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2024-05-25 | Bloomberg | Codelco Says Hernandez Resigns as CEO of Top Copper Miner | Codelco, engaged in a dispute with Anglo American Plc over the world’s fifth-largest copper mine, said its chief executive resigned in the same week as the companies resumed talks to seek an out-of-court settlement. Diego Hernandez , a former BHP Billiton Ltd. (BHP) executive, will leave Codelco after two years in the job for personal reasons, the state-owned company said in a statement on the Chilean securities regulator’s website yesterday. Chief Financial Officer Thomas Keller will replace Hernandez. The announcement comes two days after Anglo and Codelco halted legal proceedings to seek an agreement over terms of a 2002 contract that gave Codelco an option to buy a stake in Anglo assets at a below-market price. Mining Minister Hernan de Solminihac said Hernandez’s departure won’t affect negotiations. “Even with this change, the board remains intact and the person who’s taking over is someone who was in the administration and was brought in by Diego Hernandez,” de Solminihac said in an interview with state television station TVN. “The same strategy will be employed moving forward.” In his two years at Codelco’s helm, Hernandez stepped up investments in a bid to lift output at the state-owned company’s aging mines in Chile. He replaced mine managers, cut workers and recruited Keller, formerly a managing director at Toronto-based Brookfield Asset Management Inc. (BAM) Codelco is the world’s biggest copper producer. Rising Costs Hernandez faced rising costs to revamp mines including century-old Chuquicamata. Codelco’s production will slump to 800,000 metric tons from about 1.7 million tons if it doesn’t spend more than $20 billion over a decade, he said April 17. Codelco hands over all profits to the government and presents an investment proposal each year to reinvest profits. “They’ve got a lot of projects they’re looking to develop but in Chile it’s pretty hard to do with government pressures and industry pressures,” said Anna Kassianos, resources analyst at Platypus Asset Management Ltd in Sydney. In naming Keller, “continuity of the company’s management is ensured,” according to the regulatory filing. Hernandez surprised investors in October by announcing plans to exercise the option to buy 49 percent of the Anglo Sur unit for about $6 billion after reaching a funding arrangement with Mitsui & Co Ltd. (8031) Legal Battle Anglo, whose shares plunged 4.7 percent the day after the announcement, said Codelco had breached terms by attempting to take up the option prematurely. London-based Anglo unveiled in November an agreement to sell 24.5 percent of the unit to Mitsubishi Corp. (8058) for $5.39 billion, in a deal Codelco said was designed to block its option. The two companies’ ensuing legal battle was halted May 22 for a month. Anglo Chief Executive Officer Cynthia Carroll welcomed the opportunity to “re-engage,” the company said in a statement at the time. Hernandez told reporters May 23 that while trying to find a solution was “an alternative,” Codelco has a good legal case. The two sides last held talks Jan. 29, Hernandez said, adding he didn’t speak with Carroll at a recent conference in Miami. The state-owned company rejected an offer from Anglo (AAL) last year to tear up the option contract for a $1 billion payment, Hernandez said in an April 18 interview. ‘Far Apart’ “The two companies’ expectations have been very far apart,” he said May 23. “Let’s see if they’re any closer.” Sur includes Los Bronces, where Anglo completed last year a $2.8 billion expansion, and two of the world’s best undeveloped copper deposits, according to John MacKenzie , head of copper at Anglo. Codelco owns the Andina copper mine adjacent to Los Bronces in the Andean foothills near the Chilean capital Santiago. A Chilean court rejected a petition by Codelco last month to freeze 49 percent of dividends paid by the division. Keller, 55, has a commercial engineering degree from Chile’s Adolfo Ibanez University and a Master of Business Administration from the University of Chicago. He was previously executive president of the Collahuasi copper mine, which is owned by Anglo and Xstrata Plc. (XTA) Boost Output Codelco plans to spend at least $20 billion this decade to replace falling output and boost annual production to more than 2 million metric tons from less than 1.8 million tons now. The mining minister told TVN yesterday that he doesn’t have details on why Hernandez resigned. Neither Hernandez nor Keller was available to comment, a Codelco official said by telephone, declining to be named citing company policy. Hernandez’s resignation isn’t related to the Anglo dispute, the official said. Anglo isn’t commenting on Hernandez’s resignation, Marcelo Esquivel, a Santiago-based spokesman, said by e-mail. To contact the reporters on this story: Randall Woods in Santiago at rwoods13@bloomberg.net ; Sebastian Boyd in Santiago at sboyd9@bloomberg.net To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net |
2024-01-17 | Bloomberg | Fed’s Fisher Says Some Banks Should Be Restructured | Federal Reserve Bank of Dallas President Richard Fisher said he advocated breaking apart banks deemed too big to fail in order to “level the playing field” between smaller and larger financial institutions. The regional Fed bank is proposing that such financial firms be restructured into multiple business entities. Only the commercial banking pieces of the companies would have access to the safety net of federal deposit insurance and the Fed’s discount window, he said. “One of the reasons we did this is to level the playing field” between the smaller and bigger financial institutions, Fisher said in an interview today at Bloomberg’s office in Washington. The drive to fix a system with too-big-to-fail banks is “gaining momentum, and now that the election has passed, it has some political gravitas. We’ll see.” The Dallas Fed released a report today that highlighted the strengths of smaller community banks that focus on traditional lending activities, such as mortgages and small-business loans. The Independent Community Bankers of America said in a statement that it “strongly supports” Fisher’s plan. U.S. regulators are searching for ways to make the financial system more resilient after the 2008 credit freeze led to the worst U.S. recession since the 1930s. Implementing the Dodd-Frank Act, an overhaul of the banking system that was signed into law in 2010, is not enough to protect the country’s financial system, Fisher said. Speech Yesterday “We labor under the siren song of Dodd-Frank and the recent run-up in the pricing of TBTF bank stocks and credit, indulging in the illusion of hope that this complex legislation will end too big to fail and right the banking system,” Fisher said at the National Press Club yesterday. Since 2009 Fisher has been criticizing what he has called the “pathology” of banks deemed too big to fail. The Government Accountability Office said this month that it plans to study how large banks such as JPMorgan Chase & Co. (JPM) , Bank of America Corp. and Citigroup Inc. (C) benefit from assumptions that they are too big to fail. The examination will be undertaken in response to a request from Senators David Vitter , a Louisiana Republican, and Sherrod Brown , an Ohio Democrat, who say the government hasn’t done enough to prevent future bailouts. “It’s not just that it doesn’t treat too-big-to-fail,” Fisher added in his interview today, referring to the Dodd-Frank banking overhaul. “What it does is it overburdens the competition.” Not Protected Every customer, creditor and counterparty of shadow banking affiliates should also be required to sign a statement that acknowledges the fact that these entities are not protected by the federal government, Fisher said yesterday. “The next financial crisis could cost more than two years of economic output, borne by millions of U.S. taxpayers,” he said. The district bank president is not a voting member of the Federal Open Market Committee this year and has been one of the most outspoken critics of additional monetary easing within the Fed. Fisher told reporters after his remarks yesterday that the Fed’s asset purchases haven’t been as effective as he would have liked in boosting the economy. This is partly because the too- big-to-fail problem has clogged the transmission mechanism between Fed stimulus and the economy, he said. To contact the reporter on this story: Aki Ito in San Francisco at aito16@bloomberg.net. To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-10-23 | Bloomberg | Oxford Nanopore to Let Customers Test Handheld Sequencer | Oxford Nanopore Technologies Ltd. , the U.K. company developing portable gene sequencers, will begin providing its MinION handheld device to some customers to test, a sign it’s taking steps toward selling the instrument. Scientists will be able to request the gene sequencer starting in late November in exchange for assessing the device and giving feedback on quality and performance, the Oxford, England-based company said today in a statement on its website. The users will pay a $1,000 deposit, to be refunded after the equipment is returned, and shipping costs. “This is a substantial but initially controlled program designed to give life-science researchers access to nanopore sequencing technology at no risk and minimal cost,” the company said. The devices are used to study the order of building blocks in an organism’s DNA, which provides information about genetic makeup that is useful in establishing identity, understanding disease processes and finding treatments. Oxford Nanopore will show the MinION to potential customers at the American Society of Human Genetics meeting in Boston this week. The company had planned to begin selling the device by the end of 2012 and was delayed by difficulties with the sensor. The sensor chip has been redesigned and the device’s case reduced to about half the size of a smartphone, Chief Executive Officer Gordon Sanghera said. The closely held company is developing handheld and desktop devices that use a novel technique known as strand sequencing, in which an entire string of DNA is guided by an enzyme and passes intact through a hole in a cell membrane one-billionth of a meter wide. Desktop Priority Oxford Nanopore didn’t say when it would begin selling the MinION. It will give scientists who participate in the testing program priority to participate in eventual testing of its GridION desktop gene sequencer. The price of the MinION will probably be about $1,000, Charles Weston, an analyst at Numis Securities, said in an Oct. 9 note to clients. The company raised 40 million pounds ($65 million) this month from new and existing shareholders, bringing the total invested to 145 million pounds. Investors include IP Group Plc (IPO) , Illumina Inc. (ILMN) , Invesco Perpetual, Lansdowne Partners and Odey Asset Management. Illumina and Life Technologies Corp. (LIFE) , both based in California , are among companies developing gene sequencers. The company was spun out of Oxford University in 2005 with technology initially based on research by Hagan Bayley, a professor of chemical biology. Weston estimated the company’s value at $1.5 billion in a Feb. 20 note to clients. To contact the reporter on this story: Andrea Gerlin in London at agerlin@bloomberg.net To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net |
2024-03-13 | Bloomberg | Crops Can’t Expect Special Subsidies in Farm Bill, Stallman Says | Growers of corn, cotton and other major crops are going to have to learn to live without special subsidies under a new farm bill, said Robert Stallman, the head of the largest U.S. farmer group. With Congress in a budget-cutting mood and farm profits near records highs, producers will have to make the most of general programs meant to serve all commodities, such as crop insurance, rather than look for extra incentives, Stallman, the president of the American Farm Bureau Federation , told reporters today in a briefing at the organization’s Washington headquarters. “Individual commodity organizations don’t understand that they aren’t going to get their wishes fulfilled,” Stallman said. “We think we need to have an overarching program that covers all commodities,” said Stallman, who added that the elections in November will make passage of a farm bill this year difficult. Net farm income that reached a record $98.1 billion in 2011 and may be $91.7 billion this year, the second-biggest ever, has made agriculture subsidies a top target for lawmakers and government officials seeking to reduce federal spending. House Budget Committee Chairman Paul Ryan , a Republican, has recommended reductions of as much as $48 billion over 10 years, while President Barack Obama has asked for $32 billion in cuts. Stallman is scheduled to testify tomorrow in a Senate Agriculture Committee hearing on crop insurance and subsidies. The Senate panel and its House counterpart are working on legislation to replace the farm bill that expires Sept. 30. The measure would authorize spending for all U.S. Department of Agriculture programs, including nutrition initiatives such as food stamps , crop payments and insurance plans, for a period of about five years. The USDA forecasts that farm subsidies , which protect farmers while encouraging production, helping agribusiness companies such as Archer Daniels Midland Co. and Cargill Inc., may reach $11 billion this year. To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net |
2024-07-02 | Bloomberg | John Roberts, a Conservative Liberals Can Love | (Corrects ninth paragraph to reflect that Justices Stephen Breyer and Elena Kagan, not Breyer and Sonia Sotomayor , joined the relevant part of Chief Justice John Roberts ’s opinion.) Conservatives hoping to salvage something from the wreckage of the U.S. Supreme Court’s decision upholding the Affordable Care Act have something in common with liberals who want to whip up fear of a conservative Supreme Court in the run-up to the presidential election. Both sides claim that unheralded parts of Chief Justice John Roberts’s opinion made significantly conservative new law. For conservatives, that means things could have been worse, and that Roberts shouldn’t be shunned. For liberals, it means Roberts’s court can still be condemned as wildly activist, even though it chose not to strike down President Barack Obama ’s signature domestic policy accomplishment. Both versions of this story are what we might call news- cycle revisionism. Roberts’s opinion will not have the dramatic conservative effects that are being claimed for it. In this case, the first headlines were correct: Roberts actually exercised judicial restraint -- and the decision is a victory for anyone who believes that such restraint is a good thing. The first topic of revisionism is Roberts’s statement that Congress lacked authority to enact the ACA under the Commerce Clause , because the health-care-reform law regulates inaction (failure to buy insurance) rather than action. Roberts, writing only for himself, essentially bought the broccoli argument: If Congress can require you to buy health insurance, what is to stop it from making you buy (and eat) your vegetables? No Difference On the surface, this looks like a win for conservatives and a restriction on Congress’ commerce power. It isn’t. The reason isn’t that the four conservatives, including Justice Anthony Kennedy , deliberately chose not to join Roberts’s opinion ( maybe because they were angry at him for breaking ranks). It is that in the real world, as opposed to the realm of legal theory, there is no meaningful difference between action and inaction. In the future, Congress can simply phrase Commerce Clause commands in the affirmative. Consider the Civil Rights Act: Does it require public businesses to serve customers regardless of race? Or does it prohibit them from refusing to serve customers on the basis of race? See the difference? Oh yes, there isn’t one. If that weren’t enough, there is also Congress’s power to tax, on which Roberts relied. If Congress wants to penalize you for not doing something in the future, it can impose a tax. And as Roberts’s ACA decision affirmed explicitly, Congress doesn’t even have to call it a tax. In short, in practical terms, Congress has no less power than it had prior to the decision. We have been down this road of pseudo-limitations on the commerce power before. In the 1990s, the Supreme Court twice struck down laws for exceeding the commerce power, once in the case of the Gun Free School Zones Act and once concerning a provision of the Violence Against Women Act. Constitutional lawyers sweated over whether the extensive commerce power had been meaningfully restrained. In practice, they concluded, it had not. Congress could find ways to do what it needed -- and it still can. The other revisionist argument concerns the court’s holding that Congress could bribe the states to extend Medicaid to about 16 million previously uninsured persons -- but could not blackmail the states by threatening to withdraw almost all of their existing Medicaid funding if they did not participate in the extension. This part of Roberts’s opinion was joined by Justices Stephen Breyer and Elena Kagan , so it would be surprising if it were radically conservative. Drinking Age It is true that this part of the ACA ruling marks the first time the court has ever struck down a congressional act that conditioned funding on the states taking some action. In the past, it had upheld a very minor blackmailing provision, in which Congress threatened to take away 5 percent of states’ highway construction funding if they did not make their legal drinking age 21. As the court noted, the threat in the case of the ACA was far, far greater: Congress must not issue a threat to the states that amounts to what Roberts called “a gun to the head.” This does constitute an outer limit on Congress’s power -- but it is hardly a very important one. It is hard to think of a case where a state could not be bribed rather than blackmailed. Indeed, many observers think that the states will end up accepting the Medicaid extension without the threat of losing funding -- which would show the threat to have been unnecessary in the first place. In the real world, then, barring Congress from such an extreme threat will not change the balance of power between the federal government and the states in any fundamental way. The upshot is that nothing terribly conservative happened in the ACA case. The chief justice’s gestures toward conservatism were just that -- symbolic gestures to soften the blow. The day after the decision was handed down, Roberts joked that he planned to spend some time this summer in Malta , which he called “an impregnable island fortress.” His joke acknowledges the painful reality of a true practitioner of judicial restraint: No one loves you for it. Roberts is still a judicial conservative. Regardless of what he does in the future, his legacy will always include what he did not do when the ACA was on the line. ( Noah Feldman , a law professor at Harvard University and the author of “Scorpions: The Battles and Triumphs of FDR’s Great Supreme Court Justices,” is a Bloomberg View columnist. The opinions expressed are his own.) Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View columns, editorials and op-ed articles. To contact the writer of this article: Noah Feldman at noah_feldman@harvard.edu. To contact the editor responsible for this article: Michael Newman at mnewman43@bloomberg.net . |
2024-02-24 | Bloomberg | AIG Rises as Insurer Posts Record Profit on Tax Benefit | American International Group Inc. (AIG) , the bailed-out insurer, climbed after citing a return to “sustainable operating profit” as it booked a tax benefit that fueled record earnings. AIG advanced 1.5 percent to $28.40 at 4:01 p.m. in New York, after rising as high as $30.09 earlier in the day. The government needs to divest its whole stake for an average of at least $28.72 a share to recoup taxpayer funds. The shares have closed below the break-even price on the New York Stock Exchange every day since late July. The insurer now projects that it will generate enough profit to use tax assets, tied to prior losses, that can limit future payments to the government. AIG’s biggest unit, property- casualty insurer Chartis, and its plane-leasing business swung to operating profits in the fourth quarter, the New York-based company said in a statement yesterday as it posted net income of $19.8 billion. “You’re definitely going to get a bounce” in the share price, Josh Stirling, an analyst at Sanford C. Bernstein & Co., said in a telephone interview yesterday. “The question is, How long and how sustainable is it?” He has a “market perform” rating on AIG. The insurer, which booked a $17.7 billion tax benefit in the quarter, is among companies posting accounting gains as they return to profit after the recession. Ford Motor Co. said last month that it was removing a valuation allowance, created in 2006 as it began reporting operating losses, against deferred tax assets, because it expects future profits. The benefit contributed $12.4 billion to the automaker’s $13.6 billion of net income in the fourth quarter. Remaining Businesses After-tax operating income at AIG was $1.56 billion in the three months ended Dec. 31, compared with a loss of $2.21 billion a year earlier, according to the statement. Chief Executive Officer Robert Benmosche , 67, cited improvements at the company’s units and confidence in future earnings as part of the determination to record the tax benefit. Chartis had fourth-quarter operating income of $348 million, compared with a loss of $3.97 billion a year earlier, when the unit took a charge of more than $4 billion because reserves proved inadequate. International Lease Finance Corp., the plane-leasing business, had operating profit of $119 million compared with a loss of $606 million a year earlier as impairments declined. The results “confirmed its return to sustainable operating profit for the full year,” AIG said in a regulatory filing yesterday. “This, together with the emergence from cumulative losses in recent years and projections of sufficient future taxable income, represents significant positive evidence” that it will be able to use the deferred tax assets. Full-Year Profit Full-year net income of $17.8 billion compares with a $7.8 billion profit in 2010, when the company posted gains on the sale of American Life Insurance Co. and two-thirds of AIA Group Ltd. Book value per share, a measure of assets minus liabilities, rose to $55.33 on Dec. 31 from $45.30 three months earlier, on the tax benefit, AIG said. “These companies always trade off their book value,” Gloria Vogel, an analyst at Drexel Hamilton LLC who advises clients to buy AIG shares, said in a phone interview yesterday. “The fact that they grew book value 22 percent” will be viewed favorably by investors. The Treasury reduced its ownership of AIG in May to 77 percent by selling 200 million shares for $29 each in a public offering. AIG was rescued in 2008 as bets on the mortgage market soured. The bailout was revised at least four times, swelling to $182.3 billion as the U.S. extended more credit and lowered the interest charged. To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net. To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-06-14 | Bloomberg | Paradise Lost Facing Expats in Cayman Work Visa Crackdown | Jennifer Smith was so taken by the mix of white sand, blue waters and modern offices when her cruise ship called at the Cayman Islands that the New Jersey accountant found a job and moved to what she calls paradise. “We still have regulatory deadlines and long hours, but if I need a break, our office is right across from the beach,” said Smith, 29, who has worked the past three years at financial services company BDO Cayman Islands , and has no plans to leave. “It’s hard to imagine going anywhere else.” Yet foreign workers face that prospect and new arrivals could find it tougher to make the island their home as restrictions tighten. With unemployment among local citizens exceeding 10 percent, the offshore financial center is reining in the number of staff that funds, accounting firms, construction companies and hotels hire from abroad. Limits on expatriates, who make up half the island’s 39,000 workforce, will ensure more jobs for Caymanians, said Eric Bush, the nation’s chief immigration officer. “We’ll always need a certain level of foreign labor, but it’s about finding that right balance,” Bush said in a phone interview. “We’re a small nation that cannot have an influx of individuals who may turn out to be a burden.” About 2,000 foreigners face expulsion in October when their work visas expire. Premier Alden McLaughlin, who took office last month, has made it “quite clear” to his immigration department that he wants to find a way to keep them while still reducing unemployment for Caymanians, Bush said. The island also wants to remain hospitable to its offshore finance industry. Seeking Balance In seeking a balance, McLaughlin’s ruling party has vowed to require foreigners work on the island for 10 years before they can apply for citizenship, up from seven now. The government also plans to scrap a provision that enables companies to pick “key” workers who could extend their stay for two-year increments indefinitely, which is “effectively controlled by employers and unfair to employees” and prevents Caymanians from getting the same jobs, according to a report on term limits completed for the government last year. Calls by Caymanians and politicians to tighten immigration rules have risen as unemployment among Cayman citizens rose to 10.5 percent last year from 9.7 percent in 2011. In contrast, 2.4 percent of expatriates were out of work compared with 3.1 percent in the same time periods, labor statistics show. Most of the job losses have been in construction and hotel services, yet those have “exacerbated” tensions with locals in financial companies that rely on foreign workers, said Chris Duggan, president of the Cayman Islands Chamber of Commerce. Financial Industry Companies are training more locals for financial industry jobs, he said. “We’re going to have a wave of well-educated Caymanians come through the ranks of finance one day,” Duggan said. “For now, we don’t have enough to fill these positions.” A British Overseas Territory located about 270 miles south of Cuba, the Cayman Islands has registered at least 10,900 funds, more than any other Caribbean island. Financial services account for 8.9 percent of jobs, according to its statistics agency. Moody’s Investors Service affirmed Cayman Islands bonds at Aa3 in February, the same as Bermuda and China , citing incomes of $53,253 per capita that help buffer the population against natural disasters. Even so, tourism and finance contribute more than 70 percent of gross domestic product, “a sign of limited diversification” that leaves the country vulnerable during a downturn, Moody’s said. While there are steady openings for fund managers and legal jobs, companies are under pressure by the government to hire locally and face costly fees to bring in foreign workers, said Gillian McMahon, a job recruiter with the Grand Cayman-based employment agency Baraud. Hire Caymanians “There is a want to fill positions with someone from Cayman whenever possible,” McMahon said in a telephone interview. “It’s definitely a consideration with every hire if it’s going to be Caymanian or foreign.” A two-year work permit for a foreign auditor can cost $16,500 and large firms may pay more than $21,000 for a visa for financial controllers, according to McMahon. The situation facing the 2,000 foreigners whose visas are scheduled to expire in October arises from immigration changes in 2004 when the government adopted a seven-year term limit instead of the indefinite policy that had existed. Foreigners would have to leave for at least a year, though companies could apply to have “key employees” exempted. Limit Eligibility The law is meeting its purpose of limiting the number of people eligible to become permanent residents or apply for citizenship, which is possible in the eighth year of residency, the report found. As the seven-year limit, known locally as the “rollover,” approached in 2011, the government allowed terms to be extended for up to two years while a review committee completed its report and to allow changes in the laws to be adopted. “The rollover will destroy my life as I have given 14 years to this island,” said one unnamed survey respondent in comments included in the study. “Have made this my home and now you want to kick me out.” While the Cayman Islands tightens conditions for expatriates, Bermuda has loosened them, ending a limit on how long foreigners can work there as it seeks to lure funds and reinsurance companies. Abolishing limits “will help spark economic growth and create employment opportunities for Bermudians,” Home Affairs Minister Michael Fahy said in a Jan. 30 statement after the rule was changed. Bermuda Unemployment About 10 percent of Bermudians were unemployed last year compared with 2 percent of foreigners, with financial services and “international business activity” accounting for the largest number of jobs, according to a 2012 labor survey by island nation’s government. Cayman’s restrictions on foreign workers have made it harder to recruit employees and caused office tensions between islanders and expatriates, according a survey of about 100 business owners that was commissioned as part of last year’s report for the government. In responses of 384 Caymanians in that same survey, 58 percent said they wanted “keep or modify” foreign work restrictions, with one saying that it was “unfair” that foreigners held jobs when “Caymanians needed a chance at moving up the corporate ladder.” About 2,600 expatriates worked as fund administrators and accountants in the Caymans as of December, 2011, the most after service jobs such as bartenders and beach attendants, the report found. Have Roots “There’s a worry that people will have to leave,” said Joanna Boxall, who runs a website for expatriates working on the island, caymannewresident.com. “Accountants and lawyers have bought houses, they have roots here,” she said. “Law firms are booming, banks are doing well, and they still need experts.” As long as she has an accounting job at BDO, Smith said it’s “only a matter of time” before she and her husband probably buy a home on the Caymans and settle in. He moved with her from Jackson, New Jersey, and also has a job in accounting. Both have renewed their initial two-year visas and hope to stay as long as possible, at least for the seven years currently allowed and longer if allowed. “It would feel like leaving family if we were to uproot ourselves and leave the island,” Smith said. To contact the reporter on this story: Eric Sabo in Panama City at esabo1@bloomberg.net To contact the editors responsible for this story: Andre Soliani at asoliani@bloomberg.net ; Bill Faries at wfaries@bloomberg.net |
2024-10-27 | Bloomberg | Canada's Triple Five Group Negotiating to Buy Clal Insurance, Globes Says | A Canadian Jewish family, through its Triple Five Group of Companies, is in preliminary talks in Israel about the possibility of buying Clal Insurance Enterprises Holdings Ltd., the daily Globes said, without saying where it got the information. To contact the editor responsible for this story: Gwen Ackerman at gackerman@bloomberg.net |
2024-12-31 | Bloomberg | Wisconsin Prosecutor Asks State Court to Void Union Law Ruling | A Wisconsin prosecutor said the state’s highest court should throw out its June ruling upholding legislation curbing public employees’ collective-bargaining rights because one justice failed to recuse himself from the case. Ismael Ozanne, district attorney in Dane County, which includes Madison, the state capital, alleged in court filings yesterday that Wisconsin Supreme Court Justice Michael Gableman received free legal work in an ethics case from a law firm , Michael Best & Friedrich, that assisted state officials in the union law case. The “unusual” fee arrangement wasn’t disclosed at the time, and Gableman should have recused himself from the case, Ozanne said in filings. He should be disqualified from the case and the high court’s 4-3 decision in June upholding the law should be thrown out, Ozanne said in documents filed with the Wisconsin Supreme Court. “ Abraham Lincoln wrote that ‘a lawyer’s time and advice are his stock in trade,’” Ozanne, a Democrat, said in the filing. “Justice Gableman paid for none of that time or any of that advice, nor does it appear he or MBF intended to do so. Reasonable, well-informed people would reasonably question Justice Gableman’s ability to be impartial under the facts presented here.” A call to Gableman about the filing wasn’t immediately returned yesterday. Attorney Eric McLeod of Michael Best & Friedrich didn’t immediately return a voice-mail message seeking comment about the filing. Exceeded Her Authority The Wisconsin Supreme Court ruled in June that Dane County Circuit Court Judge Maryann Sumi exceeded her authority when she issued a May 26 order invalidating the measure after she had found it was created in apparent violation of the state’s open meetings law. The legislation signed into law by Governor Scott Walker requires annual recertification votes for public employees’ union representation and makes their payment of membership dues voluntary. Firefighters and police officers are exempt. Under the new law, state workers would contribute 5.8 percent of their salaries toward pensions and pay 12.6 percent of their health-insurance costs. Democrats and organized labor opposed the legislation as an attack on worker rights. Opponents protested inside and outside the state capital for almost four weeks. The case is State v. Circuit Court for Dane County, 2011AP765, Wisconsin Supreme Court (Madison). To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net : Marie Rohde in Milwaukee at fmarierohde@gmail.com. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-01-05 | Bloomberg | Jobless Claims Drop by 15,000 Last Week | Fewer Americans filed claims for unemployment insurance payments last week, showing the labor market is starting 2012 on better footing than a year earlier. Applications for jobless benefits (INJCJC) decreased 15,000 in the week ended Dec. 31 to 372,000, Labor Department figures showed today. The median estimate of 38 economists in a Bloomberg News survey forecast 375,000 claims. The average over the past four weeks declined to the lowest level in more than three years. The decrease in firings indicates employers may be getting more comfortable with their headcounts and their economic outlooks as the year begins. Economists forecast a Labor Department report tomorrow will show hiring picked up and joblessness held below 9 percent in December. “Claims are moving in the right direction,” said Aneta Markowska , a senior U.S. economist at Societe Generale in New York. “The labor market is pretty much treading water, but it’s definitely not as far behind as last year.’ Companies added 325,000 workers in December, more than forecast, adding to evidence the labor market was gaining momentum heading into 2012, figures from the Roseland, New Jersey-based ADP Employer Services also showed today. The December ADP number may have reflected the so-called purge effect. Workers, regardless of when they are dismissed or quit, sometimes remain on company records until December, when businesses update, or purge, their figures with ADP. ‘Purge’ Effect The paycheck processor estimates this change when adjusting its data for seasonal variations and, because there were fewer firings at the end of 2011 than in previous years, ADP may find it more difficult to formulate a projection. “There’s some possibility that today’s number has been pushed up by that idiosyncratic feature of ADP data,” Joel Prakken , senior managing director at Macroeconomic Advisers LLC in St. Louis , said in a press conference after the report. “In an improving labor market it can lead to an upward bias to seasonal job gains.” Macroeconomic Advisers produces the figures in conjunction with ADP. Stock-index futures trimmed earlier losses after the reports. The contract on the Standard & Poor’s 500 Index maturing in March decreased 0.3 percent to 1,268.9 at 8:49 a.m. in New York. Survey Results Claims estimates ranged from 365,000 to 390,000 in the Bloomberg survey. The Labor Department initially reported the prior week’s applications at 381,000. A Labor Department official today said there were no special issues affecting last week’s figures. The less-volatile four-week moving average (INJCJC4) decreased to 373,250, the lowest since June 2008, from 376,500. The number of people continuing (INJCSP) to collect jobless benefits fell by 22,000 in the week ended Dec. 24 to 3.6 million. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by about 5,400 to 3.5 million in the week ended Dec. 17. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, dropped to 2.8 percent in the week ended Dec. 24, today’s report showed. Forty states and territories reported an increase in claims, while 13 had a decrease. Claims, Payrolls Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates. “Conditions in the labor market seemed to have improved somewhat,” central bank policy makers noted in the minutes of the Federal Open Market Committee ’s Dec. 13 gathering released this week. “Initial claims for unemployment insurance moved down, on net, since early November but were still at a level consistent with only modest employment gains, and indicators of job openings and businesses’ hiring plans were little changed.” Employers probably increased payrolls by 150,000 workers in December after adding 120,000 the prior month, according to the median forecast of economists surveyed by Bloomberg. The unemployment rate rose to 8.7 percent from 8.6 percent, the lowest level since March 2009, the economists project. Job cuts announced by U.S. employers rose in December from a year earlier, according to another report today. Planned firings (CHALTOTL) climbed 31 percent to 41,785 last month from 32,004 in December 2010, which was the lowest monthly total in 10 years, according to Chicago-based Challenger, Gray & Christmas Inc. Government budget cuts and diminished business prospects are still leading companies to trim head counts. Boeing Co. (BA) announced yesterday it would close a facility in Wichita, Kansas , that employs more than 2,160 workers. Job cuts will begin in the third quarter of 2012, the Chicago-based planemaker said in a statement. To contact the reporter on this story: Alexander Kowalski in Washington at akowalski13@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-07-16 | Bloomberg | `Supreme Court' Battle Begins Over Consumer Chief | The imminent reshaping of U.S. banking regulation creates a new center of gravity in Washington, a consumer chief with thousands of employees, a $400 million budget and power to impose federal rules on mortgages, credit cards and layaway plans. With the stakes high, business lobbyists who failed to kill the new Consumer Financial Protection Bureau in Congress now hope to influence President Barack Obama ’s choice of director and the Senate’s confirmation proceedings. “This is akin to a Supreme Court nominee for financial services,” Richard Hunt , president of the Consumer Bankers Association in Arlington, Virginia, said in an interview. “We are taking this very seriously.” Public and private conversations in Washington about the job have centered on the likely candidacy of Elizabeth Warren , chairman of the congressional panel overseeing the Troubled Asset Relief Program, who is credited with conceiving the consumer agency. Warren’s criticism of Wall Street’s role in the financial crisis has given her celebrity status among consumer groups. Financial industry lobbyists and their political allies have said that the Harvard University law professor’s activist approach and lack of business experience are drawbacks. “I don’t think there are 60 votes for Elizabeth Warren. She’s burned a lot of bridges,” said Mark Calabria , director of financial regulation studies at the Cato Institute, a Washington free-market policy group. Oklahoma Roots Warren, 61, grew up in a working-class Oklahoma household, graduating from high school at 16 to attend George Washington University and then the University of Houston. She received her law degree from Rutgers and in 1992 joined the Harvard faculty, where she teaches bankruptcy and contract law. As chief watchdog of the government’s TARP spending, Warren has clashed with banking and administration officials including Treasury Secretary Timothy F. Geithner. At a December hearing, she accused Geithner of favoring Wall Street banks while neglecting small businesses and homeowners. When Geithner said the government bailout of insurer American International Group Inc. was necessary to protect the financial system, Warren interrupted to tout the benefits of bankruptcy. “Mr. Secretary, I come from a world of Chapter 11. People default all the time,” Warren said. “You’re a national expert on this basic issue,” Geithner said. “But banks are different. AIG is effectively a bank.” ‘Driving Force’ Through a Treasury Department spokesman, Geithner today called Warren a “driving force” behind creation of the new consumer agency. “Given her strong leadership on consumer protection, Secretary Geithner believes that Elizabeth Warren is exceptionally well-qualified to lead the new bureau,” spokesman Andrew Williams said. Consumer groups said they see Warren as the obvious choice to run the new agency. Her vision and zeal put her at the head of the pack of candidates, said Ed Mierzwinski , consumer program director at U.S. PIRG, a federation of state advocacy groups. “Every bank in America set a goal of killing this agency. We won and they lost,” Mierzwinski said. “Congress created its skeleton. The first director will create its soul. We will not be looking for a caretaker.” Through a spokesman, Warren declined to comment. Mandate to Police With a mandate to police financial activity that is “unfair, deceptive or abusive,” the new bureau may change the way credit cards, mortgages and other products are designed and sold. It has the power to investigate consumer complaints, impose standards on contracts and give purchasers new rights to sue. Industries within its reach include banks, mortgage brokers, retailers, credit-card issuers, debt collectors, credit-scoring companies and payday lenders. “All of that power is in the hands of one person. It’s going to be the closest approximation to a czar that Washington has ever seen,” said Joseph T. Lynyak , a law partner at Venable LLP who represents financial services companies. “It’s going to be surprising to an awful lot of constituencies,” he said. “For the first time the jurisdiction is not based on your charter or licensing but your activity or product or service, which is a very broad way of capturing an awful lot of folks.” Hybrid The structure of the bureau raises questions about the extent of its power that may not be answered for years. It will be born as an unusual hybrid -- an independent entity living within another agency, the Federal Reserve. While the Fed has no role in its rule-making, the law provides that the new Financial Stability Oversight Council -- a nine-member panel of regulators that includes the Fed chairman and the consumer czar -- can override a consumer bureau action if two-thirds of the members decide the rule threatens the safety or soundness of the financial system. Last year, Obama declared an independent agency to be a centerpiece of the financial reform blueprint he sent to Congress, prompting immediate opposition from industry. The U.S. Chamber of Commerce produced advertisements featuring fictional butchers, electricians and cabinet makers who said they would be hurt by the agency’s authority. Under pressure from Republicans, congressional Democrats and the White House abandoned the idea of a separate agency and agreed to house the consumer bureau inside the Fed, while giving it autonomy from the central bank. The Fed will do nothing more than “accept their mail for them,” said House Financial Services Committee Chairman Barney Frank , the Massachusetts Democrat who was an architect of the legislation. Other Names Warren is among those being considered for the job, White House senior adviser David Axelrod told reporters today. “There are other candidates as well,” he said. Names circulating through industry and consumer groups include Assistant Treasury Secretary Michael Barr , Treasury Deputy Assistant Secretary for Consumer Protection Eric Stein , and Gene Kimmelman , a former director of Consumers Union who is chief counsel for competition policy at the Justice Department. Others mentioned in connection with the post, including Ellen Seidman , executive vice president for Chicago-based ShoreBank Corp., which specializes in housing and energy- conservation loans, and Nicolas Retsinas , director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts, have said they don’t want the job. FDIC Chairman Sheila Bair , Illinois Attorney General Lisa Madigan and Massachusetts Attorney General Martha Coakley , all put forth as potential candidates, have endorsed Warren, as has Frank. ‘Start With Her’ “All the conversations about who’s going to run it naturally start with her,” said Raj Date , a former managing director at Deutsche Bank AG who now runs the Cambridge Winter Center for Financial Institutions Policy, a New York-based research group. Banking lobbyists have raised concerns about Warren’s preparedness for such a large role. “The Congress has really delegated a great deal of authority to this agency. That’s quite worrisome to the community banks,” said Steve Verdier , a lobbyist for the Washington-based Independent Community Bankers of America. While Warren “understands the difference” between community banks and larger institutions, she remains “a vigorous, vigorous consumer advocate,” Verdier said. ‘Balanced Approach’ “We’re for somebody who takes a balanced approach to ensuring that the consumer is protected in a fashion that allows lenders to actually extend credit,” said William Himpler , a lobbyist for the American Financial Services Association in Washington. “You’re talking about somebody who touches every segment of consumer credit.” The Senate approved the finance overhaul yesterday and sent it to Obama, who said he would sign it into law next week. The law instructs the bureau to merge staff members from consumer units in seven agencies, including the Fed, Treasury, Federal Trade Commission and Federal Deposit Insurance Corp. Until a director is in place, the bureau will be managed by the Treasury Department. Once established at the Fed, it will be funded with 10 percent of the central bank’s operating budget in its first year, rising to 12 percent by 2013, giving it start-up funding of about $400 million. The Fed’s existing consumer affairs division has a $26 million budget and about 114 employees. During the congressional debate over the financial overhaul, the Fed’s consumer protection staff came in for withering criticism about its failure to protect borrowers during the subprime mortgage boom. “Abysmal”, said Senator Jeff Merkley , a Democrat from Oregon. Fed Expertise Still, the new bureau should rely on the expertise of the Fed’s staff, said Patricia McCoy , a law professor at the University of Connecticut and former Fed adviser. The problem in the past, she said, was not that the staff missed warning signs about the housing crisis. Rather, “they lacked the political power to get the Board of Governors to act. They simply didn’t have that power,” McCoy said. Former Fed Vice Chairman Alan Blinder , who had called for a stand-alone consumer agency, said the Fed-based arrangement could create an “unworkable” bureaucracy that could hobble the effort. “This is a political compromise between those who wanted to have an independent agency and those who wanted to denigrate the importance of the agency by putting it under the Fed,” Blinder said in an interview. “You start out with a limp for no good reason.” To contact the reporters on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net ; Joshua Zumbrun in Washington at jzumbrun@bloomberg.net. Elizabeth Warren, chairman of the Congressional Oversight Panel for the U.S. government's Troubled Asset Relief Program. Photographer: Andrew Harrer/Bloomberg U.S. President Barack Obama makes a statement on the Senate's passage of a regulatory reform bill outside the White House in Washington. Photographer: Joshua Roberts/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-10-16 | Bloomberg | Merkel Left to Seek SPD Alliance After Greens Drop Out | German Chancellor Angela Merkel was left with the Social Democrats as her sole potential governing partner after the Greens dropped out of coalition talks citing irreconcilable differences over tax policy. Merkel and her Christian Democratic negotiators ended their meeting with Greens party leaders in the early hours today after failing to identify enough common ground to begin formal coalition negotiations. With the Greens sticking to their demands for tax rises to finance infrastructure and Merkel’s bloc unwilling to drop its rejection of tax increases, the talks broke up with no more meetings planned. “There was some astonishing movement toward our position” from Merkel, Claudia Roth, the Greens co-leader, said on ZDF television. “But on the specifics of energy, the minimum wage and a citizen’s insurance, there was no movement and that’s why we said it’s no basis for us” to continue talks to form a government, she said. The Greens’ decision to drop out of the running to join Merkel’s third-term government following the Sept. 22 elections robs the chancellor of a bargaining chip in her negotiations with the main opposition Social Democrats. Merkel’s bloc is due to meet for a third round of discussions with the SPD tomorrow. Bundestag Session Merkel has said she wants to pick a party for formal coalition talks before the first post-election session of Germany ’s lower house on Oct. 22. Before then, on Oct. 20, the SPD will hold a small congress that may approve or reject negotiations. The SPD has said that it will put any coalition agreement to a ballot of the full party membership. Greens leaders went into yesterday’s talks casting doubt on the outcome, citing a lack of clarity on Merkel’s renewable-energy goals, her policies on immigration, Europe and on finances. After about six hours of negotiations, the differences on matters such as energy emerged as “not unbridgeable,” CDU General Secretary Hermann Groehe told reporters. Yet the Greens’ decision to “stick to very massive tax increases as the only way to finance investment amounted to very considerable differences with our philosophy of creating scope for this via economic growth,” he said. Roth, acknowledging that her party’s finance proposals “were not accepted by the CDU,” said the Greens remained open to more talks if Merkel’s bloc further shifts its position. Her co-leader, Cem Oezdemir, left the door even wider open to another meeting should Merkel’s talks with the SPD break down, saying that he’d “be foolish” to rule out a resumption of the negotiations. Prickly Negotiations Both Merkel’s bloc and the Greens expressed surprise at the constructive nature of last night’s meeting, in contrast with the prickly discussions with the SPD the previous day. That may ease the way for Merkel’s party to retain control of the state of Hesse -- which includes Germany’s financial center, Frankfurt -- through a regional alliance with the Greens, breaking an impasse since a regional election held the same day as the federal vote. “Of course there is still a lot that divides us,” Michael Fuchs , a CDU deputy parliamentary leader, said of the Greens on Deutschlandfunk radio today. “These negotiations have certainly changed the relationship between the two parties.” To contact the reporters on this story: Alan Crawford at acrawford6@bloomberg.net Brian Parkin in Berlin at bparkin@bloomberg.net To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net |
