CMYK

Nxxx,2010-12-31,B,001,Bs-4C,E1

S.& P. 500
1,257.88 D
1.90
Dow industrials
11,569.71 D 15.67
Nasdaq composite
2,662.98 D
3.95
10-yr. Treasury yield
3.36% U
0.01
The euro$1.3286 U 0.0072

EconomyCurrencies

U.S. takes steps to reduce its stakein G.M.’s former finance arm.
3

Despite its troubles, theeuro is adopted by a 17th
country, Estonia.
3

Comcast expects an NBC deal tohelp nonprofit news groups.

4SportsFriday
Pages 7-12

Elder Statesman
The Jets’ Richardson stillrunning hard at age 39. 7

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B1

FRIDAY, DECEMBER 31, 2010

Major Banks
Need
Midsize Ones
If big banks start failing again,
what will replace them?
In the United States and Europe, that is a question with unsatisfactory answers in the aftermath of the financial
crisis.
To put it in sports
terms, there was nobody on the bench
HIGH & LOW waiting for a chance
FINANCEto become a star.
One result is that even after a crisis in which it was every country
for itself, banking is becoming
more internationalized than ever.
It was not always such in the
United States. After the previous
big financial crisis in the early
1980s, which centered on badloans made to Latin Americancountries, there were major regional banks that — because ofluck or wisdom — had not madethe same mistakes.
Charlotte, N.C., became an international financial center. NationsBank, which began life asNorth Carolina National Bank,
took over Bank of America. The
name stayed, but the company
was very different.
To some extent, the availabilityof a bench stemmed from a longheld suspicion of banking in the
United States. Americans feared
big banks long after President
Andrew Jackson abolished the
Bank of the United States. For
most of the 20th century, banks
operated in only one state. In
some, Illinois most prominently,
banks could have only one office.
When barriers to interstatebanking fell, there were many
players able to grow into major
institutions.
But those days seem to begone. The banks with the ability
and desire to snap up significant
banks now seem to be at least as
likely to be based outside theUnited States as inside.
If the previous crisis was largely caused by ill-advised international lending, this one washomegrown. The lending excesses centered on home mortgages, an area in which nearly
every bank took part. Whenthings blew up, there were few
banks that could escape unscathed.
Still, some did better than others. JPMorgan Chase seems tohave made fewer bad loans, although it has major headaches
Continued on Page 5

New Capital
For Groupon
Sets StageFor Offering
By EVELYN M. RUSLIFLOYDNORRIS

FRED R. CONRAD/THE NEW YORK TIMES

Tyler Winklevoss, left, and his twin, Cameron. They want to undo a $65 million deal and pursue a case against Facebook.

From Twins, Second Thoughts
By MIGUEL HELFT

the value of the shares, leaving
them with far less than they had
agreed. Whatever their value at thetime of the deal, Facebook’s shares
have soared since, putting the current worth of the settlement, bysome estimates, at more than $140
million.
Next month, the twins and Mr. Narendra plan to ask afederal appeals court in San Francisco to undo the deal sothey can pursue their original case against Facebook and
Mr. Zuckerberg, and win a richer payday. They could,
though, lose it all.
Still, they say it’s not about the money, it’s about the
principle — and vindication.
“The principle is that they didn’t fight fair,” said Tyler
Winklevoss during an interview at a pub here recently.
“The principle is that Mark stole the idea.”
His brother, Cameron, chimed in, “What we agreed tois not what we got.”
Facebook denies it did anything improper and says theAgreement
Over Facebook Deal
Is Regretted

