everything that’s good for his fatherland. He’ll clean his desk.” To contact the reporters on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net ; Christian Vits in Frankfurt at cvits@bloomberg.net .

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GE’s Immelt Differs With Paulson’s Recollection of Financial Crisis Talks

February 10, 2010

By Rachel Layne Feb. 11 (Bloomberg) — General Electric Co. says Chief Executive Officer Jeffrey Immelt disagrees with former Treasury secretary Henry Paulson’s recollection of discussions involving commercial paper as the financial crisis swelled in September 2008. Paulson’s new book “On the Brink: Inside the Race to Stop the Collapse of the Global Financial System,” says he and Immelt discussed GE’s difficulty in selling commercial paper during a phone call on Sept. 8, 2008, and in person about 6 p.m. on Sept. 15, the day Lehman Brothers Holdings Inc. filed for bankruptcy. “Now here was Jeff telling me that GE was finding it very difficult to sell its commercial paper for any term longer than overnight,” Paulson, whose book relies in part on memory, writes of the Sept. 15 conversation. “The fact that the single- biggest issuer in this $1.8 trillion market was having trouble with its funding was startling.” Immelt said he “does not believe they discussed having problems with GE’s” commercial paper in the conversations, GE spokeswoman Anne Eisele said. The company’s public disclosures during the period, in which the “markets were under great stress,” were accurate, she said. Those disclosures include a Sept. 14 memo to investors that said in part, “GE Capital’s commercial paper programs, which total $90 to $95 billion, remain robust.” GE Capital had 15 commercial paper programs in 11 currencies at an average funding cost of Libor less 25 basis points year-to-date in its largest market, the U.S., the memo said. Relying on Memory When asked about the discrepancy, Michele Davis, a spokeswoman for Paulson, referred to the author’s note in the book, which cites his reliance on memory rather than transcripts or notes. “To write this book, I called on the memories of many of the people who were with me during these events,” Paulson wrote. “Given the high degree of stress during this time and the extraordinary number of problems I was juggling in a single day, and often in a single hour, I am sure there are many details I will never recall.” Immelt is scheduled to interview Paulson about his book on Feb. 18 at New York City’s 92nd Street Y, according to the organization’s Web site . Paulson participated in a similar event on Feb. 9 with Berkshire Hathaway Inc.’s Warren Buffett. Fairfield GE climbed 9 cents to $15.69 yesterday in New York Stock Exchange composite trading . The shares have tumbled 41 percent since Sept. 12, 2008, the last trading day before Lehman Brothers’ bankruptcy filing. To contact the reporter on this story: Rachel Layne in Boston at rlayne@bloomberg.net

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