2024-01-07 | Bloomberg | Cancers Linked to HPV Rise in U.S. on Low Vaccine Use | Cancers caused by the human papilloma virus rose in the past decade as use of vaccines by Merck & Co. (MRK) and GlaxoSmithKline Plc (GSK) that may prevent the tumors was less than recommended by health officials. The rates of oral, vulva and anal cancers increased from 2000 to 2009, according to a study published today in the Journal of the National Cancer Institute. The incidence of cervical cancer, also tied to HPV, fell in white women while increasing in black women, the report said. Merck’s vaccine, which came on the market in 2006, and Glaxo’s vaccine, approved in 2009, protect against strains of the sexually transmitted virus that are linked to cancer of the anus, cervix, vagina, vulva, and throat. The U.S. recommends use of the shots in boys and girls ages 11 and 12. Only a third of girls ages 13 to 17 have been fully vaccinated as of 2010, well below the 80 percent rate epidemiologists say is needed to significantly reduce the prevalence of infections. “Vaccination rates are still quite low in terms of where we need to be to really impact HPV infections,” said Edgar Simard, an author on the study and senior epidemiologist at the Atlanta-based American Cancer Society, in a telephone interview. “If we don’t address these disparities now they will continue to manifest.” Cancer Decline The increase in HPV-related cancers contrasts with a decline in the rate of all new tumors in men, the study found. The rate for all cancers in women was little changed. Cancer deaths continued to drop, falling 1.5 percent a year during the decade. The biggest declines in death rates were in lung, breast, colon and prostate cancers while deaths increased from liver, pancreatic and skin cancers. Cancer death rates have been falling since the 1990s because of less tobacco use and more screening that can lead to early detection and treatment, the study said. “We are seeing the trend going in the right direction,” said Brenda Edwards, an author on the study and senior adviser at the National Cancer Institute. “These trends show we haven’t eliminated cancer, but we have managed to be able to diagnosis it and treat it.” Researchers on the study said they aren’t certain why the HPV vaccination rates remain low, though there are multiple barriers to getting protected. Unlike most vaccines, it isn’t required for school enrollment, putting less pressure on parents to ensure their children get the shot. It also requires three shots, meaning parents will have to take their child to the doctor multiple times. The lowest HPV vaccination rates were in southern states, including Alabama and Mississippi , and among people without health insurance. HPV-associated cancer accounted for 3.3 percent of all cancers among women and 2 percent in men in 2009, the study found. To contact the reporter on this story: Shannon Pettypiece in New York at spettypiece@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-05-04 | Bloomberg | Treasury Yields Rise From 6-Week Low Before Service Sector Data | Treasury yields rose from the lowest in six weeks before a report that will show service industries in the U.S. accelerated in April, damping demand for the perceived safety of fixed-income assets. Two- and 10-year notes slipped. The Institute for Supply Management ’s index of non-manufacturing companies rose to 57.5 from 57.3 in March, according to the median estimate of economists surveyed by Bloomberg News. The U.S. is scheduled to announce the amount of three-, 10-and 30-year debt it will auction next week. “Treasuries are losing a little of their appeal before the data,” said Orlando Green , a fixed-income strategist at Credit Agricole SA in London. “There may be some anticipation of better numbers.” The yield on 10-year notes gained one basis point to 3.26 percent as of 7:50 a.m. in New York , according to Bloomberg Bond Trader prices. It reached 3.234 percent earlier, the lowest since March 18. The 3.625 percent note due in February 2021 fell 2/32, or 63 cents per $1,000 face amount, to 103 2/32. The two-year note yield rose two basis points to 0.62 percent. It fell to 0.585 percent yesterday, the lowest since March 21. Auction Plans The U.S. will probably sell $32 billion of three-year notes, $24 billion of 10-year debt and $16 billion of 30-year bonds next week, according to a Bloomberg survey of 14 primary dealers, companies required to bid in Treasury auctions. The amounts would be the same as the previous auctions of these maturities in February. Morgan Stanley and Goldman Sachs Group Inc. are dropping bets against U.S. government securities after gross-domestic- product growth unexpectedly slowed last quarter. Economic growth is falling short of forecasts and market participants may need to reduce their yield predictions, Jim Caron , the New York-based global head of interest-rate strategy at Morgan Stanley, wrote in a report yesterday. Goldman Sachs cited Federal Reserve comments and the pace of inflation in a separate report the same day. ‘Neutral From Bearish’ “We have recently turned neutral from bearish on bonds,” Caron wrote. “We are also tactically looking to buy bonds if yields rise.” Morgan Stanley and Goldman Sachs are both among the 20 primary dealers authorized to trade with the Fed. The central bank is scheduled to purchase $1 billion to $2 billion of Treasury Inflation Protected Securities due from April 2013 to February 2041 today under its plan to support the expansion by pumping $600 billion into the economy, according to its website. GDP grew at a 1.8 percent annual rate from January through March, slowing from 3.1 percent in the final three months of 2010, the Commerce Department said on April 28. “I’m bullish” on Treasuries, said Zeal Yin, who invests in U.S. debt in Taipei at Shin Kong Life Insurance Co., Taiwan ’s second-largest life insurer, with the equivalent of $52.5 billion in assets. “They eventually will cut the deficit. GDP growth will not be as good as many people expect.” Shin Kong Life bought Treasuries two weeks ago, he said. Fed Stance Fed Chairman Ben S. Bernanke signaled April 27 that the central bank will maintain its record stimulus after it ends large-scale bond purchases. The Fed has held its key rate at zero to 0.25 percent since December 2008 and is aiming to increase growth by completing $600 billion of Treasury purchases through June. Treasury bulls are in the minority. The 10-year yield will advance to 3.59 percent by June 30 and to 3.91 percent by year- end, according to Bloomberg surveys of banks and securities companies with the most recent forecasts given the heaviest weightings. “Ultimately, the economic fundamentals should see Treasury yields move up,” said Rob da Silva, who helps oversee $235.3 billion as a fund manager in Sydney at Principal Global Investors. “The economy is on a sustainable recovery.” The company is part of Principal Financial Group Inc., based in Des Moines , Iowa. Ten-year rates will climb to 3.75 percent by year-end, da Silva said. Yield Difference The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt, has widened to 2.55 percentage points from 2.16 percentage points six months ago. The Obama administration and congressional Republicans are debating how and whether to raise the debt limit. Republicans say they won’t act unless President Barack Obama offers more spending cuts. Treasury Secretary Timothy F. Geithner said the U.S. will have three weeks more than previously seen before hitting its borrowing limit, giving the White House and Congress more time for a compromise to raise the ceiling. The government can borrow until Aug. 2, Geithner wrote in a letter to congressional leaders this week. The U.S. will stop issuing State and Local Government Series securities on May 6,Geithner wrote in the letter. The bonds “fund a variety of expenditures, including infrastructure improvements across the country,” he said. To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net ; Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net |
2024-03-26 | Bloomberg | Obama Says U.S. Military Alliance Thwarted Libyan ‘Catastrophe’ | President Barack Obama said the U.S. and its allies have halted Libyan leader Muammar Qaddafi ’s forces, destroyed his air defenses and prevented a “humanitarian catastrophe” through military action. Obama said in his weekly radio and Internet address that while the U.S. shouldn’t get involved in every crisis, “when someone like Qaddafi threatens a bloodbath that could destabilize an entire region, and when the international community is prepared to come together to save many thousands of lives, then it’s in our national interest to act.” The nation has a “responsibility” to help in Libya , he said. The mission in Libya, which began March 19 when U.S., French and U.K. forces began enforcing a no-fly zone, is “clear and focused,” Obama said. The U.S. is carrying out a United Nations mandate to protect Libyan civilians from a violent crackdown by their leader, he said. “Make no mistake, because we acted quickly, a humanitarian catastrophe has been avoided and the lives of countless civilians -- innocent men, women and children -- have been saved,” the president said. Obama reiterated that the U.S. role has been “limited” in scope, and he said it won’t include sending ground forces. “This is now a broad, international effort,” he said, citing the work of allies in the North Atlantic Treaty Organization and support from such Arab countries as Qatar and the United Arab Emirates. NATO agreed on March 24 to take command of the no-fly zone and according to spokeswoman Oana Lungescu is “actively considering” a broader role over all operations. Sharing ‘Responsibility’ “This is how the international community should work -- more nations, not just the United States , bearing the responsibility and cost of upholding peace and security,” Obama said. He said the international community is working to “hold the Qaddafi regime accountable,” which includes freezing the Libyan leader’s foreign assets worth tens of billions of dollars. “Our message is clear and unwavering,” the president said. “Qaddafi’s attacks against civilians must stop.” Oil prices have jumped about 25 percent since the Libyan rebellion began in mid-February, heightening concerns that Middle East crude supplies could be reduced. The revolt has evolved from the kind of popular uprising seen in Egypt and Tunisia into a civil war. Obama will address the nation next week on the action in Libya, the White House said in a statement yesterday. The speech, scheduled for 7:30 p.m. local time on March 28 at the National Defense University in Washington, is designed to provide an update on the situation, including the transfer to NATO command and control. Republican Address In the Republican address , Governor Bob McDonnell of Virginia said the health-care overhaul, which was “rammed through Congress in a partisan vote” a year ago, pushes “expensive, unfunded and unsustainable programs onto the rest of us.” He urged the Supreme Court to swiftly decide whether the law is constitutional and criticized the Obama administration for opposing an expedited appeal to the high court. Virginia filed a lawsuit on March 23 within minutes of Obama signing the landmark law, a top priority of his administration. In the suit, the state’s attorney general, Ken Cuccinelli, argued that Congress has the power only to tax and can’t force people to participate in a market. A federal judge agreed in December that the measure unconstitutionally requires Americans to maintain a minimum level of health insurance. Cases on Appeal The Virginia case is one of several suits challenging the requirement that people either obtain insurance or pay a penalty. U.S. district court judges have reached different conclusions, and three appellate courts are preparing to take up the issue. The overhaul had “more to do with expanding control by the federal government than actually reforming our health-care system,” McDonnell said. McDonnell, who is vice chairman of the Republican Governors Association , said the law limits governors’ abilities to control state programs and will result in higher costs and less innovation. The law’s expansion of Medicaid, the government health insurance program for the poor, is unsustainable and will leave less money for roads, schools and law enforcement , he said. In Virginia, Medicaid makes up 21 percent of the general budget and costs will rise further, McDonnell said. ‘Budget-Buster’ “The federal health-care bill is not only a budget-buster, it’s also unconstitutional,” he said. The “bureaucratic” law should be replaced with “innovative, free-market policies that drive down costs and increase coverage.” He said better options include enacting lawsuit reform, letting Americans buy insurance across state lines, promoting health savings accounts, and permitting voluntary, market-based purchasing exchanges. The U.S. needs “policies that recognize what history teaches well, and that is that the creative solutions of the free market beat one-size-fits-all plans of big government,” he said. To contact the reporter on this story: Kate Andersen Brower in Washington at kandersen7@bloomberg.net To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net |
2024-04-07 | Bloomberg | Copper in London, New York May Drop as Gain Seen as Excessive | Copper in London may decline for the first time in three days as some investors deemed the biggest gain in two weeks as excessive amid a lack of signs that Chinese demand is picking up. Three-month copper on the London Metal Exchange was little changed at $9,606 per metric ton at 3:37 p.m. in Singapore after earlier losing as much as 0.4 percent. The metal gained 2.3 percent yesterday, the most since March 23. “Recent price gains have hinged on China’s demand picking up and that’s not happening yet,” Shi Wenzhu, an analyst at Huatai Great Wall Futures Co., said from Shanghai. “Inventories remain high and premiums aren’t picking up.” Inventories in LME warehouses have risen 17 percent this year, climbing to a nine-month high of 442,325 tons on April 5. Copper stockpiles in Shanghai are up 23 percent this year. Premiums paid by Chinese importers over the London Metal Exchange cash price have been quoted at $20 a ton on a cost, insurance and freight basis to Shanghai since February, according to data from industry publication Metal Bulletin. A rise in premiums would indicate a pickup in demand. “We remain cautious on the base-metals group, particularly on copper, which remains elevated despite rising inventories, sluggish physical premiums, and persistent questions about hidden Chinese stocks,” Edward Meir , a senior analyst at MF Global, wrote in a monthly report yesterday. Shanghai warehouses hold about 600,000 tons of refined metal, with a further 100,000 tons in southern ports, equivalent to about 11 percent of China’s total annual usage, Standard Bank Plc analyst Leon Westgate said in a March 28 report. Japan ’s Economy Copper in London dropped to a three-month low of $8,944.50 a ton on March 15 on concern Japan’s record quake will hamper economic growth. The Bank of Japan today cut its assessment of the economy following the March 11 temblor and ensuing tsunami. Copper on the Comex in New York declined as much as 0.5 percent to $4.35 per pound. The contract rose 2.5 percent yesterday, also the most since March 23. June-delivery metal on the Shanghai Futures Exchange gained as much as 0.7 percent to 71,950 yuan ($10,994) a ton and ended the day at 71,690 yuan. Expectations that global copper supply will lag behind demand drove a 30 percent rally last year and pushed the price in London to a record $10,190 on Feb. 15. Rio Tinto Group, the third-largest mining company, expects copper demand in China and other emerging markets to grow faster than output, prompting a global deficit of as much as to 500,000 tons this year, Andrew Harding , head of the company’s copper business, said yesterday. Lead in London shed 0.5 percent to $2,805 a ton, and zinc lost 0.3 percent to $2,443.75 a ton. Nickel rose 1.7 percent to $26,869 a ton, tin advanced 0.6 percent to $32,300 per ton, and aluminum gained 0.7 percent to $2,688 a ton. To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net |
2024-04-01 | Bloomberg | China Stocks: Citic Bank, Fuanna, Merchants Bank, Ping An | Shares of the following companies had unusual moves in China trading. Stock symbols are in parentheses as of 11:30 a.m. local-time break. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, rose 7.16, or 0.2 percent, to 2,935.28. The CSI 300 Index (SHSZ300) gained 0.3 percent to 3,231.51. China Citic Bank Corp. (601998 CH), the banking unit of the nation’s largest investment firm, rose 1.1 percent to 5.73 yuan after saying profit surged 50 percent to 21.5 billion yuan ($3.3 billion) last year as interest rate increases helped boost its lending margin. China Merchants Bank Co. (600036 CH), the nation’s sixth- largest lender, added 1.4 percent to 14.28 yuan after saying profit rose 41 percent to 25.8 billion yuan in 2010 as lending margins widened and income grew from loans and fee-based services. Ping An Insurance (Group) Co. (601318 CH), China’s second- biggest insurer, gained 1.2 percent to 50.03 yuan, the most in a week. The company will boost fixed-income investments this year to tap rising yields and may “slightly” lift equities in the portfolio as it turns more optimistic on stocks, President Alex Ren said in an interview. Shenzhen Fuanna Bedding and Furnishing Co. (002327 CH), a manufacturer of household textile products, climbed 5.2 percent to 36.52 yuan, the biggest gain since January 28. First-quarter profit may have risen between 50 percent and 70 percent from a year earlier on higher sales and profit margin, the company said in a statement. --Zhang Shidong. Editor: Allen Wan To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-3040 or szhang5@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-11-07 | Bloomberg | Aviva New Business Climbs 14 Percent, Helped by France, Turkey | Aviva Plc (AV/) , the U.K.’s second-biggest insurer by market value, said the value of new business climbed 14 percent in the first nine months of the year, boosted by higher sales in Europe and Asia. New business rose to 571 million pounds ($918 million pounds) from 503 million pounds in the nine months to Sept. 30. the London-based company said in a statement today. Business climbed 33 percent in France , 40 percent in Turkey and by 43 percent in Asia. “Progress is in line with our expectations and we remain focused on delivering cash flow plus growth,” Chief Executive Officer Mark Wilson said in the statement. “Aviva remains in the early stages of turnaround.” Wilson, who succeeded Andrew Moss this year, is seeking to appease investors by selling assets and cutting costs to help rebuild capital depleted by the financial crisis and shrink a 5.1 billion-pound internal loan. The size of the loan remained unchanged in the period. The insurer last month sold its U.S. unit to Apollo Global Management LLC for $2.6 billion, more than it initially expected. Total long-term saving sales fell 6 percent to 5.81 billion pounds from 6.18 billion pounds in the year-earlier period. Net asset value a share fell to 273 pence at the end of the third quarter from 281 pence at the end of June. The company said it’s making “satisfactory progress” on cost reduction, with operating expenses 10 percent below their level in 2011. The combined ratio, or claims and expenses as a percentage of premiums, for the insurer’s property and casualty business was little changed at 96.9 percent in the nine-month period. Aviva has climbed 19 percent in London trading this year, lagging the FTSE 350 Insurance Index’s 28 percent advance. Larger competitor Prudential Plc (PRU) has climbed 46 percent and Legal & General Group Plc, which yesterday reported a 20 percent increase in net cash for the first nine months, has advanced 45 percent. To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-07-12 | Bloomberg | Medicine’s Big Mystery, What Does Treatment Cost?: Mimi Ferraro | The next time I see my oncologist, my main complaint will be not the side effects of my cancer treatments, though I have plenty of those, but the impossibility of finding out how much those treatments will cost before I have them. In 2006, I was diagnosed with breast cancer. I was 29. The cancer was small and, in terms of surgery and immediate recovery, things went well. But my five-year follow-up treatment has been an endless loop of side effects that generate their own costs and -- often just as stressful -- a dizzying accumulation of medical debt. Repeatedly I have been stunned by bills I didn’t expect because no one -- not doctors, hospitals or insurance companies |
2024-11-02 | Bloomberg | Hovnanian Says Revenue May Top Estimates as Deals Delayed | Hovnanian Enterprises Inc. (HOV) , New Jersey ’s largest homebuilder, said revenue for the quarter that ended this week should meet or exceed analysts’ estimates even as superstorm Sandy pushed back the completion of some deals. Revenue for the fiscal fourth quarter may top the First Call estimate of $461.1 million from Thomson Reuters Corp., the Red Bank-based homebuilder said in a statement today. Nine analysts surveyed by Bloomberg have an average estimate for revenue of $462.3 million. Sandy, which battered New Jersey on Oct. 29 in the biggest storm in Atlantic history, delayed 50 to 75 home deliveries, Hovnanian said. Closings are typically weighted toward the end of the quarter and fiscal year, according to the company. “Since we expect these 50 to 75 homes to be delivered later in fiscal 2013 and our sales backlog remains very strong, we do not expect any long-term impact as a result of Hurricane Sandy ,” Chairman and Chief Executive Officer Ara K. Hovnanian said in the statement. The majority of damage at the company’s communities should be covered by insurance, Hovnanian said. Hovnanian climbed 4.9 percent to $4.72 in New York trading. The shares have more than tripled this year for the biggest gain in the Bloomberg Industries homebuilder index. To contact the reporter on this story: Kara Wetzel in New York at kwetzel@bloomberg.net To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net |
2024-06-07 | Bloomberg | Americans Cling to Jobs as U.S. Workforce Dynamism Fades | After 4 1/2 months of meetings, interviews and hand-holding, personnel recruiter William Rowe thought he had sealed the deal. The senior executive of a major corporation Rowe had been courting finally agreed to take a top post at a venture capital- backed technology firm in California. Then four days after giving notice, the executive, who is in his 40s, had second thoughts about leaving the security of his company and returned to his old job. “He decided to go back to the mother ship” and not uproot his family to take a chance on joining a new firm, said Rowe, vice chairman of Pearson Partners International Inc., a search firm in Dallas. The deepest economic slump since the Great Depression has left its mark on both job seekers and job creators, making them more wary about taking risks in a slowly recovering labor market. Spooked by the severity of the recession and stuck with underwater home mortgages, Americans are less inclined to leave their jobs and less willing to strike out on their own to build businesses, government data show. Even with swelling profits, companies are holding back on hiring, complaining that they can’t find skilled workers for positions they do have open. As a result, the labor market is losing some of the dynamism for which it’s long been known. And the trend predates the recession: An aging population and the growth of two-income households have reduced Americans’ mobility to about half of what it once was, while technological gains and globalization have led to a loss of middle-income jobs. The economic slump only exacerbated the loss of vigor. ‘Hollowing Out’ “The U.S. labor market is becoming more sclerotic,” said Harvard University Professor Lawrence Katz, a former chief economist at the U.S. Labor Department. “We’re seeing less gross job creation and job destruction, and we have a major hollowing out of jobs in the middle.” The diminishing vibrancy matters because the less job turnover there is, the harder it is for others, particularly younger people, to find work. Unemployment among 16- to 24-year- olds was 16.1 percent in May, about double the 8.2 percent rate for the population as a whole. Also holding them back are older workers staying on the job longer after seeing their savings eroded by the housing market bust and financial crisis. Americans who are thrown out of work in such an environment also are finding it tougher to get jobs. The average duration of unemployment was 39.7 weeks in May, more than double the 18.8- week average since 1990 and not far below the record 40.9 level set in November last year. American employers added 69,000 workers last month, the fewest in a year. Like Europe “We have certainly moved” in the direction of Europe, with a less-dynamic labor market, Steven Davis , professor at the University of Chicago Booth School of Business, said in an email. He ticked off the similarities: “higher unemployment rates, longer unemployment spells, steep falls in the employment rate in the working-age population, a slower pace of worker flows, and a slower pace of job creation and destruction.” David Bouchey was among those caught in the middle. Bouchey, of Aurora, Colorado , who lost his position as a financial analyst in 2007, said he thought he’d find work because of his experience and three post-graduate degrees. “I’m overqualified for almost every job I apply for,” said Bouchey, 54. He, his wife and two sons live on about $1,000 a month in public assistance. “I never thought the economy would be this bad.” Bouncing Back Still, the economy has improved from where it was just a few years ago, when joblessness hit a 29-year high of 10 percent in October 2009. Private business payrolls are back to levels that prevailed when President Barack Obama took office in January 2009. Job openings rose in March to their highest point in almost four years, though they are still more than 20 percent below levels seen in early 2007, prior to the economic decline. Many industries -- from leisure and hospitality to professional and business services -- have increased their payrolls since the recession ended in June 2009, according to Labor Department figures. Three of the areas most affected by the slump -- construction, financial services and government -- still lag behind. Manufacturing has added almost a half-million jobs since the start of 2010 after shedding more than six million in the two decades before. Lower energy costs in the U.S. -- courtesy of a surge in natural gas production -- and rising wages overseas, particularly in China, are contributing to what James Paulsen , chief investment strategist in Minneapolis at Wells Capital Management, calls a “manufacturing renaissance.” Health Care Huntsman Corp. (HUN) , the world’s biggest maker of textile dyes, plans to increase production of ethylene and related chemicals in Texas and is evaluating additional expansion projects to take advantage of cheaper natural gas, Chief Executive Officer Peter Huntsman said in a May 1 interview. The biggest job gains have come in health care as the aging population drives up demand for workers from nursing aides to surgeons. While the economy lost 7.5 million positions during the recession, health care expanded staff and continues to do so in the recovery. Together with social assistance, it will add about 5.6 million employees to become the largest job gainer by 2020, according to the Bureau of Labor Statistics. Yet many of those positions, including personal care and home health aides, won’t require a high school education and so are unlikely to pay much. “The first baby boomer just turned 65 last year, so when it comes to health-care jobs in America, we haven’t seen nothing yet,” said Chris Rupkey , chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. In Middle Americans at the top and bottom of the income scale have benefited the most from the improvement in the labor market. Those in the middle have stayed behind. Employees making above- average wages, including doctors and energy-industry workers, and those at the other extreme, including home-health aides and restaurant staff, have seen outsized gains in hiring since the jobs upturn began in 2010, according to economists at Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. That continues a decades-long trend that picked up speed during the recession. Academic economists Nir Jaimovich and Henry Siu found that 95 percent of the jobs lost during the slump were among workers who carried out routine assignments that could be easily automated. These jobs, which include office and administrative roles, bank tellers and machine operators, disappeared during the contraction and show “no recovery to date,” Jaimovich, a professor at Duke University in Durham, North Carolina , and Siu of the University of British Columbia in Vancouver, said in a paper published on March 31. More With Less “Companies have been driving, and continue to drive, for increased productivity, to do more with less, and the tool to do that is technology improvement,” said Jonas Prising , president of the Americas for Milwaukee-based ManpowerGroup, the world’s second-largest provider of temporary workers. “What are getting squeezed are the well-paying jobs with lower skill levels that used to give a middle-class income.” Technological change has been a boon for those with the skills to exploit it. Job openings in the computer and mathematical fields outnumbered job seekers by almost four to one in April, according to the New York-based Conference Board. Tyler Stalder, 24, found work in San Francisco’s technology industry shortly after he finished a one-year web-development fellowship with a nonprofit. The computer programmer started working for Singly, a startup company, on March 2 after less than two months of job interviews. And he’s still being contacted by prospective employers trying to recruit him. Uneven Recovery The jobs recovery also has been uneven geographically. Only four states -- Alaska, North Dakota, Texas and Louisiana, all beneficiaries of the energy boom -- have reached or surpassed their previous peaks in employment, according to an analysis by economist Steven Frable of consultants IHS Global Insight in Lexington, Massachusetts. Some others, including New York and West Virginia, are close. Sixteen states still have fewer than 95 percent of their prerecession job levels, Frable said in a report on May 21. Alabama, Arizona, Florida, Michigan, Rhode Island, and Nevada are behind previous peaks by 7 percent or more. Unemployment rates also vary widely -- from 11.7 percent in Nevada, one of the regions most hurt by the real estate bust, to 3 percent in North Dakota, the center of the shale gas expansion and the state whose economic health improved the most last year, according to the Bloomberg Economic Evaluation of States. Hiring has been so frantic in the Great Plains state that the McDonald’s Corp. restaurant in Dickinson at one point was offering $300 signing bonuses. Staying Put In the past, such geographic disparities would have been ironed out as Americans flocked to where the jobs were. Labor mobility has long been a major source of strength for the U.S. jobs market when compared with Europe. That is less the case today. About one in 10 Americans currently move each year, according to James Manyika, director of the McKinsey Global Institute, the research unit of consultants McKinsey & Co. That’s well below the roughly one in five average that prevailed from 1945 through about 1990, he said. The percentage of Americans who changed residences between 2010 and 2011 fell to a record low of 11.6 percent, from 12.5 percent the previous year, according to Census Bureau figures. That compares with 17 percent in the recession of 1990-91. The image “of the highly mobile American worker is not as true as it used to be,” Manyika said. Dual-Incomes The rise of the dual-income family is one reason, he said: When both partners are working it’s harder to coordinate a move. More recently, the collapse in house prices has played a role in damping mobility, he added, although Davis said that research suggests the impact of that is small. More than 11 million households owed more on their mortgages than their homes were worth in the fourth quarter of last year, according to data provider CoreLogic, and would face losses if they opted to sell to move elsewhere for work. While Americans are more willing to leave their jobs for other opportunities than they were at the depth of the recession, they still have a way to go before they regain the confidence they exhibited prior to the downturn. The so-called quit ratio -- which measures the number of people voluntarily leaving their jobs as a proportion of total employment -- stood at 1.6 percent in March. That’s up from a low of 1.2 percent almost three years ago, yet still well below the 2.3 percent peak seen in late 2006. Not Changing “We just haven’t had people changing jobs enough,” said Betsey Stevenson , an assistant professor at the University of Pennsylvania ’s Wharton School in Philadelphia and a former chief economist at the Labor Department. “We need to see people have the confidence to quit their job and find a better one and create an opening for someone else.” The jobs recovery hasn’t been strong enough to convince many Americans to re-enter the labor force and start looking for work again. The labor participation rate -- the share of working-age people holding a job or seeking one -- stood at 63.8 percent in May, just above a three-decade low of 63.6 percent the previous month. A portion of those who have dropped out of the labor force have gone on disability. The number of workers receiving Social Security Disability Insurance from the government jumped more than 20 percent to 8.7 million in May from 7.1 million in December 2007, Social Security data show. Fewer Startups The dwindling dynamism of the U.S. labor market also shows up in the willingness of Americans to strike out on their own. The nation’s business start-up rate -- the number of new firms as a proportion of all companies -- fell to a record low of around 8 percent in 2010, according to the latest data available from the Census Bureau. That’s down from about 11 percent in 2006, before the economic slump, and a high of 13 percent in the 1980s. The longer-run decline is partly due to the aging of the population, according to the University of Chicago’s Davis. More recently, tighter credit in the aftermath of the financial crisis also may be discouraging start-ups, he said. That’s got big implications for the labor market. Research by University of Maryland Professor John Haltiwanger found that start-ups and young firms account for a disproportionate share of job creation, exhibiting what he calls an “up or out” dynamic -- they either grow fast or they fail. It’s that kind of vibrancy that has helped make the U.S. economy great, said Stevenson. “What makes the U.S. different is that we are mobile,” she said. “We find where we are going to be the most productive and we get there.” Signs that such dynamism is on the wane are “very concerning.” To contact the reporter on this story: Rich Miller in Washington at rmiller28@bloomberg.net To contact the editor responsible for this story: Clark Hoyt at choyt2@bloomberg.net |
