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Google Advertisers in China Told to Switch on Speculation Site Will Shut

by on March 15, 2010

By Mark Lee and Brian Womack March 15 (Bloomberg) — Google Inc. advertisers in China are being advised to switch to rivals such as Baidu Inc. and business partners are exploring alternatives as speculation grows the U.S. company will shut its Web site in the country. “When we talk to clients, we have been pushing them in the direction of Baidu more,” said Vincent Kobler, managing director at EmporioAsia Leo Burnett in Shanghai, which buys advertising from Google and Chinese market leader Baidu on behalf of customers. “The Chinese government has taken a firm stance, and Google, they have their own principles and are going to shut down.” China’s government said last week Google would be “irresponsible” if it carried out a plan to end censorship at its Google.cn site, responding days after Chairman Eric Schmidt said talks with authorities may yield an outcome “soon.” A pullout may force advertisers and local Internet partners such as Sina Corp. and Tom Online Inc. to review their operation with the U.S. company. “Our co-operation with Google rests on the company maintaining its operations in China,” said Liu Qi, a Beijing- based spokesman at Sina , operator of China’s third-most visited Web site, which features Google’s search engine. The Chinese company has alternative arrangements in place to ensure it won’t be affected by Google’s possible pullout, Liu said. Mountain View, California-based Google said on Jan. 12 it plans to stop censoring search results on its Chinese site after the company was hit by cyber attacks originating in China, and may end its local operations pending talks with the government on the proposal. In 2006, the U.S. company agreed to comply with requirements to filter its search results on the Google.cn site to boost its business in the country, where the ruling Communist Party restricts information it deems unfavorable. Plan For Retreat “The company will have to bear the related results” if rules are violated, Li Yizhong , minister of industry and information technology, said on March 12. “If one company violates the Chinese law and be unfriendly and irresponsible, that’s unwanted and means the company doesn’t merit its world- class status.” Chinese regulators told some of Google’s biggest partners on March 12 that they should plan for the company’s retreat from the country, the New York Times reported yesterday, citing a person with knowledge of the notice. It indicated negotiations with the government had reached an impasse, the report said. Jill Hazelbaker , a spokeswoman for Google, declined to comment when contacted by Bloomberg News. Closure Google has drawn up detailed plans to shut its search engine in China and is “99.9 percent” certain of going ahead with the closure, the Financial Times reported March 13, citing a person it didn’t name. “If Google is no longer available, we will turn to other service providers,” said K.K. Tsang, Hong Kong-based chief executive officer at GroupM, which buys advertising space for clients. Toward the end of February, advertising officials such as Kobler said business with Google was returning to normal on speculation that the company may reach a compromise with the government or that any pullout won’t occur soon. “Things have stabilized,” Kobler said Feb. 24 as the U.S. company posted recruitment ads for engineers, managers and sales staff on its Web site and employees at its Beijing office said life had returned to normal six weeks after the pullout threat. Advertisers were returning after more than 20 percent of Google customers in China probably switched to alternative paid- search providers in the wake of the Jan. 12 announcement, Steven Chang , chief executive officer for China at ZenithOptimedia Group Ltd., which buys advertising on Google’s site on behalf of companies, said at the time. To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

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U.S., U.K. Move Closer to Risking Loss of Their AAA Ratings, Moody’s Says

by on March 15, 2010

By Matthew Brown March 15 (Bloomberg) — The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service. The governments of the two economies must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, Pierre Cailleteau , managing director of sovereign risk at Moody’s in London, said in a telephone interview. Under the ratings company’s baseline scenario the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, Moody’s said today in a report. “We expect the situation to further deteriorate in terms of the key ratings metrics before they start stabilizing,” Cailleteau said. “This story is not going to stop at the end of the year. There is inertia in the deterioration of credit metrics.” The U.S. government will spend about 7 percent of its revenue servicing debt in 2010 and almost 11 percent in 2013, according to the baseline scenario of moderate economic recovery, fiscal adjustments in line with government plans and a gradual increase in interest rates , Moody’s said. Under its adverse scenario, which assumes 0.5 percent lower growth each year, less fiscal adjustment and a stronger interest-rate shock, the U.S. will be paying about 15 percent of revenue in interest payments, more than the 14 percent limit that would lead to a downgrade to AA, Moody’s said. U.K. Debt Service The U.K. is likely to spend 7 percent of revenue servicing debt this year and 9 percent in 2013, rising to almost 12 percent under the adverse scenario, Moody’s said. Financing costs above 10 percent put countries outside of the AAA category into a so-called debt reversibility band, the size of which depends on the ability and willingness of nations to reduce their debt burden by raising taxes or reducing spending. The U.S. has a 4 percentage-point band, while the U.K. has a 3 percentage-point band. “Those economies have been caught in a crisis while they are highly leveraged,” Cailleteau said, referring to the level of private and public debt as a percentage of gross domestic product. “They have to make the required adjustment to stabilize markets without choking off growth.” The U.S. would be the “most affected” under the adverse scenario, as the only country that would face a downgrade, Cailleteau said. The company’s baseline scenario assumes that all current AAA sovereigns will keep their ratings over the next three years, he said. ‘Distance-to-Downgrade’ “On balance, we believe that the ratings of all large Aaa governments remain well positioned, although their ‘distance-to- downgrade’ has in all cases substantially diminished,” Moody’s said in the report. While the U.S. is likely to benefit from economic growth more than other AAA nations, weak public consumption is likely to weigh on GDP this year, the ratings company said. “The pattern of growth and the high rate of unemployment raise the question of how strong the recovery will be going forward,” Moody’s said. “The ability of the U.S. economy to grow more rapidly and, therefore, for government revenues to contribute to fiscal consolidation, will have to depend on a revival in the growth of consumption.” U.S. Growth The U.S. economy will grow 3 percent this year and in 2011 after contracting 2.4 percent in 2009, according to the median estimate of economist forecasts compiled by Bloomberg. Unemployment will average 9.6 percent this year, up from 5.8 percent in 2008, and will fall to 9 percent next year, based on the median estimate. Sales at U.S. retailers unexpectedly climbed 0.3 percent in February, compared with a median forecast for a 0.2 percent contraction, the Commerce Department said on March 12. “The emphasis of the market, and our own, will move increasingly away from public finance developments in 2010, towards medium-term consolidation plans and the credibility thereof,” Moody’s said. Achieving the fiscal consolidation necessary to avert a downgrade will test “social cohesion” and may involve rewriting the “social contract” between governments and their people, Cailleteau said. “People have to decide what level of pain they are willing to accept to have a healthy economy.” U.K. Prime Minister Gordon Brown has clashed with opposition leader David Cameron over the timing and speed of budget cuts as they prepare for an election that must be held by June 3. ‘Very Fragile’ The opposition Conservatives argue that the government should come to grips now with the budget deficit, while Brown’s Labour Party says it’s too soon to remove fiscal stimulus. “Although the economy is now growing, recovery is still in its early stages and remains very fragile,” Brown told business leaders in London on March 10. “We’re not going to withdraw the stimulus until the recovery is assured.” The U.K. economy, which emerged from its longest-ever recession last quarter, is forecast to expand by 1.2 percent this year after a 5 percent contraction in 2009, according to median economist estimates compiled by Bloomberg. Unemployment will average 8 percent this year and 7.9 percent next year, the estimates show. “The question here is less when fiscal retrenchment ought to start, but rather how credible it is that sufficient retrenchment will take place,” Moody’s said. To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

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John Mackey: Creating a High Trust Organization

March 14, 2010

American society appears to be undergoing a crisis in trust. Most of the major organizations that we depend upon, including governments of all types, corporations, our health care system, our financial institutions, and our schools all seem to be failing us. Indeed, I do not believe it is an exaggeration to claim that our society is actually undergoing a disintegration process whereby the fundamental premises and values supporting our institutions are all being called into question. While such disintegration is of course very painful to experience, it is also a tremendous opportunity for genuine transformation. My essay will attempt to outline some of the most important values and strategies necessary for the creation of, and the transformation to, high trust organizations. Higher Purpose Virtually all of our societal organizations seem to have either forgotten or have never really known why they exist and what their higher purposes are. Instead, they have often elevated narrow individual and institutional self-interest into the only purposes that they recognize as valid. Our governments all too frequently serve the politicians and the public service unions rather than their citizens. Our schools too often serve their educational bureaucracy and teachers’ unions instead of their students and their parents. Our health care system too often seeks to maximize the profits of pharmaceutical companies, hospitals, doctors, and insurance companies rather than the health and wellness of patients. Many of our corporations primarily exist to maximize the compensation of their executives, and secondarily shareholder value, rather than value creation for customers, employees, and other major stakeholders. The single most important requirement for the creation of higher levels of trust for any organization is to discover or rediscover the higher purpose of the organization. Why does the organization exist? What is it trying to accomplish? What core values will inspire the organization and create greater trust from all of its stakeholders? While there are potentially as many different purposes as there are organizations, I believe that great organizations have great purposes. The highest ideals that humans aspire to should be the same ideals that our organizations also have as their highest purposes. These include such timeless ideals as: The Good : Service to others–improving health, education, communication, and the quality of life. Southwest Airlines, Nordstroms, The Container Store, Amazon.com, and Joie de Vivre Hospitality are examples of this great purpose. The True : Discovery & furthering human knowledge. Google, Intel, Genentech, and Wikipedia all express this higher aspiration. The Beautiful : Excellence & the creation of beauty. Apple and Berkshire Hathaway share this ideal in their own unique ways. The Heroic : Courage to do what is right to change & improve the world. Grameen Bank and the Gates Foundation express this higher purpose in their actions. Organizations that place these higher purposes at the very core of their business model tend to inspire trust from all of their major stakeholders: customers, employees, investors, suppliers, and the larger communities that they exist in. Higher purpose and shared core values tend to unify the organization behind their fulfillment and usually act to pull the overall organization upwards to a higher degree ethical commitment. Higher levels of trust are a natural result of this unity of purpose, shared core values, and greater ethical commitment. Conscious Leadership — Walking the Walk Next to the power of higher purpose, nothing is more important for creating high levels of organizational trust than the quality and commitment of the leadership at all levels of the organization. It doesn’t matter if an organization has a higher purpose if the leadership doesn’t understand it and seek to serve it. The various stakeholders of an organization, especially employees and customers, look to the leadership to “walk-the-talk”–to serve the purpose and mission of the organization and to lead by example. It is especially important that the CEO and other senior leadership embody the higher purpose of the organization. As the co-founder and CEO of Whole Foods Market, I’m the most visible person in the company. One of the most important parts of my job is touring our stores and talking to our team members, customers, and suppliers. I know that in virtually everything that I say and do, our team members are always studying me, trying to determine whether they can trust me and the mission of the company. I’m always on stage. So walking the talk is very important. I try to communicate the mission and values of Whole Foods at every opportunity and I try to live those core values myself with complete fidelity. Fidelity to the mission and values builds trust, while any deviance undermines it. High trust organizations and hypocritical leadership are mutually exclusive. Teams Everywhere Human beings evolved in relatively small tribal bands. Many scientific studies have indicated that our ability to maintain close trusting relationships with family, friends, and co-workers is constrained to probably not more than about 150 people. We can, of course, know many more people than this, but it is hard to know them well enough to develop close bonds of trust based on actual experiences. At Whole Foods we recognize the importance of smaller tribal groupings to maximize familiarity and trust. We organize our stores and company into a variety of interlocking teams. Most teams have between 6 and 100 team members and the larger teams are subdivided further into a variety of sub-teams. The leaders of each team are also members of the Store Leadership Team and the Store Team Leaders are members of the Regional Leadership Team. This interlocking team structure continues all the way upwards to the Executive Team at the highest level of the company. It has been our experience at Whole Foods that trust is optimized in this type of smaller team organizational structure. This is because each person is a vital and important member of their teams. The success of the team is dependent upon the invaluable contributions of everyone on the team. Trust is optimized when it flows between all levels within the organization. Many leaders make the mistake of believing that the key to increasing organizational trust is to somehow get the work force to trust the leadership more. While this is obviously very important, it is equally important that the leadership trust the workforce. To receive trust, it is usually necessary that we give trust. Organizing into small interlocking teams helps ensure that trust will flow in all directions within the organization — upwards, downwards, within the team, and across teams. Empowerment = Trust While small teams are essential to optimizing the flow of organizational trust, equally important is the philosophy of empowerment. The effectiveness of teams is tremendously enhanced when they are fully empowered to do their work and to fulfill the organization’s mission and values. Empowerment must be much, much more than a mere slogan, however. It should be within the very DNA of the organization. Empowerment unleashes creativity and innovation and rapidly accelerates the evolution of the organization. Empowered organizations have tremendous competitive advantage because they have tapped into levels of energy and commitment which their competitors usually have difficulty matching. Nothing holds back empowerment more than the leadership philosophy of command and control. Command and control (C&C) is actually the opposite of empowerment and it greatly lessens trust. C&C usually involves detailed rules and bureaucratic structures to enforce the rules. Such detailed rules almost always inhibit innovation and creativity. People get ahead in the organization not through being innovative, but by following the rules and playing it safe. C&C may produce compliance from the workforce, but it seldom unleashes much energy or passion for the purpose of the organization. Empowerment = Trust. C&C = Lack of Trust. The Importance Of Transparency and Authentic Communication A very important measurement and condition of trust is transparency. If we want to optimize trust then we must seek to optimize transparency. When we decide to keep something hidden the motivation is almost always a lack of trust. We are afraid that the information that we wish to hide would cause more harm than good if it were widely known. While of course, some discretion is usually necessary to protect important organizational information from migrating to one’s competitors or to outsiders who wish to harm the organization, such discretion can easily be overdone. Transparency is a very important supporting value for empowerment. Indeed, it is difficult for an organization to be empowered if it lacks transparency. Whole Foods Market strives to optimize transparency to all of our stakeholders. Authentic communication with honesty and integrity are essential attributes of both transparency and trust. This is the exact opposite of what many organizations do, which is to try to “spin” their messaging to tell people what they believe people want to hear so that people will think well of them. This lack of honest, authentic communication and transparency usually boomerangs, however, and undermines trust and creates cynicism. One of the main reasons why Americans don’t trust many political leaders, including the various Presidents that have led us, is that we discover that they routinely lie to us. They don’t tell us the truth and we come to understand that they don’t trust us and feel that they need to manipulate us. We tell the truth to people that we trust. The high-trust organization takes the risk of revealing too much information. We must be willing to take the risk that some valuable information may fall into the wrong hands because our commitment to empowerment and trust necessitates taking that risk. Creating transparency and authentic communication is an ongoing challenge that every organization faces. We must continually strive to remove the barriers that prevent it, knowing that we can’t maintain high levels of organizational trust without it. Fairness in All Things Nothing unravels trust more quickly in an organization than either the reality or the perception of unfairness. Another important virtue of creating a culture of transparency is that it helps ensure that unfairness is clearly seen and can therefore be corrected quickly. It is essential that the ethic of fairness apply to all key organizational processes such as hiring, promotion, compensation, discipline, and termination. Favoritism and nepotism undermine organizational trust. They cannot be tolerated. People are often prone to envy and any perceived unfairness exacerbates this tendency greatly, giving it the energy of justification. Creating a Culture of Love and Care Ultimately we cannot create high trust organizations without creating cultures based on love and care. The people we usually trust the most are the people that we also believe genuinely love and care for us. All too often, love and care are not qualities that we associate with organizations. We tend to look for love and friendship with our families and friends, but not from our work. Why is this? Many people believe that love and care in the organizational setting interfere with efficiency and get in the way of making the “tough but necessary” decisions that the organization requires for success. This type of thinking reflects our own lack of integration of love and care in our own lives. We have created an artificial barrier that is holding back our own personal growth and the full potential of our organizations. Fear is the opposite of love. When fear predominates in the organization, love and care cannot flourish. The opposite is also true–love and care banish fear. How can we create more love and care in our organizations? To answer this would require another essay and perhaps even an entire book. After discovering the higher organizational purpose, nothing is more important than encouraging and nurturing love and care. Here are a few suggestions that will hopefully stimulate further thinking on this incredibly important goal of creating more love and care in our organizations: • The leadership must embody genuine love and care. This cannot be faked. If the leadership doesn’t express love and care in their actions then love and care will not flourish in the organization. As Gandhi said: “We must be the change that we wish to see in the world.” • We must “give permission” for love and care to be expressed in the organization. Many organizations are afraid of love and care and force them to remain hidden. Love and care will flow naturally when we give them permission and encourage them. • We should consider the virtues of love and care in all of our leadership promotion decisions. We shouldn’t just promote the most competent, but also the most loving and caring. Our organizations need both and we should promote leaders who embody both. • Cultivate forgiveness rather than judgment and condemnation. Too many organizations believe that judgment of others and criticizing failures are essential for creating excellence. While striving for excellence is important for all organizations, this can be done at a higher level of consciousness without condemnation. Forgiveness doesn’t mean condoning mistakes and failures. It simply means that we help the other person to learn from their mistakes through non-judgmental feedback and encouragement. • End all your organizational meetings with “appreciations”. This is something that Whole Foods Market has been doing for about 25 years now with wonderful results for spreading love and care. Give everyone participating in the meeting the opportunity to voluntarily appreciate and thank other members in the group for services they have contributed or qualities that are admired. This one simple cultural practice of appreciating our fellow team members moves us out of judgment and fear into the consciousness of love. Conclusion We have the opportunity to create more conscious and higher trust organizations in the 21st century. To do so will require three major changes. First the organization must become conscious of what its higher purposes are. Without consciousness of higher purposes organizations will not reach their fullest potential because the creative energy within the organization will not be fully expressed. Secondly, we’ll need our leaders to evolve to higher levels of consciousness and trust themselves. We will not be able to create high trust organizations without more conscious and high trust leaders. Less conscious leaders will tend to hold their organizations back. Thirdly, we will need to evolve the cultures of our organization in ways that create processes, strategies, and structures that encourage higher levels of trust. These will necessarily include the important ideals of teams, empowerment, transparency, authentic communication, fairness, love and care.

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IRS tells homeowners how to get tax relief if a lender forgives part of their debt

March 12, 2010

Size Reporting from Washington With the Obama administration and private lenders actively considering mortgage-principal-reduction programs to help financially distressed homeowners, the Internal Revenue Service has issued an advisory to taxpayers who

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1st SERVICE SOLUTIONS ANNOUNCES PARTNERSHIP WITH THE BSC GROUP TO PROVIDE LOAN RESTRUCTURING SERVICES TO SELF-STORAGE INDUSTRY

March 12, 2010

strategic partnership with The BSC Group to exclusively provide loan restructuring services to self-storage owners and investors with distressed properties. Through this collaboration, 1st Service Solutions and The BSC Group, a Chicago-based commercial

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Some tax issues to consider on mortgage write-downs

March 12, 2010

With the Obama administration and private lenders actively considering mortgage principal-reduction programs to help financially distressed homeowners, the Internal Revenue Service has issued a new advisory to taxpayers who receive — or seek to receive

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Some tax issues to consider on mortgage write-downs

March 12, 2010

With the Obama administration and private lenders actively considering mortgage principal-reduction programs to help financially distressed homeowners, the Internal Revenue Service has issued a new advisory to taxpayers who receive — or seek to receive

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Pixorial Appoints Ari Kaufman as Chief Executive Officer

March 12, 2010

Collaborative Online Video Service Poised to Accelerate Growth Under Leadership of Veteran Digital Entrepreneur

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Toyota Sets Goal of Regaining U.S. Market Share Lost to Recalls Within ’10

March 11, 2010

By Jeff Green March 12 (Bloomberg) — Toyota Motor Corp. set a 2010 goal of regaining most of the U.S. market share lost in the past two months after global recalls of 8 million vehicles damped demand, the No. 2 U.S. sales executive said. The target would be as much as 16.7 percent of new-car deliveries, said Don Esmond , senior vice president of Toyota’s U.S. sales unit. That would be the same level as in 2008, and less than 2009’s 17 percent, when Toyota trailed only General Motors Co. , according to industry researcher Autodata Corp. Esmond’s plan would require a rebound from Toyota’s U.S. share of 13.4 percent through February. With inventory replenished after the recalls, he said, no-interest loans and lease discounts helped boost sales through the first 10 days of March by about 40 percent over a year earlier. “We did stumble, but I don’t think we fell to the ground,” he said in an interview yesterday before a meeting with dealers in Troy, Michigan. “There’s a fine line between taking responsibility and getting back to business.” Recouping sales in what had been the automaker’s largest market is pivotal to the Toyota City, Japan-based company’s bid to recover from recalls to fix flaws ranging from unintended acceleration to braking software. The world’s biggest automaker reported an 8.7 percent U.S. sales decline in February. Industry Boost Toyota’s incentives may push industrywide deliveries this month to an annualized rate of 12.5 million units, consumer pricing Web site Edmunds.com said yesterday. That would be the fastest pace since August, when the U.S. government offered trade-in incentives for buyers. Esmond said Toyota expects as many as 11.7 million light vehicles to be sold in the U.S. in 2010. That compares with a 2009 total of 10.4 million, according to Woodcliff Lake, New Jersey-based Autodata. Holding 16.7 percent of the U.S. market this year may not be enough for Toyota to retain second place. GM’s share through February was 19.5 percent, and Ford Motor Co. rose to No. 2 with 17.5 percent, according to Autodata. Toyota is still assessing whether to offer an extended warranty to mimic campaigns by Hyundai Motor Co. and Chrysler Group LLC to restore confidence in quality, Esmond said. Hyundai and Chrysler have 100,000-mile (160,900-kilometer) powertrain warranties, compared with 60,000-mile powertrain coverage on Toyota’s Camry sedan. No Rust “The brand got tarnished,” he said. “But I don’t think it rusted the armor all the way through.” New models such as the Sienna minivan, which arrived in showrooms in January, and the redesigned Avalon, which goes on sale in April, should help revive sales, Esmond said. Toyota will display new Scion models, the iQ and the tC, at the New York International Auto Show next month, he said. To compensate the 1,200 U.S. dealers for recall-related fallout such as longer hours for their service departments, Toyota made one-time payments ranging from $7,500 to $75,000, based on volume, Esmond said. Esmond said Toyota should finish a campaign next month to reassure the U.S. sales force about the company’s outlook. He is meeting with dealers this week in the Midwest and in the Northwest U.S. next week. Toyota’s American depositary receipts rose 58 cents, or 0.8 percent, to $76.94 yesterday in New York Stock Exchange composite trading, paring the drop for this year to 8.6 percent. To contact the reporter on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net

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IRS: $1.3 Billion Unclaimed For 2006 Tax Year

March 10, 2010

(CNN) — Some people who didn’t file a federal tax return for 2006 have more than 1 billion reasons to reconsider, but they need to do it fast, according to the Internal Revenue Service.