SAN DIEGO — Some people
go to court hoping to win millionsof dollars. Tyler and Cameron Winklevoss have already won tens of
millions. But six years into a legal
feud with Facebook, they want togive it back — for a chance to get more.
The Winklevosses — identical twins and Harvard graduates — say that they, along with another Harvard student,
Divya Narendra, had the original idea for Facebook, andthat Mark Zuckerberg stole it. They sued Facebook and Mr.
Zuckerberg in 2004, and settled four years later for $20 million in cash and $45 million in Facebook shares.
They have been trying to undo that settlement since,
saying they were misled on the value of the deal. But it has
not been an easy decision.
As recently as Thursday, the brothers considered dropping their effort to unwind the agreement, and went as far
as drafting a statement to that effect, according to people
close to the case. They decided, though, to keep fighting.
Their argument is that Facebook deceived them about

Continued on Page 4

Shaping a Network
With Oprah’s View

Academic
Economists
To Consider
Ethics Code
By SEWELL CHAN

By BRIAN STELTER

For decades cable channels have been built around
specific interests like news, sports or classic movies.
Beginning this weekend, there will be something altogether different: a cable channel shaped around a person, Oprah Winfrey.
The channel, called OWN, short for the Oprah Winfrey Network, will depend in part on Ms. Winfrey’s powerful role as a tastemaker for her millions offans.
When it starts Saturday at noon, the network
will essentially be recommending Oprah-branded
programs the way she
recommends books on“The Oprah Winfrey
Show.”“This network will
be mind- and heart-foodfor people,” Ms. Winfrey
said in an interview.
Her network is also
the most-watched experiment in the television industry. Ms. WinMARY ALTAFFER/ASSOCIATED PRESS
frey is taking an enormous risk by ending her
Oprah Winfrey is mov25-year-old
broadcasting to her own channel.
talk show in 2011 andmoving to cable, hopingthat her viewers will move with her. Whether they
watch or not, they’ll be paying for it: OWN is expected
to eventually earn 25 cents a month in subscriber feesfrom each of the 85 million households it will serve.
OWN is not just a symbolic move to cable frombroadcast. It is also a bet by Ms. Winfrey and her backers at Discovery Communications that media will be
more personalized in the future — beginning with achannel built around one of the biggest personalities in
the world.
“OWN is the first network, other than maybe theDisney Channel, that is really built around the worldview of a person,” said Tom Freston, the former chief
executive of Viacom and now an adviser to Ms. WinContinued on Page 4

The 30-year-old founder andchief executive of Groupon, Andrew Mason, could raise as muchas $950 million from investors in
the next few weeks, laying the
groundwork for a multibilliondollar initial public offering in
2011.
The social buying site, which
offers coupons for local businesses, has so far locked up $500 million in fresh capital from Fidelity
Investments, Morgan Stanley, T.
Rowe Price, and other large investors — allowing Mr. Masonand eight other directors to takea significant amount of cash off
the table.
In the coming weeks, the company could bring in another $450
million, according to a Securities
and Exchange Commission filingon Thursday.
If successful, Groupon’s latest
fund-raising effort would be thelargest ever for a start-up, a venture capital record held byDreamWorks Animation SKG forthe last 15 years, based on Thomson Reuters data.
A spokeswoman for Groupon
declined to comment on the outside investments.
The fund-raising is all part of
the typical lifecycle for an Internet start-up. But Groupon has
gone from a quirky idea to Web
darling in about two years — anespecially fast evolution that got
a turbo charge when the Chicagobased company spurned a $6 billion takeover offer by Google in
the first week of December.
A frenzy of activity followed
the failed bid.
Within days, institutional investors started lining up, readyto provide significant capital infusions. On Dec. 20, Groupon hired
its first chief financial officer, JaContinued on Page 2

HIROKO TABUCHI FOR THE NEW YORK TIMES

Kura, a chain in Japan, relies on small staffs and lots of automation, like sushi-making robots.