2024-08-25 | Bloomberg | Poland’s PZU Reports 33% Gain in First-Half Profit on Premiums, Cost Cuts | PZU SA, Poland’s largest insurer, said first-half profit climbed by a third after boosting premiums and cutting costs. Net income rose to 1.55 billion zloty ($536 million) from 1.17 billion zloty a year earlier, the Warsaw-based firm said in a regulatory statement today. That matched the 1.5 billion-zloty average estimate of eight analysts surveyed by Bloomberg. Premiums rose 5.2 percent to 7.67 billion zloty at the firm that became central Europe ’s largest publicly traded insurer by market value following an initial share sale in May last year. PZU cut costs related to computer systems and administration. Increased premiums helped PZU counter a 14 percent drop in investment income to 1.08 billion zloty after capital was cut by last year’s record dividend payout. PZU’s largest rival in central Europe, Vienna Insurance Group AG, is considering whether to bid for the Polish insurer that KBC Groep NV has put up for sale, Deputy Chief Executive Officer Peter Hagen said on Aug. 18. To contact the reporter on this story: Marta Waldoch in Warsaw on mwaldoch@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-05-03 | Bloomberg | Sharif Sees Quelling Militants as Job One in Pakistan Return | Nawaz Sharif , the two-time Pakistan prime minister seeking a return in next week’s election, will prioritize quelling militancy ravaging the country should he win power, according to one of his party’s top officials. Leading in opinion polls before the May 11 ballot, Sharif, 63, would seek the support of military commanders and political rivals to counter extremism, Chaudhry Nisar Ali Khan, who led Sharif’s Pakistan Muslim League party in opposition in the last parliament, said in an interview April 26. Faced with insurgent groups and extremist networks with differing loyalties, the “government of the day and the armed forces’ leadership must sit together and be clear as to who are with us and who are against us,” said Khan. Overhauling the crippled power sector and stemming losses at state-run companies would follow. Sunni radicals have stepped up attacks on Muslim sects they consider infidel, killing 250 people in bombings targeting the Shiite minority in Quetta and Karachi this year. A government minister and a provincial governor who opposed blasphemy laws were killed in 2011. Pakistan ’s army, which is fighting Taliban guerrillas in the northwest, dominates security policy and has its own links to extremist groups that have been enmeshed in conflicts in India and Afghanistan. If elected, “Sharif will likely lead a weak government and from a position of weakness, he won’t be able to take drastic steps needed to challenge the militants,” Muhammad Waseem, a political science professor at the Lahore University of Management Sciences, said May 2. “The policy to deal with them will firmly remain within the domain of army. I don’t think he is going to challenge that.” ‘Changed Man’ The Taliban have escalated their fight to topple the state from bases near the Afghan border, killing 60 people in attacks on election candidates. Sharif, whose first administration was cut short over corruption allegations and his second by Pervez Musharraf’s 1999 army coup, would face stiff challenges. Economic growth has slowed to an annual average of 3 percent since 2008 as a record power crisis shuts the grid for up to 18 hours a day. Ties with top aid-donor the U.S. have deteriorated. Sharif “is a changed man,” said Khan at his home in Rawalpindi, abutting Islamabad. “A lot of democracy has seeped into our decision-making. Nawaz Sharif consults very often, very vigorously.” Sharif received 37-percent support in a Gallup survey in March, double that for President Asif Ali Zardari’s Pakistan Peoples Party or former cricket star Imran Khan. The Sharif stronghold of Punjab province sends more than half the elected 272 lawmakers to parliament. House Arrest In a stark reversal of fortunes, Musharraf is under house arrest, shut out of the election over his 2007 emergency-rule declaration, subsequently judged illegal. Unidentified gunmen today shot dead the chief prosecutor investigating Musharraf over the assassination of former prime minister Benazir Bhutto , police said. A distinction had to be drawn between militants like the Taliban at war with the state and followers of radical ideology who don’t resort to violence, said Khan. “If somebody is an extremist and retains it in his heart, he doesn’t expound it, doesn’t implement it, fine,” he said. “Dealing with them is a longer term process” requiring better governance and an attack on poverty. Still, “those people who challenge the constitution and the state will be taken on.” Political Career William Milam , U.S. ambassador to Pakistan from 1998 to 2001 and a scholar at the Wilson Center in Washington , said the issue of extremism loomed over Pakistan’s future. “There’s real serious concern about whether Pakistan is losing control of one of the things that’s most important for a state -- the definition of what’s legitimate violence,” Milam said in an interview. In five to 10 years, “we could see an accelerated unraveling, a real unraveling, if the government doesn’t take action on the economy and violence.” Sharif’s family moved to Pakistan from India in 1947, building a business group that included steel and sugar mills. He entered politics under military ruler Zia-ul-Haq and as civilian government was restored became the chief rival of Bhutto, who had inherited control of the Peoples Party. As the two took turns in power for a decade, the armed forces backed successive dismissals of each over graft allegations. Kargil War Sharif ended state monopolies in shipping, airlines and telecommunications and ordered highways built when in office. He ordered nuclear tests in 1998, weeks after rival India. In 1999, the army attacked Indian troops in disputed Kashmir. Sharif, fearing a wider war and under pressure from U.S. President Bill Clinton , ordered a withdrawal. Months later, Sharif dismissed Musharraf, triggering the coup. Sharif will appoint professionals to run state-owned companies, especially power firms loaded with debt, to stop “a massive amount of economic hemorrhage,” Khan said. Ultimately, loss-making firms would be privatized. Taxes would be overhauled to reduce the burden on manufacturing while encouraging more people to pay. “It is our party, which initiated privatization, opened up the economy, brought in private banks, private insurance companies. So we know what we are talking about,” Khan said. To contact the reporters on this story: Haris Anwar in Islamabad at hanwar2@bloomberg.net ; Augustine Anthony in Islamabad at aanthony9@bloomberg.net To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net |
2024-06-20 | Bloomberg | PNC Said to Pay $3.45 Billion for RBC U.S. Retail Banking Unit | PNC Financial Services Group Inc. (PNC) has agreed to pay $3.45 billion in cash and stock for Royal Bank of Canada (RY) ’s U.S. retail banking unit, according to people with knowledge of the matter. The deal could include as much as $1 billion in PNC stock and may be announced as early as today, said the people, who declined to be identified because the talks are private. PNC also agreed to acquire credit-card assets from RBC for $165 million, the people said. The value of the agreements totals about $3.62 billion. An acquisition would help Pittsburgh-based PNC expand its retail business in the U.S. Southeast beyond a foothold in Florida. The RBC Bank unit, based in Raleigh, North Carolina , has more than 420 branches in six states across the region. PNC Chief Executive Officer Jim Rohr, 62, told investors June 3 the bank is “disciplined” with acquisitions, preferring purchases that build 10 percent market share in “larger” cities. “There’s an appetite for acquisitions given their capitalization and the lack of organic loan growth,” Tom Lewandowski, an analyst at Edward Jones & Co. in St. Louis, said in a June 17 interview. “They’re looking to go out there and purchase that loan growth.” The precise amount of PNC stock that RBC would receive will be determined closer to the date the deal is completed, which is expected by March, the people said. National City PNC has retail operations in 15 states and Washington D.C., including more than 2,500 branches, according to the bank’s website. The firm acquired National City Corp. in 2009 for about $3.9 billion in stock. Royal Bank is seeking to sell RBC Bank a decade after it entered the U.S. with a $2.16 billion takeover of Centura Banks. Royal Bank is retreating from U.S. consumer lending as competitors Toronto-Dominion Bank (TD) and Bank of Montreal (BMO) expand by acquiring troubled U.S. lenders. RBC Bank has posted 11 consecutive quarterly losses as of March 31, with combined annual losses of about $3.1 billion since 2007, according to Federal Deposit Insurance Corp. filings. RBC Bank is the smallest of Royal Bank’s U.S. operations, which also include wealth management and RBC Capital Markets investment bank. Fred Solomon , a spokesman for PNC, said the bank doesn’t comment on “rumors or speculation.” Katherine Gay, a spokeswoman for RBC, declined to comment. Royal Bank rose 64 cents, or 1.2 percent, to C$54.33 on June 17 in Toronto Stock Exchange trading. PNC fell $1.68, or 2.8 percent, to $57.79 that day in New York Stock Exchange composite trading. JPMorgan Chase & Co. (JPM) is advising RBC on the transaction, and Bank of America Corp. (BAC) is advising PNC, the people said. To contact the reporters on this story: Jeffrey McCracken in New York at jmccracken3@bloomberg.net ; Doug Alexander in Toronto at dalexander3@bloomberg.net ; Laura Marcinek in New York at lmarcinek3@bloomberg.net To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net ; Jennifer Sondag at jsondag@bloomberg.net ; |
2024-07-16 | Bloomberg | Asian Stocks Poised to Snap Two-Day Loss on U.S. Earnings | Asian stocks rose, with the regional benchmark equities gauge on course to halt a two-day drop, as Japan’s Topix index closed at its highest level in nearly two months after the yen weakened and Citigroup Inc. earnings beat estimates. Indian stocks tumbled after the central bank raised interest rates. Canon Inc. (7751) , a Japanese camera maker that gets 27 percent of its sales in the Americas, gained 2.7 percent. GCL-Poly Energy Holdings Ltd. (3800) , which produces solar-grade polysilicon, jumped 6.7 percent in Hong Kong after China’s State Council issued a plan to boost the solar industry. Paladin Energy Ltd. (PDN) soared 7.3 percent in Sydney after reporting record uranium output. The MSCI Asia Pacific Index rose 0.6 percent to 135.69 as of 7:05 p.m. in Tokyo, with all 10 industry groups on the gauge increasing. “Asian and emerging equity markets are positioned for a very good tactical rebound,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages more than $130 billion. “We started the quarter with the earnings expectation for the June quarter at around 5.5 percent and came all the way down to 2.4 percent. Chances are final results will be better than that.” The MSCI Asia Pacific Index gained 4.3 percent this year through yesterday and traded at 13.2 times estimated earnings. That compares with 15.2 times for the Standard & Poor’s 500 Index and 13.3 times for the Stoxx Europe 600 Index. Utilities gained the most among the regional gauge’s industry groups. Tokyo Electric Power Co. (9501) , Japan’s biggest utility by generation capacity, surged 13 percent to 768 yen. Regional Gauges India’s S&P BSE Sensex index slid as much as 1.9 percent, at one point heading for the biggest loss in almost a month. Japan’s Topix rose 0.7 percent, the highest close since May 22, after the market reopened following a public holiday. The Tokyo Stock Exchange became the world’s third-biggest bourse by listed companies today, adding 1,100 stocks from the Osaka Securities Exchange as the two merged their cash-equity trading platforms. South Korea’s Kospi index fell 0.5 percent. Australia’s S&P/ASX 200 Index rose 0.1 percent, while New Zealand’s NZX 50 Index lost 0.6 percent. Hong Kong’s Hang Seng Index (HSI) added less than 0.1 percent. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, rose 0.3 percent. Taiwan’s Taiex Index rose 0.1 percent and Singapore’s Straits Times Index slid 0.4 percent. Futures on the S&P 500 were little changed. The gauge gained 0.1 percent in New York yesterday. Citigroup, the third-biggest U.S. bank by assets, posted adjusted earnings of $1.25 a share for the second quarter, beating the $1.18 average estimate of 27 analysts surveyed by Bloomberg News. Yen Weakens Japanese exporters gained, with the yen trading at 99.85 per dollar as of 3:44 p.m. in Tokyo. Canon added 2.7 percent to 3,460 yen. Mazda Motor Corp. (7261) , an automaker that gets 30 percent of its sales in North America, advanced 1.4 percent to 442 yen. Indian shares fell after the Reserve Bank of India hiked rates. The central bank increased the marginal standing facility and the bank rate to 10.25 percent from 8.25 percent, and said it plans to sell $2 billion of government bonds on July 18, moves that worsen a tightening in liquidity across most of the biggest emerging markets. State Bank of India tumbled 4.1 percent to 1,833 rupees. Higher Rates The tightening “will be negative for the equity markets in the near-term as the market was looking for easy monetary policy going forward,” Hemant Kanawala, head of equities at Kotak Mahindra Old Mutual Life Insurance Ltd., which has $2 billion in assets, told Bloomberg TV India today. Solar stocks gained after China’s State Council said the world’s biggest maker of solar panels plans to add 10 gigawatts of solar power a year during the next three years. The plan would increase the nation’s solar installed capacity fivefold to more than 35 gigawatts by 2015. GCL-Poly Energy advanced 6.7 percent to HK$1.92 in Hong Kong. China Singyes Solar Technologies Holdings Ltd. (750) , a panel producer, added 4.4 percent to HK$8.77. Paladin Energy soared 7.3 percent to A$1.03 in Sydney, the biggest gain since July 1. The uranium explorer reported annual record production, up 20 percent from full-year 2012. NetDragon Websoft Inc. (777) posted a record decline, slumping 21 percent to HK$19.04 in Hong Kong. The online-game developer said it plans to sell app store 91 Wireless Websoft Ltd. for $1.1 billion to Baidu Inc., operator of China’s biggest search engine. The buyer is seeking a greater share of the mobile market. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net |
2024-02-04 | Bloomberg | Too Big to Fail Too Hard to Fix Amid Calls to Curb Banks | Top U.S. bank regulators and lawmakers are pushing for action to limit the risk that the government again winds up financing the rescue of one or more of the nation’s biggest financial institutions. Officials leading the debate, including Federal Reserve Governor Daniel Tarullo, Dallas Fed President Richard Fisher and Senator Sherrod Brown, share the view that the 2010 Dodd-Frank Act failed to curb the growth of large banks after promising in its preamble to “end too big to fail.” Strategies under consideration range from legislation that would cap the size of big banks or make them raise more capital to regulatory actions to discourage mergers or require that financial firms hold specified levels of long-term debt to convert into equity in a failure. The push for revisiting the law or writing new rules “is absolutely driven by a sense that Dodd-Frank did not end too big to fail,” said Mark Calabria, director of financial-regulation studies at the Cato Institute in Washington and a former aide to Senator Richard Shelby of Alabama when he was the ranking Republican on the Banking Committee. Three of the four largest U.S. banks -- JPMorgan Chase & Co. (JPM) , Bank of America Corp. and Wells Fargo & Co. (WFC) -- are bigger today than they were in 2007, heightening the risk of economic damage if one gets into trouble. JPMorgan’s 2012 trading loss of more than $6.2 billion from a bet on credit derivatives raised questions anew about whether the largest institutions have grown too complex for oversight. Restructuring Megabanks That loss is among events that “have proven ‘too big to fail’ banks are also too big to manage and too big to regulate,” Brown, an Ohio Democrat, said in a Jan. 22 e-mail. “The question is no longer about whether these megabanks should be restructured, but how we should do it.” Brown and fellow Banking Committee member David Vitter, a Louisiana Republican, are considering legislation that would impose capital levels on the largest banks higher than those agreed to by the Basel Committee on Banking Supervision and the Financial Stability Board, which set global standards. Brown also plans to reintroduce a bill he failed to get included in Dodd-Frank or passed in the last Congress that would cap bank size and limit non-deposit liabilities. The two senators have asked the Government Accountability Office to look into the economic benefits including lower borrowing costs that banks with more than $500 billion in assets receive as a result of federal deposit insurance, access to the Fed’s discount window and investor perceptions that they’ll be rescued in times of trouble. No Consensus Momentum for revisiting Dodd-Frank, whose Democratic authors Senator Christopher Dodd and Representative Barney Frank are no longer in Congress, is driven by both parties. Still, lawmakers are nowhere near consensus on what approach to take -- whether raising capital standards, limiting the size of institutions or curbing subsidies. The push by regulators may encourage Congress to take another look at the law, said Camden Fine, chief executive officer of Independent Community Bankers of America, which represents about 5,000 small lenders. “I think there’s going to be a synergy here between the regulators and Congress,” said Fine. “If regulators call for new authority, Congress will look for that. I would say that between now and probably the end of 2015 or 2016 you’re going to see some significant step by both Congress and regulatory agencies to rein in the big banks.” Fisher’s Bull The Dallas Fed’s Fisher, who keeps a breeding bull named “Too Big to Fail” on his Texas ranch, proposed in a Jan. 16 speech that regulators be explicit about what kinds of banking the government will backstop. Deposit insurance and discount- window loans would be available only to a firm’s commercial and consumer-banking operations. Fisher’s proposal would push other risk-taking businesses, such as investment banking, away from government support, raising their cost of funding. Fisher said reaction to his speech and bipartisan interest in limiting the safety net for banks make him think Congress may act on the issue. “I believe deep in my heart, in the way that speech has been received” that lawmakers “will move on this front,” he said in an interview with Kathleen Hays on Bloomberg Radio’s “The Hays Advantage.” While Senators Brown and Vitter want to limit bank size, “I’m a little uncomfortable about that,” Fisher said. “But it may be necessary from a transition standpoint.” Liquidation Alternatives House Financial Services Chairman Jeb Hensarling said his panel will look at alternatives to the so-called liquidation authority in Dodd-Frank, which gives the Federal Deposit Insurance Corp. power to take over failing financial groups. He and fellow Republicans on the committee have argued that the plan keeps taxpayers on the hook for bailing out large banks because it lets the FDIC borrow from the Treasury to purchase a failing bank’s assets and pay off its creditors. “There is something fundamentally wrong in our nation if there are financial institutions that are deemed too big to fail and others too small to matter,” Hensarling, of Texas, said in an interview. Living Wills Dodd-Frank and the nation’s banking regulators already have taken steps aimed at limiting the risk that a large bank will fail. The Fed conducts annual stress tests on the 19 largest financial firms to determine whether they need to boost capital and limit dividends. Banks file “living wills” to the FDIC describing how they could be wound down. The Fed also is focusing on how boards monitor risk and set compensation. Big banks and their representatives in Washington say such initiatives are evidence that Dodd-Frank is working and doesn’t need an overhaul. The notion that banks are “still somehow protected from market discipline” is “demonstrably false,” Rob Nichols, CEO of the Financial Services Forum, a Washington-based lobbying organization, wrote in a rebuttal to Fisher published Jan. 28 in the Dallas Morning News. “Fisher and other breakup proponents overlook major provisions of the Dodd-Frank Wall Street Reform Act that effectively end the problem of ‘too big to fail,’ as well as significant action taken by large banks that has dramatically strengthened the U.S. financial system,” wrote Nichols, whose group includes the heads of some of the world’s largest banks, including Credit Suisse Group AG and Goldman Sachs Group Inc. (GS) Competitive Disadvantage Breaking up large banks would put U.S. financial institutions at a competitive disadvantage, according to a report being published today by Hamilton Place Strategies, a Washington-based consulting firm founded by Tony Fratto, a White House and Treasury Department spokesman during the administration of George W. Bush. “Ultimately, breaking up U.S. banks will not improve the safety of the global financial sector and would reduce U.S. influence over the financial sector globally,” the firm wrote. Jamie Dimon, CEO of JPMorgan, told clients in Germany Jan. 21 that regulators and banks should develop systems to let lenders go bust without damaging the world economy. “We have to ensure big banks can be taken down without harming the public and at no cost to them,” Dimon, 56, said at a panel discussion in Koenigstein, near Frankfurt. Breakup Powers European regulators also are seeking ways to structure riskier activities outside of more traditional banking. U.K. Chancellor of the Exchequer George Osborne said for the first time regulators will get the power to break up banks, hardening legislation aimed at making lenders safer. The breakup powers will be added to a bill to be presented to Parliament this week, Osborne said in a speech today. Authorities will be able to split up an institution that doesn’t abide by rules to insulate retail operations from investment-banking activities. “My message to the banks is clear: If a bank flouts the rules, the regulator and the Treasury will have the power to break it up altogether -- full separation, not just a ring- fence,” Osborne said in Bournemouth, England, according to a text released by his office. The 848-page Dodd-Frank Act, passed in 2010, sought to reduce the risk of a major bank failure in two ways. It orders the Fed to design higher capital and liquidity requirements and stress test bank portfolios, while also establishing a resolution regime that gives the FDIC wide latitude to wind down a failing institution if bankruptcy isn’t an option. The impact the collapse of Lehman Brothers Holdings Inc. had on world financial markets and the U.S. economy gives regulators reason to avoid future bankruptcies. Friday Nights The alternative, using the FDIC’s liquidation authority, has its drawbacks. The law requires the approval of the Treasury secretary to shut down a large bank, bringing politics into the decision. It also would allow any failure of a large bank to be paid for using Treasury funds, with the cost recouped through fees on the industry. Republicans oppose any use of Treasury funds even if repaid. “Do you think there is a Treasury secretary ever born or yet to be born that would bring down -- like they do a community bank on a Friday night -- bring down Wells Fargo or Bank of America?” said the ICBA’s Fine. “Hell no. They would do exactly what they did four years ago.” The resolution regime also could be overwhelmed if several large banks got into trouble at once, said Harvey Rosenblum, research director at the Dallas Fed. Isolated Failure Dodd-Frank’s bank-liquidation rules “could work in one isolated large failure, but anything beyond that would be extremely difficult,” said Rosenblum, who has worked at the Fed since 1970. “We either have to cap their size or force these institutions to break themselves up.” JPMorgan’s assets rose to $2.36 trillion at the end of 2012, from $1.48 trillion in the third quarter of 2007, according to company filings. Bank of America ’s stood at $2.21 trillion compared with $1.58 trillion in the third quarter of 2007. Both New York-based JPMorgan and Charlotte, North Carolina-based Bank of America rescued failing financial companies in the crisis, becoming larger as a result. Dodd-Frank seeks to curb the size of banks by prohibiting mergers that result in a company whose liabilities exceed 10 percent of the industry’s aggregate liabilities. That built on a 1994 law prohibiting a bank holding company from making an acquisition if it would result in an entity holding 10 percent or more of the total insured deposits of the U.S. Brown’s Ceilings Neither statute stops banks from getting bigger. They can expand their balance sheets beyond these limits through non- deposit liabilities such as repurchase agreements and commercial paper, or by increasing deposits and other liabilities through internal growth. Brown’s bill would set the ceiling on deposits and liabilities at 10 percent regardless of how it was reached. “There is a strong and ongoing public debate going on whether or not the institutions should be broken up as a better solution or preferred solution,” Thomas J. Curry, who leads the U.S. Office of the Comptroller of the Currency, told the U.K. Parliamentary Commission on Banking Standards Joint Committee on Jan. 24. Democrats and the administration of President Barack Obama may be loath to re-open the Dodd-Frank debate. Representative Maxine Waters of California, the House Financial Services Committee’s ranking Democrat, issued a statement in January taking issue with Hensarling’s assertion that Dodd-Frank “enshrined a ‘too-big-to-fail’ bailout scheme into law.” Orderly Liquidation On the contrary, Dodd-Frank “mandates the orderly liquidation” of a failed institution, “in which its executives are dismissed and its shareholders are wiped out,” Waters said in an e-mailed statement. “The point of this process is to allow institutions to fail without causing catastrophic damage to the larger economy.” One dissenting member of her committee is Brad Sherman, a fellow California Democrat, who said he plans to reintroduce a bill requiring the Treasury secretary to compile a list of banks considered too big to fail and a year later break them up. “It’s not enough for current governmental leaders to declare we’re not going to bail them out,” Sherman said. “If an institution can credibly argue to some future president or some future Treasury secretary that if it goes down, it is going to take the economy with us, there’s a significant possibility they’re going to get bailed out.” Populists United Karen Shaw Petrou, who keeps track of legislation and regulation for the world’s largest banks as a managing partner at Federal Financial Analytics in Washington, said she can’t rule out the possibility of legislation. Beating on the big banks is one of the few areas where Republican and Democratic populists unite, she said. “This is going to be one of those instances where the left wing, of which there are a lot among House Democrats, and the right-wing Republicans join together,” Petrou said. “I don’t think potential legislation can be discounted.” Regulators such as the Fed may be motivated to do more, if only to preserve their powers. Dodd had so little confidence in the Fed’s ability to oversee large banks that he sought, in a draft of his legislation in 2009, to strip the central bank of its supervisory authority. Tarullo, the Fed governor in charge of supervision and regulation, has overhauled the central bank’s approach. He created a task force known as the Large Institution Supervision Coordinating Committee, which draws on economic forecasters, computer modelers, payment-systems specialists and supervisors to look across several financial institutions at once to spot clusters of risk. As a result of the stress tests, the Fed now has more loan and trading-book information on the largest banks than ever before. Tarullo’s Discomfort Still, Tarullo has expressed discomfort with large banks getting larger, saying in an October speech in Philadelphia that there’s a case to be made “for specifying an upper bound.” While not mentioning a specific limit, Tarullo said he would recommend a “presumption of denial for any acquisition by any firm that falls in the higher end of the list of global systemically important banks.” He also said Congress could limit large-bank growth by capping non-deposit liabilities. Fisher of the Dallas Fed said in an interview that his Jan. 16 speech caused an unusual stir in banking circles. After the text of his talk, “Ending ‘Too Big to Fail’: A Proposal for Reform Before It’s Too Late,” was posted on the bank’s website, Fisher said he was “flooded with notes from bankers around the country.” There was so much demand for the speech that the website crashed, he said. “This has never happened.” To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net ; Cheyenne Hopkins at chopkins@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-03-11 | Bloomberg | Wisconsin’s Walker Says Bargaining Limits to Help Middle Class | Wisconsin Governor Scott Walker defended a new law curbing most collective-bargaining rights for public employees as “good for the middle class” against a backdrop of boos and chants of “shame” from protesters. Walker, a 43-year-old Republican, said today he hopes to “inspire others to stand up and make the tough decisions” to control government spending. He spoke during a ceremonial bill-signing at the Capitol in Madison. Several hours earlier he approved the law that requires annual recertification votes for public-sector union representation and makes dues voluntary. State workers will contribute 5.8 percent of their salary toward pensions and pay 12.6 percent of their health-insurance costs. The law exempts police and firefighters. The measure incited protests across the U.S. and sparked debate about public-worker concessions as states face combined deficits of more than $100 billion next fiscal year. Walker, elected with 52 percent of the vote in November, said he hasn’t been fazed by weeks of demonstrations, saying “they have every right to be heard.” “The countless numbers of taxpayers and millions and millions of people who live in this state, the middle-class taxpayers of this state, also have a right to be heard,” Walker said in a news conference. “They’re the ones who have had to pay the higher taxes and the higher burden of excessive government.” Hundreds of protesters gathered inside the Capitol, filling stairways, hallways and bridges leading to the governor’s gallery, booing and chanting “Recall Walker.” Walker signed the bill less than 24 hours after the state Assembly gave final approval, capping three weeks of protests at the Capitol. He also rescinded a warning to unions that he would fire 1,500 state workers, according to a news release. The governor said the bill’s passage ended the need to cut the workforce. Democrats and organized labor called the bill an attack on workers and plan a rally outside the Capitol tomorrow. To contact the reporter on this story: Tim Jones in Madison at tjones58@bloomberg.net To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net |
2024-09-12 | Bloomberg | Why Fraudsters Should Applaud the SEC | Mary Jo White began her tenure as chairman of the Securities and Exchange Commission this year with a promise: The agency would require more fraudsters to confess what they did, as opposed to the SEC’s usual practice of letting them pay fines without admitting anything. Judging from the case of Ebrahim Shabudin, the fulfillment of that pledge is off to a poor start. Shabudin, 65, is one of the few high-ranking bankers to be indicted over conduct related to the financial crisis. The San Francisco lender where he served as chief operating officer and chief credit officer, United Commercial Bank, failed in 2009, costing the Federal Deposit Insurance Corp. about $1.2 billion. Shabudin held the same positions at the bank’s publicly traded parent company, UCBH Holdings Inc. The government says he and other senior executives deliberately delayed recognizing loan losses. Before it filed for bankruptcy, UCBH received almost $300 million in bailout cash from the Treasury Department’s Troubled Asset Relief Program -- all of which was lost. In 2011, a federal grand jury in San Francisco indicted Shabudin on charges of fraud, conspiracy, falsifying records and lying to the company’s auditor, KPMG LLP. He and a co-defendant have pleaded not guilty , and prosecutors are on track to bring the criminal case to trial. SEC Settlement The SEC, however, isn’t waiting to see if the criminal charges stick. Instead, in a settlement last month that went largely unnoticed, it allowed Shabudin to pay a $175,000 fine without admitting or denying its civil claims, which make essentially the same allegations as the criminal charges. He also was barred from serving as an officer or director of a public company, although there isn’t much risk that anyone would hire him as one now. This would seem like exactly the sort of case White was talking about when she first described the agency’s policy change. The story has everything: big losses for investors and taxpayers, plus accusations of accounting fraud. “There may be particular individuals or institutions where it is very important it be a matter of public record that they acknowledge their wrongdoing, and if not you go to trial,” White said in June when she described the policy shift. Factors would include the amount of harm done to investors and how egregious the fraud was, she said. Yet the SEC isn’t going to trial against Shabudin, even though the standard of proof for its claims -- a preponderance of the evidence -- is lower than that for criminal charges, which must be proved beyond a reasonable doubt. Shabudin is entitled to a presumption of innocence, of course, especially now that the SEC has let him go without copping to anything. If there were good reasons for the no-admit approach, the SEC isn’t saying what they were. The lead attorney on the case, Lloyd Farnham of the SEC’s San Francisco office, declined to comment on the settlement. So did John Nester , an SEC spokesman in Washington. An attorney for Shabudin, James Lassart of the San Francisco law firm Murphy Pearson Bradley & Feeney, didn’t return phone calls. White and her staff made a big to-do in June when they unveiled their policy shift, and so did the financial press. The SEC has been catching flak over its no-admit deals for many years, notably from U.S. District Judge Jed Rakoff of Manhattan. So far, the new tactic has been unsatisfying. Rather than showing a commitment to be tough, it has put a spotlight on the SEC’s extreme reluctance to ever insist on admissions of liability. Acting ‘Recklessly’ In its first major settlement testing the new approach, the SEC last month required hedge-fund manager Philip Falcone to admit to a long list of facts. He agreed, for instance, that he “improperly borrowed $113.2 million” at an unusually low interest rate from one of his hedge funds to pay personal tax bills, then didn’t disclose the loan to investors for about five months. He also admitted to acting “recklessly.” He and his firm also agreed to pay more than $18 million. Yet Falcone didn’t have to admit liability for violations of any specific rules or laws. Nor was he barred from being an officer or director of a public company -- which is how he was able to stay on as chairman and chief executive officer of Harbinger Group Inc. (HRG) , even though he was banned from the securities industry for five years. The SEC in its news release said Falcone admitted “wrongdoing,” a term that has no particular meaning. So see if this makes sense to you. Falcone, who hasn’t been accused of any crimes, was required to acknowledge a bunch of awful facts without admitting legal liability. Yet Shabudin, who was charged criminally over a bank collapse that cost taxpayers hundreds of millions of dollars, was allowed to cut a deal with the SEC without admitting anything at all. Here’s how to describe this newfangled policy in two words: ad hoc. ( Jonathan Weil is a Bloomberg View columnist.) To contact the writer of this article: Jonathan Weil in New York at jweil6@bloomberg.net. To contact the editor responsible for this article: Mark Whitehouse at mwhitehouse1@bloomberg.net . |
2024-10-19 | Bloomberg | The Hidden Utility of Ron Paul’s Balanced-Budget Plan: View | American voters are adept at sending mixed messages to elected officials. None are as confusing as the signals from the heartland over how to fix the federal budget. When told that the U.S. deficit is now $1.3 trillion, the majority of voters enthusiastically embrace the need to cut, cut, cut. But they balk when asked to name specific programs to downsize or lop off. That’s why U.S. Representative Ron Paul , the libertarian seeking the Republican presidential nomination, performed a valuable public service this week when he unveiled a budget plan that shows exactly what balancing the $3.8 trillion budget through spending cuts would look like. Paul’s blueprint , released Oct. 17, would balance the books in three years. Admirably, he commits real numbers to paper. He does it in just five pages. And he spares no one: the health- care industry, defense contractors, oil-and-gas companies, federal workers, homeowners, the poor, the middle class and the rich. In broad terms, Paul (whose chances of making it to the White House are beyond remote) would force Americans to confront their contradictions by slicing $1 trillion from the budget in his first year in office. He would eliminate five Cabinet-level agencies: Commerce, Education, Energy, Housing and Urban Development , and Interior. He would end the Transportation Security Administration. He would pare back most other programs to 2006 spending levels, before the financial crisis and the recession pushed up spending by the trillions. Block Grants The congressman wouldn’t stop there. Medicaid would become a block grant to the states, as would food stamps, child nutrition and other income-support programs. He would, of course, zero-out foreign aid. At least he’s egalitarian about it: If elected, Paul would pay himself a salary equivalent to the median personal income of the American worker -- $39,336. President Paul would also starve the revenue side of the ledger. Corporations would see tax rates drop to 15 percent from 35 percent. He would extend all the Bush-era tax cuts, abolish taxes on estates and investment income. He wouldn’t end Social Security, but he would let young people opt out of the retirement program. As for that $1 trillion sitting in the overseas bank accounts of U.S. corporations, Paul would allow the money to come home tax-free. Cut the Bureaucracy Such radical reductions in revenue would make it hard to run the vast federal bureaucracy. True to his libertarian principles, Paul takes care of that problem by trimming the federal workforce by 10 percent -- and giving it far less to do. He would, for example, seek to repeal both the Dodd-Frank financial reform law and President Barack Obama’s Affordable Care Act, along with eliminating many environmental and other federal regulations. What’s wrong with this? It doesn’t take much work to paint a dystopian picture. Let’s begin with a simple example. Without an Interior Department, there would be no agency to oversee national parks, federal lands and offshore drilling. Land would have to be auctioned off to the highest bidders, most likely oil-and-gas, coal and timber companies. The states would inherit Teddy Roosevelt’s national parks, but imagine how Yosemite would fare if it suddenly became the ward of strapped California. Or let’s imagine another scene from Mr. Paul’s America. Each state would have to become the regulator of its financial, manufacturing and health-care industries. A patchwork of rules would result. States might soon engage in a dangerous game of regulatory competition: Some would ease rules to attract businesses, forcing those seeking to protect the health and pocketbooks of residents to lower their standards -- or lose jobs. Illinois might choose, say, to let manufacturers dump waste in the Mississippi River. What recourse would downstream Missouri, Tennessee or Louisiana have if their drinking water became polluted? Social Security Or let’s simply consider what would happen if the under-30 crowd stopped contributing to Social Security: The pay-as-you-go system would dry up, depriving today’s retirees of benefits. About 25 million elderly households now depend entirely on Social Security for income, leaving them unable to buy food or pay heating bills. Low-income families would be hit the hardest. By converting Medicaid into a block grant, Paul would freeze what is now a $285 billion program at $186 billion from 2013 to 2016. He would do the same for food stamps , now a $58 billion program; it would be downsized to $30 billion four years in a row. We should be grateful to Paul for painting a clear picture of what so many Americans say they wish for. Our guess is that those who look at this picture will conclude that there are other, more sensible ways to restore fiscal order in the U.S. Spend More Why, for instance, is it necessary to balance the budget in three years? Most economists say a sounder approach would involve spending more -- yes, more -- for the next few years to keep the fragile recovery on track, and focusing on budget cuts in the medium term. We’ve argued, for example, for a plan to reduce the deficit by $4 trillion over 10 years, much like the one endorsed by the Simpson-Bowles panel last year. Of the $4 trillion, at least $1 trillion should come from tax increases, including higher levies on households making more than $250,000 and the elimination of other Bush-era breaks. An additional $500 billion could be squeezed out of Medicare by requiring, say, pharmaceutical companies to provide rebates on purchases by the federal program, similar to the discounts Medicaid now receives, and by increasing co-payments, deductibles and other forms of cost- sharing by the affluent. Like the congressman, we’d cut corporate subsidies and farm programs, and phase out deductions for mortgage interest and corporate-sponsored health insurance. We would ask federal workers to pay more toward their pensions. There’s an egalitarian way for Americans to share in the burden of achieving fiscal responsibility, but there’s no reason for entire Cabinet departments, the social safety net and the economy to be crushed in the process. To contact the Bloomberg View editorial board: view@bloomberg.net . |
2024-03-09 | Bloomberg | Buffett Takes $2.25 Billion in Burlington Dividends Since Biggest Takeover | Warren Buffett ’s Berkshire Hathaway Inc. (BRK/A) took $2.25 billion in dividends from Burlington Northern Santa Fe in less than 13 months of ownership, almost triple the railroad’s payout rate prior to the February 2010 acquisition. Burlington Northern paid a $1 billion dividend last month, it said Feb. 28 in a filing. The railroad held by Berkshire’s National Indemnity Co. insurance unit paid $1.25 billion last year under Buffett. The $2.25 billion total compares with $772 million that Burlington Northern handed to stockholders in the 13 months prior to being acquired by Buffett’s firm. Buffett is withdrawing cash from Burlington Northern after taking on $8 billion of debt to help finance the acquisition. Burlington Northern’s publicly traded rivals have raised their dividends and restarted share repurchases as earnings advanced across the railroad industry. The dividends may reassure rival stockholders that Berkshire’s entrance into the market won’t put their railroads at a disadvantage, said Walter Spracklin , an analyst with RBC Capital Markets. “I did indeed get questions as to whether Burlington Northern would be at a capital advantage as a privately owned entity,” said Spracklin, who covers railroads from Toronto. “This would suggest that it’s certainly not the case.” Union Pacific Corp. (UNP) , the biggest railroad by revenue, paid dividends of $602 million and repurchased $1.25 billion of shares in 2010 as it posted $2.78 billion of profit. In 2009, dividends were $544 million, and the company reported no buybacks on its repurchase plan. Burlington Northern, the No. 2 railroad, didn’t buy shares on its repurchase program in 2009. Berkshire’s Cash, Debt Buffett is adding to a cash position at Berkshire that ended December at $38.2 billion, its highest since year-end 2007. The Omaha, Nebraska-based company, which doesn’t pay a dividend to shareholders or buy back stock, is seeking acquisitions and facing payments on debt it issued last year in connection with the $26.5 billion railroad buyout. Burlington Northern’s profit gained 43 percent to $2.46 billion last year. “We expected BNSF to dividend the free cash flow to Berkshire to repay some of the acquisition-related debt,” Anita Ogbara, a credit analyst at Standard & Poor’s , said in an interview. “The level of shareholder rewards, and by that I mean dividends and share repurchases, is still in line” with publicly traded railroads, Ogbara said. Steve Forsberg, a spokesman for Burlington Northern, declined to comment. Buffett didn’t reply to a request for comment e-mailed to an assistant. Capital Spending Buffett, Berkshire’s chairman and chief executive officer, called the Burlington Northern takeover the “highlight of 2010” in his annual letter to shareholders last month. The 80- year-old billionaire said Berkshire spent $6 billion last year on property and equipment and predicted the company’s capital spending will swell to a record $8 billion in 2011. Burlington Northern used a net $3.1 billion of cash last year for investments including equipment, up from $2.64 billion in 2009. The unit said last month it plans $3.5 billion in capital spending this year. Omaha-based Union Pacific forecast spending of $3.2 billion this year, which includes buying 100 new locomotives. The company reported capital investments of $2.5 billion for 2010. Buffett called the Burlington Northern purchase an “all-in wager” on the U.S. economy. Buffett, who built Berkshire through four decades of stock picks and acquisitions, increased his focus on capital-intensive businesses as his firm has grown. “We are today quite willing to enter businesses that regularly require large capital expenditures ,” Buffett said in his 2009 shareholder letter, published in February of last year. “We expect only that these businesses have reasonable expectations of earning decent returns on the incremental sums they invest.” Berkshire slipped $694.01, or 0.5 percent, to $128,844 at 9:40 a.m. in New York Stock Exchange composite trading. The company has advanced about 6.9 percent this year. To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-05-12 | Bloomberg | Romney Seeks to Distance Himself From State Health-Care Bill He Signed | Mitt Romney delivers a speech in Michigan today aimed at addressing questions about the 2006 health-care bill he signed into law as governor of Massachusetts that is among his biggest political liabilities as he prepares for a likely run for the Republican presidential nomination. “If I am elected president, I will issue on my first day in office an executive order paving the way for waivers from ObamaCare for all 50 states,” Romney wrote in an opinion column that previewed the speech and was published yesterday on USA Today’s website. “Subsequently, I will call on Congress to fully repeal ObamaCare.” The term “ObamaCare” is a shorthand term Republicans use for the health-care legislation that President Barack Obama pushed through the then-Democratic-controlled Congress last year. Aspects of the law are similar to the Massachusetts measure. “With the passage of ObamaCare last year, the president and the Congress took a wrong turn,” Romney wrote. “My plan is to harness the power of markets to drive positive change in health insurance and health care.” The changes he proposes would seek to “return power to the states, improve access by slowing health-care cost increases, and make health insurance portable and flexible for today’s economy,” Romney wrote. Insurance Requirement The Massachusetts law, like the federal law, requires people to purchase health insurance. The state measure looms as an obstacle to supporting Romney among many Republican activists, including members of fiscally conservative Tea Party groups. “It’s an incredibly big deal,” said Ryan Rhodes, a leader of the Iowa Tea Party, based in the state that holds the first contest in the nomination process. “How do you run against ObamaCare when he based that on your plan in Massachusetts?” In his USA Today column, Romney makes little mention of the Massachusetts law. “Some states might pass a plan like the one we did in Massachusetts, while others will choose an altogether different route,” he wrote. “We can empower states to expand health-care access to low-income Americans by block-granting funds for Medicaid and the uninsured.” In announcing his speech in Michigan, Romney’s presidential campaign exploratory committee listed what it called his “principles for health-care reform,” which include giving states the responsibility and resources to care for the poor, uninsured and chronically ill; giving a tax deduction to those who buy their own health insurance; and reducing the influence of lawsuits on medical care and costs. Making Distinctions Romney, who is among the top tier of candidates in polls about potential Republican candidates, has previously tried to make distinctions between the Massachusetts law and the plan passed by Congress. “One thing I’d never do, by the way, would be to impose a one-size-fits-all plan like Obamacare on the nation,” Romney said at a forum in New Hampshire last month. “That’s simply wrong and unconstitutional, and it won’t work.” Democrats have praised the Massachusetts law and made a point of noting Romney’s involvement in its passage. “I agree with Mitt Romney, who recently said he’s proud of what he accomplished on health care in Massachusetts and supports giving states the power to determine their own health- care solutions,” Obama said Feb. 28 in remarks to the country’s governors. Preempting Others Romney’s speech today at the University of Michigan’s Cardiovascular Center in Ann Arbor is designed to explain his health-care record and offer a detailed plan on the issue before others in the still-developing Republican field do so. Anything short of an apology and an admission of error may not be enough to satisfy some Republican activists. “He’s going to have to unequivocally say that we need to roll this back and that we don’t need the government in our health care,” said Rhodes, the Iowa Tea Party leader. “It ranks right up there because it’s part of our debt and deficit issue.” David Rohde, a political science professor at Duke University in Durham, North Carolina , said, “The concerns of conservatives in the party about the health-care issue is a manifestation of the general concern about Romney, an uncertainty about whether he’s really one of them.” Rohde, who previously taught at Michigan State University in East Lansing for 34 years, said that “to whatever degree he can ameliorate the concern about the health-care issue might help ameliorate concerns about how conservative he is.” Michigan Ties Romney, 64, chose to deliver the speech in Michigan because he feels comfortable there and the state conducts an early primary, said Bill Ballenger, editor of the nonpartisan newsletter Inside Michigan Politics. Romney was born and raised in Michigan; his father, George Romney, served as the state’s governor for three terms, and his brother, G. Scott Romney, practices law in Detroit. Mitt Romney “always seems to come back to Michigan when he’s going to do something important,” including announcing his 2008 presidential bid, Ballenger said in a telephone interview. “It’s almost like coming home.” Romney lost the 2008 Republican presidential nomination to Senator John McCain of Arizona. Before his 2003-2007 term as Massachusetts’ governor, Romney co-founded the Boston-based private-equity firm Bain Capital LLC and helped turn the 2002 Winter Olympics in Salt Lake City, Utah , into a financial success. He touts those credentials as the U.S. economy struggles to rebound from the worst downturn since the Great Depression. Romney has been accelerating his travel schedule to early primary and caucus states, including Iowa, New Hampshire , South Carolina and Nevada. -- Editors: Don Frederick, Leslie Hoffecker To contact the reporters on this story: John McCormick in Chicago , at jmccormick16@bloomberg.net ; Mark Niquette in Columbus, Ohio , at mniquette@bloomberg.net. To contact the editor responsible for this story: Mark Silva in Washington at msilva34@bloomberg.net . |