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Bank of Korea’s Lee, Under Pressure at Final Meeting, May Keep Rate at 2%

March 9, 2010

By Saeromi Shin and Cesilia Han March 10 (Bloomberg) — Bank of Korea Governor Lee Seong Tae will probably keep interest rates unchanged at his final meeting as he faces “intense” political pressure to spur investment and cut unemployment. Lee will hold the seven-day repurchase rate at a record-low 2 percent when his board meets at 9 a.m. tomorrow in Seoul, 13 of 14 economists surveyed by Bloomberg News say. One expects a quarter-point increase. Finance Minister Yoon Jeung Hyun said this week now “is not the right time” to boost borrowing costs. The government wants Lee, whose term expires March 31, to hold down rates as the economy shows mixed signs: growth slowed in the fourth quarter and unemployment soared in January, while exports have risen for four months and manufacturers’ confidence is at a seven-year high. To reinforce its stance, the government has sent a vice finance minister to the past two policy meetings. “Political pressures remain intense,” said Kevin Grice , an economist at Capital Economics Ltd. in London. “While there is an outside chance that rates will move up, it is most likely” they will remain on hold, he said. Governor Lee’s successor and replacements for two other Monetary Policy Committee members “will probably be sympathetic to the government view” and the first rate increase is unlikely before the third quarter, Grice said. President Lee Myung Bak is considering five candidates to head the Bank of Korea, DongA Ilbo newspaper reported last month, citing unidentified central bank and government officials. Possible Successors These include Euh Yoon Dae , head of a presidential council set up to promote South Korea internationally; ex-Finance Minister Kang Man Soo ; Kim Jong Chang , head of the Financial Supervisory Service; Park Cheul , a former deputy governor of the central bank; and Kim Choong Soo, envoy to the Organization for Economic Cooperation and Development, according to the newspaper. The failure to announce Governor Lee’s replacement three weeks before his term expires hasn’t spooked the markets. The benchmark Kospi stock index has risen more than 5 percent in the past month and the won gained 2.6 percent over the same period. Finance Minister Yoon told reporters on March 8 that “it is the government’s firm belief that it is not the right time for rate hikes” as business investment is weak and prices are at manageable levels. Lee Sung Kwon , an economist at Shinhan Investment Corp. in Seoul, said policy makers may also hold off on a rate increase tomorrow as “concerns over tightening measures in China remain.” China Tightening China, South Korea’s biggest export market, in February ordered banks to set aside more deposits as reserves for the second time in a month to avert asset bubbles. In the fourth quarter, Chinese gross domestic product increased 10.7 percent from a year earlier, the fastest pace since 2007. In contrast, South Korea’s economy expanded 0.2 percent in the fourth quarter and unemployment surged to a 10-year high of 4.8 percent in January. President Lee has put unemployment at the top of the political agenda, vowing to cut the average jobless rate to about 3 percent this year. The government boosted this year’s budget by 3 percent to 292.8 trillion won ($258 billion) and will accelerate distribution of funds as it seeks to maintain the recovery. The central bank said the slowdown in growth in the fourth quarter was a temporary adjustment. In November, it widened the annual inflation target range to between 2 percent and 4 percent. Consumer prices increased 2.7 percent in February. Exports Surge Asia’s fourth-largest economy is showing signs of strengthening. Exports climbed 31 percent in February from a year earlier, the fourth monthly increase. Samsung Electronics Co. , the world’s second-largest mobile-phone maker, said its handset shipments may expand about a fifth this year, helped by demand for smartphones. Manufacturers’ confidence for March rose to the highest level since the fourth quarter of 2002, when the Bank of Korea published its confidence survey on a quarterly basis. The central bank’s failure to raise rates last year confounded analysts, who forecast it to be one of the first in Asia to move after the economy expanded 3.2 percent in the third quarter, the fastest pace in seven years. Since then, Australia, China, India and Vietnam have tightened monetary policy as Asia leads the recovery from the global recession. Tim Condon , head of Asia research at ING Groep NV in Singapore, says Governor Lee may use his last meeting to boost borrowing costs. “South Korea’s economy has staged a vigorous, self- sustaining recovery and the Bank of Korea can begin to normalize its policy rate,” said Condon, who forecasts a quarter-point increase tomorrow and expects the rate to rise to 3.25 percent by year’s end. “Rising property prices could become an issue if record-low financing conditions persist for too long.” To contact the reporters on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net ; Cesilia Han in Seoul at chan4@bloomberg.net

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Mint.com Manages Money for Attention-Impaired: Tech by Rich Jaroslovsky

March 5, 2010

Commentary by Rich Jaroslovsky March 5 (Bloomberg) — In Mint.com ’s creation story, as recounted on its Web site, founder Aaron Patzer started the free online personal-finance service after a tedious 2005 session with Intuit Corp. ’s Quicken budgeting software. These days, any complaints about Quicken should be directed at Patzer himself. Tired of getting its clock cleaned by his upstart operation, Intuit last year bought Mint and put Patzer in charge of its entire consumer-finance operation. Now he and his new parent face the task of figuring out how the various pieces will fit together and rejuvenating Intuit’s Quicken franchise. Mint’s greatest strength is its ability to create a budget for people who don’t have the time or patience to make one themselves. Think of it as “Quicken: Short-Attention-Span Edition.” Once you provide log-ins for your bank accounts, credit cards and other financial activities, the site gathers your transactions, categorizes them, analyzes your spending patterns and says, “OK, here’s how much you have to play with.” Now, I long ago got over any reluctance to trust software with my financial information. Still, it felt a little weird to know Mint was looking at my spending habits. It’s much the same feeling I get knowing Google Inc. is analyzing the contents of my Gmail messages in order to show me ads. No Input There are two ways of looking at how good a job Mint does. On the one hand, it’s impressive to have a budget at all, given that Mint constructs it with, essentially, no input from you. On the other hand, you’d think that a service that smart ought to know that a teenage daughter’s purchases from the Sephora cosmetics chain are more likely to be in the “personal care” realm than “clothing.” While Mint correctly guessed that purchases made at Whole Foods Market were likely to be groceries, it couldn’t figure out that transactions from Kings Super Markets were, too. So what do you do? You notice the problems and fix them yourself. In other words: You’re refining your budget. After a while, you may even find yourself clicking over to the Planning tab and beginning to do more serious work on your financial future. The key is that you’re doing it as you go along, and on your own timetable. Among other nice features, Mint provides a simple way to track the value of your investments, a useful companion iPhone app and a set of e-mail or text alerts for low balances, pending bills and exceeding your budget. Home-Equity Stumble On the other hand, the service stumbled over handling a home-equity line. Mint’s customer-service department replied promptly via e-mail with a solution that turned out to be incorrect, but that set me on the path to solving the problem myself. Mint makes money by collecting bounties from financial institutions for steering you to their products based on your spending patterns. (It also provides aggregated consumer- spending data, including to Bloomberg LP, the parent company of Bloomberg News.) To Mint’s credit, it clearly labels which offers come from its sponsors, and you’ll find unsponsored ones mixed in as well. Beware, though: There may be less to some of those purported “savings” than meets the eye. For instance, Mint suggested a credit card from its sponsor Discover that would supposedly save me a bunch of money by showering me with rewards and perks. But the comparison failed to take into account the rewards and perks of my current card. Once I went back and added those details, a lot of the purported savings evaporated. Missing From Mint Missing from Mint is the ability to make online payments, as are powerful investment-management tools. For that, you will still need Intuit’s Quicken, which comes in various editions ranging in price from $29.99 to $89.99, including its first new Mac version in three years. Quicken, which is one of the longest continually produced PC programs this side of Microsoft Word, could use a dash of Mint’s more youthful DNA. The program’s annual updates have become increasingly indistinguishable from each other, save when some annoying new feature is introduced and you have to go hunting for the command to turn it off. (My least favorite was the now-defunct Zipingo, which constantly prompted you to rate people to whom you were making payments.) Quicken also requires frequent software patches that are sometimes more trouble than they’re worth. Update No. 7 for the 2010 version promptly blew away my ability to download transactions from or send payments through my main checking account. I’ve got nothing against Quicken. It sort of runs in the family: One of my relatives works at Intuit in a non-product role, and even my father was a devoted Quicken user. But Dad passed away in 1989. For better or worse, Mint.com isn’t my father’s Quicken. Mostly for the better. ( Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net

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U.S. Retail Sales Jump the Most in Two Years as Shoppers Defy Snowstorms

March 4, 2010

By Matt Townsend March 4 (Bloomberg) — Sales at Abercrombie & Fitch Co., Macy’s Inc. and Gap Inc. beat analysts’ estimates in February as holiday sales and spring collections tempted consumers to go shopping in a month of record snowfalls. Abercrombie said today that sales at stores open at least a year climbed 5 percent. Analysts’ had projected a 6.7 percent decline, the average of estimates compiled by Retail Metrics Inc. So-called comparable-store sales at Macy’s, the second- biggest U.S. department-store company, rose 3.7 percent, more than an average projection of a 2 percent gain. Sales were helped by better-than-expected store traffic on the weekend of Valentine’s Day and President’s Day and an increase in retailers selling spring collections at full price, said Ken Perkins , president of Swampscott, Massachusetts-based Retail Metrics. “These results support the thinking that retail has momentum going into Easter,” Brian Sozzi , an analyst with Wall Street Strategies Inc. in New York, said in a telephone interview. “March could be another good month.” Cincinnati-based Macy’s rose 2 cents to $20.05 at 11:40 a.m. in New York Stock Exchange composite trading. San Francisco-based Gap climbed 16 cents to $21.92. Abercrombie , based in New Albany, Ohio, jumped $3.76 to $40 and recorded its biggest intraday gain since May 7. The 31-company Standard & Poor’s 500 Retailing Index gained 1 percent. ‘Out of Hibernation’ Total February U.S. comparable-store sales climbed 4.1 percent, topping the Retail Metrics 3 percent estimate, Perkins said in a telephone interview. It’s the sixth straight monthly gain and the biggest in 27 months. Retail sales fell 4.1 percent in February 2009, according to Perkins. “The consumer is starting to come out of hibernation and feel better about their situation,” Perkins said today in a telephone interview. More than three-fourths of retailers in the Retail Metrics survey beat estimates, he said. Sales at Gap, which runs Old Navy, rose 3 percent, twice the average estimate. Aeropostale Inc. , American Eagle Outfitters Inc. and Limited Brands Inc. also topped projections. Department-store chain Nordstrom Inc. and discount retailer Ross Stores Inc. both showed double-digit gains that exceeded predictions. Target Corp. posted a 2.4 percent gain, more than twice the estimate. Snow Effect Record-breaking snows have fallen across the U.S. East Coast this season, including 80.4 inches (204 centimeters) in Baltimore, 64.5 inches above normal. February was the snowiest month on record in New York City’s Central Park, according to the National Weather Service. Macy’s estimated that same-store sales would have climbed 5 percent last month were it not for the storms, Chief Executive Officer Terry J. Lundgren said in a statement. The snow may have shaved as much as 2 percent off all sales, Retail Metrics said. March will probably get a boost from Easter purchases as the holiday falls on April 4, eight days earlier than last year, Perkins said. Sales fell 4.8 a year ago. To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

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U.S. Service Industries Grow at Fastest Pace Since October 2007, ISM Says

March 3, 2010

By Bob Willis March 3 (Bloomberg) — Service industries in the U.S. expanded in February at the fastest pace since October 2007, a sign the recovery is broadening. The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 53 from 50.5 the prior month. The February figure exceeded the median forecast for a gain to 51, according to a Bloomberg News survey of economists. Readings higher than 50 signal growth. The factory rebound that helped the economy emerge from the worst recession since the 1930s is starting to generate improvement in other industries, giving a boost to companies such as Macy’s Inc. The group’s measure of employment rose to the highest level since April 2008, signaling the economy may be on the cusp of creating the job growth necessary to encourage spending. “The strength in the nation’s manufacturing sector is now spreading to the services economy,” Chris Rupkey , chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “With services activity picking up and manufacturing continuing to show strong gains, the economic outlook looks to be self-sustaining. We are probably just months away from seeing broad-based increases in hiring.” The index of non-manufacturing exceeded the highest estimate in the Bloomberg survey of 73 economists. Forecasts ranged from 48.5 to 52.9. Companies cut an estimated 20,000 jobs in February, the smallest drop in two years, after a revised 60,000 reduction a month earlier that was larger than previously estimated, data from ADP Employer Services showed today. The decline in February was the smallest in two years. Fewer Job-Cut Announcements A separate report from the job placement firm Challenger, Gray & Christmas Inc. showed employers in February announced the fewest job cuts in more than three years. Planned firings fell 77 percent in February from a year earlier, the Chicago-based firm said today. The non-manufacturing gauge of business activity, a measure of sentiment, increased to 54.8 in February from 52.2 in January. The index of new orders rose to 55 from 54.7, and a gauge of employment increased to 48.6 from 44.6 the prior month. A measure of prices paid fell to 60.4 from 61.2 and a gauge of backlogs rose to 46 from 45.5. The Labor Department will issue its February employment data on March 5. Job losses may have accelerated last month, partly reflecting the blizzards on the East Coast and winter storms in the South that closed some businesses and prompted temporary shutdowns of government offices, economists forecast. February Payrolls Payrolls fell by 58,000 employees last month after a decline of 20,000 the prior month, according to the survey median. Airlines are among companies cutting staff. Continental Airlines Inc. last month said it will eliminate 600 additional reservation-agent jobs, about 23 percent of its total, as more travelers book their own flights. The lack of jobs may be one reason some merchants are forecasting the improvement in sales this year will pale in comparison to the 2009 drop. Atlanta-based Home Depot, the largest U.S. home-improvement retailer, last month projected comparable-store sales will climb 2.5 percent in 2010 after dropping 6.6 percent last year. Cincinnati-based Macy’s said sales at established stores will grow by as much as 2 percent after slumping 5.3 percent in 2009. ‘Business Feels Better’ “Business feels better, there is no question about it,” Macy’s Chairman and Chief Executive Officer Terry J. Lundgren said on a Feb. 23 conference call. “We still have high unemployment, and I still see tight credit on consumers.” The ISM services survey includes industries like retailing, utilities, health care, housing, transportation and finance and insurance. The measure has lagged behind the group’s manufacturing gauge , which registered a reading of 56.5 in February, the seventh consecutive month of expansion. Factories account for 12 percent of the economy. The world’s largest economy will grow 3 percent this year after contracting 2.4 percent in 2009, according to the median estimate of economists surveyed last month. Consumer spending, which accounts for about 70 percent of the economy, is forecast to climb 2 percent this year. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Chile Hit by Magnitude 8.8 Earthquake, at Least 147 Die; Tsunami Threatens

February 27, 2010

By Sebastian Boyd and Michael Smith Feb. 27 (Bloomberg) — A massive 8.8 magnitude earthquake struck Chile early this morning, destroying highways, bridges and apartment buildings and leaving at least 122 people dead. Tsunami warnings were issued across the Pacific Ocean as far as Hawaii and New Zealand, and Chilean President Michelle Bachelet declared a “state of catastrophe.” The pre-dawn quake was centered 200 miles (317 kilometers) southwest of the capital Santiago near the main winemaking region and close to Concepcion, a metropolitan region of over 500,000 people. In the minutes and hours after the 90-second temblor, stronger than the one in Haiti last month that may have killed 300,000, the U.S. Geological Service reported almost 30 aftershocks. Five measured 6.0 or above. “Amid such a major earthquake we can’t rule out that the death toll will rise,” Bachelet said at a televised news conference. “We will provide information as soon as we have it.” President-elect Sebastian Pinera told reporters that at least 122 people were killed. “This earthquake is a massive blow to Chilean society,” Pinera told reporters in Santiago. Buildings collapsed across Concepcion, CHV Television reported. One four-story apartment building had fallen into a trench opened up by the quake, while another residential building was split in two, television images showed. Many streets were blocked with rubble from collapsed buildings. In towns closer to the epicenter, including Curico and Talca, more than 80 percent of buildings were flattened, CHV Television reported, citing unidentified officials at the national emergency agency. Collapsed Bridges, Roads Closer to the capital, a helicopter tour of the region showed collapsed bridges blocking motorways. Embankments fell apart, and lengthy stretches of road were impassable. Long lines of cars were visible at gasoline stations. Tsunami warnings were issued across the Pacific region, including South America, Australia, New Zealand, Japan, the Philippines, Russia and many islands, including Hawaii where the Pacific Tsunami Warning Centre said “urgent action should be taken to protect lives and property.” An evacuation of Easter Island has been ordered due to the tsunami threat, Bachelet said. Residents on the Pacific Ocean island, 2,180 miles (3,510 kilometers) west of the South American mainland, were told by the Chilean navy that the threat of a tsunami had eased. The temblor struck at 3:34 a.m. offshore from the province of Maule at a depth of 22 miles (35 kilometers), according to the U.S. Geological Survey Web site . Power and phone connections were disrupted and Santiago residents waited in the street amid fears of aftershocks, pictures on CNN+ showed. Copper Mines While the world’s largest underground copper mine, El Teniente, is 180 miles from the epicenter, most of the country’s copper deposits and port facilities are at least 500 miles to the north. Breakwater Resources Ltd., a Canadian mining company, said its Toqui mine facility was undamaged by the earthquake. “I’m trying to get in touch with Santiago,” said Gonzalo Cuadra , a London-based executive at Codelco, the world’s biggest copper producer and the owner of El Teniente. “I think in the north there haven’t been problems. We have to see what happened with the mines near Santiago.” The El Teniente underground copper mine, which is in central Chile, wasn’t damaged, Carmen Fernandez, head of the national emergency office, said in an interview in Santiago. Rio Tinto Group, a shareholder in the world’s largest copper mine, Escondida, located in northern Chile and owned by BHP Billiton Ltd., also had no reports of damage, London-based spokeswoman said Christina Mills said by telephone. State of Emergency A state of emergency was declared in Maule and the province of BioBio to the south, where Concepcion is located. A third region, Araucania, south of BioBio and the center of the country’s forestry industry, may also be added, Bachelet said. Some of the worst damage was around the cities of Talca, Curico and Cauquenes, near the quake’s epicenter, according to ONEMI, the national emergency agency. In downtown Santiago, rescue workers pulled a 92-year-old woman out of a home that had been reduced to a pile of rubble, TVN reported. The city’s international airport will be closed for at least 24 hours because of damage, airport chief Eduardo del Canto told the broadcaster. “The terminal is completely inoperable,” he said. “This is a major, damaging earthquake,” Randy Baldwin of the USGS told the BBC in an interview. “For any population in the area it would be reasonable to expect some damage.” Secretary of State Hillary Clinton is scheduled to arrive March 1 to Santiago on a regional tour. The State Department said in a statement the U.S. government is committed to helping the government of Chile “as rapidly and effectively as we can.” UN, U.K. Help While Chile “has considerable assets of its own,” the U.S. has put together a disaster response team and has placed two urban search and rescue teams on alert, State Department spokesman Philip Crowley said in a statement. “We continue to assess the situation and are prepared to offer whatever assistance Chile needs,” Crowley said. United Nations Secretary-General Ban Ki-Moon said his organization in monitoring the situation in Chile. The UN is on standby to provide emergency relief, the organization said today in an e-mailed statement. U.K. Prime Minister Gordon Brown also offered help. Chile was struck by the most powerful earthquake on record in 1960, when a magnitude 9.5 temblor killed about 1,655 people, according to the USGS Web site. A further 211 people died when associated tsunamis struck Hawaii, Japan and the Philippines. Earlier today, a magnitude 7 earthquake hit near Okinawa, Japan, at about 5:31 a.m. local time, the USGS said. Last month, Haiti was struck by a magnitude 7 quake. The death toll may reach 300,000, President Rene Preval said Feb. 21. More than 1 million people were left homeless. To contact the reporters on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net ; Michael Smith at mssmith@bloomberg.net

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N.Y. Governor Paterson’s Abandoned Candidacy Makes Cuomo `Natural Choice’

February 27, 2010

By Henry Goldman and A. Catarina Saraiva Feb. 27 (Bloomberg) — New York Governor David Paterson ’s decision to abandon his run for election makes his one-time rival, state Attorney General Andrew Cuomo , the “natural choice” to be the Democratic candidate, said the party’s New York chief. Paterson, 55, dropped out yesterday after published reports that he and state police officers spoke with a woman who had filed domestic abuse charges against one of his aides. He accompanied his decision, which came six days after he opened his campaign in Hempstead, New York, with a vow to serve out his term as governor through year-end. “Cuomo is going to be our nominee, I’m confident of that,” Jay Jacobs, chairman of New York’s Democratic Party, told reporters following the news conference yesterday in midtown Manhattan at which Paterson announced his plans. “I will be endorsing Andrew Cuomo.” Paterson, the former lieutenant governor who took office after Eliot Spitzer resigned in March 2008, ended his campaign as the state faces a deficit of $8.2 billion in its more-than $135 billion budget in the next fiscal year. Sinking public approval ratings had provoked the likely September primary challenge from Cuomo, 52, whom Paterson asked this week to probe the allegations. “It has become increasingly clear to me in the past few days I cannot run for office and do the state’s business at the same time, and right now New York needs a leader who can devote full-time to this service,” Paterson said at the press conference. Offer of Assistance Paterson said he offered his assistance to Cuomo should he become a candidate. The attorney general said he would announce his political intentions “at the appropriate time,” in an e- mailed statement. On Feb. 24 the New York Times reported state police officers and Paterson spoke with a former girlfriend of David Johnson, 37, whom the newspaper described as one of Paterson’s closest aides, after she accused Johnson of assault and sought a court-issued protective order against him. The case was dismissed after the woman didn’t appear for a court hearing the day after she and Paterson spoke by phone, the Times said. Paterson suspended Johnson without pay, the governor said in a Feb. 24 statement. ‘Personal Oath’ He rejected allegations that he had used his position to interfere in any way. “I’m looking forward to a full investigation of actions taken by myself and my administration, but I give you this personal oath,” Paterson said. “I have never abused my office, not now, not ever, and I believe that when the facts are reviewed the truth will prevail. “There are 308 days left in my term. I will serve every one of them fighting for the people of the state of New York,” he said. “Let’s see if the decision not to run stops the bleeding,” said Kenneth Sherrill , a political science professor at Hunter College in Manhattan. “My sense is that a lot of people in Albany really want to see him out of office.” Calls for Paterson’s resignation appeared yesterday in the New York Post and the Daily News, the city’s two largest tabloids, and from city Comptroller John Liu . “We have a $4.1 billion budget deficit to grapple with in New York City and cannot make real progress until the state budget is resolved on time one month from now,” Liu said in an e-mailed statement. “In order for this to happen, we need Governor Paterson to step down now.” ‘Sad Day’ Cuomo’s statement described the announcement as “a sad day for the governor and his family,” and added “it is in the best interests of all New Yorkers that the state government function through this difficult time and address the pressing budgetary problems we face.” The attorney general led Republican Rick Lazio , a former Long Island congressman who has said he intends to run for governor, 63 percent to 26 percent in a Feb. 22 poll by Loudonville, New York-based Siena Research Institute . The same poll showed Paterson trailing Lazio 39 percent to 46 percent. The poll had a 3.5 percentage point error margin. The Reverend Al Sharpton , the Harlem-based political activist, said it would be “premature to talk about supporting Cuomo.” Speaking at a separate Manhattan news conference yesterday, he said he wanted to see the results of the attorney general’s inquiry before calling for the governor to step down. Governor Lists Accomplishments In his announcement, Paterson cited as accomplishments his efforts to reduce more than $33 billion in accumulated budget deficits during his tenure, an increase in state contracts to minority and women-owned businesses and the repeal of laws enacted during the administration of Governor Nelson Rockefeller more than 40 years ago setting mandatory prison sentences for illegal drug possession. Paterson last month proposed a budget with $5.5 billion of spending cuts, increased federal aid, and new taxes including a 1-cent-per-ounce tax on sugared beverages to raise $465 million. Democratic Senate leaders have opposed the spending cuts. The gap for this fiscal year increased from a $500 million total officials estimated last month, as income tax revenue fell short of projections and Medicaid health services expenditures for the poor exceeded expectations. State Comptroller Thomas DiNapoli said in a Feb. 22 report the budget gap may be as high as $2 billion over the remainder of this year. DiNapoli and state Senator Liz Krueger , a Manhattan Democrat, said Paterson should remove himself from budget negotiations with the Legislature in favor of Richard Ravitch , Paterson’s appointed lieutenant governor, a real estate developer and former Metropolitan Transportation Authority chairman. “Somebody’s got to get this budget negotiated,” Krueger said in a phone interview. Ravitch “has an experience in government budgeting and negotiating under complex circumstances. He is a very skilled public finance person.” To contact the reporters on this story: Henry Goldman in New York City Hall at hgoldman@bloomberg.net ; A. Catarina Saraiva in New York at asaraiva5@bloomberg.net

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Hedge-Fund Assets Held Offshore May Be Exempted From U.S. Reporting Rule

February 26, 2010

By Ryan J. Donmoyer Feb. 26 (Bloomberg) — U.S. investors don’t have to report large holdings in offshore hedge funds and private-equity firms this year under disclosure rules designed to detect offshore tax evasion and money laundering, the Internal Revenue Service said. The IRS announcement followed the issuance of proposed regulations yesterday by the Financial Crimes Enforcement Network , a Treasury agency, that effectively spare fund investors from a June 30 deadline to report offshore accounts that exceed $10,000. Failure to file the Report of Foreign Bank and Financial Accounts, or FBAR , when required can result in penalties that exceed the value of the account. In a notice today, the IRS said it “will not apply its enforcement authority adversely in the case” where people are invested in foreign hedge funds or private-equity funds “with respect to that account for calendar year 2009 and earlier calendar years.” The decision “takes off a very large burden for people who haven’t been doing this over the years and are worried about their exposure,” said Seth Entin , a tax lawyer at the Miami- based firm Greenberg Traurig LLP . FinCEN said that it is studying the issue and that pending legislation aimed at broader regulation of private pools of capital may influence a later decision. “Treasury remains concerned about the use of, for example, hedge funds to evade taxes and FinCEN will continue to study this issue,” the rules proposed by FinCEN say. Cash-Surrender Values The proposed regulations say investments in offshore mutual funds and life-insurance policies featuring cash-surrender values are subject to the reporting requirements. Both types of investments are more liquid than assets in hedge funds and private-equity firms, which require longer financial commitments, giving rise to concern that they can be more easily used to launder funds and evade taxes, the proposed rules said. U.S. citizens with foreign holdings have rushed to meet FBAR filing requirements in the wake of the IRS prosecution of customers who hid bank accounts at UBS AG . Failure to file an FBAR can trigger annual penalties of 50 percent of an account’s value that can accumulate to exceed the original holdings. The IRS offered to reduce those penalties for Americans who voluntarily disclosed offshore holdings. FinCEN is seeking written comments on the proposed regulations. To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net .