Conveyor Belts Bring Profit to Sushi Chain
By HIROKO TABUCHISAYAMA, Japan — The Kura “revolving sushi”
restaurant chain has no Michelin stars, but it has succeeded where many of Japan’s more celebrated eateries fall short: turning a profit in a punishing economy.
Efficiency is paramount at Kura: absent are thetraditional sushi chefs and their painstaking attention
to detail. In their place are sushi-making robots and anemphasis on efficiency.
Absent, too, are flocks of waiters. They have been
largely replaced by conveyors belts that carry sushi todiners and remote managers who monitor Kura’s 262
restaurants from three control centers across Japan.
(“We see gaps of over a meter between your sushi
plates — please fix,” a manager said recently by telephone to a Kura restaurant 10 miles away.)
Absent, too, are the exorbitant prices of conventional sushi restaurants. At a Kura, a sushi plate goesfor 100 yen, or about $1.22.
Such measures are helping Kura stay afloat eventhough the country’s once-profligate diners have tightened their belts in response to two decades of little economic growth and stagnant wages.
Many other restaurants and dining businesses inJapan have not fared so well. After peaking at 29.7 trillion yen in 1997, the country’s restaurant sector has
shrunk almost every year as a weak economy has driven businesses into price wars — or worse, sent them
belly-up. In 2009, restaurant revenue, including fromfast-food stores, fell 2.3 percent, to 23.9 trillion yen —20
percent below the peak, according to the Foodservice
Industry Research Institute, a research firm in Tokyo.
Bankruptcies have been rampant: in 2009, 674 dining businesses with liabilities of over 10 million yen
went under, the highest number in the last five years,
Continued on Page 3

WASHINGTON — When the
Stanford business professor Darrell Duffie co-wrote a book on
how to overhaul Wall Street regulations, he did not mention thathe sits on the board of Moody’s,
the credit rating agency.
As a commentator on the economy, Laura D’Andrea Tyson, aformer adviser to President Bill
Clinton who teaches in the business school at the University ofCalifornia, Berkeley, does not
usually say that she is a directorof Morgan Stanley.
And the faculty Web page ofRichard H. Clarida, a Columbia
professor who was a Treasury official under President George W.
Bush, omits that he is an executive vice president at Pimco, thegiant bond fund manager.
Academic economists, particularly those active in policy debates in Washington and WallStreet, are facing greater scrutiny of their outside activities
these days. Faced with a run ofcriticism, including a popular
movie, leaders of the American
Economic
Association,
theworld’s largest professional society for economists, founded in
1885, are considering a step thatmost other professions took along time ago — adopting a codeof ethical standards.
The proposal, which has notbeen announced to the public orto the association’s 17,000 members, is partly a response to “Inside Job,” a documentary film released in October that excoriates
leading academic economists fortheir ties to Wall Street as consultants, advisers or corporate directors.
Universities
andmedicalschools have tightened disclosure requirements and conflictsof interest policies for scientists,
Continued on Page 2