2024-06-25 | Bloomberg | Man Winning Most Married Moms Poised for White House | In an ad backing Mitt Romney for president, a gold band on the main character’s left hand flashes before viewers as she laments a poor economic future for her two children should President Barack Obama win re-election. That hint to the character’s marital status reveals one of the subsets of voters that both Obama and Romney, his presumptive Republican opponent, are targeting in the 2012 campaign: married women with children. They are a slice of the electorate that swings between the parties. They also are less likely than the broader female voting population to skew Democratic. Obama won married mothers by 4 percentage points in 2008 compared to his 13-percentage- point margin among the gender as a whole, exit polls show. “These women are the Republicans’ best shot,” especially in the swing states, said Ange-Marie Hancock, associate professor of political science and gender studies at the University of Southern California in Los Angeles. In 1992, the so-called “Year of the Woman” when female representation in Congress spiked, Democrat Bill Clinton won the White House with a plurality of women voters overall while losing the married-mother vote by one percentage point. Obama won’t win this year if that margin exceeds five percentage points, Hancock said. Today’s Married Moms To create a profile of that targeted female voter and learn how she’s changed in the past 20 years, Bloomberg compiled data from the Census Bureau, Bureau of Labor Statistics, the Pew Research Center and exit polls with analysis from Selzer & Co., a Des Moines , Iowa-based polling firm. The lifestyle differences that have occurred carry with them an adjusted view by these women of their place in society, said Christine Percheski, who assisted Bloomberg with the analysis and who teaches sociology at Northwestern University in Evanston, Illinois. Compared to their 1992 counterparts, today’s married mothers are wealthier and more educated. On average, they have annual household incomes of more than $70,000, a 14 percent increase from 1992, and they are more educated, with 40 percent earning at least a bachelor’s degree, compared to 22 percent two decades ago. They work more hours and contribute more household income. They are older when they walk down the aisle and when they first give birth. At both the workplace and in politics, more people in power look like them. Changed View “It changes the way they view their role as mothers. It changes the way they relate to their husbands and other people,” Percheski said. “It changes what they need from government and it changes what kinds of policies are important to them politically.” Married mothers today are more likely to have lived on their own and worked more years prior to having children, and thus favor greater independence and identify less with traditional gender roles, she said. Deborah Snyder embodies the married mother both presidential camps are wooing. Snyder, 37, is a mother of three boys under the age of six. She earned a bachelor’s degree in Boston before returning to her hometown in a suburb south of Denver to marry her high school sweetheart. She now works as a civil engineer at Entitlement and Engineering Solutions Inc., a female-owned firm in Denver, the capital of Colorado , a state political analysts count among a handful that could determine the election’s outcome. Split Voting History Snyder was a registered Republican until switching parties and voting for Obama four years ago. She split her ballot between a Republican congressman and a Democratic senator in the 2010 midterm elections. She’s unsure how she’ll vote in November. When Obama unveiled his jobs bill last year, Snyder’s frustration reached a tipping point. “It seemed to be a lot of throwing money after money,” she said, adding that she views herself as worse off economically than her parents were at her age and worries that the deficit threatens economic growth. Still, she’s unsure Obama is to blame. Even more disturbing was the “extreme shift to the right” she watched during the Republican primary season, she said. She disagrees with Romney’s opposition to abortion rights and same- sex marriage, she said, and believes he’ll moderate his positions if elected. Work, Family, Politics Like thousands of women in her position, Snyder’s efforts to balance work, childcare and a personal life leaves little bandwidth for politics. She canceled her newspaper subscription last year after failing to find time to read it. She’s at the office during the day when her home phone rings most with political robocalls. She only turns on her television to watch DVDs, rendering useless the blitz of campaign ads on local stations. On the eve of Colorado’s presidential primary in February, Romney visited her high school alma mater a block from her house -- and she didn’t know it was happening. For months, Snyder has submerged herself in “intentional isolation,” a backlash from what she sees as the increasingly polarized nature of politics in which fights are commonplace and lawmakers attempt to campaign and negotiate by way of ultimatum. “The point of politics is to serve the people,” she said. “Politics have become self-serving -- politicians are more worried about their campaign, their party and their win than what’s best for the American people,” she said. “They’re more worried about finding a strategy to get the greatest share of voters than having their beliefs organically get those voters.” A ‘Select’ Group While much is made of the so-called marriage gap -- the tendency for marriage to increase the likelihood voters will favor Republicans -- the demographics of married mothers may signify more of a class gap, said Northwestern’s Percheski. Married mothers have become a more privileged, “select” group, she said. They are half as likely to live in poverty or lack health insurance than women in general, she added. “Because married mothers come from families with higher incomes, they need less of the social protections than some other women, and their financial interests and class interests lie more with the Republicans in terms of things like tax policy ,” said Percheski. They are also a more reliable voter then unmarried women, who studies have found tend to have a Democratic tilt. Almost half of married mothers, 47 percent, went to the polls in 2010, compared with less than a third of their unmarried counterparts, 30 percent, said Page Gardner, president of the Women’s Voices Women Vote Action Fund. Economic Focus As in 1992, voter surveys find economic issues identified as the top concerns -- and married mothers, who often control family finances -- are no exception. According to a June 15-18 Bloomberg National Poll, 48 percent of married moms say jobs and unemployment are their top issues, followed by health care at 15 percent. Fifty-two percent of them agree that the economy will get better if Obama’s policies are given more time to work and 45 percent say a “complete change of course” is needed. Married moms in the poll favor Obama over Romney, 50 percent to 46 percent, though 68 percent say the president hasn’t delivered the change he promised four years ago. For Snyder, whose two-income household was buffered from the recession more than those of her single friends, neither Obama nor Romney has convinced her that he deserves her support. “I just want to hear statements that sound like they came from their gut and not a teleprompter, so I can believe what they’re saying is really what they believe and not just a strategy to win my vote,” she said. To contact the reporter on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-05-22 | Bloomberg | Church Shelters Tornado Victims Left Homeless in Moore | With his house destroyed by a deadly Oklahoma twister and his prized 1956 Pontiac riddled with dents, its windows smashed, Clyde Vance took refuge at a local church. The 67-year-old retiree was at home when the tornado struck May 20 and the building collapsed on top of him. It took 20 minutes for neighbors to help free him. “What really bothers me is my car,” said the former security chief at The Oklahoman newspaper. “That was my pride and joy.” Vance was among several hundred people who turned Moore, Oklahoma’s First Baptist Church into part homeless shelter, part community bazaar following the storm that killed 24 residents and injured 237. Shannon Williams, 35, collected food and water for her brother, sister and four others she took in after the twister cut a mile-wide swath of devastation through their city. “I told the volunteers we came for water, not food, but they said it didn’t matter and they loaded us with all kinds of snacks and food and toothpaste and deodorant,” said Williams, a mother and student at the University of Oklahoma in nearby Norman. “The people here are amazing, which is the reason we put up with these tornadoes and stay.” More than 25 truckloads of donated water, generators, diapers, gloves and other items arrived at First Baptist less than a day after the storm swept through the Oklahoma City suburb, said Kyle Duncan, the church’s administrator. Houses of worship around the community of 55,000 residents opened their doors to those who lost homes or saw them damaged. Bathtub Buddies At the New Life Baptist Church in Norman, about 10 miles (16 kilometers) away, truck-driving brothers Ronnie White, 50, and Lonnie, 52, took shelter overnight. They had huddled in their bathtub, covered by a mattress, as the tornado ripped off the roof of their house in Moore. “Every church here is doing something, which means a lot can get done,” said Jason John, New Life’s associate pastor. At First Baptist, a half-dozen people watched news reports on big-screen televisions while others milled around, munching on snacks. Several family groups played with dogs. Workers at the church handed out ham and turkey sandwiches, doughnuts, muffins and burritos sent by local restaurants, said Patty Koonce, who lost her home to the storm. ‘Life Saver’ Koonce, who works in Oklahoma City at Graham’s Central Station night club, said the church earned a reputation as a good place for those seeking relief following a deadly May 1999 tornado. Terri Grusendorf, a manager at a community college who was picking up apples, peanuts, bananas and bath items for a friend left homeless, said First Baptist “is a life saver” in times like these. Parked outside stood a large truck trailer fitted out with stoves to cook meals for people in need in the community. Nearby, representatives of State Farm Mutual Automobile Insurance Co., Shelter Insurance Cos. and more than a dozen other insurers waited to discuss storm claims with survivors. Vance took some solace in that he could still use his prized Pontiac. “At least I was able to drive it here.” To contact the reporter on this story: David Mildenberg in Moore, Oklahoma, at dmildenberg@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-01-05 | Bloomberg | Camp Sees Debt Default Averted as Republicans Seek Spending Cuts | House Ways and Means Committee Chairman Dave Camp said he is confident that Congress and the White House will avert a default on U.S. government debt even as Republicans will demand “significant” spending cuts to raise the legal borrowing limit. Camp, a Michigan Republican whose panel holds jurisdiction over tax legislation, also said he is reassessing a top 25 percent rate he has proposed as part of a plan to revamp the U.S. income- tax code. He added he is “absolute” in opposing any further tax increases. The agreement Congress passed this week to avoid automatic tax increases and spending cuts creates a new starting point for his efforts to adopt a simpler tax code, Camp said. The tax system should have lower rates financed through fewer deductions and credits, he said in an interview on Bloomberg Television’s “Political Capital with Al Hunt ” airing this weekend. The new law, signed on Jan. 2 by President Barack Obama , raises income-tax rates on couples to 39.6 percent for annual income above $450,000. Camp last year had set a goal of establishing a maximum 25 percent income tax rate through an overhaul. Camp said he wants his tax plan to be “revenue-neutral.” So the new law raising more money from top earners sets a higher revenue target than he had under his previously announced plan. “I have to re-evaluate it with the new baseline,” Camp said, adding, “I’m going to try to get that rate as low as I can.” Curtailing Breaks To lower tax rates, Congress will have to look at curtailing breaks including deductions for home-mortgage interest and state and local taxes, Camp said. Camp, 59, echoed statements from Senate Republican Leader Mitch McConnell in opposing Obama’s calls for a “balanced” approach in further deficit reduction that includes more tax increases. Camp said future deficit deals would have to come from spending cuts only. This week’s agreement on the so-called fiscal cliff “established how much on a permanent basis what the government’s going to get out of the economy, and we’re not going to go for any more,” Camp said. That “is an absolute in my book,” he added. Boehner Match When asked about Republican House Speaker John Boehner ’s call for a dollar-for-dollar match in spending cuts in exchange an increase in the legal debt limit, Camp demurred. “I don’t think that’s necessarily been established,” he said. He said he will seek “significant reforms in spending.” Camp said his party will demand “reforms in entitlements” that “address the unsustainability” of Medicare health insurance for the elderly and disabled, Medicaid health coverage for the poor and Social Security retirement benefits. He cited a change in the Social Security cost-of-living adjustments that would lower annual increases in payments as a likely area of agreement between congressional Republicans and Obama. Camp called on the president to “lead his party” by publicly advocating deeper reductions in spending on those programs. He offered assurances that even with the disagreements between congressional Republicans and the White House, lawmakers would raise the $16.4 trillion debt limit in time to avoid missing payments on U.S. obligations. “Absolutely, we’re going to not default,” Camp said. “That’s just not even part of the issue.” The U.S. reached its legal debt limit on Dec. 31, and the Treasury Department began using extraordinary measures to finance the government. It will exhaust that avenue as early as mid-February, the Congressional Budget Office says. To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net |
2024-02-17 | Bloomberg | FTSE 100 Fluctuates Near Highest Level Since May 2008; Shares of RBS Gain | Most U.K. stocks fell as U.S. reports showed the cost of living in the world’s largest economy climbed more than forecast last month and first-time claims for unemployment benefits rose last week. BAE Systems Plc declined 4.2 percent after posting full- year profit that missed analysts’ estimates. Royal Bank of Scotland Group Plc , the bank that is 83 percent government- owned, advanced 3.8 percent as Berenberg Bank and Evolution Group Plc advised buying the shares. The benchmark FTSE 100 Index added less than 0.1 percent to 6,087.38 at the close in London as 54 stocks fell. The gauge has advanced 3.2 percent this year, bringing its rally since March 2009 to 73 percent, as investors bet that a stronger economic recovery will boost corporate earnings. The FTSE All-Share Index rose 0.1 percent today, while Ireland’s ISEQ Index lost 0.7 percent. The U.S. consumer-price index increased 0.4 percent for a second month, exceeding the 0.3 percent median estimate of 79 economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. A separate report showed more Americans than projected filed first-time claims for unemployment insurance last week, a sign the improvement in the labor market will take time to develop. “While a failure of inflation to abate by May might force the Bank into raising rates, this would put the U.K. in the unique position of tightening both fiscal and monetary policy at the same time -- a formula likely to drive renewed talk of recession,” said Sunil Krishnan, portfolio manager in the BlackRock Multi-Asset Client Solutions group. The Bank of England’s inflation projections prompted economists at banks including Barclays Capital to bring forward their forecast for the first interest-rate increase this year. Barclays Plc economist Simon Hayes said policy makers are “leaning toward a rate hike over the next few months” after the central bank published its Inflation Report in London. The index of U.S. leading indicators rose in January for the seventh straight month, signaling the expansion will extend into this year. The Conference Board’s gauge of the outlook for the next three to six months increased 0.1 percent after rising 0.8 percent in December, the New York-based group said today. BAE Systems, Europe’s largest defense company, slid 4.2 percent to 340.9 pence. The company forecast that revenue will fall this year as the U.K. government reduces spending. BAE also reported 2010 profit of 1.05 billion pounds ($1.7 billion), missing estimates. Reed Elsevier Plc sank 2.2 percent to 561.5 pence as the owner of the LexisNexis database and ComputerWeekly magazine reported net income that was in line with analysts’ estimates. RBS gained 3.8 percent to 49 pence. Evolution added the shares to its core banks buy list. Berenberg rated the shares “buy” in new coverage. -- With assistance from Nandini Sukumar in London. Editor: Jason Carey To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net |
2024-10-12 | Bloomberg | WellPoint, UnitedHealth Stock Buyback Focus Concerns Investors | WellPoint Inc. , Aetna Inc. , Humana Inc. and UnitedHealth Group Inc. denied health coverage to 49 percent more people over the past two years, citing pregnancy or plans for adoption among their reasons, a U.S. report found. The insurers rejected 651,000 applicants from 2007 to 2009 for illnesses or conditions they had before applying for coverage, according to the report by the House Energy and Commerce Committee, led by Representative Henry Waxman , a California Democrat. Each company had a business plan to exclude pre-existing conditions, according to the report. A Bloomberg National Poll released today found voters favor by a 47 percent to 42 percent margin repealing the health-care overhaul law Democrats passed, adding to Republicans’ momentum to take control of Congress in the Nov. 2 elections. The report may help Democrats focus the public on the law’s more-popular provisions, among them a ban on insurers denying coverage due to medical conditions, said Peter Harbage, a health-care consultant in Sacramento, California. “For Republicans running on a repeal health-reform platform, the report forces them to tell voters why insurers should be able to deny coverage to those who need it the most,” said Harbage, previously an adviser to John Edwards , a former Democratic presidential candidate. The report cited internal insurer documents the panel obtained. Rising Denials The companies turned down 257,100 people last year who sought to buy benefits on their own and not through employers, the House report said. They denied 172,400 applicants in 2007, the report said. Enrollment increased by 16 percent in that time, according to the committee. Insurers agreed to end denials for pre-existing conditions early in the health-care debate last year, said Robert Zirkelbach , a spokesman for America’s Health Insurance Plans , the industry’s trade group in Washington. Until all consumers are required to buy health insurance, the coverage restrictions are needed to keep people from gaming the system, he said. “In the current individual market, applicants undergo an underwriting process to discourage people from purchasing coverage only after they need medical services, which drives up costs for all policyholders,” Zirkelbach said. Donald Nathan , a UnitedHealth spokesman, declined to comment. Jill Becher a WellPoint spokeswoman, and Jim Turner, a spokesman for Humana, referred questions to the trade group. Aetna Responds The House reports “document what many health insurers, including Aetna, have been saying for years -- that the individual market needs to be reformed so we can improve access for all consumers,” said Fred Laberge , an Aetna spokesman, in an e-mail. “Improving access without also addressing the underlying issue of rising medical costs will lead to higher premiums for many consumers.” One company cited “improved pre-existing exclusion process” as a way to increase business, said the report. One of the companies had a list of 425 conditions that could be used to deny people insurance coverage, including pregnancy, diabetes and heart disease. Other documents in the report showed that people who were surgical candidates, pregnant, female and “treated for infertility within the past five years,” and “any applicant with a (body mass index) 39.0 or greater” were denied health insurance without any internal review by the company. The committee obtained the documents in response to letters Waxman sent in March. The report didn’t specify the insurers that carried out the actions. Economic Toll The economy’s weakness probably pushed health plans to deny more applicants, said Harbage, the consultant, whose clients include nonprofit foundations and unions. Healthy customers were more likely to drop coverage over the past few years, leaving insurers with sicker customers more likely to drive up medical costs, he said. “Insurers looked for more ways to manage their risk and profit,” he said. “The result is that many people who needed coverage were turned away.” Even as a plurality supported the health overhaul’s repeal, the Bloomberg poll found strong backing for most of the law’s provisions. Three-quarters favor its ban on insurance companies denying coverage because of pre-existing conditions; 67 percent support allowing children as old as 26 to stay on their parents’ policies. Also, 73 percent want to keep the addition of more prescription-drug benefits for those on Medicare , the U.S. government’s health program for the elderly and disabled. The survey of 721 likely voters was conducted for Bloomberg on Oct. 7-10 by Selzer & Co., a pollster based in Des Moines, Iowa. It has a margin of error of plus or minus 3.7 percentage points. Share Moves UnitedHealth gained 37 cents, or 1.1 percent, to $35.02 at 4 p.m. in New York Stock Exchange composite trading. Aetna increased 11 cents to $31.01. WellPoint rose 27 cents to $55.66 and Humana climbed 91 cents, or 1.8 percent, to $52.20. The four insurers treat pregnancy as a pre-existing condition and generally don’t offer coverage to expectant mothers, the House committee said in a second memo that cited company documents. Expectant fathers and those about to adopt are often denied as well, and documents show the companies have moved to limit the availability of riders that can be bought to add maternity coverage, the report said. One rider limited a woman to $6,000 in maternity benefits after she paid extra premiums for four years, the report said. In company documents, executives said maternity coverage resulted in “higher prices, lower margins and loss of market share,” the report said. Another document said one insurer typically spent 90 percent of the premiums it collects on medical care for policies with optional maternity benefits, “a money-losing ratio.” To contact the reporters on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net ; Alex Nussbaum in New York anussbaum1@bloomberg.net To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net . |
2024-10-23 | Bloomberg | Ex-Madoff Employee Was Sick Over High Returns, Jury Told | (Corrects spelling of consultant’s name in second paragraph.) A former employee of Bernard Madoff on trial for allegedly aiding the con man’s $17 billion fraud told investigators in 2008 that he closed his personal investment account two years before the Ponzi scheme unraveled because the consistently high returns made him feel “sick.” Daniel Bonventre, who oversaw Madoff’s legitimate broker dealer and proprietary trading units, “said he woke up with a sick feeling in his stomach” in 2006 and later closed his account at the company’s investment advisory business, Meaghan Schmidt, a consultant who helped unravel the fraud after its discovery, told jurors yesterday in federal court in Manhattan. Bonventre made the comment, Schmidt said, to her two days after Madoff’s Dec. 11, 2008, arrest, as employees of the consulting firm AlixPartners LLP, where Schmidt works, fanned out across the three floors of Madoff’s high-rise offices to secure documents and ascertain where the business stood. AlixPartners had been hired by a court-appointed receiver through the U.S. Securities and Exchange Commission, she said. At the time, Bonventre hadn’t been accused of any crime. Schmidt told the jury that while she was examining Madoff’s office the day after his arrest, she found a stack of about 100 checks on his desk that had been written a few days earlier, totaling about $175 million. Among them were checks for $8.2 million to Marion Madoff, the wife of Madoff’s brother Peter Madoff , who helped run the company for four decades; $1.37 million to former employee David Kugel and about $725,000 to Joann Crupi, who managed large accounts and is also on trial. Paintings, Bulls During the testimony, photographs of Madoff’s office were displayed for the jurors on flat-screen panels. The images showed Madoff’s black desk covered in papers, black leather chairs, a black table covered in framed personal photographs, and bright modern artwork on the wall, including paintings and large prints of two stylized bulls. Bonventre and Crupi have pleaded not guilty in the case, as have the three other defendants, computer programmers George Perez and Jerome O’Hara, and Annette Bongiorno, who worked for Madoff for 40 years, including as his personal secretary. Bongiorno helped run the company’s investment advisory business. The five former Madoff employees are accused of conspiring for decades to hide Madoff’s fraud by creating millions of fake documents to trick customers and regulators. Commissions Received Schmidt was the fourth witness to testify in the first criminal trial stemming from the world’s biggest Ponzi scheme , which deprived investors of $17 billion in principal and billions more in fake profit. U.S. District Judge Laura Taylor Swain said the trial may last as long as five months. Schmidt testified that the general ledger for the units overseen by Bonventre regularly received wire transfers of money from the fraudulent investment advisory business, as a result of trades “purportedly” executed overseas. She said he expressed confusion that he’d been receiving transfers of commissions from trades that weren’t actually taking place. Earlier yesterday, Matthew Cohen , an AlixPartners consultant, testified about a conversation he said he had with Perez in the days after Madoff’s arrest. Perez told him that Madoff had asked him in 2006 to alter core computer programs to permit changes to past account statements for the investment advisory unit, according to Cohen’s testimony. Perez said he accepted extra money from Madoff to overcome discomfort about the requested changes, Cohen said. Perez made the remark in response to informal questioning about his personal investment account, he said. Perez’s account, and another in O’Hara’s name, “stood out” in a probe of about 8,000 customer accounts because “they were opened the same day with roughly the same amount,” Cohen said under questioning from U.S. prosecutors. “I later learned that no cash had been deposited in order to open these accounts.” Salary, Extortion The U.S. alleges O’Hara and Perez were given $100,000 each and were permitted by Madoff to name their own salary increases and annual bonuses after they confronted him about their discomfort with altering the code. According to the U.S., O’Hara and Perez extorted Madoff after realizing their code was being used for fraud. Both men have denied that allegation. Cohen, formerly a lawyer at Skadden Arps Slate Meagher & Flom LLP, said he alerted federal investigators to Perez’s remarks and didn’t pursue the matter himself because it wasn’t part of his responsibility in reconstructing the operations of Madoff’s company. Under cross-examination by Perez’s lawyer, Larry Krantz, Cohen said he wasn’t biased in the case even though his employer, which has a profit-sharing plan with its partners, made $75 million from the Madoff case in the past five years. Paper Shredders Cohen testified that the day after Madoff’s arrest, a Friday, he began securing the 17th through 19th floors of the lipstick-shaped skyscraper in Midtown Manhattan where Madoff’s offices were located. He disabled employees’ key cards to the elevators and hired security guards for each floor, he said. Cohen said that during his initial sweep of Madoff’s offices, he found fax machines surrounded by hundreds of faxed redemption requests from customers seeking to close their accounts because of Madoff’s arrest just hours before. Over that weekend, Cohen said, a colleague purchased wire cutters at a Home Depot (HD) so he could cut the electrical cords on all the paper shredders that might be accessible to employees the following Monday. He said he also turned off the e-mail and BlackBerry servers, blocked external access to computer systems and disabled employees’ computer accounts so that when they reported to work they just sat at their desks. No employees were allowed on the 17th floor, where the fraudulent investment advisory business was located, he said. Employees who reported to work after Madoff’s arrest were asked to sign agreements that they wouldn’t alter, destroy or remove files. Cohen testified that Peter Madoff, a compliance officer at the company, was later caught by security guards using a “beach bag” to try to remove his personal life insurance documents and his last will and testament from the offices. The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan). To contact the reporter on this story: Erik Larson in federal court in Manhattan at elarson4@bloomberg.net To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net |
2024-05-25 | Bloomberg | Joplin Confronts Damage, Hunts for Survivors | The aftermath of a tornado that tore through Joplin, Missouri, in the single deadliest U.S. storm in at least 60 years has entered another stage for J. Friedel , pastor of St. Peter the Apostle Catholic Church. He spent the initial hours after the May 22 twister helping turn McAuley Catholic High School’s cafeteria into a triage center for the injured, the gym into a shelter for the homeless, and the chapel into a counseling site for “psychological trauma.” Then Friedel met with a parishioner whose husband and 1- year-old and 5-year-old children are presumed killed after seeking shelter at a Home Depot that was destroyed. As rescue workers sifted through rubble for survivors and residents sought word about missing friends and family, Friedel said Joplin was bracing for more grim news. “We know we’re entering into the next phase,” Friedel said in an interview in the school chapel. “You pray a lot, you cry a lot, you hug a lot. You just try not to go into shock and go numb.” The death toll from the tornado rose to at least 123 yesterday, with more than 750 people treated at area hospitals, according to a release from the Missouri Department of Public Safety. Tornado sirens sounded again last night in Joplin as a another storm moved through the region, driving about 150 residents staying in a Red Cross shelter at Missouri Southern State University to the interior hallways on a lower level of the school’s athletic center. ‘Not Again’ “I just thought, ‘Not again,’” said Donald Capps, 79, standing along a wall with his wife, Helen, 80. Their Joplin home was destroyed by the tornado three days ago, he said. The 123 deaths surpass the 116 people killed June 8, 1953, when a twister hit Flint, Michigan , in what had been the greatest toll since modern recordkeeping began in 1950. A 1925 tornado killed 695 people in Missouri, Illinois and Indiana , according to the National Weather Service. Emergency crews in Joplin scoured the wreckage of homes and businesses, looking for survivors after finding nine during the past two days, said Mark Rohr, the Joplin city manager. Workers will use rescue dogs to continue sweeps through the tornado’s path, said Mitch Randles, Joplin’s fire chief. “We’re still in a search-and-rescue mode,” Rohr told reporters in an area near the shell of St. John’s Regional Medical Center that was strewn with crumpled cars, twisted trees and scattered debris. Phantom Cries There have been sporadic reports about cries for help being heard from rubble piles, although “most of those are turning out to be false,” Randles said. Richard Serino, the deputy administrator of the Federal Emergency Management Agency , is in Joplin touring the damage in advance of President Barack Obama’s planned visit to the area next weekend. Serino and Obama have promised federal assistance for residents to rebuild. “We’re going to stay there until every home is repaired, until every neighborhood is rebuilt, until every business is back on its feet,” Obama said in a speech in London yesterday. Insurers’ losses from the tornado could reach $1 billion to $3 billion, based on the death toll and preliminary reports of damage to buildings, according to an estimate from catastrophe risk-modeler Eqecat Inc., in an e-mailed statement. The losses probably will be less than from the April tornadoes that swept across southeastern states, said Robert Hartwig , president and chief economist of the Insurance Information Institute , a trade group. The April storms caused $3.7 billion to $5.5 billion in insurance industry losses, according to an estimate from catastrophe risk-modeler AIR Worldwide on May 9. Loss Estimates “At this point, measuring the losses in the hundreds of millions would seem probably more appropriate until we can get a better survey of damage on the ground,” Hartwig said of insurers’ potential claims from the Joplin tornado. The storm struck a smaller area than the April cluster, which swept from Mississippi to Georgia , he said. The Joplin twister largely spared Friedel’s church. About a mile away, St. Mary’s Church and school were destroyed except for the cross in front of the building. The church’s pastor, Justin D. Monaghan, took shelter in a bathtub and survived, Friedel said. There’s uncertainty about the whereabouts of many Joplin residents because the twister flattened St. John’s hospital, nursing homes and apartment buildings, and there is no master list of where survivors may have gone, said Bill Benson, a social-media specialist for the American Red Cross. Cell phone reception also has been spotty after the storm, he said. Safe Lists As a result, an estimated 200 and 300 people have come to the Red Cross shelter in the athletic center at Missouri Southern State hoping to see the name of a friend or family member on lists of safe residents the organization is compiling, Benson said in an interview. The number of times loved ones have found a name on one of those lists is “very much in the single digits,” he said. Jessie Vallance came to the shelter twice yesterday, hoping to find information about the missing aunt of her 25-year-old foster daughter. “She’s devastated already,” Vallance said in an interview. “We’re just really hopeful.” To contact the reporter on this story: Mark Niquette in Joplin at mniquette@bloomberg.net To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net |