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Dennis Santiago: La-La Land Gets Feisty

February 26, 2010

L.A. City Councilman Richard Alarcon is hopping mad about the way his City and his people are being treated by the banking and finance industry and he’s building a template for how the City of Los Angeles will respond to it. He wants banks doing business with the City to prove they are involved in “investing local” and he is not of a mind to shy away from divesting Los Angeles’ treasure from banks who do not. And how much treasure is that? Start with around $28.9 billion dollars in city operating and related pension funds the City can influence directly. Then there’s the wealth of ordinary people and businesses local leaders can influence by example. When I testified to the Jobs and Business Development Committee on February 23rd I included in my testimony a 17 page table detailing the amounts of deposits in small and large bank branches in every zip code in Los Angeles County. It contains a powerful message that the actions of the City of Los Angeles messages a resident and commuter economic base of nearly $300 billion dollars in bank deposits presently split equally between large and small banking institutions. If such an effort activate an “invest local” movement succeeds, that is a potential public-private economic powerhouse. The hearing aired several public frustrations centering on issues including foreclosure prevention, access to banking by “Unbanked and Under Banked” persons and a most interesting side trip into the world of swaps. Alarcon reported that his 7th District faces the highest rate of pending single family home foreclosures in the City. With the 2010 wave of Option-ARM mortgage resets still to come, he has even more future social stress to weigh on his mind. A packed room filled with the yellow t-shirts from the Alliance for Californians for Community Empowerment (ACCE) and purple t-shirted members of the Service Employees International Union (SEIU) made their feelings known with the thunder of a crowd watching a Laker game. What was their message? The real net effect of the nation’s foreclosure prevention programs has done diddly. They do have a point. People are not only losing their homes they are suffering extraordinary emotional stresses dealing with a seemingly heartless loan modification process. A group from the California Reinvestment Coalition (CRC) even flew all the way down from San Jose to direct their anger specifically at the practices of the Bank of America who they allege as being singularly uncaring compared to every other bank dealing with these issues in the San Jose area. They reported they even went to Bank of America’s headquarters to express their concerns but alas Charlotte does not know the way to San Jose. The truth is that there’s no easy answer to the foreclosure problem for anyone involved with the process, bank or otherwise. Alarcon took a long view about loan modifications in his remarks. He opined that loan modifications are just kicking the can down the road and worried out loud that we’d wind up back at square one five years from now unless the programs ultimately morph into substantive principal reduction programs. The fly in that ointment though is that one can’t really offer mortgage principal relief to the troubled borrowers without creating an even greater political demand for equal or better principal relief for the far larger number of current mortgage obligors as well as a new series of tax credits for lien free real estate owners. Never mind the considerable effect it would have on bank balance sheets as mark-to-market rules trigger a mass devaluation of book assets, policy makers need to worry just as much about the implied hit to their property tax base. Like I said, there are no easy answers to this one. My gut still says we are looking at some sort of transformational outcome that will turn renters back into renters en masse. The real question is will be the landlords be a new wave of private barons, deputized banks turned unwilling REIT, federal GSE’s morphed into national rental property management companies, or does Los Angeles have in mind another one of those public-private coops that have been tried in the past be the City? The words from a song echo in my head. “life is so strange … destination unknown”. Here’s the thing, there isn’t actually anything in the draft ordinance that guides an implementable operational outcome to the issue at this time. Nebulous laws aren’t the way to San Jose either. If “responsible banking” in Los Angeles is to deal substantively with the issue of foreclosure, the control language outlining specific, actionable and realizable expectations of bankers and the specification of the public apparatus to that will be created to manage the process needs to be added to the text of the final ordinance. Councilman Alarcon also noted that fellow committee member Councilman Bernard Park’s 8th District contains the highest concentration of unbanked and under banked persons in the City of Los Angeles. It’s not a small problem. The FDIC’s 2009 Survey of Unbanked and Underbanked Households estimates that 7.7 percent of U.S. households are unbanked – meaning they have neither checking or savings accounts – and 17.9 percent of U.S. households are underbanked – meaning they make extensive use of far costlier non-bank alternatives to their financing needs. That’s a whopping 30 million households. The FDIC’s findings indicate the problem disproportionately impacts African-Americans, Hispanics and American Indians five to seven times greater than Whites and Asians. And so we get to one of the expanded objectives of City of Los Angeles Motion 09-0234 also known as the “Responsible Banking Practices” motion to compel banks doing business with the City to help address this concern. It’s a big ask and one that is a bit more complex than both government and banking probably realize. I’ve seen these we’ve got a good idea initiatives in a multitude of business and civic contexts now and I have to tell you that displacing establish incumbent businesses is not as easy as one thinks. It costs money for any business to establish a physical point of presence in a community and Los Angeles is a tough town to do that in. Bank accounts cost overhead to support and you typically have to maintain a minimum balance of some sort to gain service fees relief from a bank. Unbanked people tend not to like costs showing up as recurring fees on their already meager account balances. The check cashing shop down the street may cost more but the charge only hits when you actually have a check and the payday loan guy gives you money you need now. My message here is not that I’m supportive of higher cost alternatives to banking. Quite the contrary! I cut my teeth on civic involvement with Rebuild LA almost twenty years ago. I’ve witnessed my share of cycle of poverty perpetuating infrastructures and understand that it’s important to find and implement sustainable game change solutions. What I am saying is that a municipality contemplating mandating that banking and financial services vendors must somehow compete with entrenched “irregular immediacy” financial services models as a predicate to being eligible to deliver conventional services is a lot to ask from a portion of the banking industry that has little demonstrated business acumen addressing this kind of market demand profitably. Both of the above issues are certainly intriguing social responsibility challenges to ponder. Personally, I’d suggest making them agenda items for a banking practices task force to investigate separately rather than try to incorporate it into the original tenets of 09-0234. It’ll bog it down and in my opinion Los Angeles does not have the time to let that happen. Better to leave appropriate hooks in 09-0234 to bring the outcome of the task force’s recommendations back into the process to add to a bureaucratic vehicle created by an ordinance. The immediate need remains to perfect the primary motion into an draft ordinance that will actually be “operable” and pass it into law. Where to improve? The Los Angeles motion is presently moving along a track that could result in an ordinance that is strong on policy and weak on efficacy. The February 23rd hearing further amplified policy but left it up to the staff apparatus of the city to continue to pursue efficacy. The draft from the Los Angeles Chief Legislative Analyst’s (CLA) office is based on a copy of an old Philadelphia ordinance. The inspection criteria matrix is a direct extract from the 1978 CRA law. I have to tell you straight up. A photocopier is not a proper tool for designing a micromanagement version of the Community Reinvestment Act (CRA) able to inspect, analyze and verify compliance with “invest local” policies by any municipality, county or state. Something more specific and actionable is needed. Something that, as committee member Bernard Parks alluded to several times during the hearing, will stand up to legal scrutiny. I see the stakes in that poker hand and raise you to stringent legal AND political scrutiny. The most glaring flaw in the draft is reliance on federal CRA scores. CRA ratings are federal ratings that are updated infrequently, once every three years nominally. The scores are also computed looking at the bank as a whole AND focusing on community involvement in its’ primary markets of presence. Thus a bank like say the Bank of New York – Mellon or Capital One who do business with the Los Angeles area can argue well within the limits of statutory reason that they owe Los Angeles or any other community outside their local areas nothing under CRA guidelines. No boys and girls, I did not make that observation up. Forescee Hogan-Rowles from the L.A. public-private Community Financial Resource Center (CFRC) did and I figure the on the record observations of someone who is also a Commissioner of the Los Angeles Department of Water and Power deserves the stature of ordinance designing guidance in this process. There’s a lot more brain trust out there that can help the City of Los Angeles get this template right. The CLA and CAO need to be taking advantage of it. Naturally you utter stuff like this within earshot of people and the next question becomes, “Ok if not CRA then what Dennis?” Time for me to put my mouth where my foot is so here’s this week’s lesson in financial analysis and requlatory reporting regime design. In this case, all you city councils, county boards of supervisors and state legislatures please pay close attention. The City of Los Angeles desires to annually assess using objective data on the specific “local economy impact” of banks wishing to do business with the City. These data will be used as part of the City’s criteria to qualify the eligibility of banks to conduct such business. The City further specifies that these objective tests be based on “evidentiary grade” public document data submittals and that the City wishes to create an effective solution to capturing this data that can be scaled for use by other government entities similarly interested in “local” efficacy measurement. 1. All banks are required to submit quarterly Call Reports to the FDIC as all credit unions are similarly required to do so with the NCUA within 30 days of the end of each operating quarter. The City is aware that these Call Reports are entity wide reports that are not locality specific however it does imply that the reporting infrastructure to file these reports exists. 2. All banks are also required to file a branch level of detail Summary of Deposits report commensurate with the FDIC timed to coincide with the June 30th (2nd Quarter) Call filing each year. 3. Evaluation categories, a. Local institutions: These will be defined as financial institutions with depository and lending operations contained within Los Angeles, Orange, Santa Barbara and Riverside counties. The economic impact of these institutions will be considered to fall within a City of Los Angeles greater economic zone benefitting the resident and commuter populations of the City. The primary test for qualifying as a local institution will be their listing of branch locations as reported in the most recent FDIC Summary of Deposits reference file. b. Broad-Based institutions: Broad-based institutions are depository and lending operations with greater than 10% business activity in locations outside of zip codes contained within the economic inclusion zone. In the case of multiple unit bank holding companies (BHC’s), the broadness test for an institution will be considered taking into account all of the banking units of the BHC. 4. Annual reporting data, a. For local institutions, the June 30th FDIC Call Report or NCUA 5300 filing shall serve as the basis of analysis. b. For broad-based institutions, a special June 30th Call Report styled equivalent filing encompassing just those branches identified within the zip codes of the Los Angeles economy zone detailing lending information of interest to the City shall serve as the basis for analysis and comparison against local institutions. (final requirements TBD to be identified by the yet to be commissioned L.A. Banking Practices Committee) c. All institutions are to additionally file an annual statement detailing their past year performance on loan modifications and access by “unbanked and underbanked” persons specifically within the Los Angeles area as well as a statement on their goals for the coming year. These goals to be part of each succeeding year’s performance evaluation. (Again, the specifics of what the statement needs to have in it should be delegated to a commission of specialists to ensure the best possible capture of objectivity.) I’ve rambled almost enough. I’ll end this section with one additional message to the FDIC and NCUA. You can make this process a lot easier on America by adding the most critical pieces of information on lending to the data collection set and output fields of the SOD file. That would enable scaling the process to apply across the nation as a level playing field. I’m more than happy to help draft a Notice of Proposed Rule Making to facilitate. Hey so what ya’ll wanna bet all them prarie dogs in banking are looking up right about now wondering what that cracking sound that just went overhead was? And now a side trip into swaps. This is actually more my partner Chris Whalen’s commenting territory and I’ll leave it to him to do any definitive banter on the topic elsewhere but it seems that Los Angeles got talked into one of those “hey sovereign government you know you can lessen the cost of your municipal bond issuance by also purchasing a swap deal with it” things. This one was a good deal for the City the first four years as interest rates chugged along normally but when Ben Bernanke decided the Fed was going to artificially drive interest rates to zero percent to save Manhattan Island from itself it put the City of L.A. in the awkward position of shelling out $10 million a year in windfall profit money to the Bank of New York – Mellon on a deal that last until 2028 OR the City can buy out of it for $29 million which by the way is equal to three years of payments aka one business cycle of look ahead modeling aka about where Ben Bernanke might have changed interest rates in God knows what direction by then territory. Read the world’s newspaper about sovereign debt boys and girls. They aren’t the only ones that got nailed with that one. My mechanic likes to point out whenever I try to play with my car too much that “it costs money to go to the school of hard knocks”. But a Federal Reserve artificial windfall and there was no pre-packed out in the deal structure protecting both parties against severe non-normal departures from the projected interest rate curve model at deal instantiation? Hmm? I think I’ll leave this one here for the moment. It’s time to close the kimono for the weekend. This one had a lot of babble not normally exposed to ordinary people. Hope you’re being entertained.

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Sarah O’Leary: Bad News Couldn’t Come at a Better Time for Toyota

February 26, 2010

If you’re an automotive company dealing with a massive recall, pray for a bad economy and look to maximize your opportunities. If bad was going to happen to Toyota, their timing couldn’t be better. It’s public knowledge that there aren’t many people entering into the new car market these days. Like other automotives, Toyota isn’t missing out on much. If the economy was healthy, the PR nightmare of such an enormous recall could potentially be devastating. In a poor economy, however, people are much more apt to hold onto their cars for longer, looking to repair rather than buy. This buys Toyota much needed time. The average ownership in a good economy is several years, and even longer when things go south. Current Toyota owners affected by the recall purchased their cars in recent years, so it’s fair to estimate they’ll be holding onto them for several years to come even if the economy improves. This gives time for memories to soften, and gives Toyota a real opportunity – yes, I said opportunity – to grow a loyal following in the process. True, dealerships have been faced with repairs in the tens of thousands. But many Toyota owners probably last saw their dealership when they purchased or when the warranty was running out, choosing instead to get servicing done for potentially less money elsewhere. And this, if it can think on its feet, spells opportunity for Toyota. Typically the most profitable area at a car dealership is its service department. Toyota has a chance to win owners back (and drum up some business in the process) with strategic interpersonal intervention. In order to succeed, the owners who come in for recall repairs need to feel appreciated. Dealerships can do this in a number of ways, with the hopes of turning a negative into a positive experience that can continue for the life of the car ownership. When owners arrive, offer a free car wash. Their time is valuable, and most dealerships have car washes. Provide beverages and snacks while they wait. Have the head of sales or other dealership big wig offer them Toyota’s sincere apology. To get them back for service within 6 months, a move they probably wouldn’t make on their own, give owners a free basic inspection certificate. (Coupons don’t work as effectively as certificates or gift cards, especially with men). The bounce back effort will allow the service department the opportunity to have a positive interaction with the owner, and give the dealership an opportunity to sell additional products and services. It also probably wouldn’t hurt dealerships to announce that, because of hard economic times, they’ve lowered their service department pricing for loyal Toyota consumers. Every bit of good news will help improve consumer perception. After an owner returns home with his/her repaired car, send a letter co-signed by the dealership owner and head of the service department. Any actions that make them feel that their initial purchase decision was not in error will help them reconcile their feelings about the brand. Next to a home it’s the biggest purchase decision most consumers make, and they don’t want to feel they made a huge mistake. Toyota corporate let dealerships and owners down. If it acts quickly, however, it has a chance to make things right. Sarah O’Leary is a marketing industry veteran and owner of Logic Marketing for Sales. Toyota and all others looking for advisement can reach the agency at info@thelogicagency.com.

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New York City May Get 16 Inches of Snow as Storm Gains Strength, Hangs On

February 26, 2010

By Brian K. Sullivan Feb. 26 (Bloomberg) — A winter storm warning for New York City is in effect until 6 p.m. today as a system carrying heavy, wet flakes and gusty winds threatens to smother the region with as much as 16 inches, forecasters said. Airlines canceled hundreds of flights as the snow moved in around 8 a.m. yesterday. Temperatures in the mid-30s Fahrenheit (about 1 degree Celsius) kept snow from sticking for much of the day and kept forecasters guessing about the total accumulation for the largest U.S. city. The National Weather Service said in a 3:30 p.m. advisory yesterday that the storm was strengthening and it will probably be tomorrow before it tapers off. AccuWeather Inc. warned of downed trees and power lines and said winds may cause whiteouts in some areas. A man was killed by a falling tree branch in New York’s Central Park, WNBC reported. “If people pigeonhole this and say that, ‘Oh, this is a snow storm on Thursday,’ they are missing the big picture,” said Michael Schlacter , chief meteorologist at Weather 2000 Inc . in New York. “This is definitely not just a Thursday story.” It was the second winter storm of the week for the U.S. Northeast, and came just weeks after snowfall set seasonal records for parts of the mid-Atlantic coast. Speculation that the snows would reduce demand for motor fuel contributed to a drop in gasoline futures. Gasoline for March delivery declined 6.17 cents, or 2.9 percent, to settle yesterday at $2.037 a gallon on the New York Mercantile Exchange. Gasoline Demand ‘Annihilated’ “Demand numbers are going to be annihilated by the bad weather,” said Ray Carbone , president of Paramount Options Inc. in New York, a trader at the Nymex. More than 1,500 flights were halted across the Northeast yesterday, most of them in New York, Boston and Philadelphia. That represented about 3 percent of the 50,000 flights scheduled in the U.S. this time of year, according to FlightStats.com , a Web site that tracks aircraft movements. Continental has canceled 20 flights in its main jet operations from the Newark, New Jersey, New York area, and all 200 of its regional partner airlines from Newark’s Liberty International Airport, said Mary Clark ,a spokeswoman for the carrier. Amtrak canceled eight trains on its Empire Service line in upstate New York yesterday and some service between New York City and Albany-Rensselaer was temporarily reduced while CSX Corp., which owns the line, repairs tracks and systems damaged by trees, said Tracy Connell , a spokeswoman for the passenger railway. Oil Tankers CSX, the third-largest U.S. railroad by revenue, said its customers should expect delays during “the worst of the storm” and that its effects will linger through the weekend. The lines are used by shippers including coal producers. Two crude oil tankers put off unloading in Portland, Maine, at least until today, said Tony Youells, port manager for Inchcape Shipping Services , a shipping agent. Waves as high as 27 feet are forecast in the waters off Maine, said Jim Hayes, a weather service meteorologist in Gray, Maine. “Waves are already washing over roads in southeast Maine,” Hayes said. “We might see waves this height once or twice a year.” Winter storm warnings, meaning heavy snow, ice and freezing rain are imminent, were issued from Maryland to Maine, while blizzard warnings stretched from the mountains of North Carolina into West Virginia. High-wind warnings calling for gusts as high as 60 mph were posted for parts of North Carolina, Virginia, Massachusetts, Vermont, Maine and the District of Columbia. About 75,000 customers in New York and New England were already without power as the storm moved through the Northeast, according to utilities. A system brought rain to New York City and almost two feet of snow to western Massachusetts starting Feb. 23, disrupting air traffic in Newark, Boston, Baltimore and New York. The new storm will linger over New York because a high pressure ridge over the Atlantic and eastern Canada is essentially blocking its forward progress, which typically would be to move out over the ocean, Schlacter said. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ;

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Thai Police Deployed as Courts Mull Seizing $2.3 Billion Thaksin Fortune

February 25, 2010

By Daniel Ten Kate Feb. 26 (Bloomberg) — Thai police manned checkpoints near strategic locations in Bangkok as a court prepares to rule later today whether the government can seize about $2.32 billion from fugitive Prime Minister Thaksin Shinawatra ’s family. The verdict from nine Supreme Court judges will conclude a case that began after the army ousted Thaksin in 2006, sparking a power struggle that may shape how the country is governed. Rival camps disagree on how much authority appointed soldiers, judges and royal advisers should wield over elected politicians. Police added reinforcements around the court, Parliament and Prime Minister Abhisit Vejjajiva ’s offices, the site of violent street protests from both sides in the past two years. The political turmoil has weighed on Thai stocks, which trade at 10.8 times 2010 earnings, the third-cheapest in Asia. “There are so many moving parts here that you’d have to be a very brave investor” to put money in Thailand at the moment, said Sriyan Pietersz , head of research for JPMorgan Chase & Co. in Bangkok. “Foreign investors will want to scope it out and see how the politics goes over the next couple of months.” So far this year, foreigners have been net sellers of $156 million of Thai stocks, the second-most in Asia after Taiwan, according to data compiled by Bloomberg. Thailand’s SET Index has lagged benchmarks in Indonesia, Malaysia, the Philippines and Vietnam in that time. Prosecutors are seeking to confiscate the 76.6 billion baht ($2.32 billion) that Thaksin’s children and relatives earned from the 2006 sale of holding company Shin Corp. to Temasek Holdings Pte, Singapore’s state-owned investment firm. Judges will start reading the verdict at 1:30 p.m. local time. More Protests Planned Since the coup, courts have disbanded parties linked to Thaksin that won the past two elections. The rulings have eroded confidence in the judicial system among Thaksin’s supporters, who say different standards are applied to opponents who seized the prime minister’s offices and the airports two years ago. Prosecutors have yet to bring those cases to trial. Anti-government protesters, who wear red shirts and support Thaksin, plan to rally in Bangkok starting from March 12 to push for a fresh election. Abhisit took power in December 2008 after a court dissolved the pro-Thaksin party that won a 2007 election, citing a clause in the constitution drafted after the coup. An election must be called by the end of next year. “Thaksin was very successful at reaching out to the poor in his first election,” Vikas Kawatra , head of institutional broking at Kim Eng Securities (Thailand) Pcl, the biggest brokerage by trading volume, wrote in a Feb. 24 report. “So this dispute is not likely to go away even if the red-shirts lose Thaksin because of an inability to fund supporters.” Advanced Info, Thaicom After Thaksin founded Shin Corp. in 1983, its units were awarded one of two mobile-phone concessions and an exclusive satellite franchise. The company controls Advanced Info Service Pcl , Thailand’s top mobile-phone operator, and satellite services monopoly Thaicom Pcl . Thaksin transferred his Shin stake to his children and relatives before taking office in 2001. Seven years earlier he disclosed that he was worth 60 billion baht — about $2.4 billion at the time. The Attorney-General says Thaksin concealed ownership of his stake in Shin during his five years as prime minister and used his position to increase the value of its holdings. He stands accused of changing Advanced Info’s royalty payments to the state-owned telecoms operator and approving a government loan to Myanmar, part of which was used to buy equipment from Thaicom. Thaksin denies all allegations, according to Noppadon Pattama , a former foreign minister who is part of his legal team. Thaksin plans to watch the verdict from Dubai, where he has lived most of the time since fleeing Thailand in 2008 to avoid a two-year jail sentence for corruption. Shin shares gained 121 percent from when Thaksin took office on Feb. 9, 2001, to when his family sold the company on Jan. 23, 2006, compared with a 128 percent gain in the benchmark SET index, according to data compiled by Bloomberg. Siam Cement Pcl , Thailand’s fourth-biggest company, which is controlled by the monarchy’s investment arm, gained 717 percent in that time. To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net ; Shiyin Chen in Singapore at schen37@bloomberg.net