Nxxx,2010-12-31,B,003,Bs-BW,E1

THE NEW YORK TIMES BUSINESS FRIDAY, DECEMBER 31, 2010

A Symbol of Hope in Estonia Becomes the Currency
By JACK EWINGTALLINN, Estonia — On Saturday, Estonia completes its trip
from Soviet republic to fullfledged member of the euro zone.
In the first minutes of the newyear, Prime Minister Andrus
Ansip will slide a bank card into
an automated teller machine installed for the occasion in front of
the opera house here in the capital.
He will withdraw some euro
bills, and Estonia will officiallybecome the 17th member of thezone.
To outsiders, it may seem curious that this Baltic nation of 1.3
million is tying itself to the euro
just as the common currency is
struggling. But in fact, Estonia
has been a de facto member forsome time, pegging its kroon to
the German mark and then theeuro after giving up the Russian
ruble in 1992.
“Whatever happens, our currency is tied to the euro,” said
Riho Unt, chief executive in Estonia of Skandinaviska Enskilda
Banken, or S.E.B., a Swedishbank that is one of the Scandinavian institutions that dominatesbanking in the country. “Being inside is better than being outside.”
Economic arguments aside, inEstonia, the euro is still a symbol— tarnished, perhaps — of hopeand prosperity.
“It symbolizes that Estonia has
emerged as a full member of theEuropean family,” said Joakim
Helenius, chief executive of Trigon Capital, an asset management company. “For people here,that is a very big thing.”
While not naïve about the problems in the euro zone, Estonian
leaders remain fierce advocatesof the common currency, a reminder that for every bond investor dumping Greek or Irish
debt holdings, there is a European bureaucrat equally determined to defend the euro to thelast.
“Talking about splitting the
euro is not the way out,” Jürgen
Ligi, the Estonian finance minister, said during an interview.
“There would be huge immediate
losses for both sides.”“There is no alternative” to theeuro, Mr. Ligi said. “This is the
only boat in the sea.”
Even if it were possible for Estonia to back out of euro membership at the last minute, the consequences could be disastrous. The
kroon might plunge, most likely
making Estonians unable to repay mortgages and other bankloans, which are almost always
denominated in euros already.
The surge in defaults could bringthe economy to a standstill.
The Estonian government has
already gone to extreme lengths
to defend the currency peg. In
2009, after economic output
plunged nearly 15 percent, it cut
its budget by the equivalent of 9
percent of gross domestic product rather than devalue and put
euro membership at risk.
The austerity measures did not
provoke civil unrest in the country, unlike in neighboring Latvia.
Most Estonians seemed to accept
that sacrifices were necessary,and the economy is growing
briskly again. Many Estonians
regard themselves as a stoic people who endured much worse

according to Teikoku Data Bank,a credit research company.
In November 2009, Soho’s Hospitality, the company behind celebrity restaurants like Nobu andRoy’s, filed for bankruptcy. Roy’s
is now run by another company,
while Nobu’s chef, Nobu Matsuhisa, has opened a new restaurant elsewhere in Tokyo with
Robert De Niro.
Along with other low-cost restaurant chains, Kura has bucked
the dining-out slump with low
prices and a dogged pursuit of efficiency. In the company’s mostrecent fiscal year, which ended
on Oct. 31, net profit jumped 20
percent from the same period ayear earlier, to 2.8 billion yen.
In the last two months alone,
Kura has added seven stores.
“If you look at the restaurant
business, consumers are still
holding back because of employment fears and falling incomes,
and there’s no signs that willchange,” said Kunihiko Tanaka,
Kura’s chief executive, who
opened Kura’s first sushi restaurant in 1995. “Amid these worsening conditions, our company
feels that consumer sentimentmatches, or is even a tail wind” tothe Kura business, he told shareholders earlier this year.
The travails of Japan’s restaurant industry, and the changes inJapanese dining habits, may be
among most visible manifestations of how Japan’s “bubble
economy” excesses in the 1980s
have given way to frugal times
since the bubble burst in 1990.
With wages weak — averageannual private sector pay has
fallen 12 percent in the last dec-

U.S. Unveils
Plan to Sell
Stake in Ally,
Once GMAC
By ERIC DASHVALDA KALNINA/EUROPEAN PRESSPHOTO AGENCY

A mannequin holds a fake euro coin at a store in Parnu, Estonia. The country becomes a full member of the euro zone on Saturday.

RAIGO PAJULA/AGENCE FRANCE-PRESSE — GETTY IMAGES

A sign reads, “Euro is our money,” in Tallinn, Estonia. The
country’s economy is growing again after budget cuts in 2009.
during centuries of foreign domination.
“It wasn’t an easy process,”said Henri Kaarma, an employee
of a bank in Tallinn that laid offsome of his colleagues during thedownturn. “But it is done now,and we reached our goal. I am
proud,” said Mr. Kaarma, a muscular 36-year-old whose idea of
relaxation is to swim in icy lakes
and rivers during the winter.
Among Estonian citizens, support for the euro is far from unanimous. Polls show roughly half infavor of the euro, with the rest either apathetic or opposed. Thereis widespread suspicion thatshops and restaurants, whichhave promised not to raise prices
in the months after euro membership, have been doing soahead of time. The Estonian central bank blames recent price increases on the higher cost of imported commodities.
With an average monthly wageof 785 euros, or about $1,030, Es-