2024-10-16 | Bloomberg | Senate Leaders Reach Agreement to End Fiscal Impasse | The bipartisan leaders of the U.S. Senate reached an agreement to end the fiscal impasse and to increase U.S. borrowing authority. The Senate and House plan to vote on it later today, and the White House press secretary said President Barack Obama supports the deal. The agreement would end the 16-day government shutdown and allow the U.S. to continue borrowing, the day before its authority lapses. House Republicans today signaled that they will let it pass largely with Democratic votes. Senate opponents of the agreement, including Texas Republican Ted Cruz , said they won’t stall a vote. “The compromise we reached will provide our economy with the stability it desperately needs,” said Senate Majority Leader Harry Reid. The agreement concludes a four-week fiscal standoff that began with Republicans demanding defunding of Obama’s 2010 health-care law and objecting to raising the debt limit and funding the government without policy conditions. They achieved almost none of those goals in this agreement. “This is far less than many of us had hoped for, frankly, but it’s far better than what some had sought,” said Mitch McConnell , the Senate minority leader, who said the measure retains Republican-preferred spending levels. The framework negotiated by Reid and McConnell would fund the government at those Republican-backed levels through Jan. 15, 2014, and suspend the debt limit until Feb. 7, setting up another round of confrontations then. “This agreement achieves what is necessary,” Jay Carney , the White House press secretary, said. House Republicans Representative Kevin Brady , a Texas Republican, said on Bloomberg Television that he thinks House Republicans’ inability to come up with a plan to raise the debt limit meant that House Speaker John Boehner would have to accept whatever Senate leaders agreed upon. “This party is not uniting behind our core issues,” Brady said. “As a result, I think we are all frustrated with our ability to impact this overall agreement.” The Senate accord was unveiled a day after Fitch Ratings put the U.S. AAA credit grade on ratings watch negative, citing the government’s inability to raise the debt ceiling in a timely manner, according to a statement after markets in New York closed. Stocks Rally U.S. stocks rallied, sending the Standard & Poor’s 500 Index toward a record. The benchmark index rose 1.2 percent to 1,718.25 at 2:02 p.m. in New York after sliding 0.7 percent yesterday. Rates on Treasury bills maturing in the next six weeks fell amid optimism lawmakers worked to resolve the fiscal impasse. Rates on $120 billion of bills maturing tomorrow dropped to 0.06 percent after rising as high as 0.36 percent yesterday. One-month rates fell 17 basis points, or 0.17 percentage point, to 0.17 percent at 1:18 p.m. in New York after touching 0.45 percent, the highest since October 2008, according to data compiled by Bloomberg. The benchmark 10-year yield fell three basis points to 2.70 percent, according to Bloomberg Bond Trader data. The partial shutdown has closed national parks, slowed clinical drug trials and led to the furlough of thousands of federal workers. The Senate proposal would provide back pay for furloughed workers, said a Democratic aide speaking on condition of anonymity to discuss the plan. Senate First The Senate probably will vote before the House, said a House aide speaking on condition of anonymity because the plans aren’t set. House Republicans are scheduled to meet at 3 p.m. Under the Senate agreement, House Republicans would get almost none of their priorities. Obama has described those requests for health-law changes as unacceptable ransom demands and insisted that Republicans relent. Health Exchanges: The Battle and Background Republicans persisted after the partial government shutdown started Oct. 1 and saw their approval ratings drop in polls. Hardliners resisted plans that didn’t make major changes to the Patient Protection and Affordable Care Act. Republicans “left everything on the table” by pursuing a wrong-headed strategy, South Carolina Senator Lindsey Graham told reporters today. “We took some bread crumbs and left the entire mill on the table,” he said. “This has been a very bad two weeks for the Republican brand.” ‘Real Harms’ Cruz said he will continue to fight to make “Washington respond to the very real harms that Obamacare is causing.” Some House Republicans said they wouldn’t vote for the Senate agreement. “The Senate plan is not what I support,” Representative Jim Jordan of Ohio told reporters today. “My preference is that we address the underlying problem, which is we have a $17 trillion debt and we deal with the deficit problem and we treat people fairly under Obamacare.” The Senate agreement trades the pressing and already-missed deadlines for new ones over the next four months. The Treasury Department would be allowed to use so-called extraordinary measures to delay default for about another month beyond Feb. 7, said a Senate Democratic aide who spoke on condition of anonymity to discuss the plan. Health Law The accord includes a Republican-backed provision to tighten income-verification requirements for people receiving health-insurance subsidies, said two Senate Democratic aides who spoke on condition of anonymity to discuss the plan. The agreement won’t include a health-law provision backed by Democrats and labor unions that would delay a reinsurance fee on group health plans, the aides said. Carney said the income-verification provision wasn’t a ransom. U.S. borrowing authority will lapse at the end of tomorrow, leaving the Treasury Department with only $30 billion in cash and incoming revenues to make promised payments. Without action, the U.S. will begin missing payments between Oct. 22 and Oct. 31, according to the Congressional Budget Office. Boehner tried several times over the past month to construct a debt-limit bill that House Republicans could support, and he hasn’t brought any proposals to a vote. Republicans didn’t have enough support for the measure yesterday, said a leadership aide who spoke on condition of anonymity to discuss vote counting. Unlike previous stopgap spending measures, the House bill wouldn’t have made big changes to the 2010 health-care law, and it contains no cuts to entitlement programs that Republicans sought to add to a debt-limit increase or spending bill. Senator Kelly Ayotte , a New Hampshire Republican, questioned some other Republicans’ approach to the health law. “If they’re saying the defunding issue is going to come up again in three months, then they’ve learned nothing from this,” she said. “If we learned nothing else from this exercise, I hope we learned that we shouldn’t get behind a strategy that cannot succeed.” To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net ; Kathleen Hunter in Washington at khunter9@bloomberg.net ; Roxana Tiron in Washington at rtiron@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-09-29 | Bloomberg | Disney, Entrepreneur Media: Intellectual Property | Novozymes A/S lost a U.S. court bid to prevent Danisco A/S from selling an enzyme used in biofuel production until a trial can be held on patent-infringement claims. U.S. District Judge Barbara Crabb in Madison, Wisconsin, rejected arguments by Novozymes that Danisco would cause irreparable damages to Novozymes’ market share unless it was halted. Danisco has the ability to pay financial compensation if it ultimately loses the case, the judge said in the Sept. 24 ruling. She found there’s still a “substantial question” about the validity of the Novozymes patent. Novozymes contends its smaller rival infringes a patent on an alpha amylase enzyme that remains active in high temperatures. The two Danish companies are the world’s biggest makers of enzymes that break down organic material, such as grain and corn, to form bioethanol, used as an alternative to fossil fuels. Novozymes has “not shown that they are likely to lose a significant amount of additional market share between now and trial,” Crabb wrote. “The accused products had been on the market for more than two years” when the patent was issued. The disputed patent -- 7,713,723 -- was issued May 11, the same day the case was filed. Danisco dominated the market until 1999, when Novozymes began selling its Liquozyme enzyme, according to Crabb’s ruling. At one point, Liquozyme accounted for 80 percent of the market, before Danisco introduced a new product called GC358. Liquozyme now has about 60 percent of the market, the judge said. The judge also said it wasn’t in the public’s best interest for Danisco to be ordered off the market, since Novozymes said Liquozyme doesn’t use the invention covered by the patent. She said it was “inconsistent” for Novozymes to argue that the patent “represents an important new invention” and then say it would make no difference if no one is allowed to use it. “The legal standard for obtaining a preliminary injunction is higher than the legal standard Novozymes must meet at trial, and as such preliminary injunctions are rarely given,” Annegrethe Jakobsen, a spokeswoman for Novozymes, said by e- mail. “We believe we will ultimately prevail at the trial, which is scheduled for the fall of 2011.” Danisco, based in Copenhagen, paid Novozymes $15.3 million to settle a 2007 patent dispute over another enzyme used in ethanol production. In that case, Novozymes won after first being denied a preliminary injunction. In a separate case, Danisco filed a U.K. patent- infringement lawsuit July 19 against Novozymes of Bagsvaerd, Denmark, in connection with an unspecified enzyme. The case is Novozymes A/S v. Danisco A/S, et al, 10-cv-251, U.S. District Court for the Western District of Wisconsin (Madison). Apple Sues Nokia in U.K. in Continuing Patent Fight Apple Inc. said it filed a patent-infringement lawsuit against Nokia Oyj in the U.K., part of a broader fight between the companies over smartphone technology. A copy of the complaint, filed Sept. 28 in the U.K. High Court of Justice Chancery Division, wasn’t immediately available. Kristin Huguet, an Apple spokeswoman, said the case is related to patent-infringement claims that Apple filed against Nokia in December in the U.S. “This is an unsurprising development, which seems designed to put pressure on the ongoing dialogue between both companies,” said Mark Durrant, a Nokia spokesman. “It changes nothing in the fundamentals of the matter, which are rooted in Apple’s refusal to respect Nokia’s intellectual property and attempt to free-ride on the back of Nokia’s innovation.” The dispute began in October, when Espoo, Finland-based Nokia filed a lawsuit accusing Apple of infringing 10 patents. It demanded royalties on all iPhones sold since Apple Chief Executive Officer Steve Jobs, 55, introduced the device in 2007. Charges and countercharges followed, including complaints at the U.S. International Trade Commission in Washington that may result in a ban on imports of either the Nokia or Apple phones. Some Apple claims against Nokia are scheduled for a trial beginning Nov. 1 at the agency, and Nokia’s case against Apple is scheduled for Nov. 29, according to information on the ITC’s website. ‘ The U.K. case is based on “nine implementation patents already in suit between the two companies in the U.S.,” Durrant said. “Though litigation is always a last resort for Nokia, the company will continue to defend itself to the utmost.” In court filings in December and February, Apple claimed Nokia was seeking to force Apple into surrendering access to proprietary technology that differentiates the iPhone. Apple said it doesn’t want to license its iPhone-related patents to competitors. The new case is Apple Inc. v. Nokia Corp., HC10CO3053, High Court of Justice, Chancery Division (London). Nokia’s ITC case against Apple is In the Matter of Electronic Devices, including Mobile Phones, Portable Music Players and Computers, 337-701, and Apple’s case is In the Matter of Certain Mobile Communications and Computer Devices, 337-703, both in the U.S. International Trade Commission (Washington). For more patent news, click here. Copyright Disney, CBS, Fox Sue Ivi for Streaming Shows on Web Walt Disney Co. ’s ABC, CBS Corp. and other broadcasters sued Ivi Inc., an online subscription service, for streaming television programs over the Web without authorization. The companies, which also include News Corp.’s Fox, General Electric Co.’s NBC and the Public Broadcasting Service, today accused Ivi and its founder, Todd Weaver, of copyright infringement in a federal court complaint in New York. “Defendants have launched their infringing Internet TV service to coincide with the start of the new fall television season,” the broadcasters said in the complaint. Ivi, based in Seattle, began streaming TV stations there and in New York 24 hours a day to Web subscribers worldwide on Sept. 13, according to the lawsuit. Viewers would pay $4.99 a month after a 30-day free trial, the complaint said. Broadcasters have deals with companies including Hulu LLC, Netflix Inc. and Apple Inc. to stream TV shows. Hulu’s owners include NBC, Fox and ABC. On Sept. 20, Ivi and Weaver filed suit in federal court in Seattle seeking a ruling that Ivi isn’t infringing copyrights. The Seattle company claimed that copyright law authorized secondary transmission of copyrighted works embodied in primary transmissions, such as those from the content owners. It argued that because copyright law permits secondary transmission upon payment of licensing fees, its actions are permissible. In an e-mail yesterday, Weaver said of the new suit that “big media is choosing to fight Internet delivery the same way they fought against cable delivery and satellite delivery, when in reality it is legal to retransmit.” He said that “broadcasters charge more in advertising due to the increase in viewers. It is too bad big media must fight innovation that is legal, pays them and increases their revenue.” The broadcasters said that after they demanded that Ivi stop streaming their stations, the company initially responded that it was “open to engaging in discussions to explore more direct contractual agreements with certain plaintiffs.” Ivi sued several days later. Major League Baseball, Univision, Telemundo, Cox Media, Tribune Television, Fisher Broadcasting, WPIX, WGBH and WNET.org are also plaintiffs in the New York suit. Today’s case is WPIX Inc. v. Ivi Inc., 10-7415, U.S. District Court, Southern District of New York (Manhattan). The earlier case is Ivi Inc. v. Fisher Communications Inc., 10-1512, U.S. District Court, Western District of Washington (Seattle). Attack Against Copyright Enforcement Firm Leaks Private Data ACS:Law, the London firm that sent out demand letters to alleged illegal file sharers in the U.K., became the target of an Internet attack that exposed on the Internet private information including physical addresses and credit card numbers of “tens of thousands of broadband users,” the U.K.’s Guardian reported. The firm’s website -- www.acs-law.org.uk -- has gone offline following a sustained attack that left thousands of the firm’s e-mails published on its front page and distributed widely on the Internet, according to the Guardian. The confidential information was also uploaded to the Pirate Bay file-sharing site, which prompted the U.K.’s Pirate Party to tell protesters to “find less drastic ways to make their displeasure felt” and that it opposed such leaks of confidential matters, the newspaper reported. Andrew Crosley of the firm told the Guardian he was unable to comment on the attack “for legal reasons.” U.K. Band Member Predicts Eternal Perdition for Music Pirates Guy Harvey, a member of the British alternative rock band Elbow , says those who pirate music instead of paying for it are “going to hell,” according to the BBC. He told the BBC that while he could understand poor people’s illegally copying music, there’s “no excuse” for those who can afford it. He said they’ll have their own rooms in hell as a consequence of their actions. His band, which won the 2008 Barclaycard Mercury Prize for its album “ The Seldom Seen Kid ,” has sold more than 600,000 copies in the U.K., according to the BBC. Piracy losses are behind Elbow’s 2011 arena tour because “without the live side, nobody’s making any money,” Garvey said and the BBC reported. For more copyright news, click here. Trademark Entrepreneur Media Sued Over ‘Entrepreneur.Ology’ Trademark Entrepreneur Media Inc. , the Irvine, California-based publisher of Entrepreneur Magazine, was sued by a Texas lawyer in a dispute over his attempt to register “Entrepreneur.Ology” as a trademark. Daniel R. Castro, of Austin, Texas-based Castro & Baker LIP, said the publisher is opposing his trademark registration and sent him a cease-and-desist letter Sept. 7, threatening to sue him if he didn’t give up rights to the “Entrepreneur.Ology” mark, and his www.entrepreneurOlogy.com domain name. According to Bloomberg data, Entrepreneur Media has filed five trademark-infringement suits since 2005. Castro said the publisher claimed his domain name and trademark registration violated its “Entrepreneur” trademark. Castro is author of “Critical Choices that Change Lives,” and a book in progress tentatively titled “Anatomy of the Entrepreneur’s Brain.” He says he’s about to start a “Boot Camp for Entrepreneurs,” in which he will teach corporate executives to think and act like entrepreneurs. He says he’s given presentations on the subject of entrepreneurship for the American Red Cross, the City of Austin, International Business Machines Corp., Dell Inc. and Northwestern Mutual Insurance, according to the complaint filed Sept. 15 in federal court in Austin. The word “Entrepreneur.Ology” is one he claims he coined and that it’s “fanciful,” “inherently distinct” and, as such, entitled to trademark protection. The word, Castro says, is as distinctive a word as “Kodak” or “Exxon.” According to the patent office database, Entrepreneur Media has two trademark registrations for the world “Entrepreneur,” one of use with trade shows, and the other for pre-recorded audio and visual media. The Irvine-California-based publisher has other trademark registrations, many of which incorporate the word “entrepreneur.” The company didn’t immediately respond to an e-mailed request for comment on the suit. Lawyer Deborah A. Gubernick of Latham & Watkins, who represented the company at the U.S. Patent and Trademark Office in an attempt to block Castro’s trademark from being issued, didn’t immediately respond to an e-mail and a phone call seeking comment. Castro claims the publisher is attempting to “kidnap” the word, which he said has been used by authors “in their books and articles for hundreds of years.” They “should be allowed the freedom to continue doing so for eternity,” he said in his pleadings. He asked the court to declare that “entrepreneur” as a stand-alone word can’t be registered as a trademark, and that his “EntrepreNeurology,” ‘Entrepreneur.Ology.” and “www.entrepreneurOlogy.com” don’t infringe. He claims the publisher is violating antitrust laws by trying to keep him from using his coined words, and seeks damages, court costs and attorney fees under trademark and antitrust laws. He represents himself in this action. The case is Castro v. Entrepreneur Media Inc., 1:10-cv- 00695-JRN, U.S. District Court, Western District of Texas (Austin). For more trademark news, click here. Trade Secrets/Industrial Espionage Astro Unit Leaked Confidential Data, AV Asia Claims Measat Broadcast Network Systems Sdn., a unit of Malaysian billionaire T. Ananda Krishnan ’s Astro All Asia Networks Plc ., illegally used confidential information in a tender for new satellite dishes with reduced signal loss during rainstorms, AV Asia Sdn claimed in a lawsuit. AV Asia, a Malaysian television equipment provider, sought 1.3 billion ringgit ($420 million) for damages in the suit, filed yesterday in the Kuala Lumpur High Court. Closely held AV Asia sought help in 2008 from Maspro Denkoh Corp. , a Japanese television-receiving equipment manufacturer, to help it develop a satellite dish less susceptible to existing rain fade problems, a characteristic which lends to transmission interruptions during bad tropical weather, according to the suit. AV Asia and Maspro’s engineers met with Measat in August that year to discuss their ideas and exchanged data after signing non-disclosure agreements, AV Asia said in the court documents. “The rights of the rain fade solution were given by Maspro solely and exclusively to my client,” Ravi Sodhi, AV Asia’s lawyer, told reporters at court yesterday. Measat used the information in a bid on a contract with satellite dish suppliers and to help it start the Astro B.yond , the first high-definition television service in Malaysia, AV Asia said. Astro said it had not been served with any legal proceedings and therefore couldn’t comment. Tele System Electronic (M) Sdn, which is providing Measat with satellite dishes, was also named as a defendant, AV Asia’s lawyer said. To contact the reporter on this story: Victoria Slind-Flor in Oakland, California, at vslindflor@bloomberg.net. To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net . |
2024-03-27 | Bloomberg | China Life Profit Slumps on Investment Losses of Stock Holdings | China Life Insurance Co. (2628) , the nation’s biggest insurer, said profit slumped for a second consecutive year amid mounting investment losses. Net income fell 40 percent to 11.06 billion yuan ($1.8 billion), or 0.39 yuan a share, from 18.3 billion yuan, or 0.65 yuan a share a year earlier, the company said in a statement to Shanghai stock exchange. That compares with the 11.07 billion yuan mean estimate of 10 analysts surveyed by Bloomberg. China’s benchmark Shanghai Composite Index (SHCOMP) dropped about 20 percent in the past two years as the nation’s economic expansion cooled, eroding insurers’ investment returns and forcing them to write down on some equity holdings. Smaller competitor Ping An Insurance (Group) Co. (2318) reported a 3 percent profit increase this month as bigger banking revenue helped offset an almost tenfold jump in net realized and unrealized investment losses last year. China Life’s investment performance “hasn’t been particularly desirable and lags far behind investor expectations,” said Xie Jiyong, a Shanghai-based analyst at Capital Securities Corp. (6005) before the earnings were announced. “They should have digested almost all the unrealized losses by the end of last year though, and are very likely to record an increase in profit this year.” Investment Losses Impairment losses from equity investments jumped 140 percent to 31.1 billion yuan last year, the company said. Investment income, mainly interest earned from bonds holdings and bank deposits , rose 23 percent to 80 billion yuan, according to the statement. The company said Feb. 28 that profit probably dropped about 40 percent in 2012 on lower investment yields and increased impairment losses because of weakness in capital markets. The Shanghai Composite fell 5.2 percent in the first three quarters of last year, before rallying 8.8 percent in the fourth quarter as the nation’s economic growth gained momentum. The gauge has risen 1.4 percent this year. Ping An’s net investment losses jumped to 9.5 billion yuan last year, while impairment losses more than doubled as the company reflected the decreased values in its stock holdings under accounting rules that require such recognitions when investments fall more than 50 percent or have been at a loss for a year, the insurer’s Chief Investment Officer Timothy Chan told reporters in Shanghai March 15. Net premiums earned climbed 1.2 percent to 322 billion yuan, China Life said. The value of new business, which gauges profitability of new policies sold, expanded 3.1 percent, according to the statement. China Life fell 0.2 percent to HK20.70 in Hong Kong trading, extending this year’s decline to 18.2 percent. China Pacific Insurance (Group) Co. (2601) , the nation’s third- largest insurer, on March 24 reported a 39 percent drop in profit for last year as investment losses more than doubled and impairments jumped 57 percent. To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at dzhang14@bloomberg.net To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net |
2024-03-22 | Bloomberg | Vienna Insurance Group Falls 4th Day, Leads Czech Stocks Lower | Vienna Insurance Group AG (VIG) fell for a fourth day, leading Czech shares lower. The stock slid 1.3 percent to 829 koruna as of 3:46 p.m. in Prague , extending this week’s loss to 3 percent. The PX (PX) equity gauge, where VIG has a 13 percent weighting, fell 0.3 percent as the MSCI Emerging Markets Index slumped a sixth day after data showed manufacturing contracted in Europe and China, driving investors from riskier assets worldwide. To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net |
2024-02-20 | Bloomberg | U.S. Banks Bigger Than GDP as Accounting Rift Masks Risk | Warning: Banks in the U.S. are bigger than they appear. That label, like a similar one on automobile side-view mirrors, might be required of the four largest U.S. lenders if Thomas Hoenig , vice chairman of the Federal Deposit Insurance Corp., has his way. Applying stricter accounting standards for derivatives and off-balance-sheet assets would make the banks twice as big as they say they are -- or about the size of the U.S. economy -- according to data compiled by Bloomberg. “Derivatives, like loans, carry risk,” Hoenig said in an interview. “To recognize those bets on the balance sheet would give a better picture of the risk exposures that are there.” U.S. accounting rules allow banks to record a smaller portion of their derivatives than European peers and keep most mortgage-linked bonds off their books. That can underestimate the risks firms face and affect how much capital they need. Using international standards for derivatives and consolidating mortgage securitizations, JPMorgan Chase & Co. , Bank of America Corp. and Wells Fargo & Co. would double in assets, while Citigroup Inc. would jump 60 percent, third- quarter data show. JPMorgan would swell to $4.5 trillion from $2.3 trillion, leapfrogging London-based HSBC Holdings Plc and Deutsche Bank AG, each with about $2.7 trillion. World’s Largest JPMorgan, Bank of America and Citigroup would become the world’s three largest banks and Wells Fargo the sixth-biggest. Their combined assets of $14.7 trillion would equal 93 percent of U.S. gross domestic product last year, the data show. Total assets of the country’s banking system would be 170 percent of economic output, still lower than 326 percent for Germany. U.S. accounting rules for netting derivatives allow banks to erase about $4 trillion in assets, the data show. The lenders also can remove from their books most mortgages they package into securities, trimming an additional $3 trillion. Off-balance-sheet assets and derivatives were at the root of the 2008 financial crisis. Mortgage securitizations kept off the books came back to haunt banks forced to repurchase home loans sold to special investment vehicles. The government had to rescue American International Group Inc. with a bailout that ballooned to $182 billion after the insurer couldn’t pay banks on derivatives tied to those bonds. Derivatives are financial contracts whose value depends on stocks, bonds, currencies or other securities. Because two parties agree to swap cash or collateral at the end of a pre- determined period, that value also depends on the existence of the counterparty when it’s time to pay. Netting Derivatives Netting allows banks and trading partners to add up the positions they have with each other and show what would be owed if all contracts had to be settled suddenly. These master agreements are only relevant during bankruptcy and underestimate risk, according to Anat Admati , a finance professor at Stanford University. When a bank’s solvency is in doubt, derivatives partners demand to be paid immediately, causing a run. “These liabilities do matter in times of distress,” said Admati, whose book “The Bankers’ New Clothes” was published this month. “By netting, you are hiding fragilities.” The U.S. Financial Accounting Standards Board and the International Accounting Standards Board pledged a decade ago to converge the two bookkeeping systems. After six years of meetings, they remain divided. Proposed rules for how much money banks need to set aside for loan losses may make European and U.S. lenders even less comparable. ‘Can’t Compare’ “Having no uniform standard is challenging for issuers and users,” said John Hitchins , head of U.K. banking and capital markets at PricewaterhouseCoopers in London. “Analysts and investors can’t compare companies’ financials across borders. Banks have to prepare multiple versions of their financial statements in different countries where they have units.” The U.S. accounting board tightened rules on what needs to be consolidated in 2009 after the financial crisis, forcing more than $200 billion of assets onto the balance sheets of the four biggest banks. Those included most mortgage bonds not backed by the government. Untouched were about $3 trillion of securities guaranteed by U.S.-owned housing-finance companies Fannie Mae and Freddie Mac. While the board agreed with banks that the securities didn’t need to be counted because they were insured by the government, risk returned to firms that originated the loans after the housing market collapsed. Since 2008, the four lenders have faced demands to take back $67 billion of mortgages sold to securitizations backed by Fannie Mae and Freddie Mac. They repurchased a majority of those and settled some disputes because the loans hadn’t met agency underwriting standards. Covered Bonds European banks sell covered bonds to finance mortgage originations and aren’t allowed under international accounting rules to move the home loans that back them off their balance sheets. Covered bonds package mortgages like securitizations, and the bonds are sold to investors. In case of bankruptcy, the mortgages that back the covered bonds are walled off from other assets of the bank and can be seized by bondholders. Buyers of the bonds can demand that banks replace soured mortgages with performing ones, leaving the credit risk with the originator. That’s similar to buyback requests in the U.S. Executives at U.S. banks disagree, saying the securitizations pass mortgage-default risk to the government and investors, while covered bonds don’t. During the crisis, European nations bailed out dozens of banks to prevent the collapse of the covered-bond market. That’s similar to the rescue of Fannie Mae and Freddie Mac in the U.S. and shows how both mortgage markets are government-backed, said Hans-Joachim Duebel, founder of Finpolconsult, a Berlin-based housing-finance consulting firm. Capital Rules “Covered bonds are not that different from the Fannie- Freddie securitization mechanism,” Duebel said. “U.S. banks are just as liable for what they originate and sell to the agencies as Europeans are for what’s in their covered bonds.” Canadian banks, which use international standards, aren’t allowed to move mortgages off their balance sheets, even though about 75 percent are insured by the government. What goes on balance sheets and what’s kept off affect how much capital banks are required to have. Capital rules are intended to limit how much borrowed money banks can use in relation to shareholder equity. The higher the ratio, the greater the probability firms will have enough capital to cover losses and stay out of bankruptcy. JPMorgan, Citigroup The Basel Committee on Banking Supervision, which sets global standards, traditionally has based capital rules on risk- weighted assets rather than raw balance-sheet size. A simpler ratio introduced in 2010 as an additional measure to rein in risk-taking would be based on total assets. U.S. banks have been complying with a domestic version of that ratio for the past two decades. It requires U.S. lenders to have capital equal to 4 percent of total assets as determined by U.S. accounting standards. Under that definition, JPMorgan and Citigroup, both based in New York, and Charlotte, North Carolina-based Bank of America had capital ratios of about 7 percent, while Wells Fargo’s was 9.4 percent as of Sept. 30, the most recent period for which data are available. If the banks used international standards for derivatives and consolidated mortgage securitizations, the ratio for JPMorgan and Bank of America, the two largest U.S. lenders, would fall below 4 percent. It would be just above 4 percent for Citigroup and Wells Fargo. That would make the biggest U.S. banks look no better capitalized, or worse, than European peers such as HSBC at 5.6 percent or France’s BNP Paribas SA at 3.9 percent at the end of last year. It also could require them to raise more capital. Spokesmen for all four banks declined to comment. Accounting Differences The accounting differences colored the debate in Basel when a similar ratio was introduced. U.S. regulators on the committee, which includes banking supervisors from 27 nations, at first proposed adopting international rules for netting derivatives when calculating the simpler capital standard, also called a leverage ratio. European regulators would only agree if the ratio were set no higher than 1 percent, according to former FDIC Chairman Sheila Bair , who participated in the talks. Instead, the committee opted to use U.S. accounting rules for netting derivatives and set the limit at 3 percent. A 3 percent ratio means that a bank needs $3 of capital for every $100 of assets. For the more traditional Basel capital measure, the same $3 would result in a higher ratio because some of the assets are discounted by the smaller amount of risks they are assumed to carry. “The U.S. leverage ratio doesn’t capture off-balance-sheet risks,” said Bair, now chairman of the Systemic Risk Council, a private regulatory watchdog. “Once U.S. banks start publishing the new Basel-mandated ratios, more off-balance-sheet assets will become obvious.” EU Balking Bair said she favors raising the simple capital ratio as high as 8 percent. Hoenig, the FDIC vice chairman, has called for 10 percent. U.S. regulators are still debating how to implement the rules. Because Basel isn’t an international treaty, each country needs to adopt its own version. Still, the European Union is balking at implementing the capital rule based on total assets. It’s considering delaying when EU banks have to begin reporting the ratio using the methodology and hasn’t decided whether to make it binding. The first Basel rules were agreed to in 1988 in an effort to converge global banking regulations. Fourteen years later, U.S. and international rule-setters signed what is known as the Norwalk agreement, named after the Connecticut town where the U.S. accounting board is based, pledging to work together to “make their existing financial reporting standards fully compatible as soon as is practicable.” Common Standards Behind the initial push were David Tweedie , the first chairman of the International Accounting Standards Board; Harvey Pitt , who headed the U.S. Securities and Exchange Commission at the time; and Paul Volcker , the former Federal Reserve chairman instrumental in the group’s formation. Progress on common standards slowed after Mary Schapiro became SEC chairman in 2009 and faced lobbying by companies opposed to what they said would be costly accounting changes, according to four people with knowledge of the discussions who asked not to be identified because the talks were private. “I’ve always supported working toward convergence, and we pushed FASB and IASB hard to reach satisfactory agreements,” Schapiro, who left the SEC in December, said in an interview. “But I wasn’t keen on dropping the U.S. accounting standard and adopting the international one before those differences were significantly narrowed.” Financial Footnotes In 2011, the U.S. accounting board came close to moving in Europe’s direction on derivatives netting. There was pushback from the largest U.S. banks, according to a person familiar with the talks. Lenders argued that gross values overstate actual positions because parties often make opposite bets rather than tear up existing contracts. The board dropped the plan. Tweedie, a former chairman of the U.K.’s accounting board, failed to win the support of France and Germany for convergence, according to the people familiar with those discussions. While European banks have long favored the U.S. approach to netting derivatives, they haven’t pushed for change because it wouldn’t have an impact on income statements or capital requirements, which are based on risk-weighting of assets, according to Andrew Spooner, a London-based partner at Deloitte LLP. “When it’s about the size of the balance sheet only, and not a profit-loss issue, it’s not as crucial for firms,” Spooner said. Fannie, Freddie New disclosure requirements for U.S. and European banks on how they net derivatives that take effect this year will make comparisons easier, Spooner said. The biggest U.S. banks already are reporting more details in the footnotes of quarterly financial statements, making it possible to calculate their derivatives assets under international standards. There isn’t as much uniformity in disclosures of off- balance-sheet assets. JPMorgan’s securitizations of home loans backed by Fannie Mae and Freddie Mac were estimated by using the figure for mortgages the bank services and the average ratio of servicing to off-balance-sheet assets at other lenders. U.S. rule-setters have done more than their international counterparts to force banks to consolidate securitization vehicles. Still, there was little debate about whether lenders should include loans sold to Fannie Mae and Freddie Mac. Before the financial crisis, the government-backed firms didn’t include mortgage bonds created from those loans on their balance sheets either. After collapsing under the weight of losses and being taken over by the government, both Fannie Mae and Freddie Mac started consolidating the securities. They also tried to recover losses from banks that sold them badly underwritten home loans. Control Mechanisms Lenders have said improved control mechanisms for loans they originate and transfer to Fannie Mae and Freddie Mac for packaging into mortgage bonds obviate the need to consolidate or set aside reserves for future repurchases. That optimism isn’t shared by Esther Mills, president of Accounting Policy Plus, a New York-based consulting firm. “There was clearly a failure by certain institutions to appropriately assess the liabilities before the crisis,” said Mills, a former Morgan Stanley and Merrill Lynch & Co. accounting executive. “Are there enough liabilities going forward for the billions of mortgages being transferred?” In the first nine months of last year, San Francisco-based Wells Fargo transferred $398 billion of mortgages to residential-mortgage securitizations guaranteed by Fannie Mae and Freddie Mac. The bank recorded a $209 million liability for “probable repurchase losses,” according to its latest quarterly filing. It has faced more than $12 billion of buyback demands from the government-backed firms for crisis loans. ‘Dangerous Things’ “There are probably some dangerous things left off the balance sheet still, and we’ll only find out what in the next crisis,” said David Sherman , an accounting professor at Northeastern University in Boston. “But how many times do we have to go through this to figure it all out?” After failing to agree on common standards for derivatives netting and consolidation of securitizations, rule-setters are now heading in different directions as they debate how to account for loan-loss reserves. The U.S. accounting board proposed after the financial crisis that banks mark all loans and debt securities to market values, not just those held short-term. The board abandoned the plan after lobbying by banks, which would have had to recognize losses, according to a person familiar with the deliberations. No Convergence A new U.S. proposal that would require banks to record expected losses over the lifetime of a loan has met with similar opposition. The plan would force lenders to set aside higher reserves upfront, leading to lower profits than European peers, Sherman estimates. Under current accounting rules on both sides of the Atlantic, only incurred losses need to be reported. The international board is considering a change that would require banks to reserve for losses expected over a 12-month period. While both the U.S. and international proposals probably would result in higher loan-loss reserves, they might not prevent lenders from being too late recognizing losses, as they were in the past, according to Jamie Mayer, a bank-accounting analyst at Grant Thornton LLP in Chicago. “If their risk models don’t show any problems, and they didn’t before 2008, it’s unclear how solely changing the accounting would solve concerns,” Mayer said in an interview. In a January survey of 70 banks around the world conducted by auditing firm Deloitte, 88 percent of respondents said they don’t expect convergence on accounting rules most relevant to lenders, including derivatives, balance-sheet consolidation and how to reserve for loan losses. Leslie Seidman , chairman of the U.S. accounting board, and Hans Hoogervorst , head of the international panel, both said at a conference in New York last month that they hadn’t given up. “I still hope for one standard,” Hoogervorst said. “But at times it’s easy to be discouraged.” To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net or @yalman_bn on Twitter To contact the editor responsible for this story: David Scheer in New York at dscheer@bloomberg.net |
2024-06-06 | Bloomberg | Clifford Chance, Covington, Chadbourne: Business of Law | Three of the U.K.’s highest-grossing law firms raised salaries for London lawyers, who can earn as much as 65,000 pounds ($99,000) in their first year after qualifying to practice. Clifford Chance LLP said on June 4 it would increase pay for newly qualified lawyers by about 3 percent, to 63,500 pounds, while Linklaters LLP raised those rates 4 percent to 64,000 pounds. Slaughter and May also raised pay for that level about 2 percent to 63,000 pounds. Allen & Overy LLP and Freshfields Bruckhaus Deringer LLP kept salaries unchanged. “The London office has had another successful year,” said Clifford Chance partner David Bickerton. The Magic Circle, comprising the five largest and most profitable British law firms, cut or froze pay over several years as deal work dried up during the financial crisis that began in 2008. While the salaries of junior lawyers are rising again, they lag behind their New York counterparts, who make as much as $160,000 in their first year. About six in 10 U.K. lawyers received a pay raise in 2012, according to a survey by recruitment firm Robert Walters Plc. (RWA) Nearly 70 percent of those got an increase of less than 6 percent. “It’s certainly looking up,” said Nick Shillinglaw, a legal recruiter at Michael Page International Plc (MPI) in London. “There’s more confidence in the market now.” Finance and niche practices, such as intellectual property litigation or tax, are attracting the highest salary offers, he said. Law firms are under pressure to pay junior lawyers competitively while not angering clients, who have had increased leverage during the economic downturn to pressure firms to lower their bills. “We believe this strikes the right balance between rewarding our associates with increased scales at the same time as recognizing that economic conditions remain tough,” Richard Clark , the executive partner at Slaughter and May, said in an e-mail. Law Firm News Federal Election Commission General Counsel Rejoins Covington Federal Election Commission General Counsel Tony Herman is returning to Covington & Burling LLP. “We are delighted to welcome Tony back to Covington,” Timothy Hester, chairman of the firm’s management committee, said in a statement. At the FEC, Mr. Herman was responsible for managing approximately 100 lawyers in the Office of General Counsel’s four divisions. He led a major restructuring of the office that resulted in improved efficiency and work quality. “I enjoyed working at the FEC during an important juncture in the nation’s election cycle, but I look forward to returning to Covington, a truly unique and wonderful law firm,” Mr. Herman said. Herman’s litigation practice has included intellectual property and technology, employment, food and drug and general commercial litigation. Moves at Hogan Lovells and Chadbourne & Parke Hogan Lovells LLP yesterday announced the addition of three partners from Chadbourne & Parke LLP to its litigation and arbitration practice, while Chadbourne named a new head of its arbitration practice. Oliver J. Armas, who had been co-head of Chadbourne’s international arbitration group, and Phoebe A. Wilkinson, the former co-head of Chadbourne’s product liability group, will join Hogan Lovells in New York. Luis Enrique Graham, a litigation and arbitration practitioner, will be resident in Mexico City, with a significant presence in New York. “This team offers strategic experience in international arbitration and products liability for a diverse range of clients,” Warren Gorrell, co-chief executive officer of Hogan Lovells, said in a statement. Chadbourne & Parke yesterday named Mark Beckett as its new head of the firm’s international arbitration practice. “International arbitration is a core strength of our firm, and we are very excited about Mark’s new role in leading the group,” Andrew Giaccia, Chadbourne’s managing partner, said in a statement. Beckett, along with partner Rachel Thorn, one counsel and two associates joined Chadbourne from Latham & Watkins LLP in December. Nixon Peabody Partner Becomes President of New York Bar The New York State Bar Association, the nation’s largest voluntary bar association with 76,000 members, has selected Nixon Peabody LLP partner David M. Schraver as its next president. Schraver, whose term began on June 1st, will serve as the 116th president in the bar association’s history. Schraver plans to focus much of his one-year term on the future of legal education and the profession at a time when many law school graduates are shouldering six-figure student loans and facing uncertain job prospects. Under the theme of “Serving the Profession, Serving the Public,” he plans to engage law school educators, practicing attorneys, judges and others in a yearlong examination of how best to prepare new attorneys for a changing profession. “It is critical that the state bar continue the momentum we’ve gained on many issues, as well as be prepared to address other matters as they arise. Our association needs to be focused and flexible in dealing with issues within our profession and in the communities we serve,” Schraver said in a statement. Schraver will continue to represent his clients while serving as NYSBA president. His practice includes a broad range of complex civil and commercial litigation in state and federal courts, with a special emphasis on Indian law, energy/utilities litigation, contract litigation, and fiduciary and professional liability. Kilpatrick Townsend Adds Partner to Insurance Recovery Team Mary Craig Calkins has joined the Los Angeles office of Kilpatrick Townsend & Stockton LLP as a partner in the firm’s insurance recovery team. She had been a partner at Jenner & Block LLP. “Mary adds exceptional depth to an already strong team,” said Helen Michael, co-head of the insurance recovery team. “We have been looking to continue to grow our group on the West Coast and Mary is among the most recognized and highly regarded leaders in our field. Kilpatrick Townsend clients will be the beneficiaries of her expertise.” Calkins is a litigator who focuses on complex commercial litigation and insurance recovery for policyholders. She has extensive experience concerning directors’ and officers’ liability, entertainment and intellectual property claims, construction defects, e-commerce and technology claims, first party property and business interruption losses, and broker liability issues. Conferences At ABA Conference, Law Firms Said to Watch Privilege Cases A handful of closely watched cases currently under review by state supreme courts may signal the fate of a long-running campaign to expand protection for internal law firm communications regarding potential malpractice suits. For over two decades, courts routinely rejected law firms’ efforts to shield internal communications about potential malpractice liability to their clients. Lower courts have in recent years moved away from that rule, and some of those cases are now pending before the highest courts in several jurisdictions. A May 31 panel at the 39th ABA National Conference of Professional Responsibility, held in San Antonio , said the cases could allow lawyers to keep confidential communications within the firm when the firm faces malpractice. The program was moderated by Mark L. Tuft, a partner at Cooper, White & Cooper LLP, and included three other participants who focus on attorney liability matters: John C. Koski, general counsel of Dentons US LLP, Merri A. Baldwin, a partner at Rogers Joseph O’Donnell PC, and Allison D. Rhodes, a partner at Hinshaw & Culbertson LLP. The panel focused on measures law firms can take to avoid being compelled to turn over damaging internal communications absent judicial recognition of a privilege to keep these communications confidential. The panel, for example, suggested that if a firm filed a lawsuit that was dismissed as untimely, the firm should withdraw from the matter. If withdrawal is impossible, the firm can ask the client to consent to the firm’s engaging in internal, privileged communications about its potential liability. “That letter, if properly drafted, also solves the problem,” Rhodes said at the panel. She added that firms increasingly seek such consent before problems arise. For more, click here. Video Law School Applications Down Except for Top Schools It’s easier to be admitted to law school these days because fewer people want to be lawyers, according to data about the entering Class of 2012 released by the American Bar Association and the Law School Admissions Council. Bloomberg Law crunched the numbers, but surprising aspects remain about law school admissions. The number of applications this year for full-time programs fell 12 percent, to 444,000. Applications were down at most schools, but they increased at 25 schools. To see the video, click here. To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-12-31 | Bloomberg | Emerging Stocks Cap 15% 2012 Gain as Chinese Output Grows | Most emerging-market stocks rose, pushing the benchmark index to a 15 percent advance in 2012, as Chinese manufacturing expanded and U.S. lawmakers negotiated to avert automatic tax increases and spending cuts. Zhuzhou CSR Times Electric Co. (3898) , which supplies electrical systems for China’s railways, gained for a fourth day. China Life Insurance Co. (601628) jumped the most in three weeks as the nation’s securities watchdog said insurers would be allowed to set up mutual funds. Lenovo Group Ltd. (992) , the world’s biggest maker of personal computers, fell to a five-week low after the chief executive officer cut his stake. China’s Shanghai Composite Index climbed to a six-month high. The MSCI Emerging Markets Index was little changed at 1,055.20 in New York, as 189 stocks rose while 163 fell. Chinese factory output grew at the fastest pace in 19 months, HSBC Holdings Plc and Markit Economics said today. While, the U.S. House of Representatives doesn’t plan any votes on the budget tonight, Senate Minority Leader Mitch McConnell said lawmakers are “very, very close” to a deal to avert the $600 billion in tax increases and spending cuts set to start at midnight. “We’re getting farther away from this fear of a hard landing in China and getting closer to some kind of meaningful recovery in the rate of growth of the world’s second-largest economy,” Michael Gayed, the chief investment strategist at Pension Partners LLC, said by phone in New York. Chinese Rebound Equity markets in Russia, Hungary , Poland , the Czech Republic, South Korea, Taiwan , Indonesia, Thailand and the Philippines were closed for holidays. Markets in Brazil, Chile and Argentina were also closed. The 21 nations in the developing-nations gauge send about 17 percent of their exports to the U.S. on average, World Trade Organization data show. Allowing the tax increases and spending cuts to take effect would cause a recession in the first half of 2013, according to the U.S. Congressional Budget Office. “Most traders have their eyes on the U.S. fiscal cliff and how it unfolds,” said Alex Mathews, the head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi, South India. The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, added 1.5 percent to $44.35, and rallied 17 percent this year. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 5.8 percent to 21.70. Zloty Rallies The Shanghai Composite of domestic Chinese shares climbed 1.6 percent to its highest level since June 20. The gauge jumped 15 percent this month, the most since July 2009. The BSE India Sensitive Index (SENSEX) , or Sensex, slipped less than 0.1 percent for a 26 percent gain in 2012. The FTSE Bursa Malaysia KLCI Index (FBMKLCI) gained 0.5 percent to a record, led by a 9.4 percent surge in Kuala Lumpur Kepong Bhd. (KLK) India’s Sensex had the biggest gain this year among the so- called BRIC nations, while the Shanghai Composite (SHCOMP) was the worst performer with a 3.2 percent increase. Brazil’s Bovespa Index (IBOV) rose 7.4 percent and Russia’s Micex Index added 5.4 percent. Mexico’s IPC Index (MEXBOL) was little changed, falling less than 0.1 percent. Fomento Economico Mexicano SAB (FEMSAUBD) , owner of Latin America’s largest convenience store chain, fell 1 percent, leading decliners on the gauge. Bolsa Mexicana de Valores SA , operator of the nation’s stock exchange jumped 3.4 percent, the steepest one-day rally in almost a month. South Korea’s won advanced 0.6 percent against the dollar in offshore trading today after inflation slowed, extending this year’s advance to 8.3 percent. Poland’s zloty led gains among major emerging market currencies in 2012, climbing 9.4 percent versus the euro and 11 percent against the dollar. Argentine’s peso has dropped 13 percent this year, the worst performance among developing-nation currencies. Utilities Drop PT Bumi Resources (BUMI) , which slumped 73 percent in Jakarta in 2012, was the worst performer on the MSCI Emerging Markets Index (MXEF) for the year. Its parent, Bumi Plc, is at the center of a dispute between its founders Nathaniel Rothschild and Indonesia’s Bakrie Group. United Spirits Ltd. (UNSP) , India’s largest distiller, had the biggest gain on the MSCI gauge this year after climbing 286 percent. Diageo Plc (DGE) said in November it will buy a controlling stake in United Spirits for $2.04 billion. Health-care companies rose the most among the 10 industry groups in the MSCI index of developing nations, rallying 32 percent this year, while utilities were the worst performers with a 2.4 percent advance. Brazilian power companies led utility declines as lawmakers intervened to cut tariffs, with Centrais Eletricas Brasileiras SA, the state-controlled power generator, sinking 65 percent in 2012. Chinese PMI Zhuzhou CSR, based in Hunan, China, jumped 4.7 percent in Hong Kong today. The final reading of a Purchasing Managers’ Index for China was 51.5 in December, according to data released today by HSBC and Markit Economics. That compares with a 50.9 preliminary reading issued Dec. 14 and a final 50.5 in November. A reading above 50 indicates expansion. China Life Insurance rose 3.1 percent in Hong Kong, its third day of gains. New China Life Insurance Co. (1336) added 2.6 percent and Ping An Insurance (Group) Co. (2318) gained 1.9 percent. The China Securities Regulatory Commission posted draft rules on its website yesterday allowing insurers’ asset management units and securities brokerages to set up mutual funds, a move the regulator said seeks to “attract various funds into the capital market.” Emaar Slides Lenovo sank 2.2 percent in Hong Kong, its second day of losses after Chief Executive Officer Yang Yuanqing sold 29 million shares of the company. Emaar Properties PJSC (EMAAR) , developer of the world’s tallest skyscraper, dropped 1.6 percent, the most in two weeks. The United Arab Emirates, where foreigners make up more than 80 percent of the population, issued guidelines to restrict mortgages for expatriates to 50 percent of property value, according to guidelines issued by the central bank yesterday and obtained by Bloomberg News. The extra yield investors demand to own emerging-market debt over U.S. Treasuries narrowed 7 basis points, or 0.07 percentage point, to 264 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index. To contact the reporters on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net ; Victoria Stilwell in New York at vstilwell1@bloomberg.net To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net ; Emma O’Brien at eobrien6@bloomberg.net |