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New York City May Get Up to 13 Inches of Snow, Making Travel `Hazardous’

February 25, 2010

By Brian K. Sullivan and Alex Morales Feb. 25 (Bloomberg) — New York City may receive more than a foot of snow in a storm that’s forecast to hit in rush hour, disrupting travel, the National Weather Service said. The service issued a winter storm warning that starts at 6 a.m. and runs through 6 p.m. tomorrow, and forecast as much as 13 inches (33 centimeters) of snow. “Snow is expected to develop around the start of rush hour Thursday morning then continue through Friday,” the National Weather Service said in a statement on its Web site. “This will make travel very hazardous or impossible.” Continental Airlines Inc. and Delta Air Lines Inc. canceled some of their flights into the area, while Amtrak canceled some trains. It was raining at about 5 a.m. in New York City. “Expect the steadiest and heaviest snow to fall from mid- morning Thursday through Thursday evening,” the weather service said. “Snow may mix with rain for brief periods of time on Thursday. If no mixing-in occurs, amounts will be up towards the higher end of the range, if not more.” Winter storm warnings, meaning heavy snow, ice and freezing rain are imminent, were issued for a swath of the Northeast, including parts of Maine, Vermont, New Hampshire, New York, Pennsylvania, New Jersey and Maryland. In Washington, snow was forecast before 10 a.m., and winds may gust as high as 37 miles (60 kilometers) an hour, the weather service said. The Washington-Baltimore corridor may receive as much as five inches of snow in the storm, according to Brandon Peloquin, a weather service meteorologist in Sterling, Virginia . Flights Canceled The system is the latest from an El Nino-driven weather pattern that has pushed moist air across the southern U.S., where it has mixed with colder air coming down from the Arctic, Matt Rogers , president of Commodity Weather Group in Bethesda, Maryland, said. The result has been record snows from Washington to Philadelphia. El Nino is a warming of the Pacific Ocean that occurs every two to five years and lasts about 12 months. Continental , the fourth-largest U.S. carrier, canceled all flights today from Newark Liberty International Airport by regional partners including Continental Express and Pinnacle Airlines Corp.’s Colgan unit, said Mary Clark , a spokeswoman for the Houston-based carrier. The cancellations involve “several hundred” flights, Clark said. She didn’t have a more specific number. Delta , the world’s largest carrier, canceled 65 flights in the New York area for today, said Susan Elliott , a spokeswoman for the Atlanta-based company. UAL Corp. ’s United Airlines scrapped 70 flights yesterday because of weather and was considering plans for today, Sarah Massier, a spokeswoman, said. The three airlines issued travel waivers allowing passengers to re-schedule their plans for free, according to statements on their Web sites. Canceled Trains Amtrak canceled eight trains on its Empire Service lines in the upstate New York area, said a spokeswoman, Karina Romero . In northern New Jersey , as much as 18 inches of snow may fall, the weather service said. Parts of Maine, Connecticut, Massachusetts, New York, New Hampshire and Rhode Island were issued with flood watches, with as much as 3 inches of rain forecast. Today’s will be from the second storm to hit the area this week. A system brought rain to New York City and almost two feet of snow to western Massachusetts starting Feb. 23, disrupting air traffic in Newark, Boston, Baltimore and New York. “The Northeast is being impacted by one storm now, and the monster storm is going to impact the region tomorrow into Friday,” Eric Wilhelm of private forecaster AccuWeather.com . said yesterday. “A really complex situation is developing in the Northeast.” Power Failures Likely On the Massachusetts coast, sustained winds of 30 mph are expected, with gusts as intense as 50 mph, according to a weather service high wind watch issued for the area. “There could be real problems with power outages,” Wilhelm said. “That could be the real legacy of this storm.” More than 50,000 customers in the Albany area and western Massachusetts were left without power by the storm that moving north through New England yesterday, according to utilities. High winds may also create wind-chill problems that will boost energy consumption, Rogers said. Temperatures in the region are expected to be in the 30s Fahrenheit, while the wind will make it feel colder. Demand for heating oil may be 8 percent higher than normal through March 3, according to Weather Derivatives , a Belton, Missouri, forecaster. Heating oil for March delivery rose 0.98 cent, or 0.5 percent, yesterday to settle at $2.0421 a gallon on the New York Mercantile Exchange. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ; Alex Morales in London at amorales2@bloomberg.net

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India’s Economy May Grow 8.2% Next Year, Creating Room for Stimulus Exit

February 25, 2010

By Cherian Thomas and Kartik Goyal Feb. 25 (Bloomberg) — India’s economic growth may accelerate to as much as 8.2 percent in the year starting April 1, providing room for a “gradual rollback” of fiscal stimulus, the finance ministry said before tomorrow’s budget. “The economy has posted a remarkable recovery from the global recession,” according to the annual Economic Survey prepared by officials advising Finance Minister Pranab Mukherjee , which was released in New Delhi today. “The recovery creates scope for a gradual rollback, in due course, of some of the measures undertaken over the last 15 to 18 months.” Mukherjee may raise excise tax by 2 percentage points and the service tax to 12 percent from 10 percent, Goldman Sachs Group Inc. said last week. India and China, the world’s fastest growing major economies, are withdrawing stimulus as consumer demand strengthens, stoking inflation and asset bubble concerns. India’s benchmark wholesale-price inflation accelerated to 8.6 percent in January, the fastest pace since October 2008. In China, where the economy grew 10.7 percent last quarter, property prices have surged 9.5 percent in January, the most in 21 months, as total new loans surged to 1.39 trillion yuan ($204 billion), more than in the previous quarter combined. Sixty percent of India’s inflation reading is contributed by food items after monsoon rains were deficient last year, the ministry said. Since December 2009, there have been signs of food-price inflation spreading to manufactured goods and services, the ministry said. “Inflation management therefore should involve controlling the demand situation as well as reining in inflationary expectations through various monetary measures,” the Indian finance ministry said. Budget Deficit Mukherjee is scheduled to unveil the budget for the fiscal year starting April 1 tomorrow at 11 a.m. in parliament in New Delhi. He had cut excise tax by 4 percentage points and stepped up government spending on roads and power since December 2008 to support the economy amid a global recession. The budget deficit may widen to 6.5 percent of GDP in the year ending March 31, a 16-year high, the ministry estimated today. India’s central bank governor Duvvuri Subbarao last month said the government must withdraw fiscal stimulus steps and cut the budget deficit to help cool inflation. The central bank, on its part, last month raised the proportion of deposits that lenders need to maintain as cash reserves to 5.75 percent from 5 percent to contain inflation. India must cut its debt to 68 percent of GDP by March 2015 from the current 82 percent, the ministry said, citing recommendations of the 13th Finance Commission, a government panel appointed to suggest a roadmap to reduce government debt. Savings Rate Mukherjee can start to reverse tax cuts as India’s $1.2 trillion economy may “breach” the 9 percent growth pace by March 2012, the finance ministry said, citing the country’s savings rates that now match those in Japan, South Korea and Malaysia. The economy may grow 7.2 percent in the year ending March 31, the nation’s statistics department said today. India’s savings rate is at 32.5 percent of gross domestic product compared with 28 percent in Japan, 30 percent in South Korea and 38 percent in Malaysia, according to the report. “Since these indicators are some of the strongest correlates of growth and do not fluctuate wildly, they speak well for India’s medium-term growth prospects,” the ministry said. “The savings rate is likely to rise further as the demographic dividend begins to pay off in India.” The finance ministry estimates 440 million Indians out of a total population of 1.2 billion are under the age of 18. India’s population will rise to 1.7 billion by 2050 and will overtake China as the world’s most populous nation, according to the United Nations. Rising Demand “It is entirely possible for India to move into the rarified domain of double-digit growth and even attempt to don the mantle of the fastest-growing economy in the world within the next four years,” the finance ministry said. Rising demand helped Tata Motors Ltd. , India’s largest truckmaker, post a 68 percent gain in sales in the three months ended December, while sales at Bajaj Auto Ltd, the second- largest motorcycle maker, more than doubled in January. Still, expansion in gross capital fixed formation, a proxy for investment growth, is at 5.2 percent, below the economic growth rate. That makes it necessary to watch the growth recovery in private investment in the fiscal third and fourth quarters while scaling back fiscal stimulus, the ministry said. To contact the reporters on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net ; Kartik Goyal in New Delhi at kgoyal@bloomberg.net .

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New York City May Get as Much as 13 Inches of Snow Starting Early Thursday

February 24, 2010

By Brian K. Sullivan Feb. 24 (Bloomberg) — The National Weather Service boosted its forecast for tomorrow’s snowstorm in New York City, saying that as much as 13 inches may fall and that travel in the region may be “very hazardous or impossible.” A winter storm warning goes into effect at 6 a.m. tomorrow. It calls for 7 to 13 inches (18 to 33 centimeters), up from earlier predictions of 5 to 10 inches, according to a weather service bulletin . The storm may be accompanied by wind gusts as high as 30 mph before it abates about 36 hours later. “Expect the steadiest and heaviest snow to fall from mid- morning Thursday through Thursday evening,” according to the statement. “Snow may mix with rain for brief periods of time on Thursday. If no mixing-in occurs, amounts will be up towards the higher end of the range, if not more.” The storm is the latest in an El Nino-driven weather pattern that has pushed moist air across the southern U.S., where it has mixed with colder air coming down from the Arctic, said Matt Rogers , president of private forecaster Commodity Weather Group in Bethesda, Maryland. The result has been record-breaking seasonal snows from Washington to Philadelphia. El Nino is a warming of the Pacific Ocean that occurs every two to five years and lasts about 12 months. Flights Canceled Continental Airlines Inc. , the fourth-largest U.S. carrier, canceled all flights tomorrow from Newark Liberty International Airport by regional partners including Continental Express and Pinnacle Airlines Corp.’s Colgan unit, said Mary Clark , a spokeswoman for the Houston-based carrier. The cancellations involve “several hundred” flights, Clark said. She didn’t immediately have a more specific number. Delta Air Lines Inc. , the world’s largest carrier, scrubbed 65 flights in the New York area for tomorrow, said Susan Elliott , a spokeswoman for the Atlanta-based company. UAL Corp. ’s United Airlines scrapped 70 flights today because of weather and is “still evaluating our plan for tomorrow,” said Sarah Massier, a spokeswoman. Amtrak canceled 8 trains for tomorrow on its Empire Service lines in the upstate New York area, said a spokeswoman, Karina Romero . A winter storm warning, meaning heavy snow, ice and freezing rain are imminent, has been issued from Maryland to Maine, according to the weather service. In northern New Jersey , as much as 18 inches of snow may fall, the agency said. ‘Strong Winds’ Possible “Strong winds are also possible,” the weather service statement for New York and New Jersey said. “This will make travel very hazardous or impossible.” In Massachusetts, southern New Hampshire, Rhode Island and Connecticut, where as much as 3 inches of rain may fall, flood watches have been issued. “It is a really complicated system, it is like a three- part deal,” Rogers said. “It is definitely going to be what they call a bomb in meteorology.” Tomorrow’s snow will be from the second storm to hit the area this week. A system brought rain to New York City and almost two feet of snow to western Massachusetts starting yesterday, disrupting air traffic in Newark, Boston, Baltimore and New York. “The Northeast is being impacted by one storm now, and the monster storm is going to impact the region tomorrow into Friday,” Eric Wilhelm of private forecaster AccuWeather.com . said earlier today. “A really complex situation is developing in the Northeast.” Power Failures Likely On the Massachusetts coast, sustained winds of 30 mph are expected with gusts as intense as 50 mph, according to a weather service high wind watch issued for the area. “There could be real problems with power outages,” Wilhelm said. “That could be the real legacy of this storm.” More than 50,000 customers in the Albany area and western Massachusetts are already without power from the storm moving north through New England today, according to utilities. High winds may also create wind-chill problems that will drive energy consumption, Rogers said. Temperatures in the region are expected to be in the 30s Fahrenheit, while the wind will make it feel colder. Demand for heating oil may be 8 percent above normal through March 3, according to Weather Derivatives , a Belton, Missouri, forecaster. Heating oil for March delivery rose 0.98 cent, or 0.5 percent, today to settle at $2.0421 a gallon on the New York Mercantile Exchange. Snowfall for Washington The Washington-Baltimore corridor has the potential to receive as much as 5 inches of snow in the storm, according to Brandon Peloquin, a weather service meteorologist in Sterling, Virginia . “There is some uncertainty with this storm,” Peloquin said by telephone. “There is some wiggle room. The track is critical.” The storms will add to what’s already been a benchmark winter in the eastern U.S., where seasonal snowfall records were broken in Washington and Baltimore. Most of that snow has melted away, Peloquin said. The heavy snow will taper off the day after tomorrow, although snow flurries and clouds will linger over much of the Northeast through the weekend, Wilhelm said. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ;

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Americans Want To Get Back To Work: Why Won’t The Government Hire Them?

February 24, 2010

Glenn Blackburn, 45, has been collecting unemployment ever since he got laid off in August 2008. He’s grateful for the money, but what he really wants is to put in an honest day’s work. “It’s like a year and a half of just sitting around doing nothing,” said Blackburn. “It gets demoralizing.” In fact, he’d rather the government paid him to do something rather than just send him a check every two weeks while he searches for a job. “I live in Michigan, and there is plenty to fix around here,” the former casino worker tells HuffPost. “Put me to work digging ditches or helping build roads. Anything is preferable to sitting on my butt. This would give those of us on unemployment back our pride and actually accomplish something with the money being spent. There is a work force of a million people just sitting idle waiting for something to do. That is a massive amount of lost labor that could be fixing America’s infrastructure. Instead of unemployment, hire me to do that.” That potential work force is actually way greater than a million people; there are over 11 million American workers currently getting unemployment benefits and another 3.5 million or so who want jobs but can’t find them. Marvin Bohn, (pictured at right) a 57-year-old former executive chef in Ohio, is another American who wants to work for his money. He’s been getting unemployment checks since June 2008. “You keep wondering what’s gone wrong. Is there something wrong with you? You apply for jobs you’re overqualified for and you don’t get ‘em, and you get chided for making too much on unemployment.” By contrast, a government job sounds good to him. “Instead of receiving the unemployment checks, even if it’s a fill-in job, it’d be doing good,” he said. “I would be very happy to do that.” Christopher Hardin of Valdese, N.C., (pictured at right) said he, too, would jump at the opportunity to work rather than put up with the indignity of a futile job search in return for unemployment benefits. “Being 55, I haven’t been able to find any work,” said Hardin, whose most recent job was loading and unloading trucks for an auction house. “I apply for jobs all the time. I don’t get any return email or phone calls.” Blackburn, Hardin and Bohn — and however many other Americans want the government to put them back to work, too — don’t have many champions on Capitol Hill or in the White House. Democratic leaders, increasingly worried that members of their party will get swept out of office in the November elections, are desperate to do something about job creation. But the packages they are seriously considering are a mishmash of ineffective or inefficient measures, distinguished only by their political safety. The $15 billion jobs bill passed by the Senate Wednesday morning grants tax breaks to businesses that hire unemployed workers, and a $1,000 credit if the new workers stay on the job for a year. But economists point out that much of that will subsidize hires that would have been made anyway, and even in the best case won’t make a big dent in the problem. The bill also encourages business investment by accelerating tax write-offs. And yet, despite a distinct lack of enthusiasm from Democratic or Republican party leaders, economists from both the left and right made the argument at a Tuesday hearing of the House Financial Services Committee that there’s an urgent need for the government to put people to work directly. And they explained why. “Someone separated from the labor force runs the real risk of permanently separating from the normal economy. It is crucial that we reconnect as many people as possible before it is too late,” said Kevin Hassett, a former senior economist at the Federal Reserve and current director of economic policy studies at the conservative American Enterprise Institute. “The good news is that a lifeline now could easily start a worker back on a positive career track, making the lifeline a much more cost effective policy than years of welfare support. “Direct jobs programs could be a much more powerful way to get this process going than last year’s stimulus,” Hassett said. “If the economic stimulus moneys were spent directly hiring individuals, they would have created 21 million jobs.” Hassett suggested that more money should go to state programs that fund new private-sector and public-sector jobs. But he also supports direct government hiring. Larry Mishel, president of the progressive Economic Policy Institute, pointed out that this has been done before. “Twice in the past during times of high unemployment, the United States successfully turned to large-scale programs of direct job creation,” Mishel said. “We know from those experiences that a $40 billion public jobs program can be geared up quickly and help put a million of our citizens back to work in jobs that will improve their communities and contribute to shared prosperity.” Mishel suggested several “fast-track” jobs that could put people to work within six to nine months: painting and repairing schools and other public facilities, cleaning up abandoned buildings, and staffing emergency food programs, among others. Direct employment under Mishel’s proposal would cost $40 billion a year at $40,000 per job. (Princeton economist Alan Blinder wrote in a Washington Post op-ed last week that direct hiring for public works jobs would cost $30,000 per year — a lot less than the $100,000 per job he estimates for “garden variety” stimulus spending.) By contrast, the proposals emanating from Congress and the White House won’t work very well as long as consumers and other businesses aren’t buying. A growing consensus among economists is that it’s the demand side — not the supply side –of the problem that needs to be more directly addressed. “Businesses won’t invest and start hiring until consumer demand picks up, which won’t happen with 27 million people unemployed or underemployed. Obviously, the overwhelming need is to create jobs — millions of them, as quickly as possible,” Mishel said. Andy Stern, president of the Service Employees International Union, told the House committee: “We began 2010 with fewer jobs than we had in 2000, though the labor force has grown by almost 11 million workers since then. “There are currently more than 6 unemployed workers for every job opening. There are nearly 15 million unemployed workers in America; more than 6 million have been jobless for over six months. Worse yet, there are now almost 26 million workers who are either unemployed or underemployed. That is the equivalent to the population of 18 states. The scope and scale of the jobs crisis is clearly a national emergency.” And Mark Zandi, chief economist for Moody’s Economy.com, told the panel: “We should err on the side of doing too much, rather than doing too little.” “Congress has the tools to create millions of jobs over the next 12 months,” Mishel said. “It also has the responsibility. The public is rightly demanding action, and there is no excuse — not the budget deficit, not fears of inflation, not feasibility — for failure to act.” As for Glenn Blackburn, unemployed and living with his fiancee and her two daughters in Petoskey, Mich., he says he’d be more than happy to do the types of work Mishel talks about. He worked for nine years at the Odawa Casino Resort, making about $17 an hour in wages and tips, before his layoff. He says the only work available anywhere nearby is what he calls “putt-putt jobs” — clerking at convenience stores or washing dishes. With those jobs, he’d earn less than the $388 he’s been pulling down in unemployment benefits every week, so it makes no sense to take them before his unemployment runs out (which he said will happen soon). In the meantime, he’s taking computer classes in hopes of making himself more employable. He’d be happier if the government just put him to work helping his own neighborhood. “What I’m making on unemployment,” he said, “if I could make that much and go out and they said, ‘Go out and start digging, of course I would.”