tonia will be the poorest memberof the euro area. Though central
Tallinn is filled with Audis andMercedes parting the winterslush, unemployment remains
above 10 percent and about a fifthof the population lives in poverty.
Among the less fortunate,
there seems to be little hope thateuro membership will bring improvement.
“The last years are very difficult,” said Rufina Martinovskaya,
a single mother selling knit
sweaters and mittens at an outdoor market on the edge of Tallinn’s 13th-century Old Town.
Ms. Martinovskaya, swathedagainst the cold in a thick scarf
and long fleece jacket, said shelost her job as an architect four
years ago, when Tallinn’s real estate boom stalled.
“There is no building. It
stopped,” she said. “I’m an architect, and now I work here,” shesaid, surveying the rows of wooden stands visited by a handful of

tourists. Ms. Martinovskaya said
she made just enough for her andher 11-year-old daughter to eat,with nothing left for even simple
pleasures.
A few political leaders have
tried to tap such sentiments. Edgar Savisaar, mayor of Tallinn
and leader of the main opposition
party, told the German newspaper Die Zeit, in an interview published on Tuesday, that Estonia
was not ready for the euro andthat the sacrifices to join were too
great.
But even Mr. Savisaar acknowledged that such sentiments
had not coalesced into a serious
anti-euro movement. Despite thesevere austerity program, thegovernment led by Mr. Ansip remains popular.
This is a country that continued functioning recently aftersnowfall that was heavy even by
Nordic standards, and manytimes the amount that crippledtransportation in Britain, Franceand Germany. After plows swept
Tallinn this week, high walls ofcleared snow made some streetslook like white canyons.
Estonian leaders approach theeuro with the same spirit of perseverance. “We have never taken
the euro as a short-term project,”
said Marten Ross, deputy governor of the Estonian central bank.
He and other leaders portraythe country as the anti-Greece,with a history of discipline andwillingness to suffer for the eurocause. Last year, Estonia had thelowest level of total debt of any
European Union country, just 7
percent of gross domestic product. The government’s budget
deficit will be well under 3 percent of G.D.P. this year, when almost every other country in theeuro area is in flagrant violationof limits set by treaty.
The European Central Bank

Conveyor Belts Bring Profit
To a Japanese Sushi Chain
From First Business Page

B3

N

ade, to 4.05 million yen, or about$49,300, in 2009 — the Japanese
now spend less on eating out. An
average single-person household
spent 163,000 yen on dining in
2009, 27 percent less than in 2000,
according to detailed budget surveys compiled by the Ministry ofInternal Affairs.
In a survey by Citizen Holdings, the watchmaker, of 400 men
in their 20s to 50s, the averagetime spent at cafes and restaurants plunged from 7 hours and52 minutes a week in 1990 to 2
hours and 25 minutes in 2010.
An aging population is also depressing restaurant sales. Morethan one-fifth of Japan’s population is already over 65, and surveys indicate that older people
tend to eat out less. The population is also shrinking, reducing the restaurants’ potential
customer base.
Meanwhile, Japanese companies have cut back sharply on
their entertainment expenses,
further hurting restaurant sales.
Total corporate spending on dining and entertainment has
halved from a peak of 9.5 trillion
yen in 1991 to 4.8 trillion yen in
2008, according to data from the
National Tax Agency.
“The restaurant industry here
is so linked to the state of theeconomy, and that’s why we’reseeing this decline,” said Munenori Hotta, a food service industry expert at Miyagi University
in Japan. “In this climate, even
top restaurants are having tomoderate their prices to keep attracting customers,” he said.
Japan’s dining-out boom had
its roots in the 1970s and 1980s, asincomes grew and rural populations flocked to big cities. So-