2024-02-04 | Bloomberg | Egypt Turmoil May Offer Swaps Reward on Contagion, Citi Says | Egypt ’s political turmoil may undermine confidence in the region, rewarding investors holding default insurance on a basket of Middle Eastern bonds while selling protection on Egyptian debt, according to Citigroup Inc. Investors will profit if credit-default swaps on one or more of five countries in the so-called first-to-default basket widens, said Michael Hampden-Turner, a strategist at Citigroup in London. First-to-default trades pay investors for the risk that any one of the group defaults. The cost of insuring Egyptian debt has surged 30 percent since the start of protests to oust President Hosni Mubarak , inspired by a revolution in Tunisia. Contracts linked to Bahrain, Abu Dhabi, Morocco, Israel and Egypt may increase because of the unrest, Hampden-Turner said. “Fundamental popular questions about democracy and the relationship with the West might have implications in local areas,” Hampden-Turner wrote in a note to investors. “We propose a trade that will work if one or several sovereign CDS spreads in the region also widen relative to Egypt.” Investors should buy insurance on $10 million of debt in the basket and sell protection on an equivalent amount of Egyptian debt, Hampden-Turner said. If swaps on Egypt rise near to default levels, the change in market value of the basket will match the other side of the trade. A decline in Egyptian swaps may also yield a profit, as the market value of protection sold outperforms the basket, he said. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. An increase signals deterioration in perceptions of credit quality. To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net |
2024-01-13 | Bloomberg | Credit Score Zealots Pursue Fool’s Errand | Jeff Rose, a 33-year-old financial planner, is trying to improve his credit score even though it’s 780, which is 69 points above the median score. Rose, who lives in Carbondale, Illinois , said he opened up a second credit card last year to establish another line of credit and help boost his score. He said he doesn’t know exactly what actions will help or hurt his score, so wants to get it above 800 to ensure he gets the best rate if he refinances his mortgage. Three years after the credit crisis when lenders abruptly closed accounts and cut limits, consumers, including those who have excellent scores, have become more focused on getting the number above 800. Those efforts may be futile because once consumers have FICO credit scores of 760, a higher one doesn’t mean they’ll get better interest rates on mortgages and credit cards or more elite card offers, said Greg McBride, senior financial analyst at Bankrate.com, a unit of Bankrate Inc. “There’s very little incremental benefit to getting a score above that,” said McBride, who’s based in North Palm Beach , Florida. Once consumers are above 760, “it’s a lot more difficult to move the score up in any noticeable way, and little reward.” Mayank Maheshwari, 26, a business analyst who lives in Jersey City , New Jersey , said his FICO (FICO) score is 780 and he’s still trying to get it higher. He has a student loan that he hasn’t paid off in full, although he can afford to, because he thinks maintaining monthly payments on time will help increase his score. FICO Scores The most common scores are based on models established by Minneapolis-based FICO, formerly known as Fair Isaac Corp., which are used to gauge a consumer’s financial health. The numbers, which range from 300 to 850, affect the ability to get mortgages and credit cards, as well as the rates borrowers pay for them. The score is used by 90 of the 100 largest U.S. financial institutions, according to FICO’s website. There are other scores used by lenders, such as VantageScore, which has a 501 to 990 range for measuring credit risk. About 18 percent of 200 million consumers in the U.S. with credit scores, or 36 million Americans, had credit scores of 800 or higher in 2011, according to estimates from FICO. More than 75 million had scores of at least 750 while the median credit score last year was about 711, FICO said. ‘Bragging Rights’ The percentage of consumers with scores of 750 or more has fluctuated only slightly during the past five years, said Barry Paperno, consumer affairs manager for myFICO.com. That’s because consumers with high credit scores tended to maintain their good behaviors during the credit crisis, such as paying down debt and cutting expenses, Paperno said. The score that’s considered the cutoff to qualify for the best rates, however, has changed. Before the recession, it was generally 720 instead of at least 750, said Ben Woolsey, director of marketing and consumer research at CreditCards.com, a website for cardholders based in Austin, Texas. FICO credit scores rank borrowers according to the likelihood of default and there’s almost no difference in the probability of default when a consumer has a 780 or an 820, said Ken Lin, chief executive officer and founder of San Francisco- based Credit Karma. That means lenders won’t price a consumer differently and extend different rates, since the risk is virtually the same, Lin said. “If you’re at 780 plus, it’s all bragging rights from there,” Lin said. Credit Decisions The average rate for a 30-year fixed mortgage was 3.89 percent in the week ended Jan. 12, according to Freddie Mac. The average interest rate charged on credit-card balances was 12.8 percent in November, according to Federal Reserve figures released Jan. 9. A FICO score of 760 or higher on a $300,000 30-year fixed mortgage may qualify a borrower for a 3.62 rate or $1,368 monthly payment, compared with a 3.85 percent rate and monthly payment of $1,406 for those with scores from 700 to 759, according to myFICO.com. Having a credit score of at least 720 means a consumer may get a 3.89 rate on a 36-month auto loan of $25,000 and pay $737 a month, compared with 5.31 percent and a payment of $753 for those with scores from 690 to 719. The decision to offer a mortgage and the size and rate on that loan is based on many factors about a borrower’s financial history, Tom Kelly , a spokesman for JPMorgan Chase & Co. , the largest U.S. bank by assets, said in an e-mail. JPMorgan’s risk management approach is proprietary, and criteria that go into the decisions on credit cards may be based on income and credit history with other Chase products, said Paul Hartwick, a spokesman for the New York-based bank, also in an e-mail. Elite Offers While the type of mortgage product and region may impact rates, generally FICO scores above 720 receive the lowest rates, Terry Francisco , a spokesman for Bank of America Corp. in Charlotte , North Carolina , said in an e-mail. A FICO score is one of several considerations the bank uses in determining credit-card rates, Betty Riess , a spokeswoman for Bank of America, which is the second-biggest U.S. lender, said in an e- mail. Elite card offers are more likely to be based on income and assets than solely on high credit scores, Bankrate’s McBride said. When making credit decisions, American Express Co. (AXP) looks at a cardmember’s credit profile, which includes total debt level, reported income, credit bureau score, credit report and payment history, Melanie Backs, a spokeswoman for the New York- based firm, the biggest credit-card issuer by purchases, said in an e-mail. Hiccups Happen Revolving debt , which includes credit cards, climbed in November by $5.6 billion, the biggest advance since March 2008, according to Federal Reserve data. “There are a lot of companies out there competing for credit,” said Linda Sherry, director of national priorities for Consumer Action in Washington. “Once you’re there, your dance card is going to be full,” she said, referring to a score of about 770. The benefit for consumers who have good scores and are still trying to raise them is that they’ll have more of a cushion in case they do something that negatively affects their scores, said Woolsey of CreditCards.com. Borrowers should also keep in mind that each lender may vary on what they use as a cutoff for qualifying for the best rates, although anything above 750 generally should be sufficient, he said. “Some hiccups could happen and I get whacked and I’m a 720, so you shouldn’t be too comfortable because you never know what might happen,” said Rose, the CEO and founder of Alliance Wealth Management. Timely Payments Consumers with scores from 750 to 800 who want higher numbers should continue what they’re doing, just for a longer period of time, said FICO’s Paperno. That means continuing to pay bills on time, keeping a low amount of debt relative to available credit and not opening accounts unless needed, he said. Making a payment 30 or more days after the due date could cut a score by as much as 110 points while applying for a new card may result in a five point drop, said Liz Weston, author of “Your Credit Score.” Borrowers should avoid using more than 30 percent of their available credit, even if they pay their balances in full, because the balance owed may be reported to the credit bureaus before the payment is due, according to McBride. Credit Monitoring Credit scores are usually a lagging economic indicator, since delayed payments on mortgages and subsequent foreclosures may take time to show up on reports, said Lin of Credit Karma. The average score will rise this year as a result of the economy recovering, Lin said. Some things consumers do to try to improve their scores, such as paying for a credit score monitoring service, aren’t worth it, said Ed Mierzwinski , consumer program director at the U.S. Public Interest Research Group in Washington. Monitoring doesn’t prevent errors or identity theft and consumers may not understand the cost of the service, Mierzwinski said. Instead, borrowers may want to just stagger looking at each one of the free credit reports they’re entitled to annually from the three major credit bureaus every four months, he said. “Credit is there to save you money,” said Lin, referring to how a high credit score can help consumers qualify for lower interest rates. “You shouldn’t be using money to build credit.” To contact the reporter on this story: Alexis Leondis in New York aleondis@bloomberg.net To contact the editor responsible for this story: Rick Levinson at rlevinson2@bloomberg.net . |
2024-04-26 | Bloomberg | ICBC 1Q Profit Rises 12% on Fee Income, Beats Estimates | China’s four largest banks , among the world’s 10 biggest by market value, defied a sluggish economy to report record quarterly profits in the first three months after boosting lending and fee-based services. Combined net income at Industrial & Commercial Bank of China Ltd. , the world’s most profitable lender, and its three closest domestic rivals rose 11 percent to 215 billion yuan ($35 billion), according to their earnings statements. Earnings exceeded analysts’ estimates at all four Beijing-based banks. The biggest lenders are taking advantage of their nationwide branch networks and customer base and maintaining pricing power for loans, even as the economy slowed below 8 percent for the longest streak in at least 20 years. Profit may grow by less than 10 percent this year for the first time since the lenders sold shares to the public in the last decade as China deregulates interest rates and defaults rise, according to analysts’ forecasts compiled by Bloomberg. “As long as loan growth remains at robust but not too aggressive levels, the banks will have further earnings upgrades,” said Sandy Mehta, chief executive officer of Value Investment Principals Ltd., which doesn’t hold shares of mainland banks. “Investor sentiment on the Chinese banks is overly cautious.” Shares of nine Hong Kong-listed Chinese banks have gained an average 0.2 percent this year, outperforming a 0.5 percent decline in the benchmark Hang Seng Index. Lending Growth China’s banks advanced 2.76 trillion yuan of new loans in the first three months, 12 percent more than a year earlier, the second highest level on record, government data show. ICBC extended 461 billion yuan of new loans in the first quarter, 25 percent more than the same period a year ago. ICBC, the world’s largest lender by market value, yesterday reported a 12 percent increase in first-quarter earnings to 68.7 billion yuan, while China Construction Bank Corp., the second- largest, posted a 16 percent increase. Net income rose a better- than-expected 8.2 percent at both Agricultural Bank of China Ltd. and Bank of China Ltd. “Chinese banks this year will need to rely on expanding the scale of lending to bolster income growth as there are pressures on loan profitability,” said Wilson Li, a Shenzhen- based analyst at Guotai Junan Securities Co. “Chinese banks are in an economic cycle where bad loans are climbing. As long as the increase is slow and gradual, that shouldn’t be a concern.” ICBC’s non-performing loans rose to 80.2 billion yuan as of March 31 from 74.6 billion yuan at the beginning of the year as smaller borrowers struggled for repayment. Bad loans also rose at Construction Bank and Bank of China Ltd. (3988) , according to their statements. At Agricultural Bank, the balance decreased by 165 million yuan in the first quarter to 85.7 billion yuan, or 1.27 percent of total advances, according to yesterday’s statement. All four are majority-owned by the government. Solar Bankruptcy Suntech Power Holdings Co. said March 20 it wouldn’t oppose a bankruptcy petition filed by eight Chinese banks, including ICBC, Bank of China and Agricultural Bank, against the solar manufacturer’s main unit. The Wuxi-based company had more than $2.2 billion of debt at the end of March 2012. China’s economy grew 7.7 percent in the first quarter, trailing the median forecast of 8 percent in a Bloomberg survey, as gains in factory output and consumption weakened, jolting stocks and commodities markets worldwide. The China Banking Regulatory Commission last month told banks to limit investments of client funds in credit assets that aren’t publicly traded and to isolate the risks from their operations. Wealth management products increased 56 percent to 7.1 trillion yuan last year, equivalent to 7.6 percent of total deposits, according to official data. Chinese banks rely on such products, which pay higher rates than regulated deposit accounts, to retain savers as interest rate deregulation accelerates and clients divert savings to other types of investment. Deposit Premium The People’s Bank of China in June allowed banks to pay a premium of as much as 10 percent over the central bank’s benchmark rate on standard deposits. Unlike many of their competitors, the five biggest state-owned lenders aren’t offering the maximum rate allowed. “Big banks with a strong deposit franchise and customer base may fare better” than the rest of the industry this year. said Tan Hui, a Beijing-based analyst at Founder Securities Co. The net interest margin narrowed to 2.78 percent at Agricultural Bank in the first quarter from 2.97 percent a year earlier, while it widened at Bank of China and Construction Bank (939) , according to their statements. The State Council said last month it will take further steps this year to loosen state control over interest rates and the yuan as new Premier Li Keqiang seeks to open up the economy to sustain growth. To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-10-21 | Bloomberg | Banks Face Two-Front War on Bad Mortgages, Flawed Foreclosures | Shoddy mortgage lending has led bankers into a two-front war, pitting them against U.S. homeowners challenging the right to foreclose and mortgage-bond investors demanding refunds that could approach $200 billion. While federal regulators and state attorneys general have focused on flawed foreclosures, a bigger threat may be the cost to buy back faulty loans that banks bundled into securities. JPMorgan Chase & Co. , Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. have set aside just $10 billion in reserves to cover future buybacks. Bank of America alone said this week that pending claims jumped 71 percent from a year ago to $12.9 billion of loans. Investors such as Bill Gross ’s Pacific Investment Management Co. contend that sellers are obligated to repurchase some mortgages because of misrepresentations such as overstatements of borrowers’ income or inflated appraisals. Their case may be bolstered by probes in 50 states into whether banks used documents that were also flawed to conduct foreclosures. Neither dispute is likely to be resolved quickly. “It’s going to be trench warfare with years of lawyering,” Christopher Whalen , managing director of Institutional Risk Analytics, said in a telephone interview from White Plains, New York. “The banks can’t afford to lose.” The biggest risks for banks may be loans packaged into mortgage-backed securities during the housing bubble, of which $1.3 trillion remain. The aggrieved bondholders include government-controlled firms Fannie Mae and Freddie Mac, bond insurers and private investors. Fannie, Freddie Fannie Mae and Freddie Mac, the largest mortgage-finance companies, may be owed as much as $42 billion just on loans they bought directly from lenders, according to Fitch Ratings. On top of that, investors in private mortgage bonds, including them, may collect as much as $179.2 billion, Christopher Gamaitoni , vice president of research at Compass Point Research & Trading LLC in Washington, said in an August report. That brings the total to more than $220 billion. Pimco, BlackRock Inc., MetLife Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America to repurchase mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit. In a letter to the bank, the group cited alleged failures by Countrywide to service the loans properly. “It enhances the likelihood of claims coming to fruition,” said Gamaitoni, a former senior financial analyst at Fannie Mae. Repurchase Obligations Bank of America, which acquired Countrywide, the biggest U.S. mortgage lender, in 2008, faces potential repurchase obligations of $74 billion, according to an August report by Branch Hill Capital, a San Francisco hedge fund, which is betting against the Charlotte, North Carolina-based company’s shares. Potential claims consist of $21.8 billion to Fannie Mae and Freddie Mac, $45 billion for investors in mortgage bonds and $7.2 billion for insurance companies, Branch Hill said. Bank of America has $4.4 billion in reserves for claims on $12.9 billion of loans, the company reported Oct. 19, and has already resolved claims on more than $14 billion of loans. The company will “defend our shareholders” by disputing any unjustified demands that it repurchase mortgages, Chief Executive Officer Brian T. Moynihan said in an interview on Bloomberg Television. Most claims “don’t have the defects that people allege.” JPMorgan took a $1 billion third-quarter expense to increase its mortgage-repurchase reserves to about $3 billion. Citigroup raised its reserves to $952 million in the third quarter, from $727 million in the previous period. Wells Fargo reduced its repurchase reserves to $1.3 billion, from $1.4 billion in the second quarter. ‘Overstated’ Issues “These issues have been somewhat overstated and to a certain extent, misrepresented in the marketplace,” Wells Fargo Chief Financial Officer Howard Atkins said yesterday on the bank’s third-quarter earnings call. “Our experience continues to be different than some of our peers in that our unresolved repurchase demands outstanding are actually down.” So far, most lenders have resisted large-scale settlements, agreeing only to paybacks after defects are discovered in individual loans. Investors have in some cases been stymied in their efforts to examine individual loan files by mortgage-bond trustees, which administer the securities. In July, the Federal Housing Finance Agency, the government conservator of Fannie Mae and Freddie Mac , issued 64 subpoenas demanding loan files to assess the possibility of breaches in representations and warranties by securities issuers. Plaintiff Claims The most common issues with the mortgages bundled into securities were borrowers who didn’t occupy the homes and inflated appraisals that distorted the loan-to-value ratio, according to lawsuits filed by the Federal Home Loan Banks in Seattle and San Francisco. A sampling of 6,533 loans in 12 securitizations by Countrywide found 97 percent failed to conform to underwriting guidelines, according to a lawsuit filed Sept. 29 by Ambac Assurance Corp. in New York state Supreme Court. Richard M. Bowen , former chief underwriter for Citigroup ’s consumer-lending group, said he warned his superiors of concerns that some types of loans in securities didn’t conform with representations and warranties in 2006 and 2007. “In mid-2006, I discovered that over 60 percent of these mortgages purchased and sold were defective,” Bowen testified on April 7 before the Financial Crisis Inquiry Commission created by Congress. “Defective mortgages increased during 2007 to over 80 percent of production.” Analysts’ Estimates Some analysts say that the losses will be manageable by the banks. Last week, Mike Mayo , an analyst at Credit Agricole Securities USA in New York, estimated a cost of $20 billion for repurchases. Goldman Sachs Group Inc.’s Richard Ramsden said a worst-case scenario would be $84 billion. U.S. Representative Brad Miller , a North Carolina Democrat on the House Financial Services Committee, says he asked Treasury Secretary Timothy Geithner in a recent hearing whether the government included mortgage-repurchase losses in the so- called stress tests of banks conducted last year, because he was expects that they will be growing. Geithner couldn’t immediately answer, and Miller assumes they weren’t. “It appears the banks have contractually promised the mortgages met specific requirements, and also it certainly appears not all of them did,” Miller said. “In all likelihood a great many of them didn’t.” The other front in the battle is the potential cost to banks of improper documentation used in foreclosures. Attorneys general in all 50 states are jointly investigating foreclosure procedures, including the use of so-called robo-signers who didn’t check the material they were signing. Litigation costs for such cases may reach $4 billion, while a three-month delay in foreclosures would add an additional $6 billion to industry expenses, FBR Capital Markets estimated in an Oct. 19 report. Document Errors Foreclosure document errors also can be used to push for repurchases. The total amount of loans that the four biggest banks may need to buy back because of flawed paperwork could be “on the order of” about $25 billion, said Paul Jablansky , a senior debt strategist at Stamford, Connecticut-based RBS Securities Inc. With these demands to investigate breaches of contracts, “it’s relatively objective, the loan files are either complete or not, and the missing files are either material and adverse, or not.” To settle disputes with homeowners about attempts to foreclose, banks may offer borrowers more generous loan modifications, potentially including principal reductions, said Frank Pallotta , managing partner of Loan Value Group, a mortgage-consulting firm in Rumson, New Jersey. ‘Going to Cost Them’ “The potential for owners to challenge lenders on foreclosure improprieties certainly is there,” Pallotta said. “Even if it turns out that the banks were right in 99 percent of these foreclosures, the additional diligence on their part, going forward, is going to cost them more money.” The litigation over buybacks, also known as putbacks, can also pit big banks against each other. Last month, Deutsche Bank AG, acting as a trustee, refiled a lawsuit over misrepresented mortgages in $34 billion of Washington Mutual Inc. mortgage securities, with $165 billion in original balances. The new suit in the U.S. District Court for the District of Columbia included JPMorgan as a defendant, after the Federal Deposit Insurance Corp. said that JPMorgan was wrongly claiming its insurance fund had agreed to cover the liabilities, according to the amended complaint. JPMorgan Balks JPMorgan, which bought most of WaMu after it failed in 2008, is balking at turning over loan files to the trustee, according to the suit. “Based on the limited information available to” Deutsche Bank, including evidence of WaMu’s shoddy practices found in internal documents released in a Senate investigation, either JPMorgan or the FDIC owes investors $6 billion to $10 billion, according to the complaint. About 26 percent of mortgages underlying securities without government backing are at least 60 days late, in foreclosure proceedings or already backed by seized homes, according to data compiled by Bloomberg. Typical prices for the most-senior bonds tied to so-called Alt-A mortgages, whose borrowers often failed to document their pay or plan to live in properties, fell to as low as 33 cents on the dollar in March 2009, before rallying to 64 cents last week, according to Barclays Capital Inc. data. Like WaMu, many lenders that originated the mortgages have gone out of business, making litigation more complex, said Kurt Eggert , professor of law at Chapman University in Orange, California. And top executives at the surviving companies, such as the CEOs of Bank of America and Citigroup, have been replaced. “It’s troubling that the people who caused the problem have walked away and left everybody else to fight over who gets stuck with the tab,” Eggert said in a telephone interview. “It’s like a massive game of dine and dash.” To contact the reporters on this story: John Gittelsohn in New York at johngitt@bloomberg.net ; Jody Shenn in New York at 2380 or jshenn@bloomberg.net To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net . |
2024-05-08 | Bloomberg | MBIA Said to Pay $350 Million to Settle SocGen Lawsuit | MBIA Inc. (MBI) , the bond insurer that reached a $1.7 billion settlement with Bank of America Corp. this week, will pay $350 million to Societe Generale SA (GLE) to resolve litigation, a person familiar with the matter said. The agreement settles claims over the insurer’s 2009 restructuring, which Societe Generale and other banks had sought to reverse, saying it exposed them to losses by transferring assets. Societe Generale is the last bank to settle with MBIA in the case following the accord with Bank of America, and the agreement will end the litigation against the insurer. MBIA won state regulatory approval in 2009 to move the company’s guarantees on state and municipal bonds out of its MBIA Insurance unit, which backed some of Wall Street’s most toxic mortgage debt. More than a dozen financial institutions then sued claiming they were harmed as holders of financial guarantee policies. Banks filed complaints against MBIA and the state insurance department. A New York state judge in March dismissed a lawsuit by Bank of America and Societe Generale seeking to reverse the state’s approval of the restructuring. Regulatory Filing MBIA announced the Societe Generale settlement in a regulatory filing today without the disclosing the amount. “As a result of this agreement and the Bank of America settlement announced on May 6, 2013, all litigation brought originally by the group of 18 domestic and international financial institutions, relating to transformation, has been resolved,” MBIA said. Jim Galvin, a spokesman for Paris-based Societe Generale, didn’t respond to e-mails seeking comment on the settlement. Kevin Brown, a spokesman for Armonk, New York-based MBIA, declined to comment. “Today is a good day for SocGen and truly a new day for MBIA,” Benjamin Lawsky , the superintendent of New York’s insurance regulator, the Department of Financial Services, said in a statement. “This fair resolution will hopefully help strengthen the municipal bond market, which is critical to our nation’s infrastructure and economic recovery.” Investment Grade The new bond insurance unit created by MBIA in the 2009 split, which was intended to jumpstart the company’s municipal debt guarantee business, was raised to investment grade by Standard & Poor’s today after being cut to junk in February. National Public Finance Guarantee Corp.’s financial-strength rating was lifted three steps to BBB from BB, and the ratings company said it may upgrade the unit again to A pending the resolution of the lawsuit over the split. The MBIA parent, now rated B-, also was placed on watch for a ratings upgrade by S&P. MBIA rose 7.6 percent to close at $15.48 in New York trading after rising as much as 9.5 percent. The settlement comes after MBIA and Bank of America reached a settlement that will pay MBIA the equivalent of $1.7 billion and give the bank a 5 percent stake in the bond insurer. The settlement also provides MBIA with a $500 million revolving credit line from Bank of America. MBIA won’t draw on the loan to pay Societe General, said the person. MBIA Insurance will pay $200 million while $150 million will come from MBIA’s U.K. subsidiary, according to the person. The cases are ABN Amro Bank NV v. Dinallo, 601846-2009, and ABN Amro v. MBIA, 601475-2009, New York State Supreme Court ( Manhattan ). To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net. To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net . |
2024-10-05 | Bloomberg | French Stocks: BNP Paribas, Bonduelle, EADS, GDF Suez, Vilmorin | France’s CAC 40 Index rose 82.12, or 2.3 percent, to 3,731.93 at the 5:30 p.m. close in Paris, snapping a six-day decline. The SBF 120 Index gained 2.1 percent to 2,782.24. The following shares rose or fell in the French capital. Stock symbols are in parentheses. April Group (APR FP) increased 2.4 percent to 22.22 euros, the highest since May as Exane BNP Paribas initiated coverage of the Lyon-based insurance broker with an “outperform” rating. BNP Paribas SA (BNP FP) rose 3.9 percent to 53 euros as a gauge of European banking shares advanced for the first day in seven after Moody’s Investors Service said it’s impressed with Greece’s efforts to reform its finances. Credit Agricole SA (ACA FP) increased 3.1 percent to 11.87 euros and Natixis (KN FP) gained 3 percent to 4.38 euros. Bonduelle SCA (BON FP) sank 9.4 percent to 61.99 euros, the biggest drop since July 2008, after the producer of canned and frozen food said operating profit will decline significantly in 2010-11, hurt by difficult harvests and cost overruns. European Aeronautic, Defence & Space Co. (EAD FP) rose for a second day, gaining 2.3 percent to 18.60 euros. Airbus SAS, the commercial aircraft unit of EADS, won orders for 379 new aircraft through the end of September, the planemaker said in figures released on its website. GDF Suez SA (GSZ FP) rose 2 percent to 26 euros, the first increase in four days. The utility won a 300 million-euro ($415 million) biomass contract in France. Prowebce (ALPRW FP) surged 6.2 percent to 14.50 euros, the highest level in almost a year. The website developer said first-half operating profit increased to 680,000 euros from 530,000 euros. Vilmorin & Cie. (RIN FP) advanced for the first time in four days, rising 2.2 percent to 80.60 euros. Goldman Sachs Group Inc. initiated coverage of the seed company with a “buy” recommendation. To contact the reporters on this story: David Altaner in London at daltaner@bloomberg.net ; Francesca Cinelli in Milan at fcinelli@bloomberg.net. To contact the editors responsible for this story: Colin Keatinge at Ckeatinge@bloomberg.net ; David Merritt at dmerritt1@bloomberg.net . |
2024-07-03 | Bloomberg | Prudential Becomes First to Challenge Treasury Risk Tag | Prudential Financial Inc. (PRU) , the No. 2 U.S. life insurer, is contesting a U.S. finding that it poses a potential risk to the financial system, becoming the first company to challenge the label that brings additional oversight. Prudential requested a hearing to explain why it shouldn’t be considered a systemically important financial institution, or SIFI, the Newark , New Jersey-based company said yesterday in a regulatory filing. “We will continue to work closely with regulators to demonstrate our belief that the company does not meet the requirements of the SIFI designation,” Scot Hoffman, a spokesman for the insurer, said in an e-mailed statement. The Dodd-Frank act, designed to avoid a repeat of the 2008 bailouts, increased supervision of the largest U.S. lenders and allowed the Treasury Department’s Financial Stability Oversight Council to designate non-bank firms for extra oversight. The label could impose limits tied to capital and liquidity, the insurer said in the filing. Companies that receive the risk label will be regulated by the Federal Reserve , which hasn’t yet written final rules for the oversight. Prudential has said it wants to avoid regulatory standards designed for banks. Suzanne Elio, a Treasury spokeswoman, said the council has a “robust process” for evaluating whether companies are systemically important. The label “non-bank SIFI has the potential for being very disruptive to their business model, if they’re required to hold capital at a level that puts them at a disadvantage to other insurance companies,” said Ed Shields, an analyst at Sandler O’Neill & Partners LP. Strangfeld’s Course Chief Executive Officer John Strangfeld, 59, is pursuing a different course than the leaders of American International Group Inc. (AIG) and Fairfield, Connecticut-based General Electric Co. (GE) ’s finance unit, GE Capital Corp., which each said yesterday they won’t contest SIFI status. The three companies said June 3 they were identified by the council as potential risks to the economy. They were given until today to appeal. Prudential has said that it doesn’t fit the quantitative standards to be labeled a SIFI, and that traditional insurance activities don’t pose systemic risk. By requesting the review, Prudential may be able to get more insight into how it will be regulated and what parts of its business most concern federal regulators, said Ed Mills, a policy analyst at FBR Capital Markets in Arlington, Virginia. He said the company probably won’t be able to convince the council that it’s not systematically important. GE, AIG “We have decided not to appeal or ask for a hearing,” Russell Wilkerson , a spokesman for GE Capital, said yesterday. “We have been and will be prepared to meet the requirements for SIFIs.” During the financial crisis, AIG received a U.S. bailout that swelled to $182.3 billion, as bets on mortgages soured. The insurer repaid the U.S. rescue last year and has said it understands why it faces extra scrutiny. “AIG welcomes supervision by the Federal Reserve, and is already working closely with the Federal Reserve Bank of New York as our regulator,” Jon Diat, a spokesman for the insurer, said in an e-mail. The council has 30 days to schedule a hearing, Prudential said, citing U.S. regulations. MetLife Inc. (MET) , the largest U.S. life insurer, wasn’t included in this review because it was already under Fed regulation stemming from its ownership of a bank, which it has since sold. The New York-based insurer has said it shouldn’t be deemed systemically important. While Prudential’s insurance units are well regulated, the company’s size, global reach and investments help make it systemically important, said Mayra Rodriguez Valladares, managing principal at MRV Associates. “I look at the asset size, I look at the interconnectedness, I look at the international positions,” she said by phone. “And I’m struggling to think, why do you think you’re not a SIFI?” To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net ; Tim Catts in New York at tcatts1@bloomberg.net To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net ; Ed Dufner at edufner@bloomberg.net |
2024-09-15 | Bloomberg | Medicare Advantage Enrollees to Rise 10% in 2012, U.S. Says | Enrollment in the Medicare program administered by private insurers will increase next year as premium rates decline, the U.S. government projects. Enrollment in Medicare Advantage plans for the elderly and disabled will climb 10 percent in 2012, the U.S. Department of Health and Human Services said today in a statement. Premiums paid to market leaders UnitedHealth Group Inc. (UNH) , Humana Inc. (HUM) and WellPoint Inc. (WLP) will decline 4 percent. “The plans have made a very strong statement that they intend to commit to the program and price their products competitively,” Jonathan Blum, director of the U.S. Center for Medicare said on a call with reporters. Blum credited the rise in enrollment to improving quality of the plans and government negotiating lower costs. Shares of the top Medicare Advantage companies rose following the announcement. Shares of Minnetonka, Minnesota- based UnitedHealth gained $1.06, or 2.2 percent, to $49.74 at 11:37 a.m. in New York Stock Exchange composite trading. “This is very good news for insurers,” said Ana Gupte, an analyst at Sanford C. Bernstein in New York , in an e-mail. Insurers, through their Washington lobbying group America’s Health Insurance Plans, have argued that reductions in U.S. payments to the industry in the 2010 health-care overhaul will eventually slash enrollment. The Congressional Budget Office estimated in 2010 that, because of the law, the number of people in the program would be 35 percent lower in 2019. Blum said that the 2012 enrollment projections had proved insurers wrong. “If we were going to see pull-outs we would have seen them by now,” Blum said. “It tells me the program is going to continue to be strong, even though payment rates are going to come down over time.” To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net To contact the editor responsible for this story: Steve Walsh at swalsh@bloomberg.net |