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`Snow Hurricane’ Threatens New York, New England; Bigger Storm Approaches

February 24, 2010

By Brian K. Sullivan and Alex Morales Feb. 24 (Bloomberg) — A winter storm threatened to dump more than a foot (30 centimeters) of snow across parts of upstate New York and New England, while forecasters warned of an even more powerful system hitting the northeast tomorrow. “You may hear it called a ‘snow hurricane’ because blizzard may not even do it justice,” said Alex Sosnowski , an expert senior meteorologist with AccuWeather Inc. in State College, Pennsylvania. “It is like we’re getting a decade’s worth of storms all in one season.” Warnings for the current storm stretch from Maine through New Hampshire, Vermont and New York state as well as Massachusetts and Connecticut, according to the National Weather Service. Rain was falling today in New York, while inland, it was snowing in Albany, where up to 13 inches of snow were forecast through the night and today, the agency said. The next storm will develop off the U.S. East Coast out of a system coming up from the Gulf of Mexico, Sosnowski said. They’ll add to what’s already been a benchmark winter in the eastern U.S., where seasonal snowfall records have already been set for Washington and Baltimore. AccuWeather’s Web site describes the coming storm as “nothing short of a monster” and predicts high winds and heavy rain across Long Island, Connecticut and New York. “Midday models show a region from Cape Cod to northern Maine receiving hurricane-force winds at the storm’s peak, Thursday afternoon and overnight,” private forecaster MDA Federal Inc. said in a statement. The lowest hurricane-force wind is 74 miles per hour (119 kilometers per hour). NYC Snow The storm is forecast to enter New York’s metropolitan area early in the morning on Feb. 25, said Joe Pollina, meteorologist with the National Weather Service in Upton, New York. The weather service Web site said up to five inches of snow may fall there tomorrow, with winds gusting as high as 36 miles an hour. In coastal areas, the storm is likely to draw in warm air that will mean rain, while areas from upstate New York to Ottawa may receive 12 inches or more of snow, Sosnowski said. “This thing is a little different animal,” Sosnowski said by telephone. “Instead of passing on by, it looks like it is going to hook back.” To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ; Alex Morales in London at amorales2@bloomberg.net

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Winter Storm May Pound U.S. Northeast Later This Week, Add to Snow Totals

February 23, 2010

By Brian K. Sullivan Feb. 23 (Bloomberg) — As a winter storm threatens to leave more than 12 inches of snow across upstate New York and parts of New England, forecasters are warning of an even more powerful system arriving Feb. 25. “You may hear it called a ‘snow hurricane’ because blizzard may not even do it justice,” said Alex Sosnowski , an expert senior meteorologist with AccuWeather Inc. in State College, Pennsylvania. “It is like we’re getting a decade’s worth of storms all in one season.” Winter storm warnings and advisories for the current storm stretch from Pennsylvania through Vermont and Massachusetts, according to the National Weather Service. While rain is falling in coastal areas such as New York, heavy snow is falling in Albany, where forecasts call for as much as 7 inches tonight and 10 inches tomorrow, the weather service said. The next storm will develop off the U.S. East Coast out of a system coming up from the Gulf of Mexico, Sosnowski said. AccuWeather’s Web site describes the storm as “nothing short of a monster” and predicts high winds and heavy rain across Long Island, Connecticut and New York. “Midday models show a region from Cape Cod to northern Maine receiving hurricane-force winds at the storm’s peak, Thursday afternoon and overnight,” private forecaster MDA Federal Inc. said in a statement. The lowest hurricane-force wind is 74 miles per hour (119 kph). NYC Snow New York City will probably receive snow from the storm, which is forecast to enter the metropolitan area early in the morning on Feb. 25, said Joe Pollina, meteorologist with the National Weather Service in Upton, New York. “We anticipate some snow for much of the area,” Pollina said by telephone. He said it is too early to estimate snowfall amounts for New York because the storm’s path may still change. The weather service will begin releasing those forecasts sometime tomorrow, he said. In coastal areas, the storm is likely to draw in warm air that will mean rain, while areas from upstate New York to Ottawa may receive 12 inches or more of snow, Sosnowski said. “This thing is a little different animal,” Sosnowski said by telephone. “Instead of passing on by, it looks like it is going to hook back.” The current storm has tied up air traffic along the East Coast, according to the Federal Aviation Administration Web site. Weather-related delays of more than an hour were reported in Boston, Philadelphia and Newark and at LaGuardia and John F. Kennedy airports in New York. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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Alexander Haig, Former Secretary of State, Four-Star General, Dies at 85

February 20, 2010

By Laurence Arnold Feb. 20 (Bloomberg) — Alexander Haig , the decorated four- star general and assertive aide to U.S. presidents who declared himself “in control” at the White House after Ronald Reagan was shot, has died, the Associated Press reported. He was 85. He died today at Johns Hopkins Hospital in Baltimore from complications associated with an infection, AP said, citing the Haig family. Haig straddled the worlds of politics and the military during almost two decades in posts that included supreme commander of the North Atlantic Treaty Organization . His 18- month tenure as Reagan’s first secretary of state, the pinnacle of his political career, was marred by turf battles and by the famous comment he could never live down. He uttered it on March 30, 1981, hours after John Hinckley Jr . shot and wounded Reagan outside a Washington hotel. As surgeons worked to save Reagan’s life at a nearby hospital, and with Vice President George H.W. Bush in flight to Washington from Texas, Haig huddled with other top officials at the White House, then went before reporters. “Constitutionally, gentlemen,” he told the press, “you have the president, the vice president and the secretary of state, in that order, and should the president decide he wants to transfer the helm, he will do so.” He went on, “as of now, I am in control here in the White House, pending the return of the vice president and in close touch with him.” Fourth in Line In fact, under the rules of presidential succession, Haig wasn’t in control. The secretary of state is fourth in line to the presidency, behind the vice president, speaker of the House and president pro tempore of the Senate. His off-the-cuff comment gave Haig a lasting image as a power-grabber. “It was reminiscent of Dr. Strangelove,” Richard Darman , Reagan’s deputy chief of staff, wrote in his memoir. “Haig intended to calm the nation. He unnerved the world.” Haig had “lost control” and “written his own political epitaph,” Larry Speakes, Reagan’s spokesman, recalled in his memoir. “From then on, other members of the Reagan team would be viewing him with suspicion, and within 15 months their hazing would drive him out of the White House.” For his part, Haig long defended his comment as merely “a statement of fact that I was the senior Cabinet officer present.” The ‘Vicar’ During his stormy term as secretary of state, Haig called himself the “vicar of American foreign policy” and reportedly chafed when others — even Reagan — took steps without his approval. In one instance, White House Chief of Staff James A. Baker III rebuked Haig for remarks on Central America that diverted attention from the administration’s planned message about the economy. “Indiscreet and volatile, knowledgeable and arrogant, Haig was ever ready to take offense at slights real and imagined,” Richard Reeves wrote in “ President Reagan: The Triumph of Imagination .” In April 1981, while convalescing from his gunshot wound, Reagan penned a heartfelt handwritten note to Soviet leader Leonid Brezhnev , extolling the importance of peace. Haig tried without success to persuade Reagan to sharpen the letter’s tone. Haig’s tenure was “doomed from that moment,” according to Reagan biographer Lou Cannon. Reagan’s Limits “Al really did not understand how much Reagan intended to be his own president,” Cannon said in a 2008 interview. “Reagan delegated a ton of stuff, arguably more than he should have, but he considered the U.S.-Soviet relationship the most important thing on his plate, and he was never about to delegate that.” Haig resigned in June 1982 and presented his side of the story in a 1984 book, “ Caveat: Realism, Reagan and Foreign Policy .” The Reagan White House was “an administration of chums,” he wrote, and his status as an outsider was a “handicap.” He said he was unjustly blamed for failing to forge a diplomatic solution to avert the Falklands War between Argentina and the U.K. He also denied longstanding allegations that he gave Israel a green light to invade Lebanon in 1982. Haig became a presidential candidate himself in 1987, joining a Republican field that included Bush, the sitting vice president. He dropped out on Feb. 12, 1988, four days before the New Hampshire primary, and endorsed Senator Robert Dole , who went on to lose the nomination to Bush. Attacking Bush Haig spent much of his brief candidacy attacking Bush, venting some leftover resentment toward the Reagan White House. Rejecting one of Reagan’s central arguments, candidate Haig said the ballooning budget deficit was a “Republican deficit” that couldn’t be blamed on congressional Democrats. He indicated that at least some of his anger toward Bush stemmed from his feelings toward Baker, a Bush friend and adviser. Alexander Meigs Haig Jr. was born on Dec. 2, 1924, the son of a lawyer. He was raised in the suburbs of Philadelphia. He graduated in 1947 from the U.S. Military Academy at West Point, New York, and obtained a master’s degree in international relations from Georgetown University in 1961. He served military assignments in Japan, Korea, Europe and Vietnam, working part of the time under General Douglas MacArthur . Among numerous commendations, Haig received a Distinguished Service Cross , the nation’s second-highest medal for heroism, for leading outnumbered U.S. troops in a 1967 battle with Viet Cong forces. Nixon White House He joined Richard Nixon ’s White House in 1969 as chief military assistant to National Security Adviser Henry Kissinger , became deputy assistant to the president for national security and was promoted to general in 1972. He worked on negotiations for a cease-fire in Vietnam as well as arrangements for Nixon’s historic visit to China in 1972. After a brief stint as Army vice chief of staff, Haig returned to the White House and succeeded H.R. Haldeman as chief of staff as Nixon’s team dealt with the fallout from the Watergate break-in. Haig played a central role in persuading Nixon to resign in August 1974. Nixon’s successor, Gerald Ford , named Haig commander-in- chief for U.S. forces in Europe. Haig then spent five years as supreme allied commander in Europe, responsible for the multi- nation forces of NATO. He survived an assassination attempt in June 1979 when a bomb exploded near his car as he was being driven to his NATO office in Belgium. That same year, he became president and chief operating officer of Hartford, Connecticut-based United Technologies Corp . Confronting Soviets Reagan, upon taking office in 1981, named him the 59th secretary of state. Haig endured contentious confirmation hearings in the Senate, then went to work building a foreign policy rooted in direct confrontation with the Soviet Union in Cuba, Central America and elsewhere. His resignation in June 1982 marked the end of his work in government. He returned to United Technologies as senior adviser and director while opening and serving as chairman of Worldwide Associates Inc. , which provides political and security consulting to international corporations. He served on the boards of several companies, including America Online Inc., MGM Grand Inc. and Metro-Goldwyn-Mayer Inc. He was popular on the paid lecture circuit and hosted an independently produced weekly television program, “World Business Review. ” In addition to his 1984 book on the Reagan White House, he wrote “Inner Circles: How America Changed the World,” published in 1992. Haig married the former Patricia Fox on May 24, 1950. They had two sons, Alexander and Brian, and a daughter, Barbara. To contact the reporter on this story: Laurence Arnold in Washington at larnold4@bloomberg.net .

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Facebook Said to Offer More Ways to Pay for Tractors, Fish Food in Games

February 19, 2010

By Ari Levy, Brian Womack and Joseph Galante Feb. 19 (Bloomberg) — Facebook Inc. is expanding a service called Facebook Credits that gives it a 30 percent cut of sales from tractors, fish food and guns in online games, according to four people who have held discussions with the company. Facebook is already testing the payment option in at least 17 games, including “Happy Aquarium” and “Restaurant City.” The company will make the service available in more games ahead of its annual developers conference in April, said the people, who declined to be named because the plans aren’t public. After relying on advertising for almost all of its revenue, Facebook is moving to take a bigger piece of the market for virtual items bought in games, which may quadruple to $3.6 billion in the U.S. by 2012, according to ThinkEquity LLC. Today, almost all of those sales go to the game developers, such as Zynga Inc., creator of “FarmVille,” and Electronic Arts Inc.’s Playfish unit. “It will likely be a significant revenue stream,” said Jeremy Liew , a managing director at Menlo Park, California-based Lightspeed Venture Partners who invests in social games. “They’ll keep working on it until it makes economic sense for developers.” Facebook, the most popular social-networking site, allows outside developers to offer games to its 400 million users. The games are free, and players can pay for items that advance their progress, such as a $3.33 tractor in “FarmVille,” a $5.95 helicopter in “Mafia Wars” or a $4.89 box of fish food for “Happy Aquarium.” Facebook Cut The Palo Alto, California-based company is seeking to take advantage of the popularity of online games, a market that has already blossomed in Asia. Shares of Tencent Holdings Ltd. , a game company in Shenzhen, China, tripled in the past year, giving it a market value of $35 billion. Facebook is also taking a page from Apple Inc., which gets a 30 percent cut of sales from iPhone apps. Today, gamers on Facebook can either buy Facebook Credits to obtain items in games, or pay for them through third-party services. Of the $3.6 billion in U.S. virtual goods sales in 2012, about $2.2 billion will be on social networks, with 80 percent on Facebook, said Atul Bagga , a ThinkEquity analyst in San Francisco. If all payments on the site use Facebook Credits, that would mean $530 million in revenue for the company, he said. ‘Trust Factor’ “It’s the trust factor,” Bagga said. “You trust Facebook more than you would trust any other payment company.” EBay Inc.’s PayPal unit said yesterday that it will become a payment option for Facebook Credits, allowing PayPal customers to buy the site’s virtual currency. Players can also use credit cards or their mobile phone to buy credits. Payments and virtual currencies will likely be a focus of Facebook’s developers conference, which is scheduled to start April 21 in San Francisco, said three people who have had discussions with the company. “We are continuing to look at ways to extend our virtual currency — Facebook Credits — via a small alpha test with a handful of developers,” Facebook said in an e-mailed statement. “The test started in May and is exploring ways for people to use their Facebook Credits with third-party applications.” Allowing Facebook’s users to buy a single virtual currency that can be spent on all games will probably increase sales for developers, said Vish Makhijani , chief operating officer of San Francisco-based Zynga, the largest creator of games on the site. ‘Additional Liquidity’ “Facebook Credits will drive more people to become buyers,” Makhijani said. “That additional liquidity or ability to spend in more places clearly would be more attractive to a consumer than something you can only spend in one place.” In rolling out Facebook Credits, the company may still allow players to buy goods using other payment services. Developers would prefer to have Facebook Credits as an option — rather than being the exclusive payments provider — because purchases made with Facebook cost them more, said Vikas Gupta, chief executive officer of Jambool Inc. , also known as Social Gold, which offers an in-game payment system. “Facebook Credits comes at a pretty high tax,” said Gupta, whose San Francisco-based company charges developers 7 percent to 10 percent per purchase. Still, he said Facebook Credits “will help grow the overall ecosystem so you’ll see more people pay for goods.” To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net ; Brian Womack in San Francisco at Bwomack1@bloomberg.net ; Joseph Galante in San Francisco at jgalante3@bloomberg.net

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Swaps Sleuths Are the Fix for Too Tangled to Fail: David Reilly

February 18, 2010

Commentary by David Reilly Feb. 19 (Bloomberg) — For all the hand-wringing over too- big-to-fail banks, there is at least one simple solution: shrink them. A more vexing question is how to deal with links between firms, and markets, that can pose even bigger threats. While “too big” can be defined by, say, assets, or deposits, it is hard, if not impossible, to spot connections that will spawn financial havoc. The government didn’t expect Lehman Brothers Holdings Inc. ’s collapse to cause a run on money market funds, and no one foresaw that American International Group Inc. could endanger the likes of Goldman Sachs Group Inc. or Societe Generale due to credit default swaps. That is why legislation introduced in the Senate earlier this month to create an agency to map ties among firms while also assessing threats is a good first step toward dealing with too-tangled-to-fail banks. The plan becomes even more important given a possible agreement between senators and the Obama administration to create a council of regulators to oversee the financial system, as the New York Times reported Wednesday. That council — likely to include regulators such as the Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Treasury Department — will need unbiased, wide-ranging data and analysis that goes well beyond what regulators have today. This is why legislation to create a data-gathering agency — introduced by Rhode Island Democratic Senator Jack Reed — would prove vital in making any new regulatory set-up work. Who Gets Hit Although regulators now get all sorts of data from financial firms, it’s not in a form that can be easily shared. Nor does it, in most cases, dig down to the level of individual loans and transactions. Data also isn’t standardized. So regulators can’t quickly pull together information from across Wall Street to, say, assess who would get hit if a particular company, financial product or market blew up. Firms’ interconnectedness, and our lack of knowledge about it, was repeatedly raised as a deep-seated danger during a Senate Banking Committee hearing earlier this month. “It isn’t the balance sheet of the bank that’s a problem,” testified former Citigroup Inc. Chief Executive John Reed . “It’s the interconnectedness of one financial institution with virtually all other financial institutions.” After all, hedge fund Long-Term Capital Management, which blew up in 1998, required a bailout overseen by the Fed not because of its size, but because its trades linked it to almost every firm on Wall Street. The huge growth in financial derivatives, especially credit-default swaps and interest-rate swaps, has only made this issue more acute. Mapping the Universe Reed’s bill wouldn’t look to end connections among firms. It would instead try to map them by giving the new agency the power to require standardization of transaction data, which financial firms would then have to turn over to the new agency. This would help the firms and regulators get a better picture of who may lose if someone goes under. Then the plan is that the new agency would analyze the across-the-Street data it collects to map markets and identify potential hot spots. The proposal is the brainchild of a group of academics, economists and regulators who formed a volunteer committee to push what they dubbed the National Institute of Finance. Ideally, such an agency would gather quants, numbers geeks, data hounds and just plain old, outside-the-box thinkers who, instead of creating the kind of financial models that lead to bubbles, would spot disaster before it strikes. Weather Forecasts Two of the main backers of such an institute — John Liechty , an associate professor of business at Penn State University, and Allan Mendelowitz , a former director of the Federal Housing Finance Board — have compared it to the National Oceanic and Atmospheric Administration , which houses agencies such as the National Weather Service. “Our financial markets are at least as important and as complicated as the weather,” Liechty testified last week before a Senate Banking subcommittee hearing on such an agency. “If that’s the case why don’t we have the equivalent of NOAA for the financial markets?” Any new agency will only work, though, if it is independent. That is why it needs to be housed outside existing regulators such as the Fed, which have their own biases and often-times parochial views. ‘Speak the Truth’ As Liechty testified, “You need to have somebody who has the ability to speak the truth in the middle of a crisis or in the buildup to a crisis.” Independence is one potential short-coming of Reed’s bill, though. While it calls for the agency’s director to serve a 15- year term, it also creates a board that includes the Treasury Secretary and heads of regulatory agencies. That opens the door to political interference. There will also be complaints about costs. Yet by mandating standardized data terms, such an agency may help banks and other financial firms cut back-office and information-technology costs. Of course, even if the new agency works perfectly, there’s no guarantee it would prevent future crises. For starters, regulators have to be willing to act on warnings. It’s also dangerous to put much faith in the ability of complex financial models to predict risk. Plus, secretive regulators, like the Fed, will likely push to keep much of the information this new agency would generate under wraps. That would be a mistake. If investors, along with regulators, have a better grip on the connections between firms they will be better able to price risks, or steer clear of them altogether. That is the real goal. Because ultimately we can’t eliminate linkages among firms that form the basis of markets. We can, though, try to manage them. To do that, we first need someone to independently measure them. Otherwise, any new council of regulators will be flying blind. ( David Reilly is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: David Reilly at dreilly14@bloomberg.net

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Austin Pilot’s Suicide Note Says Tax Dispute With IRS Began in Early 1980s

February 18, 2010

By Ryan J. Donmoyer Feb. 18 (Bloomberg) — Joseph Stack, the software engineer police say flew a small plane into an Austin, Texas, building housing offices of the Internal Revenue Service, may have been in conflict with the U.S. agency for almost 30 years. Authorities said a suicide note posted on a Web site and signed “Joe Stack (1956-2010)” may have been posted by the 53- year-old suspected of deliberately crashing the plane today. The crash injured at least 13 people, with one federal employee reported missing. The writer said he lost “$40,000 and 10 years of my life” participating in what tax experts describe as an attempt to avoid taxes by claiming his home was a church. He said he later clashed with the IRS over a law targeting computer consultants suspected of abusing employment tax rules. In the Web posting, Stack wrote of raiding retirement accounts after suffering a loss of income following a move to Texas, struggling to report “a boatload of undocumented income” earned by his wife, and trying to write-off a piano, which he called “an expensive new business asset.” Craig Etter , a tax lawyer at Greenberg Traurig LLP in McLean, Virginia, said the employment tax issue has been controversial in the technology industry since it was enacted as a last-minute inclusion in the Tax Reform Act of 1986 , the last time Congress overhauled tax laws. “It caught everybody by surprise,” he said. “It’s not often that legislation carves out one industry to pick on. There were a lot of angry people.” Computer Consultants The law makes it harder for software engineers, computer consultants, and other technical services workers to act as independent contractors, rather than as employees. While some workers prefer to be classified as employees, meaning the employer pays half of Social Security and Medicare taxes that total 7.35 percent of salary, independent contractors can shelter more money from taxes by making larger contributions to retirement accounts and by deducting business expenses. Workers in the computer-consulting industry typically want to be classified as independent contractors for that reason, Etter said. President Barack Obama proposed a crackdown on employment tax fraud in his 2011 budget proposal with new rules to more clearly define when workers should be classified as employees or as independent contractors. In addition, the IRS this month is scheduled to begin auditing 6,000 companies to test compliance with employment tax laws. Businesses duck about $14 billion a year in taxes due to worker misclassification, the Treasury Department estimated in 2005. Church Exemption In his posting, Stack said his tax troubles began when he was working in Southern California in the 1980s. He describes becoming involved in an organization that sought to exploit a tax-code section that exempts churches from taxes. “We carefully studied the law (with the help of some of the ‘best,’ high-paid experienced tax lawyers in the business) and then began to do exactly what the ‘big boys’ were doing,” Stack wrote in his note, referring to tax exemptions claimed by the Catholic Church. That “little lesson,” he wrote, cost him “$40,000 and 10 years of my life, and set my retirement plans back to 0.” In a statement today, IRS Commissioner Doug Shulman said his department is “working with law-enforcement agencies to fully investigate the events that led up to this plane crash.” Stack’s posting, which was taken down from his Web site at the request of authorities, specifically mentioned the IRS as a target. “Violence not only is the answer, it is the only answer,” it said. “Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.” J.J. McNabb , a Bethesda, Maryland, author working on a book about tax protesters who has testified before Congress twice on the subject, said the posting echoes the beliefs of such activists. “He fits the mold,” she said in an interview. “Blaming the government for your failures in life is unfortunately a big factor in the tax protester movement.” To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net .

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Austin Pilot’s Suicide Note Says Tax Dispute With IRS Began in Early 1980s

February 18, 2010

By Ryan J. Donmoyer Feb. 18 (Bloomberg) — Joseph Stack, the software engineer police say flew a small plane into an Austin, Texas, building housing offices of the Internal Revenue Service, may have been in conflict with the U.S. agency for almost 30 years. Authorities said a suicide note posted on a Web site and signed “Joe Stack (1956-2010)” may have been posted by the 53- year-old suspected of deliberately crashing the plane today. The crash injured at least 13 people, with one federal employee reported missing. The writer said he lost “$40,000 and 10 years of my life” participating in what tax experts describe as an attempt to avoid taxes by claiming his home was a church. He said he later clashed with the IRS over a law targeting computer consultants suspected of abusing employment tax rules. In the Web posting, Stack wrote of raiding retirement accounts after suffering a loss of income following a move to Texas, struggling to report “a boatload of undocumented income” earned by his wife, and trying to write-off a piano, which he called “an expensive new business asset.” Craig Etter , a tax lawyer at Greenberg Traurig LLP in McLean, Virginia, said the employment tax issue has been controversial in the technology industry since it was enacted as a last-minute inclusion in the Tax Reform Act of 1986 , the last time Congress overhauled tax laws. “It caught everybody by surprise,” he said. “It’s not often that legislation carves out one industry to pick on. There were a lot of angry people.” Computer Consultants The law makes it harder for software engineers, computer consultants, and other technical services workers to act as independent contractors, rather than as employees. While some workers prefer to be classified as employees, meaning the employer pays half of Social Security and Medicare taxes that total 7.35 percent of salary, independent contractors can shelter more money from taxes by making larger contributions to retirement accounts and by deducting business expenses. Workers in the computer-consulting industry typically want to be classified as independent contractors for that reason, Etter said. President Barack Obama proposed a crackdown on employment tax fraud in his 2011 budget proposal with new rules to more clearly define when workers should be classified as employees or as independent contractors. In addition, the IRS this month is scheduled to begin auditing 6,000 companies to test compliance with employment tax laws. Businesses duck about $14 billion a year in taxes due to worker misclassification, the Treasury Department estimated in 2005. Church Exemption In his posting, Stack said his tax troubles began when he was working in Southern California in the 1980s. He describes becoming involved in an organization that sought to exploit a tax-code section that exempts churches from taxes. “We carefully studied the law (with the help of some of the ‘best,’ high-paid experienced tax lawyers in the business) and then began to do exactly what the ‘big boys’ were doing,” Stack wrote in his note, referring to tax exemptions claimed by the Catholic Church. That “little lesson,” he wrote, cost him “$40,000 and 10 years of my life, and set my retirement plans back to 0.” In a statement today, IRS Commissioner Doug Shulman said his department is “working with law-enforcement agencies to fully investigate the events that led up to this plane crash.” Stack’s posting, which was taken down from his Web site at the request of authorities, specifically mentioned the IRS as a target. “Violence not only is the answer, it is the only answer,” it said. “Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.” J.J. McNabb , a Bethesda, Maryland, author working on a book about tax protesters who has testified before Congress twice on the subject, said the posting echoes the beliefs of such activists. “He fits the mold,” she said in an interview. “Blaming the government for your failures in life is unfortunately a big factor in the tax protester movement.” To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net .