HIROKO TABUCHI FOR THE NEW YORK TIMESKura puts codes on the bottom of its plates to keep track of how
long a sushi portion has been circulating on a conveyor belt.
called family restaurants brought
cheap, Western-style food to themasses flourished in that era. So
did American fast-food chains,which were considered novel at
the time. Kentucky Fried Chicken
opened its first restaurant here in
1970, followed by McDonald’s in
1971.
At the other end of the pricerange, a new generation of
wealthy Japanese savored imported French wines at lavish
restaurants. By 1986, there were503,088 restaurants across Japan,
according to records from the Internal Affairs Ministry. That was
nearly double the number from 15
years earlier — and was morerestaurants than now operate in
the United States, which has
more than twice the population ofJapan.
After the bubble burst in 1990,
new low-cost restaurant chainsthat offered pizzas for as little as
400 yen, or $4.86, started tospread across Japan, and restaurateurs spoke with alarm ofready-made, convenience-store

meals that were siphoning off
sales.
In the depths of the slump, in
1995, Mr. Tanaka started a company based on serving quality
sushi on the cheap.
His idea of using conveyor
belts to offer diners a steadystream of sushi on small plates
was not a new one; an Osakabased entrepreneur invented
such a system in the late 1950s.
But Mr. Tanaka set out to undercut his rivals with deft automation, an investment in information technology, some creativity and an almost extreme devotion to cost-efficiency. In Japan,
where labor costs are high, thatmeant running his restaurants
with as few workers as possible.
Instead of placing supervisors
at each restaurant, Kura set up
central control centers with video
links to the stores. At these centers, a small group of managers
watch for everything from wayward tuna slices to outdated posters on restaurant walls.
Each Kura store is also highly

will not need to intervene to prevent a sell-off of Estonian government bonds. There are none,
though the government is considering a debt issue to finance expansion of the energy sector.
What little the government hasborrowed has come directly frombanks.
Estonia is also one of the mostbusiness-friendly countries in theworld. It is ranked 17th by theWorld Bank for ease of doing
business, ahead of countries like
Japan, Germany and Switzerland. Estonia has no tax on reinvested corporate earnings, andin contrast to most other European countries, there are few restrictions on hiring and firing employees.
“The business environment inEstonia has always been good,”
said Bo Henriksson, manager ofthe Baltic region for ABB, a company based in Zurich that makes
power distribution equipment
and other products in Estonia.
Hopes are high that euro membership will encourage more investment from nearby Finland.
Its capital, Helsinki, is just twohours away by fast ferry, but
smaller Scandinavian companies
might have feared exchange raterisk if Estonia was ever unable todefend the kroon.
“That has been an issue for foreign investors,” said Priit Perens,
managing director in Estonia for
Swedbank, a Swedish institution.
For many Estonians, such
benefits make it worth enduring
a sovereign debt crisis or two.
“There is no reason to beafraid,” said Peep Aaviksoo, aconsultant and former chief executive of EMT, an Estonian mobile
phone company. “If you look at
the not-so-happy history of Estonia, we have had worse experiences.
“Now we are back in Europe.”