2024-08-23 | Bloomberg | Santiago Bourse Sees Record IPO Year as Companies Wait for ‘Right Moment’ | Chile is poised for a record year of initial public offerings as companies in industries from construction to fish farming wait for global financial turmoil to subside to sell shares, according to the Santiago exchange. Companies have put off rather than canceled their share sale plans, Bolsa de Comercio de Santiago Chief Executive Officer Jose Antonio Martinez said in an interview yesterday from the exchange in downtown Santiago. Four companies have made their trading debuts in Santiago this year, the most since 2005. Builder Ingevec SA, scheduled to sell shares today, shelved plans earlier this month, citing volatility in a regulatory filing. A four-week rout in equities, driven by concern the global economy will enter a recession, wiped out more than $8 trillion in global stock values. Chile’s Ipsa index slumped 11 percent in the past month. “We’ll see in the next months, once the market turbulence subsides, more companies coming to the market,” Martinez said. “The process of new offerings is here to stay.” While Chile isn’t immune to global turbulence and would feel the effect of any global recession, the local economy is on a sound footing, Finance Minister Felipe Larrain told Radio Cooperativa yesterday. The economy grew 10 percent in the first quarter from a year ago and 6.8 percent in the second quarter. The government forecasts 6.6 percent growth for this year. Two-Year Low The Ipsa, which trades at 15.6 times reported earnings, the lowest since May 2009, will rise 10 percent by year-end driven by consumer demand even as the economy shows some signs of deceleration, Tomas Langlois, who manages the country’s second- best performing equity fund, said by phone yesterday. The integrated Andean securities exchange formed by the Santiago, Lima and Colombia bourses, known as MILA, expects to start a stock index with Standard and Poor’s “in the coming days or weeks,” Martinez said. Chilean brokerage Celfin Capital SA may start operations in Colombia as soon as next month, company President Juan Andres Camus said today at the Bloomberg Chile Economic Summit in Santiago. The Santiago exchange is also working on integration arrangements with the main exchanges in Brazil and Mexico. A project with Brazil’s BM&FBovespa SA (BVMF3) to enable cross-border transactions similar to MILA will probably start in the first half of next year, Martinez said. An accord with Bolsa Mexicana de Valores SAB is subject to a clarification of tax treatments, he said. Transaction Volumes MILA is also planning to allow investors to trade “in the short term” exchange-traded funds and shares in closed investment funds, Martinez said. “MILA should lead in the long run to an increase in activity in the three markets where it operates,” and its success shouldn’t be measured by day-to-day transaction volumes, Martinez said. “The goal is to help in the development of capital markets in each of the countries involved. Its results should be evaluated in one, two or three years,” he said. BlackRock Inc., the world’s largest money manager, is preparing to start a local exchange-traded fund in Chile after the regulatory changes, Axel Christensen, BlackRock’s managing director for South America excluding Brazil, said at the summit in Santiago today. Trading in MILA, which started May 30, totaled $1.3 million with 116 transactions in June, falling to $275,000 and 23 transactions in July, according to data on the Santiago exchange’s website. There were 59 transactions worth a combined $608,000 between Aug. 1 and Aug. 19, according to the exchange. Cross Border Even as MILA’s first three months garnered just $2.2 million in trades, financial-services firms including Larrain Vial SA and Celfin Capital and companies such as Grupo de Inversiones Suramericana are stepping up their regional operations. ING Groep NV (INGA) created a mutual fund that invests in the three countries, Global X Funds started a regional exchange- traded fund and Colombia’s Helm Bank SA formed an alliance with Chile’s Empresas Penta SA. Lan Airlines SA (LAN) , Colombia’s Interconexion Electrica SA (ISA) and Peru ’s Grana y Montero SA are also expanding in the region. ING agreed last month to sell most of its Latin American insurance operations to Grupo de Inversiones Suramericana SA, the parent company of Colombia’s largest bank, for about 2.7 billion euros ($3.9 billion). MILA stocks have a combined value of $583 billion, surpassing Mexico’s $418 billion, according to data compiled by Bloomberg. Average daily traded volume in the past year was $234 million in Chile, $101 million in Colombia and $34 million in Peru. That compares with Mexico’s $676 million and Brazil’s $4 billion, according to data compiled by Bloomberg. Colombia’s benchmark index, the IGBC, has outperformed its MILA peers so far this year with a 15 percent retreat. Peru’s IGBVL has declined 17 percent in the same period while Chile’s IPSA has slumped 16 percent. The main indexes in Brazil and Mexico have fallen 24 percent and 12 percent, respectively. To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net |
2024-02-14 | Bloomberg | Brazilian Stocks: BR Malls, Estacio, MMX Mineracao, Porto Seguro | The following companies had unusual price changes in Sao Paulo trading. Stock symbols are in parentheses and prices are as of 3:15 p.m. New York time. Preferred shares are usually the most-traded class of stock. The Bovespa Index rose 1.2 percent to 66,557.55. BR Malls Participacoes SA (BRML3 BZ) gained 2.2 percent to 15.60 reais. Banco BTG Pactual SA is studying the acquisition of a controlling stake in the company, Veja magazine said, without saying where it obtained the information. A press official for BTG Pactual, who declined to be identified, citing internal policy, said the Sao Paulo-based bank doesn’t comment on market speculation. Estacio Participacoes SA (ESTC3 BZ) advanced 5.5 percent to 23.40 reais. Brazil ’s largest private university administrator rose the most since Oct. 1 on speculation increasing personal incomes will boost enrollment. MMX Mineracao & Metalicos SA (MMXM3 BZ) rose 2 percent to 9.37 reais. The iron-ore producer controlled by Brazilian billionaire Eike Batista said it will operate a mine owned by steelmaker Usinas Siderurgicas de Minas Gerais SA for 30 years. Porto Seguro SA (PSSA3 BZ) jumped 4.5 percent to 26.23 reais. The insurance company had the biggest gain since Nov. 2009 after saying in a regulatory filing it will create a company to offer mobile service in Brazil. The company will share infrastructure mobile service with Tim Participacoes SA, according to the statement. To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net |
2024-11-05 | Bloomberg | China Diabetes Triples Creating $3.2 Billion Drug Market | Beijing doctor Li Guangwei sees China ’s struggle with 90 million diabetes sufferers daily. Among the standing-room-only crowd waiting outside his clinic door are patients with slurred speech, mismatched clothes and aggression. These are the ones with low blood-sugar, a condition that can make people appear drunk and is often caused by too much of the hormone insulin, said Li, head of Fuwai Hospital ’s diabetes unit. More than half of China’s diabetics have inadequate blood- glucose control, a 2011 study of 140,000 patients showed. Prevalence of Type 2 diabetes , a disease linked to inactivity and excess calories, has more than tripled in China over the past decade, fueling 20 percent-a-year growth in drug sales and straining health services. It’s also stoking need for newer, costlier medications from Merck & Co. (MRK) , Novo Nordisk A/S (NOVOB) and Sanofi that help avoid blood-sugar spikes and complications such as heart attack and stroke. “If we can choose drugs with little or no risk to more effectively treat patients, we can stop using older drugs that raise insulin levels and can cause hypoglycemia ,” said Li, using the medical term for low-blood sugar that sometimes causes his patients to become delirious and to pick fights. “It impairs brain function and there’s no way to stop it until we get the blood sugar back to normal.” Merck, Novo Nordisk The mainstay diabetes treatment worldwide is metformin, available free in China through the government’s national health insurance program. Doctors want to augment the 50-year-old pill with newer medicines, such as Januvia from Merck, which helps to stabilize blood-sugar, according to an April 2012 paper in the journal Diabetes & Metabolism. Victoza, sold by Novo Nordisk, offers “minimum risk of hypoglycemia,” according to company- sponsored research in the Lancet in 2010. Novo fell 0.5 percent to 915.50 kroner at 11:09 a.m. in Copenhagen trading, while Sanofi declined 1.6 percent to 68.34 euros in Paris. The Bloomberg Europe Pharmaceutical Index (BEPHARM) dropped 0.1 percent. As few as two in five diabetics in China have their blood- sugar under control, said Ji Linong , president of the Chinese Diabetes Society, potentially damaging the heart, blood vessels, kidneys, eyes and feet. That compares with the U.S., where blood-sugar is controlled in 70 percent, according to Manish Pant, director of policy and programs at the International Diabetes Federation in Brussels. Average Spending A key difference is that an average of $194 a year is spent treating each diabetes patient in China, versus more than $5,000 in developed countries such as the U.S., the IDF said. Even as China’s health spending is forecast to almost triple to $1 trillion over the next eight years, surging rates of diabetes mean China is struggling to detect cases and provide basic care, according to Pant. China has almost four times as many people with diabetes than the U.S., where there are 23.7 million sufferers, according to the IDF. By 2030, 40 million more will have the condition in China, where diabetes causes 173.4 billion yuan ($28 billion) a year in medical costs, the diabetes group estimates. “China, unfortunately, has become the world’s capital for diabetes,” said Michael Rosenblatt, Merck’s chief medical officer, in an Oct. 25 interview in Shanghai. “The government is starting to pay more attention as this is the beginning of a huge problem, both health and economic.” China’s diabetes drugs market will expand 20 percent annually to reach 20 billion yuan ($3.2 billion) by 2016, spurred by guidelines that set higher treatment standards, said Yan Shangjun, a Shanghai-based consultant with IMS Health Inc. China’s pharmaceuticals market overall will increase 15-to-18 percent a year to reach as much as $165 billion over the same period, the research company said in July. Medicines for the Masses Merck’s Januvia was approved for use in China in 2009 and costs 9.6 yuan ($1.50) per 100-milligram tablet, typically taken daily. Merck has applied to have the medicine added to China’s National Drug Reimbursement List, the Whitehouse Station , New Jersey-based drugmaker said in an e-mail. It takes as long as five years for a new product to be added to the reimbursement list, McKinsey & Co. said in an August report. Addition makes it available to the masses and can bolster sales, with 12 of the top 15 multinational drugmakers deriving more than half their sales in China from subsidy- eligible medicines, the report said. “The government is afraid of accepting at a national level a high cost reimbursement structure that they can’t afford,” said George Baeder, senior vice president of Asia-Pacific consulting with Quintiles Transnational Corp. Wealthier Patients Still, wealthier patients will pay out of pocket to get better care, said Lu Bin, a diabetes specialist at Shanghai’s Huashan Hospital. “There will be real demand for newer drugs that don’t cause hypoglycemia and other side effects,” Lu said in an interview at the hospital’s diabetes clinic, where the waiting room was full at 8 a.m. on a Friday morning. “In Shanghai, where incomes are higher, most people should be able to afford it, but outside the first-tier cities there may be issues.” Some more-affluent provinces are introducing their own pharmaceutical subsidies to improve affordability, encouraging drugmakers to target markets outside major urban centers, said Joseph Cho, head of the Research and Development-Based Pharmaceutical Association Committee, a Beijing-based group representing foreign companies. “We see a massive opportunity to move deeper into the country,” said Fabrice Baschiera, general manager of Sanofi (SAN) ’s China drugs business. “We’ve moved into the tier-two cities, and we’re moving deeper into the tier-three and the counties, where the government is today investing massively because there is a huge unmet need.” Sanofi’s Lantus Sanofi sells Lantus, an insulin product that Baschiera estimates has 17 percent of the market in China. China has overtaken Japan to become Novo Nordisk’s biggest market after the U.S., Chief Scientific Officer Mads Krogsgaard Thomsen said. “We expect China to grow in the range of 15 percent a year,” he said. “China has such a huge problem -- we are talking about 100 million diabetes patients versus 26 million in the U.S.” Novo Nordisk, the world’s largest insulin marker, wants to supply provincial-level centers with higher-volume, lower-margin insulin products. At the same time, Thomsen said, it’s targeting more profitable markets in China’s biggest cities with products such as Victoza, which mimics a hormone called GLP-1 to stimulate natural insulin production. The Bagsvaerd, Denmark-based company said it hasn’t applied for reimbursement for Victoza yet as the window for review isn’t currently open. A 10-to-15-day course of Victoza, approved in China in 2011, costs as much as 878 yuan ($140), Novo said. The company lifted its 2012 sales and profit forecasts on Oct. 31 after third-quarter earnings beat analyst estimates, helped by demand for Victoza in new markets. To contact Bloomberg News staff for this story: Daryl Loo in Beijing at dloo7@bloomberg.net To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net |
2024-02-04 | Bloomberg | U.S., Japan, Aussie Bonds Fall on Growth Bets, Stock Gain | U.S., Japanese and Australian bonds tumbled as stocks rallied after an American report spurred optimism the world’s biggest economy will keep adding jobs. The gap between U.S. 5- and 30-year notes widened to 2.35 percentage points, the most in four months and above the decade average of 1.50 points. Rising long-term rates indicate traders expect the economy to pick up, as they demand higher yields in case inflation quickens. Bill Gross , who runs the world’s biggest bond fund at Pacific Investment Management Co., said he is avoiding long-term bonds. “The global economy continues to recover,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan ’s second-largest publicly traded bank. “That is pushing up yields and equity markets around the world.” U.S. 10-year yields increased two basis points, or 0.02 percentage point, to 2.04 percent as of 6:47 a.m. in London , according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in November 2022 dropped 6/32, or $1.88 per $1,000 face amount, to 96 11/32. The rate on Japan’s December 2022 note climbed four basis points to 0.805 percent, the highest since Jan. 15. The extra yield investors demand to hold 10-year government bonds in the U.S. instead of Japan widened to 1.28 percentage points, the most since March. Similar-maturity Australian yields touched 3.61 percent, the highest since May. The equivalent rate for Singapore bonds climbed to 1.55 percent, the most since September. Stocks Advance The Dow Jones Industrial Average (INDU) of U.S. shares exceeded 14,000 last week for the first time since October 2007. The MSCI Asia Pacific Index (MXAP) rose as much as 0.9 percent today to the highest since August 2011. China ’s non-manufacturing Purchasing Managers’ Index increased to 56.2 in January from 56.1 in December, according to a report yesterday. A reading above 50 indicates expansion. U.S. payrolls increased by 157,000 workers in January, following a revised 196,000 gain the prior month and a 247,000 jump in November, Labor Department figures showed Feb 1. The unemployment rate unexpectedly climbed to 7.9 percent. Federal Reserve Bank of St. Louis President James Bullard said in a Feb. 1 interview that he expects growth in the world’s biggest economy to gain enough momentum to let the central bank reduce the pace of bond-buying as early as the middle of the year. Continued Purchases Bullard backed the Federal Open Market Committee’s decision last week to continue purchasing securities at the rate of $85 billion a month, the third round of a policy known as quantitative easing or QE. Fed officials have pushed the benchmark interest rate close to zero and expanded central bank assets to more than $3 trillion to spur growth and reduce unemployment. The Treasury Department will release today its borrowing estimates for the current quarter and the three months beginning April 1. The department has resorted to “extraordinary measures” to continue funding the government after reaching its statutory debt limit. The House of Representatives voted Jan. 23 to suspend the $16.4 trillion federal debt ceiling until May 19. Derivatives traders are signaling there’s little chance of a bear market in Treasuries for the next three years. Demand for insurance against a steep rise in 10-year note yields, the so-called payer skew in options on swaps, has fallen to about its average since 2009, according to Barclays Plc data. The gap between volatility on three-year options that allow investors to pay fixed rates on 10-year interest-rate swaps and those that grant the right to receive fixed rates has narrowed to about 15 basis points from 25 points on June 1. Unemployment Concern “The concern and focus of the Fed is still unemployment,” William O’Donnell, the head U.S. government bond strategist at RBS Securities Inc. in Stamford , Connecticut , said in an interview on Jan. 28. “And in the Fed’s eyes it’s not good enough yet,” he said. A Bank of America Merrill Lynch index showed the debt handed investors a 1 percent loss last month, the worst start to a year since 2009. Technical indicators are signaling the increase in yields may be nearing an end. The 14-day relative strength index for the 10-year Treasury yield was at 71 today, above the level of 70 that suggests to some traders the rate has advanced too quickly and may be set to reverse course. The figure for the 30-year yield was at 71.8. U.S. inflation will be benign in 2013, Pimco’s Gross said in a Feb. 1 interview with Tom Keene on Bloomberg Radio’s “ Bloomberg Surveillance .” It may pick up in 2014 to 2016, he said. Faster inflation “will create an upper drift in long-term yields,” Gross said. “How do we play it? We avoid long-term bonds.” The Fed’s measure of inflation expectations for the period from 2018 to 2023, known as the five-year five-year forward break-even rate, climbed to 2.89 percent. It hasn’t been so high since August 2011. The average over the past decade is 2.75 percent and compares with an annual inflation rate of 1.7 percent as measured by consumer prices. To contact the reporters on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net ; Kristine Aquino in Singapore at kaquino1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net |
2024-03-10 | Bloomberg | First Gen, Galaxy, Hutchison, Value Partners: Asia Ex-Japan Equity Preview | The following companies may have unusual price changes today in Asian trading, excluding Japan. Stock symbols are in parentheses and share prices are from the previous close, unless noted otherwise. First Gen Corp. (FGEN) : The Philippine power producer said a unit will build a water reservoir and a hydroelectric plant in the northern province of Nueva Ecija, a stock-exchange filing showed. The stock fell 1.2 percent to 11.36 pesos. Galaxy Entertainment Group Ltd. (27) (27 HK): The casino operator part-owned by Permira Advisers LLP expects to increase its revenue by 20 percent this year, Deputy Chairman Francis Lui said at a briefing in Hong Kong. Galaxy gained 0.4 percent to HK$11.32. Hutchison Whampoa Ltd. (13) (13 HK): Hutchison Port Holdings Trust, which manages Chinese port assets for Hutchison Whampoa, reduced the maximum amount it may raise in the initial public offering to $5.56 billion, two people with knowledge of the matter said. The company is offering about 5.4 billion units in a trust at 99 U.S. cents to $1.03 each in Singapore , said the people, who declined to be identified before an announcement. The units were initially offered at 91 cents to $1.08 each, according to a sale document sent to investors on Feb. 28. Hutchison Whampoa added 0.8 percent to $HK92.75. Hyundai Engineering & Construction Co. (000720 KS): South Korea’s biggest construction company will pay stockholders 700 won a share in dividend, the company said in a regulatory filing. The stock dropped 1.6 percent to 78,800 won. Powertech Technology Inc. (6239) (6239 TT): Powertech, which provides chip-testing services, purchased 8,200 preferred shares in EBS Inc. for 4.1 billion yen ($49 million), Powertech said in a statement to the Taiwan Stock Exchange. The shares dropped 1.9 percent to NT$105. Value Partners Group Ltd. (806) (806 HK): The money manager, backed by China ’s second-largest insurance company and U.S.- based Affiliated Managers Group Inc., said full-year profit for 2010 doubled after record inflows and fund gains. Net income at the Hong Kong-based company increased to HK$653.2 million ($83.8 million), or 39.9 Hong Kong cents a share, from HK$318.8 million, or 19.9 cents, a year earlier, it said in a statement to the Hong Kong stock exchange. The shares fell 1.9 percent to HK$7.96. To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-03-16 | Bloomberg | Texas Governor Perry Agrees to Close 2011 Deficit Using Reserve | Texas Governor Rick Perry reversed course and agreed to use $3.2 billion of reserves to close a gap in this year’s budget, while remaining opposed to a similar move in the next biennium. Perry, 60, and House of Representatives Speaker Joe Straus, a San Antonio Republican, agreed with Comptroller Susan Combs to use reserves to help close a $4.3 billion deficit for the year that ends Aug. 31, according to a joint statement yesterday. The agreement calls for $800 million in budget cuts, and counts on $300 million in extra sales-tax receipts, according to the statement. Perry last week said legislators should look for more efficiencies and urged public schools to use their own reserves and not the state’s $8.2 billion. The so-called rainy- day fund is collected from energy taxes. “Perry’s been like the prettiest girl at the school and the hardest to get a date with,” said Bill Miller , a Republican political consultant whose clients have included businesses and politicians. “He’s wanted everyone to prove it, emotionally and substantively, that they really needed the money,” said Miller, who works at HillCo Partners in Austin. “He’s the jury, and he’s been convinced.” Perry has insisted on only using the reserve as a last resort to cover nonrecurring costs, Katherine Cesinger, a spokeswoman, said yesterday by e-mail. He agreed to use the money following meetings with legislative leaders, she said. “I remain steadfastly committed to protecting the remaining balance of the rainy-day fund, and will not sign a 2012-2013 state budget” that uses the reserve, Perry said yesterday in the statement. Projected Deficit The Republican governor last week emphasized his opposition to increasing taxes and using reserve funds to balance the budget, in a meeting with about 70 House lawmakers. The state faces a projected deficit of $15 billion to $27 billion for the two-year spending cycle that begins in September. Texas voters in November “overwhelmingly sent a message that we don’t want to see Texas be like California and New York ,” Perry told reporters after the meeting. “Fiscal conservatism will be the foundation of this state.” Republican legislative leaders including Representative Jim Pitts of Waxahachie, the House’s chief budget writer, pushed back. They said spending cuts may force firings of thousands of teachers, close dozens of nursing homes and deny financial aid to many college students. Using about 40 percent of the reserve fund now diminishes Texas’s flexibility in balancing its budget over the next two years, said Horacio Aldrete-Sanchez, a Dallas-based Standard & Poor’s analyst. Longer-Term Solution “Stronger credits such as Texas should look for a longer- term solution that tries to preserve some budgetary balance over the long term,” Aldrete-Sanchez said in a telephone interview. While Perry and Lieutenant Governor David Dewhurst, also a Republican, have said tax increases aren’t being considered, Aldrete-Sanchez said spending cuts alone “may not be sufficient to address the budget deficit .” Texas used $1.9 billion of reserves in 2005, including for its Emerging Technology Fund, favored by Perry. In 2003, the state took out $1.2 billion to help pay for health insurance for children and low-income residents, according to a 2009 report from the Center for Public Policy Priorities, a nonprofit research group in Austin, the capital. Looking Forward Using reserve funds now is a mistake because Texas will face more severe economic pressure over the next few years resulting from rising Medicaid costs, Talmadge Heflin, a Texas Public Policy Foundation analyst in Austin, said by e-mail. “Those who seek to empty the fund because it is raining today have not checked the long-range weather forecast,” Heflin said. The foundation promotes limited government. Perry’s opposition to spending from the reserves has been a nod to “Tea Party” conservatives, said Cal Jillson, who teaches politics at Southern Methodist University in Dallas. “Perry was solidifying himself with his base,” he said. “Everyone has known since before the session started that we were in a hole and that we would have to use the fund.” To contact the reporter on this story: David Mildenberg in Austin, Texas, at dmildenberg@bloomberg.net To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net |
2024-08-08 | Bloomberg | Billionaire Wee to Retire as Chairman of Family Bank | Wee Cho Yaw, the 83-year-old billionaire who turned a local Singapore bank into Southeast Asia’s third-biggest lender, plans to step down as chairman of the family-controlled United Overseas Bank Ltd. (UOB) Wee, whose son Wee Ee Cheong took over as chief executive officer in 2007, will give up his role to Hsieh Fu Hua, a former president at Temasek Holdings Pte in April, according to an exchange filing yesterday. The lender also reported a 12 percent increase in second-quarter profit , surpassing analysts’ estimates, following gains on investments. “This is a passing of the baton, quite wisely you can’t hold on forever,” said Hugh Young , Singapore-based managing director at Aberdeen Asset Management Asia Ltd., which owns slightly less than 5 percent of UOB. “Hsieh has a wealth of experience, knowledge of the financial industry, is well plugged in and respected. It’s a sensible transitional change.” The elder Wee, whose father founded the bank in 1935, has charted acquisitions in Indonesia and Thailand that boosted earnings and expanded operations beyond Singapore’s 5.2 million people. He had led UOB as its CEO for more than three decades, beating bigger rival DBS Group Holdings Ltd. in an acquisition to extend his reach in Singapore, and propelled the bank into new markets such as Greater China , which made up 6.5 percent of pretax profit in the first half. Profit Gain UOB’s net income gained to S$713 million ($574 million) in the three months ended June 30, from S$636 million a year earlier, the bank said yesterday. That beat the S$627 million average of nine analysts’ estimates compiled by Bloomberg. Fees and commissions rose 14 percent while investment income and gains from the sale of securities jumped 30 percent, compared with 7.4 percent growth in income from lending. UOB joins DBS and Oversea-Chinese Banking Corp. in reporting higher earnings as high-quality borrowers buffered an economic slowdown, narrowing loan profitability and effects from Europe ’s debt crisis. The Monetary Authority of Singapore’s forecast for 1 percent to 3 percent growth this year will make further earnings improvement difficult, Barclays Plc said. “In a slowing environment, it’s hard to see strong revenue growth for the rest of the year for Singapore banks,” Lyris Koh, a Singapore-based analyst at Barclays, said before the results. “I would still be cautious on the outlook for asset quality just because as growth slows, we think that non- performing loans might naturally start seeing an uptick,” she said. Shares Advance The stock rose 0.8 percent to S$20.10 as of 10:40 a.m. in Singapore trading, extending the gain this year to 32 percent. That’s the best performance among the three Singapore banks, with DBS (DBS) advancing 28 percent and OCBC adding 20 percent. In 2001, the elder Wee also defeated DBS, the region’s biggest bank by assets, in the S$10 billion takeover of Overseas Union Bank Ltd. as the controlling family blocked a hostile bid by DBS and opted for the sale to Wee. The tussle for Overseas Union also led to statements by DBS and its adviser Goldman Sachs Group Inc. distributed to investors in Europe questioning the integrity of directors at Overseas Union and UOB. The Singapore regulator said DBS and Goldman acted “inappropriately” during the failed bid, which resulted in a public apology. The younger Wee, 59, joined the bank in 1979 and was named deputy chairman and president in 2000. Strategy Intact The billionaire chairman owns shares in property investor UOL Group Ltd., Tiger Balm maker Haw Par Corp., developer United Industrial Corp. Ltd., United Overseas Insurance Ltd. and United International Securities Ltd. He holds 263.8 million shares in UOB worth $4.2 billion, according to data compiled by Bloomberg. The Wee family owns between 17 percent and 18 percent of the bank, UOB said in a statement today. “For the last over 50 years, his reputation and contribution to the industry goes without saying,” CEO Wee said of his father at a briefing in Singapore yesterday. “At some point, we need to have transitions. As far as management is concerned, as far as strategy is concerned, it all remains intact.” Hsieh stepped down as a president at Temasek, Singapore’s state-owned investment company, in October 2011 after 13 months to “make room for personal priorities.” He was also a former CEO of Singapore Exchange Ltd. (SGX) The bank’s net interest income for the quarter was S$981 million, compared with fee and commission income of S$386 million and other non-interest income of S$243 million. Wee’s Compensation During the tenure of the elder Wee, who was born in Quemoy, China , UOB became the first Singapore lender to get a license to conduct operations in yuan in 2002. The chairman was paid S$2.75 million to S$3 million in the year ended Dec. 31, according to UOB’s annual report. His compensation included a S$2.25 million fee for “providing valuable advice and guidance” to the management, it said. “This could cede more power to the CEO and the executive management, given that the old man has been a very strong hand,” Aberdeen’s Young said. “Maybe the son will feel a little freer, which would be understandable. Working with a chairman who has lived and breathed the bank can be a little intimidating, especially or even if he’s your father.” To contact the reporters on this story: Sanat Vallikappen in Singapore at vallikappen@bloomberg.net ; Joyce Koh in Singapore at jkoh38@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-04-26 | Bloomberg | Wadhwani Says London Homes Seem Place to Park Cash in Crisis | London has cemented its status as a haven for rich foreigners whose homebuying is stoking property prices there and masking weakness elsewhere, according to former Bank of England policy maker Sushil Wadhwani. “The euro zone has eased up, but then there always seems to be a crisis somewhere in the world and the money seems to regard London and a few other places as the appropriate place for it to be parked,” Wadhwani said in an interview in the U.K. capital yesterday. “The 2008 experience has scared rich people so much, they’re willing to pay quite a lot for what they deem as insurance.” Investors from regions such as the Middle East and the euro area are fueling purchases of real estate in prime London districts from Belgravia to Mayfair as a haven from economic and political unrest at home. Along with Chancellor of the Exchequer George Osborne ’s Help-to-Buy plan and the central bank’s credit program, that demand is supporting property values in the city to record levels as weakness prevails in other areas of Britain. The national housing market “on some aggregate measures does look overvalued,” said Wadhwani, founder and chief executive officer of Wadhwani Asset Management LLP. “But if you look at those aggregate measures, it’s really driven by London.” The pound’s decline has also helped attract international investors. Sterling has fallen about 2.8 percent this year on a trade-weighted basis , and is the worst performer after the yen among 10 developed-market currencies. Sterling was little changed against the dollar at $1.5435 as of 9:50 a.m. in London. `Stable' Conditions Central London luxury-home prices rose 8.4 percent in February from a year earlier, the biggest gain in 10 months, Knight Frank LLP said last month. Values excluding the capital city rose an annual 0.5 percent in March, Acadametrics Ltd. said on April 12. Taylor Wimpey Plc (TW/) , the U.K’s second-largest homebuilder by volume, said yesterday that national market conditions were “stable” and London was of “growing importance” as south east England led an increase in customer interest. While it’s difficult to argue that property in some areas outside the capital is “egregiously overvalued,” London “is a different kettle of fish ,” Wadhwani said. Osborne’s announcement in his March 20 budget to use taxpayers’ money to make interest-free loans to homebuyers and guarantee mortgages risks inflating house prices , a panel of lawmakers said last week. The initiatives follow the Bank of England’s Funding for Lending Scheme introduced in August to boost mortgages and company loans. “It’s the paradox of policy that we want to avoid the mistakes we made before, but in the meantime in order to get some growth we’re willing to do the same things that we did before,” said Wadhwani, who was a BOE Monetary Policy Committee member from 1999 until 2002. “To some extent, that is what is occurring now.” To contact the reporter on this story: Scott Hamilton at shamilton8@bloomberg.net To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net |
2024-10-12 | Bloomberg | Dewey, Skadden, Bingham, Cooley, Foley: Business of Law | An effort by the official partners’ committee of Dewey & LeBoeuf LLP to compel appointment of an examiner was “for an improper purpose as a litigation tactic,” a bankruptcy judge said Oct. 9 in approving a $71.5 million settlement with former partners. Two days later, the firm filed papers asking the judge to disband the official partners’ committee. In papers filed yesterday, Dewey said the original decision by the U.S. Trustee to appoint an official committee representing former partners “was a misstep that needs to be corrected.” The firm characterized the committee as not having “contributed in a productive way to this bankruptcy case.” Lawyers for the partners’ committee have generated $780,000 in fees “without any corresponding benefit to the estate,” Dewey said in its filing. “The motion is a cold-hearted and cynical attempt to disenfranchise the most vulnerable victims of Dewey’s bankruptcy,” David M. Friedman, counsel for the partners’ committee, said in an e-mail. Friedman, a partner at Kasowitz Benson Torres & Friedman LLP, predicted the motion to disband “will fail.” In his opinion this week approving the settlement between the firm and more than 400 partners, U.S. Bankruptcy Judge Martin Glenn said the official partners committee did “whatever it could to scuttle any proposed” settlement. The firm takes the position that former partners have no economic interest in the case. They are “out of the money,” according to court papers, because any claim by a partner can only be paid after unsecured creditors are fully paid. At this point, the official unsecured creditors’ committee adequately represents the interests of partners, Dewey said. Glenn will hold a hearing on Nov. 1 to decide if the committee should be disbanded. In turning down the official committee’s motion for an examiner, Glenn said the committee hadn’t shown there to be the required $5 million in undisputed unsecured claims. In yesterday’s motion to disband the committee, Dewey said it estimates there are “at least $500 million in allowed secured and general unsecured claims.” Dewey has two official committees, one for unsecured creditors and the other for former partners. The firm once had 1,300 lawyers before liquidation began under Chapter 11 in May. There was secured debt of about $225 million and accounts receivable of $217.4 million at the outset of bankruptcy, the firm said. The petition listed assets of $193 million and liabilities of $245.4 million as of April 30. The case is In re Dewey & LeBoeuf LLP, 12-12321, U.S. Bankruptcy Court , Southern District of New York (Manhattan). Deals Skadden, Foley Advise Oshkosh on $3 Billion Icahn Offer Carl Icahn , the billionaire activist investor, offered to buy Oshkosh Corp. (OSK) for about $3 billion, saying management of the military vehicles supplier has failed to deliver on pledges to improve profitability. Oshkosh said it will consult with financial and legal advisers and notify shareholders of its position within 10 business days of receiving an offer. Skadden, Arps, Slate, Meagher & Flom LLP and Foley & Lardner LLP are serving as legal advisers. Skadden mergers and acquisitions partners Gary Cullen and Richard Grossman lead the team. From Foley, transactional and securities partners Patrick G. Quick and John K. Wilson are advising Oshkosh. Icahn is being advised by in-house attorneys at his company, the American Lawyer reported. The $32.50-a-share offer is 21 percent more than the Oshkosh, Wisconsin-based company’s Oct. 10 closing price, Icahn said yesterday in a statement. Icahn said he intends to nominate directors for election to Oshkosh’s board at the company’s annual meeting, with his offer conditional on those directors being elected. Oshkosh, which supplies blast-resistant trucks to the U.S. Army and Marine Corps, posted a 66 percent drop in net income last year as its sales shrank with the end of the war in Iraq and the U.S.’s plans to withdraw troops from Afghanistan. Icahn, Oshkosh’s largest investor with a 9.5 percent stake, has criticized the firm’s executives for the poor performance. “Management has taken a passive attitude to the future of this company, willing to sit back and watch what happens to the defense, housing and construction industries,” Icahn said in the statement. “Oshkosh needs proactive shareholders to bring a proactive management team together to weather a volatile economy, a shrinking defense industry and a budget constrained municipal environment.” For more, click here. Firm News Baker & McKenzie Elects New Management from Around the World Baker & McKenzie said Sydney partner Bruce Hambrett and Toronto partner Jim Holloway were elected to serve on its executive committee. Hambrett and Holloway succeed Jeremy Pitts in Tokyo and Alan Harvey in Dallas , whose terms ended. Hambrett, who joined the firm in 2004, has been the chairman of Baker & McKenzie, Australia since 2009 and also was head of the Australian insolvency and restructuring group. Holloway has been managing partner of the firm’s Toronto office since 2007. He focuses on intellectual property law, particularly in relation to trademark, patent, copyright and trade-secret disputes. He joined the firm immediately after graduating from law school in 1991, Baker & McKenzie said in a statement. The executive committee is Baker & McKenzie’s primary management team, with responsibility for developing and implementing the firm’s global business strategy, as well as managing the day-to-day business. It consists of eight elected partners, including the chairman, Eduardo Leite. Leite said in a statement that he’s confident the new leaders’ experience and skills will “move forward our strategy and focus on becoming a more client-driven and performance-based firm.” In other management news, current executive committee member Winston Zee in Hong Kong was elected chairman of the Asia Pacific Regional Council. Zee joined the firm in 1981 and the executive committee in 2010. The firm also announced several new practice leaders. Simon Hughes will become chair of the private-equity practice group and Ashok Lalwani assumes the chair of the India focus group. Pitts will be chair of the newly formed global financial institutions industry group. Erik Scheer takes over as chair of the global tax practice group. The firm said its worldwide fee income was $2.31 billion in the fiscal year that ended June 30. The management changes were announced at the firm’s annual meeting, held this year in New York. Almost 700 partners from 71 offices in 44 countries attended. The firm has more than 4,000 lawyers. Moves Bingham, Manatt, K&L Gates, Cooley Hire New Partners Law firms hired new partners at offices in Washington, New York, Chicago and Sacramento, California , in a range of practices, including regulatory, corporate, litigation and environment and energy. Bingham McCutchen LLP said former White House deputy counsel John Schmitz will join the global regulatory and transactional practice and Bingham Consulting LLC. Schmitz will be a partner and principal in Bingham Consulting in the Washington office. Before joining Bingham, Schmitz served as managing partner of Schmitz Global Partners, a consulting firm with offices in Washington and Berlin, representing U.S. and European companies in international transactions and regulatory matters. Schmitz served as a partner at Mayer Brown LLP from 1993 to 2009 and was the founding partner of the firm’s offices in Germany. Before joining Mayer Brown, Schmitz served as deputy counsel to President George H. W. Bush from 1989 to 1993. Manatt, Phelps & Phillips LLP announced that Harry W.R. Chamberlain II joined the firm’s Sacramento office as a partner in the litigation division. Chamberlain was previously at Buchalter Nemer in Los Angeles , the firm said. He has experience in appellate and insurance work, focusing his practice on appellate and regulatory law, complex litigation and employment law. Scott R. Miller joined Sheppard, Mullin, Richter & Hampton LLP as a partner in the intellectual property practice group, based in the firm’s Los Angeles office. Miller joins from Connolly Bove Lodge & Hutz LLP, where he was partner-in-charge of the Los Angeles office and a member of the firm’s management committee, Sheppard Mullin said. Mitchell G. Mandell joined White & Williams LLP as a partner in the commercial litigation and financial restructuring and bankruptcy groups in the New York office. He previously was a partner at Norris McLaughlin & Marcus PA, where he headed the New York office litigation practice group. Mandell has more than 25 years’ experience handling commercial litigation matters and corporate transactions and specializes in the resolution of global commercial disputes, involving both foreign and domestic businesses. The Chicago office of K&L Gates LLP added Donald E. Bingham as a partner in its finance practice. Bingham joins the firm from Sidley Austin LLP. Bingham focuses his practice in the areas of commercial lending, intellectual property finance, capital markets and structured finance transactions. Cooley LLP announced that Scott S. Balber joined the firm as a partner in its New York office. Balber was co-chair of Chadbourne & Parke LLP’s commercial litigation practice. He joins Cooley’s business litigation practice group as head of financial services litigation. Balber’s clients include financial institutions, as both plaintiffs and defendants in complex commercial cases, as well as in connection with securities class actions and regulatory matters. McCarter & English LLP hired Marshall B. McLean as special counsel in the environment and energy and corporate practice groups. He will be based in the firm’s Newark, New Jersey, office. McLean previously was an associate in the corporate and securities and energy and natural resources groups of Reed Smith LLP in Princeton, New Jersey. McLean represents developers, manufacturers and investors in the renewable energy industry. His work in this area includes the Solar Energy Generating Systems projects in California and the Riverside Renewable Energy project in Gloucester City, New Jersey. McLean has advised on wind projects as well, including the Alta project in Mojave, California. McLean also maintains a traditional corporate practice focused on mid-market mergers and acquisition matters, including corporate finance, securities law and regulatory compliance. Trials Hartford Faces Lawyer’s Claim Involving Treasury Official Hartford Financial Services Group Inc. (HIG) went to trial in a lawsuit by a Texas lawyer who accuses the insurer of causing him to be prosecuted on bribery charges that were dropped after a mistrial. The negligence lawsuit includes the lawyer’s accusation that the company’s former general counsel, Neal S. Wolin, now U.S. deputy treasury secretary, took part in a cover-up linked to alleged extortion by two employees, according to court filings. Todd Hoeffner, the lawyer seeking $25 million in damages, sued the Hartford, Connecticut-based insurer in state court in Houston. Wolin, who isn’t named as a defendant in the lawsuit, testified against Hoeffner in a 2009 criminal trial that ended with a deadlocked jury. Wolin’s testimony will be part of the jury trial that began yesterday with opening statements by lawyers. Hoeffner was charged with making illegal payments to two claims processors to get inflated insurance settlements for clients suffering from silicosis. The charges followed an internal company investigation ordered by Wolin and given to federal prosecutors, according to court records. Jurors at the 2009 trial couldn’t reach a verdict. Hoeffner, later faced with new charges that didn’t include bribery, agreed to pay prosecution costs and the criminal case was dropped. Hoeffner sued Hartford in October 2011 on claims the insurer lied to the government about him. The motive, he said, was to hide the claims processors’ extortion of $3 million from the portion of the settlements paid to him as legal fees. He accuses Hartford of negligence, economic duress, interference with his attorney-client relationships and intentional infliction of emotional distress. Hartford protected the employees to keep them from telling regulators the company lacked sufficient cash reserves to pay asbestos-related claims at the time of the scheme, and Wolin participated in the cover-up, Hoeffner said in court filings. Wolin, through his attorney, denied Hoeffner’s