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Pilot’s IRS Suicide Note Probed After Plane Is Crashed Into Texas Building

February 18, 2010

By Darrell Preston and Justin Blum Feb. 18 (Bloomberg) — Federal authorities are investigating a Web site suicide note and an Austin, Texas, house fire linked to a pilot who crashed his small plane into a building in the Texas capital containing offices of the U.S. Internal Revenue Service, said a law enforcement official with knowledge of the investigation. The pilot was identified as Joseph A. Stack, said the law- enforcement official, who spoke on the condition of anonymity because he was not authorized to comment publicly. Investigators are probing whether Stack set fire to his house before crashing the plane, the official said. Spokesmen for the Federal Bureau of Investigation and the Department of Homeland Security said that initial indications show no ties to organized terrorism. “It does not appear to be terrorism,” White House spokesman Robert Gibbs told reporters traveling with President Barack Obama on Air Force One today. The Department of Homeland Security “is looking at all angles,” he said. Authorities are looking into a Web site suicide note signed “Joe Stack (1956-2010)” that may have been posted by the 53- year-old Stack, which described his anguish over years of battling with the Internal Revenue Service. “Violence not only is the answer, it is the only answer,” the letter said. “Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.” One Unaccounted For Austin police said in a news conference that they have accounted for all but one person believed to be in the building when it was hit by the plane. They were trying to determine whether that person had been at work before the accident. The IRS said in a statement it employed 190 people in the Echelon 1 building in Austin. North American Aerospace Defense Command, which oversees defense of airspace over the United States and Canada, said in a statement that it launched two F-16 fighter aircraft from Ellington Field in Houston in response to the crash. Witnesses interviewed by the Associated Press described windows exploding and flames shooting out after the plane rammed the building. “It felt like a bomb blew off,” Peggy Walker, an IRS revenue officer, told the AP. Walker said she was sitting at her desk in the building when the plane hit. “The ceiling caved in and windows blew in. We got up and ran,” she said. In witness accounts posted on the Austin American-Statesman newspaper Web site, William Winnie, identified as an Internal Revenue Service agent, described watching the plane come straight at the building from a window on the third floor. “It looked like it was coming right in my window,” Winnie told the Statesman. The plane turned and dove into the floors below him, Winnie said. ‘Isolated Incident’ The plane was a Piper Cherokee PA 28 that took off from the airport in Georgetown, 30 miles north of Austin, at 9:40 a.m., said Diane Spitaliere, a Federal Aviation Administration spokeswoman, in an interview in Washington. The plane wasn’t stolen as initially reported by local news outlets, said Art Acevedo, Austin police chief, in a press conference broadcast on the Internet. “I can tell you categorically there is no concern from a law enforcement or terrorism perspective,” said Acevedo. “This is an isolated incident.” Firefighters were called to a burning home in Austin before the crash. Public records showed the house was owned by Andrew Joseph Stack. The American-Statesman reported that a neighbor ran to the house when he saw it in flames, and later saw a woman and young girl drive up in a car. Neighbors believed the two to be Stack’s wife and daughter, the paper reported. A Red Cross spokeswoman said they were assisting two people who were “remarkably calm, clearly distraught” and “physically fine,” the paper said. To contact the reporters on this story: Justin Blum in Washington at jblum4@bloomberg.net ; Darrell Preston in Dallas at dpreston@bloomberg.net ;

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Gary P. Luquette: Deciding Today on Energy for Tomorrow

February 18, 2010

In his State of the Union address, President Obama talked about “making tough decisions about opening new offshore areas for oil and gas development.” When it comes to respectfully developing America’s abundant oil and natural gas resources–including areas in the Outer Continental Shelf (OCS)–there’s nothing tough about this decision. We should be developing America’s Outer Continental Shelf, and we should be doing it now. It’s a huge win for America. Here’s why. America needs the energy. The recession may have slowed energy demand temporarily, but one day, we expect that overall energy demand will not only return, it will grow. In fact, we’re seeing growth already in China and India. Some people point to renewables and alternatives as a silver bullet to solve the demand challenge. But as the President pointed out in his White House briefing remarks this week, the sheer scale of our energy needs requires that we focus on a comprehensive approach. The fact is, we need more of all forms of energy, including oil and natural gas–which, most projections see as providing the dominant share of the energy mix for decades. The good news: the OCS has significant potential. Over time, it could add 1 million more barrels of oil and natural gas equivalent a day–potentially representing a fifth of the current total U.S. oil production. Advances in technology could increase that amount dramatically. America presently imports about two-thirds of the oil it needs every day. Every additional barrel produced here at home reduces our dependence on imported energy. Every additional barrel produced here keeps American jobs and dollars at home. That’s critical. Because America needs the jobs and the economic boost that developing the OCS will provide. My industry already provides good jobs to 2.1 million Americans directly; the industry supports another 7 million indirectly. Developing the OCS and other areas that are presently off limits could potentially create 160,000 new jobs–and provide up to $1.7 trillion additional government revenue. For decades, the industry has been safely operating in the Gulf of Mexico, under comprehensive and rigorous government regulations. The same capability that allows us to operate in the Gulf’s extremes–in over 10,000 feet of water, for example–also safeguards our people and the environment. Advances in technology provide tremendous benefit, but that’s reinforced by how we operate. Even if a soft drink can accidentally fell overboard, we’d report it. We know that our ability to operate in the rest of the OCS depends on doing things in a responsible and sustainable way. We take this responsibility very seriously. Developing the OCS is not without significant investment and financial risk. It’s important to remember that both are borne by companies, not by the government. But the resulting energy and economic security benefit everyone. That’s what U.S. Senators Jim Webb (D-VA) and Mark R. Warner (D-VA) emphasized in a letter last month to Interior Secretary Kenneth Salazar. The letter encouraged the Secretary to accelerate an offshore development process currently hampered by unnecessary delays. Senators Webb and Warner’s advocacy is in step with what many other Americans want. According to a recent poll, 68 percent of American voters think offshore oil and natural gas development should get a green light. So how do we move forward from here? Quickly–and on three fronts: First, we need a modern, accurate inventory of key areas of the OCS. Most of the data we have about prospective OCS areas is based on 25-year-old technology. The Department of the Interior’s Minerals Management Service (MMS) recently restarted a long-delayed process to take the first steps toward gathering better information in the Atlantic. But more state-of-the-art data is needed. Only then can we understand the true extent of the resource the OCS contains and which areas offer the greatest potential. That data can inform public dialogue and help make the most prudent leasing and development decisions. Second, the MMS should finalize–soon–its proposed OCS five-year plan. It is the guiding framework for any future development. Their planning process, in place for many years, has proven to be comprehensive, in that it includes feedback from all stakeholders in the development of America’s natural resources. Third, Congress should open up the Eastern Gulf of Mexico to exploration, which we know holds significant potential for new energy. It is a proven and productive hydrocarbon basin and is nearest existing energy infrastructure, enabling industry to move from exploration to development to market in a relatively short period of time. This has the support of many Senators, who included provisions to expand access there in legislation passed by the Senate Energy Committee. At a time when our economy is under duress, and our energy security is challenged, now is the time to move forward and develop America’s natural resources. Creating jobs, generating incremental taxes and royalties to our government, and producing more energy here at home is the prudent thing to do. Let’s act now–it’s a huge win for America.

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Top 400 Earners in U.S. Averaged $345 Million in Income in 2007, IRS Says

February 18, 2010

By Ryan J. Donmoyer Feb. 18 (Bloomberg) — The 400 highest-earning U.S. households reported an average of $345 million in income in 2007, up 31 percent from a year earlier, IRS statistics show. The average tax rate for the households fell to the lowest in almost 20 years. The figures for 2007, the last year of an economic expansion, show that the average income reported by the top 400 earners more than doubled from $131.1 million in 2001. That year, Congress adopted tax cuts urged by then-President George W. Bush that Democrats say disproportionately benefits the wealthy. Each household in the top 400 of earners paid an average tax rate of 16.6 percent, the lowest since the agency began tracking the data in 1992, the Internal Revenue Service statistics show. Their average effective tax rate was about half the 29.4 percent in 1993, the first year of President Bill Clinton’s administration, when taxes were increased. The statistics underscore “two long-term trends: that income at the very top has exploded and their taxes have been cut dramatically,” said Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, a Washington research group that supports increasing taxes on high-income individuals. The top 400 earners received a total $138 billion in 2007, up from $105.3 billion a year earlier. On an inflation-adjusted basis, their average income grew almost fivefold since 1992, the data show. Political Ammunition The data may provide ammunition for President Barack Obama and Democrats led by House Speaker Nancy Pelosi of California who say they intend to increase the capital gains tax rate and let tax rates for the highest earners increase in 2011. Almost three-quarters of the highest earners’ income was in capital gains and dividends taxed at a 15 percent rate set as part of Bush-backed tax cuts in 2003, the statistics show. Of the 400 earners, 289 paid a total effective federal tax rate of 20 percent or less in 2007, the last year for which figures were available, the data show. Bill Ahern , director of policy and communications for the Tax Foundation, a Washington research group that advocates lower taxes, said the 2007 data doesn’t reflect the current economic circumstances. “In a good year like 2007, it’s not surprising to see that the owners and managers of the nation’s largest firms made a fortune,” Ahern said. “Notice that two-thirds of their 2007 income was in capital gains, which have dropped like a rock since then.” The data were first reported by Tax.com , a blog run by Virginia publisher Tax Analysts. To contact the reporter on this story: Ryan Donmoyer in Washington at rdonmoyer@bloomberg.net

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Kevin Trudeau SENTENCED: Infomercial King To Jail For Contempt Of Court

February 17, 2010

Infomercial king Kevin Trudeau has been sentenced to 30 days in jail for contempt of court. The sentence comes after Trudeau persuaded visitors to his website to help him launch an e-attack on a federal judge’s computer — so many people emailed the judge that his computer in Chicago crashed. AP has more details of the attack and subsequent charges: U.S. District Judge Robert W. Gettleman’s computer became hopelessly clogged with e-mails from admirers of Trudeau’s diet book and other volumes, the judge told a hearing. Court technicians had to be called in to make his inbox usable again. Something similar happened to his BlackBerry, Gettleman said. Gettleman has overseen Trudeau’s long-running legal battle with the Federal Trade Commission, which claims ads for Trudeau’s books offering cures for dozens of ailments — from faltering memory to hair loss — misrepresent the facts. The judge said Trudeau urging the deluge of e-mails was harassment. “The penalty I will impose will probably include some custody and a fine,” the calm, soft-spoken Gettleman said after holding Trudeau in direct criminal contempt. He ordered Trudeau to post a $50,000 bond and surrender his passport. Gettleman said the glut of e-mails delayed court business and will force the U.S. Marshals Service to do a threat assessment. Trudeau arrived in court voluntarily after Gettleman threatened to send marshals to bring him in. He sat silently through the hearing before being led away for fingerprinting and a mug shot. Chief defense counsel Kimball R. Anderson told Gettleman that Trudeau had posted an apology on his Web site and urged visitors not to attempt further contact. “I am confident this incident will not occur again,” Anderson said. The apology message posted on Trudeau’s Web site admitted asking visitors to the site Wednesday to communicate with Gettleman but added “that was a mistake.” “It was wrong to make that request,” Trudeau’s posting said. “Please do not under any circumstances communicate with the court or the judge. I apologize for the mistake.”

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Kevin Trudeau SENTENCED: Infomercial King To Jail For Contempt Of Court

February 17, 2010

Infomercial king Kevin Trudeau has been sentenced to 30 days in jail for contempt of court. The sentence comes after Trudeau persuaded visitors to his website to help him launch an e-attack on a federal judge’s computer — so many people emailed the judge that his computer in Chicago crashed. AP has more details of the attack and subsequent charges: U.S. District Judge Robert W. Gettleman’s computer became hopelessly clogged with e-mails from admirers of Trudeau’s diet book and other volumes, the judge told a hearing. Court technicians had to be called in to make his inbox usable again. Something similar happened to his BlackBerry, Gettleman said. Gettleman has overseen Trudeau’s long-running legal battle with the Federal Trade Commission, which claims ads for Trudeau’s books offering cures for dozens of ailments — from faltering memory to hair loss — misrepresent the facts. The judge said Trudeau urging the deluge of e-mails was harassment. “The penalty I will impose will probably include some custody and a fine,” the calm, soft-spoken Gettleman said after holding Trudeau in direct criminal contempt. He ordered Trudeau to post a $50,000 bond and surrender his passport. Gettleman said the glut of e-mails delayed court business and will force the U.S. Marshals Service to do a threat assessment. Trudeau arrived in court voluntarily after Gettleman threatened to send marshals to bring him in. He sat silently through the hearing before being led away for fingerprinting and a mug shot. Chief defense counsel Kimball R. Anderson told Gettleman that Trudeau had posted an apology on his Web site and urged visitors not to attempt further contact. “I am confident this incident will not occur again,” Anderson said. The apology message posted on Trudeau’s Web site admitted asking visitors to the site Wednesday to communicate with Gettleman but added “that was a mistake.” “It was wrong to make that request,” Trudeau’s posting said. “Please do not under any circumstances communicate with the court or the judge. I apologize for the mistake.”

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New York Blanketed With More Snow, Delaying Flights; Storm Heads to Boston

February 17, 2010

By Brian K. Sullivan Feb. 16 (Bloomberg) — New York’s evening rush hour may be disrupted after more than 3 inches of snow were dumped on the city on top of an overnight snowfall, according to the National Weather Service. The snow comes as the latest government forecasts predict cooler weather will dominate the eastern two-thirds of the U.S., with the exception of Maine, until at least March. The lowest temperatures are likely to be in the mid-Atlantic states, according to the U.S. Climate Prediction Center in Camp Springs, Maryland. The Northeast consumes four-fifths of the nation’s home heating oil, and the fuel rose today partly on speculation the cold will boost demand. Heating oil for March delivery was up 7.74 cents, or 4 percent, to settle at $1.9963 a gallon on the New York Mercantile Exchange. “It is beginning to look quite likely that the extensive snow that currently covers the northern two-thirds of the country will enhance the probability of winter cold lingering well into March,” said Jim Rouiller , a senior energy meteorologist at Planalytics Inc. Manhattan’s Central Park reported about 3 inches (7.6 centimeters) in the six hours before 1 p.m. New York time, pushing the seasonal snowfall amount to 28.5 inches, 12.9 inches above the average of 15.6 inches, said John Murray, a weather service meteorologist in Upton, New York. The record for Central Park is 75.6 inches set in 1995-1996, he said. Heavy at Times Snow today has been heavy at times, falling at a rate of as much as 2 inches per hour in the New York area, Murray said. The storm is forecast to taper off around 6 p.m., when a winter weather advisory will be lifted. “It is going to make travel difficult,” Murray said. “People should exercise caution.” Danbury, Connecticut reported 6.3 inches, while 4 inches fell in Bridgeport, 7.5 inches in Paramus, New Jersey, 2.3 inches in Newark and 4 inches in Armonk, New York, according to a weather service statement. New York’s LaGuardia and Newark’s Liberty International airports had delays of more than an hour, according to the Federal Aviation Administration’s Web site. Boston’s Logan International Airport reported delays of 45 minutes and a block on incoming flights was implemented at John F. Kennedy International Airport in New York. Boston Snow Boston is expected to receive about 5 inches, according to a weather service statement. Winter weather advisories and storm warnings stretch from Indiana to Maine, the agency said. The storms spared Baltimore and Washington, where back-to- back blizzards earlier this month closed the federal government and set new seasonal snowfall records. Yesterday’s heating degree days value in Central Park was 31, or normal, according to the weather service. Last year it was 30. The value, which is calculated by subtracting the daily average temperature from 65 degrees Fahrenheit, gives an indication of how much energy will be needed for heating. The average temperature in Central Park this month has been 31.1 degrees, 2.1 degrees below normal, according to the weather service. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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Tony Greenberg: Why Good Service Is About Trust

February 16, 2010

I’m a tough customer. I admit it. Takes one to know one. I’m a loud shocking dose of reality for companies that sell me something. I expect too much from them. I’ve given them my money for, and put my trust in; their products or services, and I expect them to value that accordingly. I can be a firm’s greatest ally or its worst nightmare. So when something goes wrong, I want the company to fix it. Now! When it takes too long, I let them know it. When service representatives can’t solve the problem, I want to talk to their bosses, their bosses’ bosses, all the way up to their CEOs. And when a service rep tells me, “My supervisor will just tell you the same thing,” well, there’s nothing I want to hear less. Why am I such a pain in the, excuse me, why am I such an exacting customer? Because I’ve been on the other side of the fence, working in the customer-service business, for my entire career. I answer my own phone. When my customers have a problem, I have a problem. And it’s my job to fix it. My customers aren’t small companies, either. They include some of the world’s biggest movie studios, software makers, and game companies, among others. But if I want them coming back, I have to fix their problems, and fast. So I know what it takes. Just because I’m an extreme case, doesn’t mean I’m alone (extreme, maybe slightly irrational, and definitely passionate, but not strange). I know customers deserve better than most companies give them. Michael Treacy was never more right. Why do firms think they can excel in more than one of these three disciplines: Operational excellence, Product leadership or Customer intimacy. Pick any successful firm and see they are great at one , not all. After all, what’s your time worth? For a business, what’s your customer worth? What happens when a company doesn’t value the time of its customers? As a customer, do you include the cost of bad customer service when you decide to buy from one company over another? Shouldn’t our service providers pay us our hourly rate when they put us on hold? Ahh, that would make them think thrice. And if you don’t value your time in dealing with a company that doesn’t, you should. “We don’t want to push our ideas on to customers; we simply want to give them what they want.” – Laura Ashley Companies spend hundreds, even thousands of dollars to acquire a single steady customer, on the expectation that they will be able to milk that customer for far more money in coming years (figure out your company’s cost of customer acquisitions and their lifetime value here ): The math is pretty straightforward. Yet everywhere we look, there are companies that can’t seem to count. It seems they are quite clear about where their heads are at: * I called T-Mobile on a separate issue and it took 13 minutes to get someone on the line. After multiple ID authentications, the service rep told me he couldn’t help with a problem with that phone line when I called on that phone line. “It’s Our Policy,” they said. I had to call back from a different phone line to get help. You and your policy will send your customers running. My policy is to give my money to someone else. Please don’t ever tell me your policy. Just make me happy. * Credit card companies, especially supervisors, don’t even answer your call. (See Jackie Ramos , the bank employee fired after complaining about exorbitant client charges) Instead, you have to leave a number so someone can call back later, even days later, if you’re around and able to take the call. And rather than putting your photo on your credit card to reduce fraud, they just charge usurious interest rates to “make up for their losses.” Don’t the banks understand that we don’t even know who owns which bank now? In the jumble of bank consolidations post-meltdown, I was sorting out which credit cards were mine and which were my various companies. Certain cards had different names than the actual bank name. My auto-pay and my firms were fully confused. This of course led to overpays, underpays, extortion and usurious charges, credit limit cuts, etc. Thank goodness Bank of America had one rock star, Janet Sassano, whom I found after being up hung up on, hours wasted and insulted by other customer “service” specialists. Sassano, by contrast, was the proverbial princess in shining armor. She took each of my 12 issues and resolved them to my absolute satisfaction. She took great pride in helping me sort out these issues and was pleasant, trusting, and reliable in calling me and my accounting team back and even checked up on us as the months went on. * Toyota has a full-fledged disaster on its hands, one that could scar the company for years, because it didn’t deal quickly with issues tied to its brake and accelerator systems. (The New York Times took a long look at Toyota’s ongoing pattern of slow responses to safety/quality issues, available here .) * I had to go all the way up the Southern California Edison ranks to its CEO to resolve what should have been a simple matter of fixing an online payment snafu. To their credit, that did solve the problem. I addressed them in a 15-point, 22-page document requesting policy, and governance and process-management changes. Also to their credit, they articulately responded in writing about how they would address each of those issues. But why oh why was it necessary to go to the top for something that should have been relatively easy to fix? Then there’s MacMall, a Torrance, CA. based distributor of Apple computers and related gear. It the same firm as PC Mall. If you’re on any technology mailing list, you’ve probably gotten at least 70 of their catalogs, or seen their multi-page magazine ads. I guess poor customer service is a core MacMall positioning element that I could have known about ahead of time. Note their low consumer rating on ResellerRatings.com. If you were ever to consider returning or replacing a product, it would be one of the worst places you could choose. Out of thousands of online resellers, to me it seems like it’s just one step above a phishing site. MacMall execs, I suggest you look at the Apple stores, busting at the seams, and chase the premium services market not the sleazy discount / no service no frills game. I take a lesson and story from my friend Billy Ladin – founder ComputerCraft, one of the first Apple retailers from the 80′s. He was taught lessons from partners Steve Jobs and his former employee, who told him discounts were the only way to survive. Yup, that employee was Michael Dell. I guess in the long run Steve Jobs got it right. It seems he had a tough time finding retailers so he did it for himself. Look at him now. One time I met Jobs, skiing with him on Aspen mountain. We were having lunch, and I was curious as to why he bought 2 apple strudels and no meal. He said, ‘Why should I eat that boring food when I can have this,” as he crunched into his meal. Classic. I wonder if it was the Apples or if the same would be true for chocolate. Everything he makes is exciting. A few months ago, I bought a computer from MacMall for the first time (granted, I have been a customer for years). I should have realized then that trouble was coming when the company wouldn’t let me buy a computer online, have it configured and installed with my software choices, and pick it up at the store two miles from my place. I had to wait four days for the computer to be shipped those two miles to my office and pay for postage. Guess what they said: “It’s Our Policy.” How lovely. They explained that it was a security risk. I asked them how they thought a known customer who puts in a known credit card and will pick up the equipment with his personal ID is a risk compared to international fraud rings that steal products, services, PayPal accounts and more by using a credit card online? Riddle me that, Batman. “Everything starts with the customer.” –Louis Gerstner, IBM Four months later, the computer’s hard drive failed. I went to the Apple Store and had a great experience. But when I went to swap the hard drive for solid-state storage so I wouldn’t be vulnerable to another hardware failure, they told me I couldn’t, because I hadn’t bought the machine directly from Apple. I had to go back to MacMall for that. That led to a long and unsatisfying dance with MacMall, going all the way up to and through its president, who promised in an email to call me. But then he chose instead to tell his store to blow me off. The bottom line: I wanted the hard drive replaced, but needed the bad drive back so I could recover my important data. MacMall wouldn’t let me, and in fact, after a lengthy delay, ultimately refused to do anything to fix the problem because I had complained too much. One MacMall technician was an angel, and I’d like to use that trouper’s name, but I’m afraid it’ll just get him in trouble. Apple’s process wasn’t perfect (some of their policies, later waived, seemed nonsensical). But had I bought Apple’s computer from Apple, my problem would have been fixed, and quickly. Apple gives its managers the flexibility and discretion to solve a customer’s unique problem. They understand that they’re building a relationship of trust with a customer, not just cashing in on a quick purchase. “Above all, we wish to avoid having a dissatisfied customer. We consider our customers a part of our organization, and we want them to feel free to make any criticism they see fit in regard to our merchandise or service. Sell practical, tested merchandise at reasonable profit, treat your customers like human beings — and they will always come back.” – L.L. Bean So who needs MacMall ? They survive on a threadbare margin of just 1.8 percent. They must depend on volume (and those endless ads and catalogs) to generate enough new customers to make ends meet. Margins that thin make it almost impossible for any company to finance a proper customer-service operation, and the evidence suggests that’s not where they spend their money. They spend it on making policies to not serve customer needs. Apple, by contrast, has a secret weapon in its stores: the Genius Bar. If you need help, they answer questions, diagnose issues and solve problems. Even my initial phone call was promptly answered, and the online personnel set up a high-priority appointment at the Genius Bar to analyze the problem in person. A company like Compact Appliance also understands the trust equation. I bought an air conditioner, but it was too loud to use. I had to return it, and called the CEO, who was apologetic, and fixed the problem immediately, even helping me pick out a replacement. Trust me; I’ll use them again and again and again. “There are only two industries that refer to their customers as users.” – Edward Tufte So, saving $50 on a $1,200 computer is nice, but what’s your time worth? There’s probably a reason why a company like MacMall has dozens of negative Facebook posts about it. Too many of us do a terrible job understanding a product’s true cost. It’s not just the purchase price. It’s what it costs to live with that product, and its maker, for years to come, especially if something goes wrong. Companies that skimp on customer service and cut corners on parts are secretly charging you more than you know. So what keeps a customer coming back? Trust. Trust that they’re buying good products. Trust that they’ll get a fair price. And trust that they will be dealt with fairly if a problem arises. And how do they build that trust? It seems the more suck-cessful a firm becomes the worse they usually become… You already know my answer: Only Time Buys Trust . And if a company doesn’t take the time to build and continue to earn customer trust, it deserves to be in trouble. I know every time my company, RampRate Sourcing Advisors, works with a client, it’s another chance to build trust. It’s also another chance to blow it. I can’t let that happen. We don’t let it happen ever. Even if we lose money, it’s our reputation. We need to be better consumers if we expect to get better products. That means holding companies accountable when they shortcut on service, and give us short shrift on quality products. Your time matters at least as much as that little discount you may get. Remember that next time you decide whether you want to buy that computer from MacMall or Apple. So tell me, have you had a bad experience with a company that led you to stop buying its products? Did you shout it out to your comrades and associates? Did you tip your competitor to buy from them…grin? Did you tell others? Did you talk about your problem on Yelp, Twitter, Facebook, or other sites? Did you report them to the authorities? Do Something! Do you include the company’s reputation for reliability and service in the cost of its products? I urge you to tell your stories here by posting to this service manifesto. Pass the link. Shout it out. Lets all try to make our lives easier. “There are only two ways to get a new customer: 1. Solicit a new customer any way you can. 2. Take good care of your present customers, so they don’t become someone else’s new customer.” -Ed Zeitz

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Is Obama Doing Enough To Create Jobs?