automated. Diners use a touch
panel to order soup and otherside dishes, which are delivered
to tables on special express conveyor belts. In the kitchen, a robot busily makes the rice morsels
for a server to top with cuts offish that have been shipped froma central processing plant, where
workers are trained to slice tunaand mackerel accurately down to
the gram.
Diners are asked to slide finished plates into a tableside bay,where they are automaticallycounted to calculate the bill,
doused in cleaning fluid andflushed back to the kitchen on a
stream of water. Matrix codes on
the backs of plates keep track of
how long a sushi portion has
been circulating on conveyor
belts; a small robotic arm disposes of any that have been out
too long.
Kura spends 10 million yen to
fit each new restaurant with thelatest automation systems, an investment it says pays off in labor
cost savings. In all, just six servers and a minimal kitchen staff
can service a restaurant seating
196 people, said a company
spokesman, Takeshi Hattori.
“Its not just about efficiency,”
Mr. Hattori said. “Diners love it
too. For example, women say
they like clearing finished plates
right away, so others can’t see
how much they’ve eaten.”
Traditional sushi chefs havenot fared so well, however. While
the overall market for belt-conveyor sushi restaurants jumped
42 percent, to 428 billion yen, in2009 compared with 2003, higherend sushi restaurants are on the
decline, according to Fuji-Keizai,
a market research firm.
“It’s such a bargain at 100 yen,”said Toshiyuki Arai, a delivery
company worker dining at a Kura
restaurant with his sister and her
3-year-old son. “A real sushi restaurant?” he said. “I hardly go
anymore.”The federal government saidon Thursday that it was planninga complex transaction that would
temporarily increase its ownership position in the former lending arm of General Motors tonearly three-fourths of the company while also paving the way
to cash out its stake.
The Treasury Department said
it would exchange $5.5 billion ofpreferred stock into commonshares, raising its equity stake to74 percent, from 56 percent, of theoutstanding common stock. The
government, as part of its bailoutof the financial system, had
poured a total of $17.2 billion into
GMAC, now known as Ally Financial, to stabilize the troubled
auto and mortgage lender at theheight of the crisis.
The stock conversion will notchange the total amount ofmoney the government has injected into the company, but will
make it easier for it to execute alarge stock offering, because
common shares are more comparable to shares of other publicly
held lenders and therefore easierto sell and borrow against.
Still, the move will severely
erode the value of Ally’s existing
private shares. After the conversion, Cerberus, the large private
equity firm, will hold an 8.9 percent stake, and G.M. and anotheraffiliate together will own just under 10 percent of the shares.
The government used a similar
strategy in the spring of 2009 to
begin the delicate process ofwinding down its $45 billion investment in Citigroup. This
month, the Treasury announced
that it had turned a nearly $12 billion profit on the nearly one-third
stake it held in that bank.
The Treasury is pursuing asimilar stock conversion with the

A complex plan totemporarily increase
its stake in the bank.
American International Group,
which could raise the government’s ownership position toaround 90 percent before it starts
selling off those shares in thenext few months.
“Ally has made substantial
progress in restructuring its operations and improving its financial performance during 2010,
and this transaction will position
us to begin to exit the investment,” Tim Massad, who oversees bailout investments at theTreasury, said in a statement.
The stock conversion is the latest in a series of maneuvers thatsuggest Ally is readying itself fora return to private hands. This
week, Ally announced that it
would pay $462 million to Fannie
Mae to avoid having to buy backpoorly underwritten loans it soldto Fannie, the government-controlled mortgage finance giant.
That was the first settlement
struck by any major housing
lender and removed a large cloudover any major stock sale.
Over the last year, Ally has
been more aggressively marking
down the value of some of its
most troubled mortgage assets inanother move that would clear
the way for a sale.
Michael A. Carpenter, Ally’s
chief executive, called the conversion a “key milestone” and asign of the “significant progress”
the company had made this year.
Such a sale would be a remarkable turnabout for one of the nation’s biggest and most troubled
consumer lenders. GMAC was
the only financial institution to
return three times to the government for bailout aid, after a disastrous foray into subprime
mortgages pushed the company
to the brink of bankruptcy.
Federal officials concluded thatthe collapse of GMAC probably
would not send shock waves
through the financial system theway the failure of a giant bankwould. However, such a situation
would pose a devastating blow tothe auto industry, its suppliers
and its employees.
The Federal Reserve granted
GMAC an emergency waiver tobecome a bank at the height ofthe crisis, making it eligible for $5
billion of bailout funds and $900
million in additional aid. After thegovernment’s stress tests in 2009,
the Treasury poured in $7.5 billion more.
But after GMAC struggled tosecure additional funds from private investors, it returned for$3.8 billion. That gave the government a controlling financial position and the power to designate
up to four directors. So far, it has
approved three; it is vetting thefourth. By raising its stock ownership position to 74 percent, thegovernment has the authority toname two more.