February 12, 2010

Even as one in 10 Americans remain unable to find work and President Obama has established job creation as his “number one focus” this year, the legislative proposals being seriously discussed in Washington don’t even come close to addressing the problem, according to some leading economists. Among the White House’s proposals is a payroll tax holiday to incentivize firms to hire more workers. Two competing ideas, one from Senators Bob Casey Jr. (D-Pa.) and Kirsten Gillibrand (D-N.Y.) and another from Senators Charles Schumer (D-N.Y.) and Orrin Hatch (R-Utah), propose similar plans but with small differences in detail. The latter is expected to be introduced in legislation the week after next by Senate Majority Leader Harry Reid (D-Nev.). But the consensus among many economists is that what’s really needed are public works projects and major investments in infrastructure and education to create long-term, sustainable jobs. Economists, including James K. Galbraith , Dean Baker , Joseph Stiglitz and Robert Reich , say the short-term moves being considered on Capitol Hill — such as marginal tax credits and funds to boost lending to small businesses — are likely to fizzle out. They’re good ideas but they just don’t go far enough to reverse the loss of more than 8 million jobs over the last two years. Galbraith wants a government-created financing network that will lend money to businesses and industries which align with long-term U.S policy initiatives, like energy consumption and renewal. Extending unemployment benefits is also a good idea, Galbraith said, but it’s a relief measure, not a job-creation one. The economists also focus on the demand side of the economics equation. “Without adequate demand, small businesses can’t sell their goods and services, and therefore won’t hire,” Robert Reich, an economist at the University of California at Berkeley and former Labor Secretary under President Bill Clinton, said in an interview. “Consumers won’t have money in their pockets until the government primes the pump adequately through a larger stimulus that gets money out there right away.” A Friday editorial in the New York Times noted: “No matter what Congress does to lower the cost of labor, employers won’t hire unless they believe demand will be sufficient to sell whatever the business produces.” There are about six unemployed workers for each available position , according to the Labor Department. In normal economic times, there is at most one unemployed worker per open position, notes Mark Zandi , chief economist for Moody’s Economy.com. Zandi expects the unemployment rate to hit 10.6 percent in the coming fall, nearly a full percentage point increase over the current rate. Goldman Sachs, arguably the leading firm on Wall Street, forecasts unemployment to average 10.3 percent this year and 10.7 percent in 2011. The Obama administration is a bit more optimistic. It said last week it expects unemployment to average 10 percent this year, and 9.2 percent next year. Increasing demand will stimulate job growth, and the simplest way to do that is for the government to hire workers, either directly or through private contractors working on public projects. “Direct public-service employment is straightforward. As long as the new government jobs do not compete with the private sector, the net job creation should be one-for-one,” wrote Alan Blinder , a Princeton University economist and former Federal Reserve official, in a Nov. 15 op-ed for the Wall Street Journal . “So hire people to repair parks, not shopping malls. And if we restrict ourselves to low-wage jobs, the cost will not do grievous harm to the budget. For example, at an average all-in cost of $30,000 a year, one million new jobs would cost $30 billion.” After debating the benefits and costs of tax incentives versus government hiring, Blinder concluded: “The more I dwell on these things, the better direct public-service employment sounds.” During a Dec. 3 meeting on jobs at the White House, several participants discussed the benefits of the government directly hiring more workers, according to a summary report : Another idea that came up several times, specifically mentioned by Alan Blinder, Anna Burger [secretary-treasurer of the Service Employees International Union], [Detroit] Mayor David Bing and Larry Mishel [president of the Economic Policy Institute], was public sector hiring, particularly by state and local governments. Anna Burger mentioned several possible tasks for new public employees, including home care and child care, park cleanup, infrastructure construction, and weatherization of public buildings. She also noted that jobs requiring little training could be created more quickly than those requiring specialized workers. Zandi notes that increasing spending gives taxpayers more “bang for the buck” than tax cuts. For every additional $1 spent on infrastructure, the economy gets a $1.57 benefit. The only better deals for taxpayers are increased unemployment benefits, food stamps and a program that involves states shouldering a portion of private-sector salaries in exchange for those workers keeping their jobs. Hiring more workers, though, means adding an expense to the government’s balance sheet. While tax cuts for businesses will bring in less revenue, public sector hiring adds costs. Deficit hawks, ever mindful of increased government spending, would likely pounce on this. Galbraith and his like-minded colleagues argue that now is not the time to worry about deficits. “The valid complaints about fiscal policy over the past 14 months are not that it has run up the national debt and rewarded the princes of Wall Street, but rather that it has been too limited — that we ought to have done more. Yet these policies are political losers now: nobody is proposing more stimulus,” wrote J. Bradford DeLong, an economics professor at the University of California at Berkeley, in an op-ed on Project Syndicate . Last year’s $787 billion stimulus plan has widely been credited with averting disaster. DeLong argues that the lack of serious attention being given to a second robust stimulus “is strange, because usually when something works the natural impulse is to do it again. Good policies that are boosting production and employment without causing inflation ought to be politically popular, right?” “Investing in our nation’s infrastructure is one of the main pieces of President Obama’s approach to job creation,” an administration official wrote in an e-mail. “The administration has already invested over $80 billion in strengthening our nation’s infrastructure, to create jobs and strengthen regional economies, through the Recovery Act. There’s $48 billion in transportation infrastructure in the Recovery Act, including $8 billion to build a national high-speed rail network. In addition, the Recovery Act includes $3.4 billion in grants to private companies, utilities, manufacturers and cities to fund smart energy grid projects that will support tens of thousands of jobs and benefit consumers in 49 states. “We’re also investing $7 billion through the Recovery Act to bring broadband to communities where there is little or no access — a significant step forward in driving local economic development. Some additional examples include investments of $6 billion in State Clean Water and Drinking Water Revolving Funds to rebuild the country’s water infrastructure, $5.5 billion in General Services Administration federal buildings and $4 billion in the Department of Housing and Urban Development’s Public Housing Capital Fund.” A little over a third of last year’s stimulus (the Recovery Act) was allocated for federal contracts, grants and loans. The rest were for tax cuts and entitlement programs like unemployment benefits. Rather than acknowledging advice to ramp up public works projects, Washington is trying to prove it’s serious about reducing the deficit. That’s part of the reason why tax cuts and incentives for businesses are such popular ideas, as opposed to major infrastructure spending. Zandi recently wrote in support of such an idea. “Despite all the uncertainty, a tax break stands the best chance among the proposals under consideration for ensuring the U.S. job machine kicks into full gear later this year,” Zandi wrote Wednesday in an op-ed for Moody’s Economy.com . “Such a program could be particularly effective if implemented by late spring. By then, firms will have had time to regain their confidence, and banks should be extending credit somewhat more freely.” Obama’s payroll holiday proposal would create about 726,500 jobs — the most of the three, Zandi wrote. It would cost about $33 billion up front, or about $45,500 per new worker. Based on the most recent employment figures, that addition of new workers would return the overall employment level to where it was in July, when the unemployment rate was 9.4 percent. Also, taxpayers won’t get as much “bang for the buck” as they would if the government hired more workers. A job tax credit nets a $1.30 benefit for every $1 in cost. While the Obama administration has proposed a host of measures to stimulate job growth, like increasing the availability of credit for businesses, little is expected to go directly towards stimulating demand. “To make the leap from recovery to expansion,” the economy needs another $210 billion in fiscal stimulus over the next two years, said Zandi in January at an Urban Institute discussion . “We have to turn the corner on the notion that this is just a pump that needs to be primed, an engine that needs to be restarted, something that can be kicked back into functioning form with a little extra federal spending,” Galbraith said of stimulus plans. “We’ve actually done this twice — first in the spring of 2008, and then we did [it] in the spring of 2009. “It certainly didn’t fail,” he said of last year’s stimulus. “We’d be much worse off without having done it. But the expectation that this is a sufficient measure for restarting sustained economic growth has been disappointing, and that’s something we need to recognize.” In an interview, Jessica Milano, a senior fellow at the Democratic Leadership Council who recently wrote a report on job growth , said that the focus should be on long-term solutions that create sustainable jobs, rather than purely short-term stimulus. “The argument is…we need to do something now, we need to do something in the short-term,” she said. “I would argue what’s good for the long-term is good for the country overall. So taking the longer approach and focusing on strategies that will increase investment, and not only create jobs but build a lasting infrastructure for the 21st century, has more value than the short-term stimulus-type policies.” One example of a short-term fix is former President George W. Bush’s 2001 tax cuts. “That sort of stimulus, which is focused purely on consumption demand or improving consumer demand, might work in the very, very short-term. You might see a little bit of a bubble. You might see a little bit of a push. But I don’t think that is a sustainable long-term approach,” Milano said. “You can use that in combination with something else, but you can’t just use that.” In the end, policymakers have to do something substantial to ensure the nascent recovery underway doesn’t reverse course, or hurt the country’s long-term economic prospects. As Zandi put it in January : The Great Recession is over, but the recovery will be a difficult slog through much of this year. The risks are also uncomfortably high that the economy will backtrack into recession. Policymakers should provide more help to the economy to ensure the recovery becomes self-sustaining. The Federal Reserve must not raise interest rates too soon or end its credit easing efforts too quickly. Congress must provide more resources to unemployed workers whose benefits are running out, to state governments unable to balance their budgets, and to small businesses looking for credit and all businesses that expand payrolls.

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U.S. Government Shuts a Fourth Day After Record Snow as Airports Recover

February 11, 2010

By Brian K. Sullivan Feb. 11 (Bloomberg) — The U.S. government will close for a fourth day while a blizzard moves out over the Atlantic Ocean after setting snowfall records from Washington to Philadelphia and triggering power outages and havoc for commuters. Schools along much of the Washington to Boston corridor as well as federal agencies in the nation’s capital will remain shut for another “snow day” after the second of two back-to- back storms crippled air, rail and road traffic. The U.S. National Weather Service lifted its blizzard warning for New York before dawn. Schools in New York City will re-open today after the Department of Sanitation deployed 1,600 snowplows and 2,100 workers to clear major roads. Clear skies and temperatures just above freezing are forecast to start the melting process along the eastern seaboard, where an average of 12 inches (30 centimeters) fell from New York to Baltimore, said Andy Ulrich , a meteorologist with AccuWeather.com in State College, Pennsylvania. “The sun will be out fully and there won’t be a cloud in the sky,” Ulrich said in a telephone interview. “The sun is getting stronger as we approach spring so there will be some melting.” Grounded Flights, Outages The storm yesterday caused the cancellation of 5,700 flights across the U.S. and at least 1,100 more today. It also caused power outages from North Carolina to Pennsylvania and New Jersey for at least 178,000 customers, according to utilities. UBS AG , Switzerland’s largest bank, sent home an estimated 3,000 workers in New York, New Jersey and Connecticut amid the blizzard, advising them to take public transport if possible. New Jersey Transit was set to resume normal services for commuters today while Long Island Rail Road said it was preparing for regular rush-hour services after blizzard conditions created chaos and delays for commuters. Exelon Corp. ’s Peco utility said today that about 106,000 customers remain without service in southeastern Pennsylvania after the second storm of the week dumped almost two feet of snow on the region. Delaware and Maryland were also hit hard, with 27,000 Delmarva Power customers without power by nightfall yesterday, said Bridget Shelton , a spokeswoman for the company, a subsidiary of Pepco Holdings Inc. It may take several days to restore power to all of them, she said. “This is clearly a multiday event,” Shelton said in a telephone interview. “The weather and the roads are contributing to an extended restoration effort.” Natural gas futures fluctuated as heating oil climbed on higher demand and crude oil rose for a fourth day in New York. Crude for March delivery gained as much as 76 cents, or 1 percent, to $75.28 a barrel on the New York Mercantile Exchange. Airlines Scramble Delta Air Lines Inc. , the world’s largest carrier, expects operations in Washington and Philadelphia to be almost entirely halted through midday. At least 460 more Delta flights are canceled for today, said Trebor Banstetter , a spokesman for the Atlanta-based company. At Washington’s Dulles International Airport, the snow was 26 inches deep, according to the National Weather Service, with 11 inches on the ground at Kennedy International Airport. AMR Corp. ’s American Airlines scrapped 180 flights today, said Tim Wagner , a company spokesman. US Airways Group halted 478 as well, said Valerie Wunder , a spokeswoman. Cost to Taxpayers In Pennsylvania, closed interstate highways were expected to reopen by dawn even with the setting of annual snowfall records, Governor Edward G. Rendell said. Two tractor-trailer trucks that jackknifed on I-78 yesterday left 170 vehicles stuck in the snow, said Robert French , Pennsylvania Emergency Management Agency director. The federal government announced the closing of agencies in the Washington area for a fourth consecutive day. Washington received 10 inches of snow yesterday, pushing the seasonal total to 54.9 inches, surpassing the mark set in 1898-99. The record snowfall that brought the U.S. capital to a standstill is costing taxpayers about $100 million each day the federal government is shut in productivity loss and other costs, the Office of Personnel Management said. Snow Records In Baltimore, 11.9 inches fell through the evening rush- hour, setting a new annual tally of 72.3 inches. That surpassed the 62.5 inches that fell in 1995-96, according to the National Weather Service in Sterling, Virginia. A winter weather advisory for hazardous travel as a mix of rain and sleet turns to snow was issued until midnight today for the Dallas area by the National Weather Service. Snow in some areas north of Interstate 20 could reach four inches, it said. The U.S. southern states of Louisiana, Mississippi and Alabama may get a sampling of what the Northeast has endured when a storm bearing snow moves through there, Ulrich said. The National Weather Service in New Orleans issued a winter storm watch for sleet that could turn to snow for tonight through tomorrow afternoon. The watch was expanded to include all areas south of the Louisiana-Mississippi border to the Interstate 10/Interstate 12 corridor. Ulrich said it is too early to forecast accurate totals for those states, which seldom see snow, though the weather service said amounts could reach as much as six inches. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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Record Snowfalls in Washington Area Cost U.S. Taxpayers, Local Businesses

February 10, 2010

By Catherine Dodge and Kate Andersen Brower Feb. 11 (Bloomberg) — The blizzard and record snowfall that brought the U.S. capital to a standstill is costing taxpayers about $100 million each day the federal government is shut. Near-whiteout conditions left federal offices closed for a third straight day yesterday, and last night the Office of Personnel Management announced the shutdown remains in effect for today. The office estimates that each day the government closes results in a loss of about $100 million in productivity and other costs. Washington yesterday broke its annual snowfall record. The nation’s capital received at least 9.8 inches (24.9 centimeters), pushing the seasonal total to 54.9 inches, which breaks the old mark of 54.4 set in 1898-99, according to the National Weather Service in Sterling, Virginia. The storm was the second for Washington in less than a week; 20 inches of snow fell over the weekend. Many government employees are working, even as their offices have been officially closed. “Employees either telecommute or bring work home,” said Steve Ellis , vice president of Taxpayers for Common Sense , a Washington-based watchdog group. “Not being in the office doesn’t necessarily mean not being productive.” Essential employees report to their offices and critical work is completed, he said. “The country can get by a few days without people manning the offices and the phones, but I imagine if it went much longer we would start to run into problems,” Ellis said. ‘Cost of Doing Business’ The government shutdown “is a cost of doing business,” Robert Bixby , head of the Washington-based Concord Coalition , a nonpartisan budget watchdog group, said. “What are they supposed to do, bring people in and get them killed on the roadways?” Washington’s electric supplier, Pepco, a subsidiary of Pepco Holdings Inc ., pulled its crews off the streets yesterday because of unsafe conditions, according to the company’s Web site. Washington’s Dulles International and Reagan National airports were closed yesterday. Even the U.S. Postal Service suspended delivery during the blizzard, and city snow plows were pulled out of service during whiteout conditions, the local ABC station reported on its Web site. Peter Morici , an economist at the University of Maryland in College Park, said the government closure won’t have a big effect. “The checks will still be written, the money will be spent and tax revenue will be collected,” he said Won’t Lose Customers “The federal government isn’t going to lose customers to anybody,” he said. “It isn’t like the Japanese government is going to get the sales.” Any work that isn’t finished this week will just get made up later on, Morici said. Although the shutdown is bad news for restaurants that cater to government workers, the local economy isn’t likely to take a big hit because the money is spent elsewhere, such as in hardware stores on salt, shovels and other tools, he said. “This is a great inconvenience, but for the losers, there are winners,” Morici said. “It tends to even out.” One of the losers yesterday was the Old Ebbitt Grill in downtown Washington, across from the U.S. Treasury Building. Just a handful of customers were trickling into the normally bustling restaurant, said manager Jenna Velella. “We’re kind of known as the power-lunch place in the area,” she said. With all the government workers, attorneys and lobbyists snowed in, there was little action. ‘A Lot Quieter’ “When they aren’t here, it’s definitely a lot quieter,” Velella said. In the five years Velella has been at the restaurant, she said she’s never seen it as slow as it’s been the past couple of days. Barbara Lang, president of the D.C. Chamber of Commerce, said the snow and the double whammy of the government closure is “disastrous” for small stores and restaurants downtown. She estimates losses in the millions of dollars for these businesses. “You’re not going to make up five or six days of activity,” she said. “That money is just gone.” Some businesses took advantage of the bleak weather. The Dupont Hotel hosted an “ice bar,” serving beer, malts and Irish coffee outside on Feb. 6, a Saturday. The hotel made twice as much money at the bar than it would have on a normal weekend day, said Aaron Gillespie, director of sales and marketing. ‘A Wash’ Gillespie said the money he’s making on food sales — and the fact that most hotel occupants can’t leave — make the blizzard “a wash” for business. The people who were going to check out aren’t leaving and the people who were going to check in can’t get into town, he said. Vida Fitness , a three-floor gym and spa in Washington’s Chinatown, stayed open from 9 a.m. to 5 p.m. yesterday seeking to capture business from cooped-up city dwellers. David von Storch, president and founder of three Vida Fitness gyms in Washington, said while attendance is down 50 percent, he’s winning a lot of “positive PR points” with customers. “You can only stay inside so long before you get cabin fever; the gym is an outlet to blow off some steam,” he said. Von Storch also owns three Capital City Brewing Company restaurants, two in Washington D.C. and one in northern Virginia, where business isn’t doing so well. “We are getting slammed,” he said. “We’ve lost $250,000 in sales since Saturday and there’s no way to make the money back from the meals we’ve lost, so we’re just going to have a bad quarter.” Civil Rights Leaders At the White House, even with most staff staying home, President Barack Obama’s schedule went on as planned yesterday. Obama met to discuss job creation for about an hour with civil rights leaders including Al Sharpton and Benjamin Jealous , the president of the National Association for the Advancement of Colored People . “We were glad the president, even on this day of a blizzard, decided to have the meeting and be so open and free with his time,” Sharpton told reporters outside the West Wing after the meeting while holding an umbrella and standing in a driving snow. “I would say good afternoon, but it’s cold out here,” Jealous said. To contact the reporters on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net ; Kate Andersen Brower in Washington at kandersen7@bloomberg.net .

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Washington, Baltimore Set Snowfall Records as Blizzard Chokes Eastern U.S.

February 10, 2010

By Brian K. Sullivan and Chris Dolmetsch Feb. 10 (Bloomberg) — Blizzard warnings for as much as 20 inches of snow were posted from Washington to Long Island as a storm settled in for a daylong siege, closing government offices, grounding 9 percent of U.S. flights and threatening 3 inches an hour for New York. The storm is also stirring up tropical storm-strength winds from North Carolina to Massachusetts, where gusts of nearly 60 mph (96 kph) are expected, according to the National Weather Service . The gusts may knock down trees and power lines, causing widespread power disruptions, the agency said. “With the storm intensifying rapidly this morning, the worst-case scenario in terms of a truly paralyzing blow to the Washington-Philadelphia-New York urban corridor will be realized,” said Jim Rouiller , a senior energy meteorologist at Planalytics Inc. He said many cities in the region “are now very near or have exceeded their all-time snowfall for a winter season. It may take days for the infrastructure associated within this corridor to fully recover.” The storm is the second in less than a week for Washington, which received as much as 20 inches over the weekend and had been struggling to dig out. Federal offices closed early on Feb. 5 and have not been open since. Getting Stronger The storm’s barometric pressure is expected to fall to 970 to 969 millibars, said Glenn Field, a weather service warning coordinator meteorologist in Taunton, Massachusetts. “That is an extremely intense storm,” Field said by telephone. The barometric pressure is the kind usually found in a Category 1 hurricane, Jeff Masters of Weather Underground in Ann Arbor, Michigan, said. Hurricane-strength winds and seas of as high as 30 feet (9 meters) are expected to develop off the U.S. East Coast, according to weather service bulletins. “This ranks as one of the more intense Nor’easters,” Masters said by telephone. “Roof collapses are happening and that is going to be a concern with the heavy weight of the snow.” Snow was falling on Long Island at a rate of 2 inches per hour, Field said at mid-morning. The weather service office in Upton, New York, received 5 inches in just two hours, he said. Snow Totals As of 1 p.m., 8.7 inches were reported at Reagan National Airport; 11.9 inches at Baltimore-Washington International; 8.8 at Philadelphia International; 6.3 inches in Tenafly, New Jersey; 5 inches in Manhattan’s Central Park ; 6 inches at Sag Harbor, New York; and 6 inches in South Norwalk, Connecticut, according to the National Weather Service. In Delaware, 17,000 are without power according to Bridget Shelton, a spokeswoman for Delmarva Power , a subsidiary of Pepco Holdings Inc. “We’re having problems getting people restored because of a lack of visibility with the wind whipping the snow around,” Shelton said. “A lot of the crews just can’t see well enough to do what they need to do.” New York-based Consolidated Edison Inc. is adding extra crews to help avert snow- and ice-related blackouts, according to a company statement. Washington’s electric supplier, Pepco, also a subsidiary of Pepco Holdings, pulled its crews off the streets because of unsafe conditions, according to the company’s Web site. Travel Shutdowns Pennsylvania Governor Edward G. Rendell ordered Interstates 83, 78, 77, 476, 176, 676 and parts of 81 to close. Additional road closures are expected. “For your safety, do not drive,” Rendell, a Democrat, said in a statement. A blizzard warning issued early today for the New York City area is in effect until 6 a.m. tomorrow, the National Weather Service said. Washington’s blizzard warning is in effect until tonight, while Boston may receive 8 inches (20 centimeters) of snow and as much as 12 inches may fall south of the city, said Paul Walker , a senior meteorologist at AccuWeather Inc. New Jersey Transit said it would curtail its schedules after 2:30 p.m. Amtrak , the national passenger railroad, hasn’t run a full schedule since last week’s storm and more trains were canceled yesterday, a spokesman, Cliff Cole , said. More than 4,200 flights have been canceled in the U.S. so far today, or about 9 percent of the total schedule, according to FlightStats.com . Coming on top of at least 2,700 yesterday, that is the most since at least 2004, when the Portland, Oregon- based company started gathering data, said Meara McLaughlin, vice president of business development. Flight Disruptions More than 500 flights have been canceled for tomorrow and “hundreds and hundreds more” are likely, she said. “Usually cancellations are system-specific, like when there’s a computer outage or a storm in one city,” McLaughlin said. “With this, it’s every carrier at more than half of the nation’s largest airports. It’s really a unique situation.” Washington’s Dulles and Reagan National airports were closed . Delta Air Lines Inc. , the world’s largest carrier, scrubbed 900 flights today and expects operations in Washington and Philadelphia to be almost entirely halted through mid-day Thursday, said Betsy Talton , a spokeswoman for the Atlanta-based company. AMR Corp. ’s American Airlines planned to shut down its operations at New York’s LaGuardia airport at noon, said Tim Wagner , a company spokesman. US Airways Group halted 1,571 flights, or half its schedule, said Valerie Wunder , a spokeswoman. Some weather models are pointing to another, probably less intense storm, hitting the region early next week, Masters said. To contact the reporters on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ; Chris Dolmetsch at cdolmetsch@bloomberg.net .

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Google to Build High-Speed Internet Network in Challenge to AT&T, Verizon

February 10, 2010

By Ari Levy and Kelly Riddell Feb. 10 (Bloomberg) — Google Inc. is planning to build high-speed fiber-optic broadband networks in the U.S. to offer Internet speeds that are more than 100 times faster than what Verizon Communications Inc. and AT&T Inc. sell today. The company, owner of the world’s most popular Web-search engine, said today it will offer the service at a “competitive price” to at least 50,000 people and potentially as many as 500,000. Google wants to use the networks for applications that consume lots of bandwidth. Google’s jump into the market may pressure AT&T , Verizon and Comcast Corp. to bolster their high-speed networks, said Mike Jude, an analyst at researcher Frost & Sullivan in Denver. The company already offers a wireless network in Mountain View, California, and is an investor in Clearwire Corp. , which provides Internet access using a technology called WiMax. “The more competition in broadband the better, the higher the bandwidth the better,” Jude said. Google’s plan to offer speeds of 1 gigabit per second may prompt competitors to follow, he said. “If Google went out and started delivering a gigabit per subscriber, it would show that anybody with fiber can do the same thing.” Verizon’s FiOS, AT&T’s U-Verse, and Comcast’s DOCSIS 3.0 services offer residential downloads no faster than 50 megabits a second, with the cheapest connections being 1 megabit or less. While the companies could offer faster speeds, they haven’t done so because there hasn’t been demand, said Lawrence Harris , an analyst at CL King & Associates in New York. A 1-gigabit service could be popular with video-game players and those who want faster video, and could eventually extend into 3-D viewing, Harris said. ‘Real Progress’ Google’s first step is to find cities that want the service, said Minnie Ingersoll, a product manager at the Mountain View-based company. She said Google will likely identify at least one city this year. The company’s engineers and outside developers will work on applications that illustrate the speed of the fiber connection, she said. Google plans to work with companies that build fiber-optic networks, Ingersoll said. Google is probably still soliciting interest from vendors, and companies that helped with Verizon’s FiOS build may be poised to benefit from the project, Harris said. Those include Alcatel-Lucent SA , BigBand Networks Inc., Tellabs Inc. and Corning Inc., he said. “Network providers are making real progress to expand and improve high-speed Internet access, but there’s still more to be done,” Google said on its blog. “We don’t think we have all the answers — but through our trial, we hope to make a meaningful contribution to the shared goal of delivering faster and better Internet for everyone.” Broadband ‘Testbed’ Google fell $2 to $534.45 at 4 p.m. New York time on the Nasdaq Stock Market. Comcast slid 8 cents to $15.31. AT&T fell 14 cents to $25.12 on the New York Stock Exchange, and Verizon rose 12 cents to $28.87. Google has urged the Federal Communications Commission to find new ways to promote high-speed Internet access. FCC Chairman Julius Genachowski said today in a statement that Google’s trial is a “testbed for the next generation” of Internet services. Bob Varettoni , a spokesman for New York-based Verizon, said Google’s network expansion is “another new paragraph in this exciting story.” AT&T spokesman Michael Coe and Comcast spokeswoman D’Arcy Rudnay declined to comment. “We look forward to learning more about Google’s broadband experiment in the handful of trial locations they are planning,” Brian Dietz , a National Cable and Telecommunications Association spokesman, said in a statement today. The cable industry will invest in and improve the speed of its networks, he said. Clearwire Investment Google will collect responses from communities until March 26, and will announce which areas have been chosen later this year. The company plans on building the fiber lines to the home, much like Verizon’s FiOS, and will be paying for the deployment, Ingersoll said. Verizon is investing $23 billion in its fiber-optic network. Ingersoll declined to specify how much money Google has dedicated to its venture. The company had $24.5 billion in cash and short-term investments at the end of December. Google is expanding in the telecommunications industry in other ways. In January, the company introduced a touch-screen mobile phone called Nexus One and opened an online store to sell the handset. In 2008, Google was part of a group of companies that invested in Clearwire, founded by mobile-phone pioneer Craig McCaw . ‘Grandiose’ Plans In 2008, Google pushed for spectrum being auctioned by the U.S. government to be open to any device or program. “Google’s announcement today amounts to a nationwide competition for communities to step up and make the case for what a next generation network could do for them and then show America what is possible,” Massachusetts Senator John Kerry said in a statement. “I believe in the power of big broadband pipes over which people are free to innovate and deliberate and will be watching this experiment carefully.” In 2006, Google won a bid to build a free Wi-Fi network in San Francisco. The plan was put on the back burner after EarthLink Inc., which was going to build the network, backed out and city politics delayed deployment. “Sometimes Google has a very short attention span, they have grandiose plans and then a year later everyone asks what have they done with that?” said Tero Kuittinen , an analyst at MKM Partners LP in Greenwich, Connecticut. “This announcement took everyone a bit by surprise and we don’t know what’s going to come of it.” To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net ; Kelly Riddell in Washington at kriddell1@bloomberg.net

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Washington Closes, Flights Canceled in Northeast as Snowstorm Hits Region

February 10, 2010

By Brian K. Sullivan Feb. 10 (Bloomberg) — Thousands of flights were canceled, schools in New York closed and the U.S. Congress suspended work as a winter storm threatened to drop as much as 20 inches (50.8 centimeters) on parts of the East Coast today. The storm, the second for the Washington-Baltimore area in less than a week, will be accompanied by cold and winds gusting from 35 to 55 mph (56 to 88 kph) in the Northeast, forecasters said. Ten to 20 inches could fall in Washington and Baltimore, while 10 to 16 are forecast for New York. The winds are likely to be intense enough to rival those of a tropical storm, said Jim Rouiller , a senior energy meteorologist at Planalytics Inc. “The words unprecedented and paralyzing would describe what is about to happen to the Philadelphia-Baltimore-DC corridor,” Rouiller said in an e-mail. “It’s looking more likely that blizzard or near-blizzard conditions will hit New York City.” Winter storm warnings stretch from Illinois to Massachusetts, the National Weather Service said. The snow began falling at midday yesterday in Washington and was expected to begin in New York overnight. Heating oil advanced on speculation demand will increase as temperatures plunge in the Northeast, which consumes four-fifths of U.S. home heating fuel. Contracts for March delivery gained 5.18 cents, or 2.7 percent, to settle at $1.9373 a gallon on the New York Mercantile Exchange. Flights Canceled Amtrak , the national passenger railroad, hasn’t run a full schedule since last week’s storm, and more trains were canceled yesterday, said Cliff Cole , a spokesman. At least 2,000 flights have been canceled nationwide, according to U.S. airlines. US Airways Group Inc. halted 1,300 flights today across its system, including many at New York’s LaGuardia and Washington’s National airports, or 42 percent of its entire schedule, while Delta said it cut “several hundred” and AMR Corp. ’s American Airlines trimmed 120. The U.S. Senate won’t meet today because of the storm, Senate Democratic Leader Harry Reid announced on the floor yesterday. The House has canceled votes for the rest of the week. In the New York City area, where a winter storm warning was posted and public school students had the day off, the snow is expected to be heavy at times before tapering off tonight, the National Weather Service in Upton, New York, said. In New York City, 365 plow-equipped salt-spreaders were ready to begin operating at first snowfall, said Kathy Dawkins , a spokeswoman for the Sanitation Department . The plan calls for some 1,600 plows to start work when 2 inches pile up. Snow removal usually costs the city about $1 million per inch of accumulation, Dawkins said. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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Federal Offices Closed Another Day as Washington Readies for Second Storm

February 9, 2010

By Brian K. Sullivan Feb. 9 (Bloomberg) — Federal government offices remain closed for a second full day as Washington, still reeling from a weekend blizzard, prepared for a storm packing as much as 20 inches (51 centimeters) of new snow. The storms, which may also dump 8 to 13 inches of snow on New York and Long Island, will be accompanied by cold and winds gusting from 35 to 55 mph (56 to 88 kph) in the Northeast, forecasters said. The National Weather Service urged people not to travel except for emergencies. The snow “has a very distinct potential of reaching crippling proportions from Washington and Philadelphia to New York City and possibly Boston,” said Jim Rouiller , a senior energy meteorologist at private-forecaster Planalytics Inc., in Wayne, Pennsylvania. “If this upcoming storm indeed verifies, it will lift annual snowfall to historic levels and set many all-time snowfall records across this portion of the country,” he said. Crude oil rose for the first time in four days on the forecast, rebounding from a seven-week low. Heating oil also was up in trading in Europe, boosted by the forecasts for cold weather and more snow in the U.S. A winter storm warning was posted for Washington starting at noon today, where 10 to 20 more inches may fall, the agency said. Federal government offices, which closed early Friday, remain shut, the Office of Personnel Management said in an e- mailed statement. Warnings Posted A snow emergency issued in the District of Columbia on Feb. 5 when as much as 40 inches of snow began falling over the mid- Atlantic region had been lifted yesterday, the Washington Post said. A winter storm warning also was posted for New York City starting at midnight. Snow in metropolitan New York was expected to be heavy at times before tapering off tomorrow evening, the weather service in Upton, New York, said. A system moving in from the west is forecast to collide with a coastal system moving north. Tom Kines , a senior expert meteorologist with AccuWeather Inc., said 6 to 12 inches of snow may fall along a corridor from Washington to Boston and some areas may receive as much as 18 inches. Winter storm watches, warnings and advisories stretch across much of the eastern half of the U.S. from Minnesota to Delaware and south to Alabama and the Florida Panhandle, according to the National Weather Service . Temperatures from Southern California to Maine are expected to be below normal from Feb. 13 to Feb. 17, according to the latest forecast by the U.S. Climate Prediction Center . Midwest Snow The region from Chicago to Detroit, where snow began yesterday, were expected to receive as much as 12 inches, Kines said. More than 230 flights at Chicago’s airports including those by Southwest Airlines Co. have already been cancelled, the Sun-Times reported today. Forecasters expect up to 20 inches of new snowfall in the Baltimore area. Public schools in central Maryland remained closed today and may keep students from class for the rest of the week if heavy snows continue, the Baltimore Sun reported. Ski areas in Pennsylvania and Virginia will get a boost from the storm while resorts in Maine, Vermont and New Hampshire are likely to miss out, Kines said. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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Skype Rival Fring of Israel Lures Mobile-Phone Users to Free Video Calls

February 8, 2010

By Gwen Ackerman Feb. 8 (Bloomberg) — Israeli startup Fring , backed by founders of instant messenger ICQ, is bringing free video calls to mobile phones and offering wireless services similar to those of Skype Technologies SA. “We overlap with what Skype does, but our starting point is different,” said Chief Executive Officer Avi Shechter. Skype lets users call each other for free via the Internet. “We don’t even have a computer solution,” said Shechter, who previously headed ICQ , sold to AOL for $287 million in 1998. “We believe in mobile and that mobile is where the growth will be.” Fring is adding more than 500,000 users a month and allows them to call, message, and chat with each other over mobile phones. The average user is on Bnei Brak-based Fring’s service for four hours a day, Shechter said in an interview. “The company has a good chance of coming into a market dominated by Skype by offering something marginally better,” said Gilad Alper , an analyst at Tel Aviv-based Excellence Investments Ltd. He added that it could take years “to become very important in terms of mass adoption.” Fring, set up three years ago, also lets users see one another’s locations and integrate friend lists from other social networks, such as Facebook and Twitter. Its investors include Yossi Vardi , who backed ICQ, and Pitango Venture Capital, an Israeli fund with $1.4 billion under management. ‘The Hottest Space’ “Fring’s potential is that it is operating in maybe the hottest space, mobile internet,” said Rami Kalish , Pitango co- founder and managing general partner. Mobile Internet use in the U.S. grew 34 percent from the first quarter of 2008 to the first quarter of 2009, reaching 51 million mobile Internet users in March 2009, according to California-based TMT Strategic Advisors. Fring’s mobile instant messaging component is “a good example of how mobile instant messaging can successfully evolve,” researcher Gartner Inc. said in an October report. Skype, with more than 520 million customers, lets users call each other for free over the Internet from computers and mobile phones. It makes money when customers use the service to call regular phones and pay for voice-mail, call forwarding and text messaging services. EBay Inc., which sold its controlling stake in Skype for about $2 billion in November, had predicted Skype sales will exceed $1 billion in 2011. Advertising Revenue Fring is making money on advertising and plans to start add-on paid services soon, Shechter said. The company has signed deals with Telefonica 02 Slovakia and Telekom Austria AG’s domestic wireless unit Mobilkom. Phone companies are seeking to make more money from data services such as mobile Internet as voice revenue falls. Israel in 2008 drew more than twice the venture capital per citizen than the U.S. and 30 times as much as continental Europe, according to Saul Singer , co-author of the book “Start- up Nation,” which made the New York Times list of hardcover business best sellers. Israel currently has 64 companies trading on the Nasdaq and is the second-largest foreign contingent after China, according to Nasdaq official Asaf Homossany . To contact the reporter on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net .

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New York May Get Snow as U.S. Northeast Faces Round Two of Severe Weather

February 8, 2010

By Brian K. Sullivan Feb. 8 (Bloomberg) — A new storm system barreling across the country may bring as much as 12 inches (30 centimeters) of snow to New York, Washington and Baltimore starting tomorrow night, forecasters said. With the Washington-Baltimore area still digging out from a weekend storm that left record snowfalls in some areas, the latest blast of winter “is going to be accompanied by heavy winds, which will make it feel worse, and across the Northeast that wind is going to last through the weekend,” said Tom Kines , a meteorologist with AccuWeather Inc. in State College, Pennsylvania. The forecast pushed natural gas futures up today as demand for heating fuel rises. Crude oil rose for the first time in four days, rebounding from a seven-week low. Kines said 6 to 12 inches of snow may fall along a corridor from Washington to Boston, and some areas may receive as much as 18 inches. The snow will be followed by cold air that will drop temperatures 10 to 15 degrees below normal and be accompanied by heavy winds, he said. Winter storm watches, warnings and advisories stretch across the U.S. from Utah east to New Jersey and from North Dakota south to Alabama, according to the National Weather Service . Temperatures from Southern California to Maine are expected to be below normal Feb. 13 to 17, according to the latest forecast by the U.S. Climate Prediction Center . Natural gas for March delivery rose 8.7 cents, or 1.6 percent, to $5.602 per million British thermal units at 9:56 a.m. on the New York Mercantile Exchange. Crude oil for March delivery rose 39 cents on the Nymex, or 0.6 percent, to $71.58 a barrel at 9:42 a.m. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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Mid-Atlantic States Plow Roads, Runways, Rail Lines, Brace for More Snow

February 8, 2010

By Vincent Del Giudice and Dan Hart Feb. 8 (Bloomberg) — U.S. government offices were closed today as Washington, D.C., and the mid-Atlantic region attempted to dig out from a weekend blizzard and braced for another storm expected in the coming days. The storm of 2010 that was described by some forecasters as “epic” left almost 40 inches of snow in some places. The blizzard led to thousands of power outages and shut down air traffic along the mid-Atlantic seaboard. The National Weather Service said an encore storm was forming that may unleash another carpet of snow and ice during the next 48 to 72 hours. State and municipal officials told residents to think twice about traveling while cities dug out from the initial onslaught. Schools in the Washington area canceled classes for today. “People need to be very careful,” said Beverley K. Swaim- Staley , Maryland’s secretary of transportation, in an interview. “It was a very heavy snow.” As far as the next storm, she said, “We’re doing everything we can to get ready. Obviously, three feet of snow won’t melt by then.” The Virginia Railway Express, a commuter line connecting Washington to Manassas, Virginia, and Fredericksburg, Virginia, announced on its Web site it planned to suspend operations today because of power outages. ‘Amazing’ The weather service in Sterling, Virginia, issued a winter storm watch for tomorrow for a system that “had potential for 5 or more inches of snow” for the region. The weather service placed the chance of precipitation at 90 percent by tomorrow night. Over the weekend, Elkridge, Maryland, south of Baltimore, recorded 38.3 inches (97 centimeters) of snow, according to the National Weather Service. Baltimore’s airport had 24.8 inches, while Washington’s Reagan National had 17.8 inches, its second- biggest snowfall total. Philadelphia registered 28.5 inches, its second-biggest snowfall also. In Virginia, Howellsville, west of Washington, reported 37 inches of snow. “This was an epic storm,” said Andrew Ulrich , a meteorologist for AccuWeather.com Inc. in State College, Pennsylvania. “The sheer amount of snow was amazing.” Two men died assisting at the scene on an accident on Interstate 81 in Virginia on Feb. 5. Forecasters compared the blizzard to the “Knickerbocker Storm of 1922” that caused a deadly roof collapse at a Washington theater called the Knickerbocker. Ninety-eight people died in that catastrophe and 133 others were injured. Few Planes, Trains Yesterday, airports across the region struggled to dig out from the storm, and Washington Reagan, across the Potomac River from Washington, was closed for a second day. The other airports in the Washington region resumed a very limited schedule. Subway systems in Washington and Baltimore operated limited service, and utility crews worked to restore service to thousands of customers. Bus service was suspended in Washington and its suburbs, Baltimore and its suburbs, and parts of Delaware. In Pennsylvania, the Southeastern Pennsylvania Transporation Authority reported delays yesterday on its bus system due to “icy conditions,” according to the SEPTA web site. Philadelphia International Airport, meantime, reported some flight cancellations. The blizzard also caused the Senate to postpone a vote. Jim Manley , a spokesman for Senate Majority Leader Harry Reid , Democrat of Nevada, said the Senate would wait until tomorrow to consider the nomination of Craig Becker to the National Labor Relations Board. Costly The snow removal efforts strained state and local government coffers. Before the weekend, Maryland spent $50 million on snow removal this season. A storm in December cost $27 million of that and this weekend’s storm will likely cost more than that, Swaim-Staley said. The state has exhausted its reserve fund and will probably seek state assistance, she said. Virginia had already spent the $79 million it budgeted for this year for snow removal, and paid for the latest storm from a $25 million reserve fund. Karen Le Blanc, a spokeswoman for the District of Columbia said the city government was “probably over” its $6.2 million budget for snow removal. To contact the reporter on this story: Vincent Del Giudice in Washington at vdelgiudice@bloomberg.net . Dan Hart in Washington at dahart@bloomberg.net .

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Washington, Philadelphia Get Two Feet of Snow; Thousands Are Without Power

February 6, 2010

By Dan Hart and Kelly Riddell Feb. 6 (Bloomberg) — A winter storm packing strong winds and more than two feet of snow socked the Baltimore and Washington metropolitan areas, with more snow forecast through today. The town of Elkridge, Maryland, just south of Baltimore, recorded the region’s most snowfall with 30.3 inches (77 centimeters) as of this morning. Twenty inches was measured in Baltimore and northeast Washington, while Dulles International Airport had 18.9 inches, according to the National Weather Service. “It doesn’t appear likely that this one will break the record for Washington, but it may do so for Baltimore,” said Kristina Pydynowski with AccuWeather.com Inc. in State College, Pennsylvania. A blizzard warning covering the northern portion of the District of Columbia, stretching up along the Chesapeake Bay in coastal Maryland and into Delaware and New Jersey remained in effect through 10 p.m. The warning means heavy snow combined with winds of as much 25 miles per hour could cut visibility to less than a quarter of a mile. The storm knocked out power to about 100,000 Dominion Resources Inc. customers, most of them in northern Virginia, the company said on its Web site. About 105,000 customers of Pepco Holdings Inc., most of them in Montgomery County, Maryland, were without service as of noon. ‘Snowmaggedon’ In the capital, it remained a workday for some. A 15-car presidential convoy navigated snowy streets to take President Barack Obama to a speaking engagement at Washington’s Capital Hilton hotel, just blocks from the White House. “Snowmaggedon in Washington D.C.,” the president said to the crowd of fellow Democrats, joking that the Californians present weren’t used to such wintry conditions. Most flights in and out of Baltimore-Washington Airport today have been canceled, according to the airport’s Web site . All flights at Washington Reagan International Airport and Dulles International Airport are grounded, the Washington Metropolitan Airports Authority said. Last night, the Washington Metropolitan Area Transit Authority suspended above-ground rail service and bus service last night. Philadelphia Amtrak canceled several trains today due to downed trees and power lines on some of its tracks in Virginia. Accela Express train service between Washington and New York has been suspended, Amtrak said on its Web site. Philadelphia, on the northern edge of the storm, had 17.8 inches of snow as of this morning. The National Weather Service in Mount Holly, New Jersey, forecast as much as 24 inches for the city. More than 160,000 power outages were reported across Pennsylvania, Governor Ed Rendell’s office said. Washington’s all-time snowfall record was in January 1922 when 28 inches fell in the so-called Knickerbocker storm, the National Weather Service said. That storm killed 98 people and injured 158 when snowfall caused the roof of the Knickerbocker Theater on 18th Street and Columbia to collapse. Baltimore’s record of 26.8 inches came during the “Presidents’ Day Storm” in 2003, the agency said. A winter weather advisory was issued by the weather service for New York City, calling for between 1 inch and 4 inches of snow for the area through 6 p.m. “It may struggle to reach an inch in the five boroughs of the city,” Pydynowski said. “It’s just the way the storm is shaping up, this isn’t like your usual nor’easter where the snow reaches up and down the East Coast.” To contact the reporter on this story: Dan Hart in Washington at dahart@bloomberg.net ; Kelly Riddell in Washington at kriddell1@bloomberg.net .

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