allegations and said that when he learned of what appeared to be a bribery scheme involving rogue workers, he ordered company investigators to dig into the matter. The case is Sanchez v. Hoeffner, 2010-15489, 133rd Judicial District Court of Texas (Houston). For more, click here. New Suits Stephen King Agent Sued by Lawyer for $1 Million Over Firing A lawyer who said he represented Stephen King for more than 30 years sued the author’s agent, Arthur Greene, for at least $1 million in damages over his firing. Jay D. Kramer was fired March 30, shortly after Greene and his wife met with King, according to the lawsuit filed yesterday in New York State Supreme Court in Manhattan. Kramer said he and Greene had been discussing the splitting of commissions. Greene, who also acted as King’s accountant, and his wife, Susan Greene, were “motivated by resentment toward Mr. Kramer” and “greed,” according to the complaint. “Defendants’ misrepresentations and other misdeeds and the resulting improper termination of Mr. Kramer have also damaged his reputation in the entertainment industry,” a lawyer for Kramer, David M. Schreier, said in the complaint. King was the world’s second-highest-earning author in the past year, grossing about $39 million, trailing only James Patterson , according to Forbes.com. Greene, in a telephone interview, said he represents King and that Kramer “worked for me.” He declined to comment further. Greene retained Kramer on King’s behalf in 1978, according to the complaint. Kramer later worked independently of Greene on publishing agreements and other work, he claimed. The case is Kramer v. Greene, 653567-2012, New York State Supreme Court, County of New York (Manhattan). On The Docket Goldman Sachs’s Tourre Gets July 15 Trial Date in SEC Suit Goldman Sachs Group Inc. (GS) ’s Fabrice Tourre will go to trial July 15 in the U.S. Securities and Exchange Commission’s lawsuit accusing him of misleading investors in a collateralized debt obligation. U.S. District Judge Katherine Forrest in Manhattan set the trial date yesterday at the end of a hearing in which an SEC lawyer argued that she should reinstate some claims against Tourre that another judge dismissed earlier in the case. Last year, U.S. District Judge Barbara Jones threw out some of the SEC’s claims after Tourre argued that he couldn’t be held liable under U.S. securities law for transactions that occurred outside the country. The SEC argued yesterday that the claims should be reinstated because of a recent appeals court ruling that applied a broader definition of “domestic securities transaction” than the one used by Jones. Tourre’s case was assigned to Forrest last week. Tourre, 33, who is studying for a Ph.D. in economics at the University of Chicago , wasn’t present in the courtroom yesterday. His lawyer, Pamela Chepiga , a partner at Allen & Overy LLP, told Forrest that she will check with her client to make sure there is no conflict between his exams and the trial date. The SEC sued Goldman Sachs and Tourre in April 2010. The New York-based investment bank agreed in July 2010 to pay $550 million to settle the allegations against it. The case is SEC v. Tourre, 10-03229, U.S. District Court, Southern District of New York (Manhattan). To contact the reporter on this story: Elizabeth Amon in New York at eamon2@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-06-13 | Bloomberg | Down-Under Greeks Send Money as Crisis Stirs Homeland Ties | Half a century after leaving Greece and more than 12,000 kilometers (7,500 miles) from Athens , Paul Afkos says there’s no escaping the calling of his motherland. With Greek unemployment four times higher than in his adopted Australia, the 59-year-old head of Afkos Industries , a maker of mining components based near Perth, has plowed A$18 million ($17.9 million) into a 109-bed hotel in northern Greece that opened in April. “I see it as a duty,” Afkos says, after bringing forward by eight months the opening of the Afkos Grammos Hotel Resort in Kastoria. “I can’t be seen as a hypocrite, not helping my fellow Greeks. I wanted to open early to provide some assistance to these people who are in need of a job.” Australia ’s Greek population has grown from seven pirates dispatched by Britain in 1829 to a diaspora of about half a million, making Melbourne the third-largest Greek city behind Athens and Thessaloniki. Armed with patriotism and the best- performing currency against the euro since late-2008, Australia’s Greeks are deploying wealth amassed in the fastest growing major developed economy to a nation that’s needed 240 billion euros ($300 billion) in bailouts. Greece votes June 17 in an election set to decide its future in the euro zone. John Tripidakis , a Greek lawyer with an Athens practice who splits his time between Sydney and Melbourne, said half his clients are interested in buying property in Greece, up from less than 10 percent two years ago. “They are looking for a bargain,” he said in an interview from Sydney. “Yet they are still connected to the sentimental criteria of buying something near the village of their father or grandfather.” Prices Plunge Beachfront summerhouses or suburban bargains in Athens are among the most-desired properties, said Tripidakis, a lawyer for 30 years who was born in the Greek capital. Apartment prices in Greece fell 3.7 percent in 2009, 4.7 percent the following year and 5.1 percent in 2011, and house values have declined even further, the central bank said in April. The real-estate market is “without any signs of recovery,” the bank said. “What better time than the present to buy?” Tripidakis said. “Cash is king.” The Australian dollar has surged 66 percent against the euro since October 2008 as Lehman Brothers Holdings Inc.’s failure drove up credit costs, slowed global growth, and exposed the stretched finances of European nations such as Ireland and Greece. Spain last week asked euro-region governments for as much as 100 billion euros to rescue the country’s banking system. Home Buyers “Anecdotally, pretty much every person from my parents’ generation or their children are going over there and purchasing property in the town or area where they grew up,” said George Boubouras, 44, the Melbourne-based head of investment strategy at UBS AG’s wealth management unit in Australia and a Greek citizen. “They are very strong and passionate about it, and it’s very much not with the brain, it’s with the heart,” said Boubouras, who was born in South Australia and inherited property in Greece, where his cousins and extended family live. Many properties change hands only for cash, he said. Greece has at least a one-in-three chance of leaving the 17-country euro area within months of this weekend’s election, Standard & Poor’s said in a June 4 report. Greek deposit outflows have accelerated before the vote, two bankers familiar with the situation said, on concern the nation may move closer to abandoning the region’s currency. Family Ties The crisis dominates conversation in the Greek-owned shops, cafés and accountancy firms in Melbourne ’s eastern suburb of Oakleigh, the heartland of the city’s Greek community. “The majority of people I speak to have family back home,” 36-year-old butcher Tom Droutsis said in his father’s shop, where posters of the historical Greek town of Nafpaktos, his mother’s birthplace, hang on the walls. “I feel for them.” At least once a week, a visitor from Greece comes to the shop or he fields an inquiry about work or other opportunities in Melbourne from someone caught up in the crisis, he said. Australia’s 2006 census counted 365,145 people of Greek ancestry in Australia and 109,980 Greek-born migrants among Australia’s population of 19.9 million at the time. Greece was home to 10.8 million at the end of 2011. In Australia, the seven young sailors from Hydra transported when the colony was still accepting convicts from Britain were followed by exiles from Ottoman rule, then other Greeks seeking riches during Australia’s Gold Rush. Emigration increased in the 20th century amid conflict with Turkey , depression and civil war. Plato, Olympics According to a New South Wales state government website, between 1947 and 1982, almost 250,000 arrived in Australia from mainland Greece, its islands and Greek communities outside the nation that gave the world Plato and the Olympic Games. “For Greeks living abroad, Greece is not a country, it’s a cultural ideology,” said Anastasios Tamis, author of “ The Greeks in Australia ,” published in 2005. “It’s what she has offered the world from the classical perspective. This has perpetuated love and patriotism.” Almost half of Australia’s Greek community lives in the nation’s second-biggest city of Melbourne, and about 30 percent in Sydney, according to the NSW government site. More than a quarter of Australia’s Greek community returns to Greece for the northern hemisphere’s summer, Tamis said. Still, some question the merit of investing in Greek property when the country’s immediate future is undecided. Uncertain Times “Greek Australians may be looking, but how many are actually proceeding?” Yannis Perrotis, managing director of CBRE Atria, a unit of real estate company CBRE Group Inc. (CBG) , said in an interview in Athens. “Nobody, and I mean nobody, knows what is going to happen to this country.” Con Berbatis, a Perth-based pharmacist and a partner at the Holiday Inn Hotel in the city, said he sees opportunities in Greece but isn’t buying assets yet. Instead, he has met Greek consular officials in Australia to discuss how to donate as much as A$50,000 of medical supplies as the crisis cripples Greece’s healthcare system. “A number of things need to stabilize before I put my money in there,” said Berbatis, born in Australia in 1946, 20 years after his father left Greece. “The prerequisites for me are a stable currency and a stable political structure.” Stephen Koukoulas, managing director of Canberra-based Market Economics Pty, said a Greek exit from the euro would see investors “badly burnt” by currency depreciation as the nation returned to the drachma. ‘Risk-Reward’ “Investments should be related to risk-reward trade-offs, and if they’re done for reasons of the heart, not of the head, you can get buried if things move against you,” said Koukoulas, a third-generation Greek Australian whose grandfather arrived in Sydney in 1920. Afkos said he’s “optimistic” that Greece, which has a jobless rate of 22 percent, won’t exit the euro. The former co- owner of the Perth Glory soccer team said the resort he built in Kastoria has given work to 25 local families. “That’s the kind of help we Australian Greeks can do,” said Afkos, who followed his father to Australia in 1964 with his sister and mother. “I have a warm feeling for the people.” To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net ; Philip Lagerkranser at lagerkranser@bloomberg.net ; Andreea Papuc at apapuc1@bloomberg.net |
2024-10-23 | Bloomberg | Bernanke QE3 Stocks Miss Greenspan Irrational Exuberance | Federal Reserve Chairman Ben S. Bernanke is trying to inject a little of the exuberance his predecessor Alan Greenspan called “irrational” into markets for everything from stocks to housing. Bernanke, who is seeking to spur the economy with a third round of so-called quantitative easing, has said his stimulus works by lowering borrowing costs and encouraging investors to seek higher-yielding assets. Boosting home and equity prices through bond buying will encourage consumers and businesses to spend more, according to Bernanke. Since these are the same assets that plummeted during the financial crisis after reaching record highs, “is there some risk you could start a new bubble and repeat the whole cycle? I suppose there is,” said Robert Shiller , the Yale University professor who forecast the end of the Internet boom in his book, “ Irrational Exuberance ,” which was published in March 2000, the month the Nasdaq Composite Index peaked before crashing 78 percent. (CCMP) Bernanke’s approach risks “distorting” decisions, and “it might be economically inefficient to try to push prices up so much,” Shiller, who also predicted the bursting of the subprime-mortgage bubble, said in a New York interview Oct. 15. ‘Distort’ Allocations While Federal Reserve Bank of New York President William C. Dudley acknowledged that current policy “could distort asset allocations and lead to renewed financial-asset bubbles,” this isn’t a risk now, he said in an Oct. 15 speech. “There is little evidence of problems or excesses, but this could change as the recovery proceeds,” said Dudley, who is also vice chairman of the policy-setting Federal Open Market Committee. If these risks climb, they will need to be factored into the committee’s decisions, and Fed officials will “examine what steps could be taken on the macro-prudential front in response,” he said. In answering audience questions, Dudley said the Fed’s policies are affecting yields in the bond market , though “to say that’s a bubble, I don’t think that’s quite right.” He added that the debt market is a “lever of policy” for the central bank. The Fed’s asset purchases helped drive yields on the benchmark 10-year Treasury note to a record low of 1.38 percent on July 25. The yield was 1.81 percent on Oct. 22. Rising Index The Standard & Poor’s 500 Index reached 1,465.77, the highest since 2007, on Sept. 14, the day after the FOMC said it would buy $40 billion of mortgage-backed bonds a month without limiting the total or duration of purchases. The index is up about 109 percent since hitting a nadir in March 2009. Home prices also have begun to rise, jumping in the second quarter by the most in more than six years, according to the S&P/Case-Shiller index, a real-estate benchmark of property values in 20 cities that Shiller created with Karl Case , a professor emeritus at Wellesley College in Massachusetts. Fed policy makers are meeting today and tomorrow in Washington. The Fed’s large-scale asset purchases probably will lift stocks by 3 percent in the two years following the Sept. 13 announcement of QE3, as low yields on government bonds push investors into riskier assets, according to a Sept. 27 report by Deutsche Bank AG economists. They also estimate the new stimulus will lift home prices by 2 percent in the same period, assuming the Fed maintains purchases of Treasuries and mortgage debt through 2013. Perfect Knowledge “How do they know whether or not these prices will prove to be justified in the long run?” said John Lonski , chief economist at Moody’s Capital Markets Group in New York. “The Fed doesn’t have perfect knowledge about what constitutes a sound long-term price for equities or housing, but this is a risk the Fed is willing to take.” Lonski said potentially inflated asset prices could prove “devastating” if the Fed is forced to tighten policy quickly or mistimes its exit from record monetary stimulus. The Fed has had “less than perfect” timing in the past, he said. Greenspan’s “irrational exuberance” comment in 1996 wasn’t actually timely: When he spoke, the Dow Jones Industrial Average was above 6,400. It peaked at over 11,700 in January 2000, before technology stocks crashed. In May of this year, Greenspan said stocks are “very cheap” and likely to rise. Slumping Dow The Dow slumped 1.6 percent to 13,127.64 as of 1:15 p.m. today in New York, heading for the biggest loss since June amid disappointing results at companies from 3M Co. (MMM) to DuPont Co. (DD) , both of which are components in the 30-stock gauge. The broader S&P 500 lost 1.3 percent to 1,415.70. The benchmark for American equities has been trading at a valuation of 14.2 times reported earnings, compared with a six-decade average of 16.4 times, according to data compiled by Bloomberg. Critics blame Greenspan for inflating the housing bubble by holding the Fed’s benchmark interest rate too low for too long, slashing it to 1 percent in late June 2003 and keeping it there for a year. Bernanke has relied on unorthodox stimulus such as quantitative easing to reduce borrowing costs after cutting the federal funds rate to near zero in December 2008. The latest steps have succeeded in making home mortgages less expensive, with the average fixed rate offered on new 30-year loans at 3.49 percent on Oct. 22, down from 3.57 percent Sept. 12, the day before the last FOMC meeting, according to Bankrate.com data. Willing Spenders QE3 is designed to boost “Main Street,” the Fed chairman said at a Sept. 13 press conference after the Fed announced the measure. “Many people own stocks directly or indirectly,” Bernanke said. “The issue here is whether or not improving asset prices generally will make people more willing to spend.” The S&P 500 has risen about 0.7 percent since Bernanke set the stage for a third round of bond buying in an Aug. 31 speech in Jackson Hole, Wyoming. Allen Sinai , president and chief executive officer of Decision Economics Inc. in New York, says the stock-market effect is “underrated.” He estimates that a 20 percent gain in the S&P 500 can add as much as 1 percentage point to U.S. growth with a one- to two-year lag. The Fed’s third round of quantitative easing could be more powerful for stock prices than previous rounds because the open- ended policy is contingent on higher employment and stronger economic growth, assuring better earnings, he said. Stronger Growth “It is as if the Federal Reserve has promised to keep on reducing the federal funds rate until the economy grows at a higher rate,” Sinai said. Persistent Fed stimulus means “I can expect stronger growth, and stronger growth should mean higher earnings, and I can buy stocks.” Fed Governor Jeremy Stein questioned in an Oct. 11 speech whether companies would take advantage of record-low borrowing costs to invest in equipment and software or simply buy back stock and pay dividends. Investment-grade corporate bonds with an average maturity of more than 10 years yielded a record low 2.76 percent on Oct. 15, according to index data compiled by Bank of America Merrill Lynch. Investment-grade issuance in the U.S. has topped $900 billion in 2012, already exceeding all of last year’s borrowing, data compiled by Bloomberg show. As corporate bond yields fell and issuance rose, total dividend payments jumped to $275.8 billion in the four quarters ending Sept. 2012 compared with $247.3 billion in the previous four quarters, according to data gleaned from Securities and Exchange Commission filings by FactSet, a data-analysis company in Norwalk, Connecticut. ‘Very Seriously’ Stein also said the possibility that Fed policies are causing banks, insurance companies and pension funds to take on more risk as they try for higher returns “should be taken very seriously.” “A short summary would be that there is some qualitative evidence of reaching-for-yield behavior in certain segments of the market but that we are not seeing anything quantitatively alarming at this point,” Stein said. “The worry is that one often sees only the tip of the iceberg in these kinds of situations, so one needs to be cautious in interpreting the data.” Yields on high-yield, high-risk securities also have fallen, to a record low of 6.84 percent on Oct. 18, Bank of America Merrill Lynch index data show. If Fed policy makers “just keep buying assets, the price of assets will go up in a big way because they want to do a huge amount every month,” said Jagdish Bhagwati, a professor of economics at Columbia University in New York whose former students include European Central Bank President Mario Draghi and International Monetary Fund Chief Economist Olivier Blanchard. “That also has a downside because it can lead to a bubble; that’s exactly what we should be worried about,” Bhagwati said. “Creating bubbles is not a risk-free thing.” To contact the reporters on this story: Caroline Salas Gage in New York at csalas1@bloomberg.net ; Jeff Kearns in Washington at jkearns3@bloomberg.net To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net |
2024-03-18 | Bloomberg | Bank Leumi Advances on Report Haim Saban May Purchase Stake | Bank Leumi Le-Israel Ltd. (LUMI) rose to the highest in almost a month after a local website reported investor Haim Saban and outgoing Leumi Chief Executive Officer Galia Maor may acquire a stake in the bank. The bank denied the report after the close of trading today. The shares of Leumi, the country’s largest bank by assets, climbed 1.8 percent to 11.65 shekels, the highest since Feb. 23, at the 4:30 p.m. close in Tel Aviv. “The shares are rising on the rumor that Saban might want to buy a stake in Leumi,” said Terence Klingman, senior analyst for international clients at Psagot Investment House Ltd. “I would not attach high value to the rumor.” Israel ’s News1 hebrew website reported Haim Saban, the chairman and chief executive officer of Saban Capital Group, together with investors may consider buying the 9.6 percent stake in Leumi that may be sold by businessman Shlomo Eliahu, after his acquisition of Migdal Insurance and Financial Holding Ltd. earlier this month. At the time of the Migdal accord, Eliahu said he would need to reach an agreement with regulators about his stake in the bank. “There is nothing to it,” Leumi said in an e-mailed statement after the close of trading today. Moshe Debby, a spokesman for Saban Capital Group in Israel, declined to comment. To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net |
2024-06-27 | Bloomberg | Genworth Reviewed for Cut by Moody’s as Insurer Seeks CEO | Genworth Financial Inc. (GNW) , the life insurer and mortgage guarantor, is being reviewed for a possible downgrade to junk by Moody’s Investors Service as the company seeks a new chief executive officer. The cost to protect against losses on the insurer’s debt climbed. Genworth’s rating could be lowered from Baa3, the lowest investment-grade level, if it fails “to take capital actions that enhance holding company financial flexibility without hurting long-term earnings power,” the ratings firm said today in a statement on the Richmond, Virginia-based insurer. The insurer is seeking to regain investor confidence and limit losses from backing home loans after the 2008 financial crisis and U.S. housing slump pushed Genworth into aggregate losses of more than $700 million in the four years ended Dec. 31. Michael Fraizer resigned in May as CEO after shelving a plan in April for an initial public offering of its Australia mortgage-insurance unit. Genworth is working “on plans to strengthen our capital structure and realign our business portfolio,” acting CEO Martin Klein wrote in a letter to shareholders today. “We continue to take steps to improve the performance of our businesses, generate and manage capital, and meet the needs of our policyholders, while working to build value for our shareholders.” The insurer is seeking a permanent CEO as it reviews its business portfolio, Chairman James Riepe said in in May. Klein, the chief financial officer, took the CEO post on an interim basis. Long-Term Care Moody’s reduced the financial-strength rating of Genworth’s life-insurance operation to A3 from A2, citing “a weaker credit profile” and the concentrated position in long-term care. MetLife Inc. and Prudential Financial Inc., the two-largest U.S. life insurers, are both retreating from the long-term care market after interest rates declined. The U.S. mortgage-guaranty business was also placed on review for a cut. Mortgage insurers pay lenders when borrowers default and foreclosures fail to recoup costs. Contracts protecting Genworth’s debt against default for five years increased 1.9 percentage points to 11 percent upfront, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. That’s in addition to 5 percent a year, meaning it would cost $1.1 million initially and $500,000 annually to protect $10 million of Genworth’s debt. A year ago, investors would have paid $367,000 a year to guard against losses on $10 million of Genworth’s debt, according to CMA. Genworth slipped 3 cents to $4.91 at 4 p.m. in New York. The stock has plunged 51 percent in the past year. To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-11-10 | Bloomberg | States Given Extra Month for Health Exchange Blueprints | President Barack Obama ’s administration gave U.S. states one more month to decide how they plan to develop new health exchanges that will let people shop for insurance coverage. While the states still must say by Nov. 16 if they plan to build their own marketplaces, they can now wait until Dec. 14 to submit the actual blueprint, Health and Human Services Secretary Kathleen Sebelius said in a letter sent yesterday to state governors. States that want to create a partnership with the federal government to manage the exchanges have until Feb. 15 to outline the duties they’ll handle. All but 13 governors had taken a wait-and-see approach on the exchanges, which are supposed to be running by 2014 as one of the requirements in Obama’s overhaul of the health-care system. Governors who miss the deadline will turn over to the federal government most authority to decide which insurers can sell plans to their state residents. “The administration is committed to providing significant flexibility for building a marketplace that best meets your state’s needs,” Sebelius said in the letter. Thirty-four states have accepted at least two grants from the federal government to start planning an exchange, according to Sebelius’s department. That puts about 20 states in a position to build an exchange or partner with the federal government on one, in addition to the 13, plus the District of Columbia , who have already said they’ll run their own. The federal exchange will also control enrollment of low- income people into state Medicaid programs. To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-10-25 | Bloomberg | Senate Democrats Seek to Extend Obamacare Enrollment Period | Ten Senate Democrats, including seven facing re-election next year, are backing away from their party by calling for changes to the federal health-care program. The senators are seeking an extension of the deadline for people to join health-care exchanges because of “substantial technology glitches” with healthcare.gov, the primary way for consumers to shop for insurance. Website failures have made it harder for people to compare coverage and enroll in the U.S. plans before March 31 or face penalties. In a letter sent to Health and Human Services Secretary Kathleen Sebelius, the senators said they are “discouraged and frustrated with the problems.” The letter was released today by its author, Senator Jeanne Shaheen, a New Hampshire Democrat. “Extending this period will give consumers critical time in which to become familiar with the website and choose a plan that is best for them,” according to the letter. “Individuals should not be penalized for lack of coverage if they are unable to purchase health insurance due to technical problems.” Sebelius, at a news conference today in San Antonio, said the department isn’t discussing an extension because any change in dates has “subsequent consequences” for insurance providers. Earlier today, in Austin, Texas , she said she didn’t realize the site wouldn’t be “operating optimally” before its Oct. 1 debut. ‘Some Progress’ “We’re making some progress,” Josh Earnest , a White House spokesman, told reporters today traveling with President Barack Obama to New York. “We’re less than four weeks into a six-month enrollment here.” Jeffrey Zients, the consultant Obama named this week to resolve the website’s flaws, said today the exchanges will be fixed by December. Management of the website project has been reorganized and a lead contractor has taken over, Zients said on a conference call in Washington. Obama’s administration has the authority to extend the enrollment period without congressional approval, said Amber Moon, a spokesman for North Carolina Democratic Senator Kay Hagan, who signed Shaheen’s letter. The law allows Sebelius to determine the enrollment period and exempt individuals from the penalty. Six Weeks The Obama administration this week announced a change that gives individuals six more weeks, or until March 31, to enroll without facing penalties. Under the law, anyone not covered for three months or longer faces a fine. For the insurance to take effect and avoid the fines, uninsured Americans would have had to sign up by Feb. 15. The Democratic senators took a page from the playbook of 20 colleagues in their party who wrote Obama in July urging him to nominate Janet Yellen to become chairman of the Federal Reserve. Obama picked Yellen, currently the Fed’s vice chairman, for the top post this month. The health-care letter, in which the senators note their support of Obama’s signature domestic achievement, could also force the president’s hand, said Jim Manley, a former aide to Senate Majority Leader Harry Reid. “They’re going to have to give this a good, hard look,” Manley said in an interview. Democrats in the U.S. Senate had refused, as part of budget negotiations, to discuss changes to the Patient Protection and Affordable Care Act, including a one-year delay of the requirement for individuals to enroll in the insurance exchanges. Partial Shutdown The fight over the law, known as Obamacare, contributed to the 16-day partial government shutdown and led to a record low favorability rating for Republicans in a Gallup Poll. In the week since Republicans yielded and government opened, they’ve shifted tactics and are highlighting the website’s flawed debut. A House hearing yesterday was the first salvo in the fresh line of attack, as Republicans blamed Obama’s administration for the shortcomings of the health-insurance website that contractors said wasn’t adequately tested. Meanwhile, Democrats have been focused on fixing the health-care program’s website. West Virginia Democrat Joe Manchin, who supports delaying the individual mandate, is crafting a bill to delay the $95 penalty for not enrolling. Hagan yesterday said the enrollment deadline should be postponed by two months. The Democrats’ letter didn’t specify a new deadline. Shaheen’s letter was signed by four Senate Democrats running for re-election next year in states Obama lost in 2012: Hagan, Mark Begich of Alaska , Mary Landrieu of Louisiana and Mark Pryor of Arkansas. Also signing were Mark Udall of Colorado and Tom Udall of New Mexico, whose terms also end next year, along with Dianne Feinstein of California , Michael Bennet of Colorado and Martin Heinrich of New Mexico. Bennet is the chairman of the Democratic Senatorial Campaign Committee. To contact Bloomberg News staff for this story: Michael C. Bender in Washington at mbender10@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-06-13 | Bloomberg | Credit Agricole Seeks an End to Its Greek Imbroglio | In 2006, Georges Pauget, then Credit Agricole SA Chief Executive Officer, bought Greece’s Emporiki Bank, calling it a “perfect fit.” Six years on, the purchase has put the French lender in the eye of a perfect storm. A possible euro exit for Greece has made Credit Agricole the foreign bank with the most to lose. France ’s third-biggest bank has 23 billion euros ($29 billion) of Greek loans on its books, the largest such holdings for a foreign bank. Although Greek loans represent about 3 percent of parent Credit Agricole Group’s lending commitments, they amount to at least 40 percent of the country’s private cross-border debt claims. Gains made in the polls by Greece’s anti-austerity parties before the June 17 election have raised the specter of the country having to abandon the euro, driving Credit Agricole to reassess support for its unit. Costs from Greece’s euro exit may reach 6 billion euros for the bank, Citigroup Inc. analysts Kinner Lakhani and Florent Nitu estimated. “The Greek vote’s outcome will influence Credit Agricole’s decision on whether to stay or to quit the country,” said Jerome Forneris, a Marseille-based fund manager at Banque Martin Maurel, which manages $8.5 billion euros, including Credit Agricole shares. “If Greece exits the euro, what’s the interest of keeping a unit there?” Growth Quest The bank is considering all options for Emporiki should Greece leave the euro, including combining it with a local rival or walking away, according to a person with knowledge of the bank’s plans. The situation is in flux and nothing will be decided until after the elections, said the person, who declined to be identified because the deliberations are private. Credit Agricole spokeswoman Anne-Sophie Gentil declined to comment on the bank's plans. Before today, shares of the bank , based near Paris, tumbled more than 78 percent since early October 2009, when Greece signaled its borrowings were higher than estimated, triggering Europe ’s debt crisis. The Bloomberg Europe Banks and Financial Services Index fell 43 percent in the period. Credit Agricole shares today rose 3.5 percent to 3.05 euros. A quest for growth drove Credit Agricole and its French rivals BNP Paribas SA (BNP) and Societe Generale SA (GLE) to markets outside their home turf in the last decade. French banks held $541 billion in private and public debt in Greece, Ireland, Italy , Portugal and Spain at the end of December, the most by foreign lenders, Bank for International Settlements figures show. Argentina Exit For Credit Agricole, founded in 1894 as a French farmers’ bank, the Greek imbroglio shows the pitfalls of its foreign forays. A decade ago, after Argentina defaulted on its debt and ended its peso peg to the dollar, Credit Agricole abandoned its units there, Banco Bisel SA, Banco de Entre Rios SA and Banco Suquia SA, taking a 106 million-euro hit, its website said. The Greek situation may be stickier. “Leaving by shutting the doors and handing the keys to local authorities isn’t possible as in Argentina,” said Benoit Petrarque, an Amsterdam-based analyst at Kepler Capital Markets who has a “reduce” rating on the stock. “Reputation risk and legal risks inside of the euro zone are much stronger.” Jean-Paul Chifflet, 62, Credit Agricole (ACA) ’s CEO since 2010, told shareholders last month that the bank will continue operations in Greece so long as it remains in the euro, depositors trust banks and the French lender’s local unit has access to the nation’s central bank’s emergency liquidity. Emporiki Options Credit Agricole got a break last week when it reached an accord with Greek authorities that will let Emporiki access emergency funds from the central bank should the need arise. “It’s like an insurance policy, if there were deposits outflows, they would be covered,” Citigroup’s Lakhani said. Chifflet shrank funding, including capital, to the Greek unit to 5.2 billion euros at the end of March compared with 11.4 billion euros a year earlier. He said he’s “personally involved every day” in the unit. Emporiki’s loans -- close to 10 percent of Greece ’s gross domestic product -- exceed deposits, requiring Credit Agricole to provide funding to help close the gap. Credit Agricole’s accumulated losses from Emporiki represent on average more than 15 million euros for every one of the unit’s 337 branches. The loss since 2008 is about 4,000 euros per client. Credit Agricole may try to merge its Greek assets with a local firm and exit the country, although finding a buyer won’t be easy, said Julian Chillingworth, who helps manage 16 billion pounds ($24.9 billion) at Rathbone Brothers Plc in London. Sufficient Reserves “Possibly, Credit Agricole may like to sell the Greek unit, if they find someone to get rid of it to,” he said. “But do you see anyone interested?” Parent Credit Agricole Group’s reserves are large enough to withstand “extreme” Greek losses, Chifflet said. And although the bank expects that Greece will remain in the euro, the risk of “further adverse developments” may lead it to reconsider its support to Emporiki and “its overall strategy,” the Greek unit said in a statement last month. Credit Agricole’s expansion in southern Europe also makes it vulnerable to contagion worries. In Spain, its exposure totals 11.3 billion euros, with “modest” real-estate risks. The bank also holds a 20.6 percent stake in Spanish lender Bankinter SA and about 20.5 percent of Portugal’s largest bank by market value, Banco Espirito Santo SA. (BES) Its Parma-based Italian unit, although one of the country’s most profitable retail banks, has its headquarters and a leading market share in the region struck recently by earthquakes. ‘Stratospheric’ Prices Credit Agricole’s insurance unit holds 11.6 billion euros of public debt from Greece, Spain, Portugal, Ireland and Italy. “The ship is solid, but it’s starting to take on water,” said Jacques-Pascal Porta, who helps manage 500 million euros at Ofi Gestion Privee in Paris. Mostly under state tutelage until the late 1980s, Credit Agricole’s expansion picked up after its 2001 initial public offering. Its biggest purchase remains the 16 billion-euro takeover of Credit Lyonnais SA in 2003. Credit Agricole, under the leadership of former CEO Pauget and former Chairman Rene Carron, invested 2.2 billion euros in 2006 to buy a majority stake in Emporiki, the least profitable of Greece’s top banks at the time. Since then, Emporiki has been unprofitable every year except 2007, with cumulated net losses for Credit Agricole of 5.3 billion euros. “The prices paid in Greece and in Spain were stratospheric,” said Francois Chaulet , who helps manage about 200 million euros at Montsegur Finance, including Credit Agricole shares. “Still, you can’t blame them for everything. There was also a political will to create European champions.” Complex Structure The French bank’s complex structure partly explains some of its expansions woes. Credit Agricole Group’s 39 French regional banks own a 56 percent stake in the listed Credit Agricole SA. About 2,500 small, local lenders closely held by their 6.7 million customers form the bulk of the regional banks. The heads of the regional banks gather monthly to discuss strategy. “You need to be reactive and to take rapid decisions,” Porta said. “Their governance isn’t the most adapted to face new challenges coming from bad choices abroad.” Credit Agricole Group, the entity regulators and rating agencies monitor to check compliance with international capital and liquidity standards, had 54.2 billion euros of core Tier 1 capital, or 10.9 percent under Basel 2.5 standards, at the end of March, it said May 11. It expects to reach a 10 percent core Tier 1 ratio under stricter Basel III rules at the end of 2013. First Loss While Credit Agricole Group’s core Tier 1 ratio would remain above 9 percent under Basel III in the event of a Greek euro exit, the losses would widen the capital gap between the listed bank and the group’s total reserves, Citigroup analysts Lakhani and Nitu wrote. The group could support the listed bank through a capital increase or through guarantees, they wrote. Credit Agricole last year had its first annual loss , scrapped its dividend and gave up its 2014 financial targets. The parent group remained profitable. The bank is closing most of its derivatives business. Chifflet told investors it has cut all proprietary trading. At the end of April, Credit Agricole achieved 91 percent of its target to cut risk-weighted assets by 35 billion euros, part of the effort to comply with stricter capital rules. Chifflet has put forward the name of Xavier Musca, former French President Nicolas Sarkozy ’s chief of staff, to join the bank as deputy CEO overseeing international consumer-banking, asset-management and insurance, Credit Agricole said today. ‘Soldier On’ The bank’s board votes on the nomination next month. Musca will bring “an essential managerial asset,” Ofi’s Porta said. “He comes with the greatest degree of expertise,” Porta said. “He knows the Greek dossier since he was at the heart of French decision-making.” Any euro-friendly outcome of the Greek ballot may also provide an upside for Credit Agricole after Chifflet’s steps to “clean” Emporiki, analysts and investors said. In the first quarter, Emporiki’s deposits rose by 570 million euros as loans fell. Compared with 2006, Emporiki Bank’s staff has shrunk 33 percent to 4,200. Strub, dispatched in early 2009 as Emporiki’s CEO, has cut quarterly labor costs to 66 million euros in the first quarter, a 31 percent drop from three years earlier. In January, he got unions’ approval for a 10 percent wage cut with immediate effect. “Credit Agricole can try to soldier on,” Chillingworth said. “There isn’t much else they can do, right?” To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-05-08 | Bloomberg | Richard Lugar Was Too Polite for Today’s Republicans | Republican moderates are no longer a dying breed. With Tuesday’s defeat of Senator Richard Lugar of Indiana, they are dead. Known as Richard Nixon ’s favorite mayor when he ran Indianapolis back in the 1970s, this rock-solid Republican is no longer Republican enough. As defined by the Tea Party, Lugar was “ Obama’s favorite senator ,” a reference to Lugar’s welcome to the newbie from Illinois in 2005. Of course, Lugar voted against most of his “friend’s” agenda, including against President Barack Obama ’s health-care law, but never mind. In the Tea Party’s Republican Party , it is no longer enough to vote conservatively. You must have the demeanor of a zealot. The man who defeated Lugar, Indiana State Treasurer Richard Mourdock, is purity itself. Not for him to dignify a Democrat by talking to him. He loves the “broken” version of Congress: ideologically extreme, scornful of compromise, unmoved by facts or evidence, dismissive of the legitimacy of its political opposition. Mourdock is not one to let cooperation darken his door. “I feel more frustrated with Republicans than Democrats,” he says. “It is not bipartisanship we need. It is principle.” The Lugar-Mourdock race was the Tea Party ’s marquee contest this cycle, the one that promised annihilation of an infidel. The Tea Party hoped to mount a challenge to Utah Senator Orrin Hatch ’s re-election bid, but its favored candidate chose not to run and Hatch moved sharply right. Going after Senator Olympia Snowe of Maine would have been satisfying, but she decided to retire. A Heartland Icon That left only a Republican icon from the heartland. Many of Lugar’s accomplishments required some element of that hated principle, bipartisanship. The Tea Party worked to make everything good he did look bad. Take his signature accomplishment as chairman and ranking member of the Senate Foreign Relations Committee: He conceived, fought for and got passed a law to control nuclear weapons, an effort more important every day as terrorists chase loose nukes. But passing landmark legislation gets you nothing but suspicion if it was done in collaboration with a Democrat, Senator Sam Nunn. Therefore 1991’s Nunn-Lugar Act (note the placement of Lugar’s name) is diminished by its provenance. As his party moved right, Lugar’s American Conservative Union rating slumped from the 90s to the 70s over the past few years. Lugar had a raft of conservative votes -- including against the despised health-care law -- but they were lost in his votes in favor of the Troubled Asset Relief Program, the stimulus, Obama’s Supreme Court nominees (even though he shepherded Bush’s nominees through the Senate), the Dream Act (which Hatch sponsored back in the day) and the debt-ceiling increase. Heresies, all. More than Lugar’s votes, there is his mild manner. Even when behaving as the Tea Party requires, Lugar did it without the requisite bombast and disdain for the other side. Throughout his career, the safest place in the Capitol has been between Lugar and a camera. For a reporter with a notebook, however, he is a godsend, unfailingly polite and patient. If you don’t understand how weapons of mass destruction are making their way from Kazakhstan to al-Qaeda, it’s not because he didn’t explain it thoroughly. Eating his daily lunch of yogurt and an apple at his desk, never swanning around at night, Lugar has the sober demeanor of a priest or insurance adjustor. But Lugar made a few mistakes that Mourdock capitalized on. Famously frugal, Lugar stopped keeping a residence in his home state, sleeping at a hotel on trips home. He counted the family farm as his residence and didn’t bill the government for trips there. A Quiet Farmer A farmer by nature who speaks quietly and in full sentences, Lugar is as plain as the Amish who dot his state. He was so popular for so long in Indiana that he forgot how to campaign. He didn’t face a primary challenge after his first election to the Senate in 1976; in 2006, he had no Democratic opponent. In Mourdock, however, he had a formidable challenger. For the Tea Party, Mourdock may be the perfect candidate -- with the single imperfection that he actually holds office, thereby disqualifying himself as a pure political outsider. (At least Mourdock has never worked in the devil’s playground of Washington.) Although Mourdock never misses a chance to eat rubber chicken, Lugar was scarce at party events until he found himself with a real race on his hands. Mourdock is backed by Sarah Palin and Grover Norquist , while Lugar has refused to sign Norquist’s no-tax pledge. Mourdock’s ads turned Lugar into a cartoon. One quoted the president saying that he’s “worked with Republican senator Dick Lugar to pass a law,” cutting off the part where Obama says “that will secure and destroy some of the world’s deadliest unguarded weapons.” Mourdock’s message to Indiana Republicans: Vote for me and you will never have to worry about the horrifying possibility that your senator will befriend Obama. Mocking, exaggerated, courting confrontation -- Mourdock is what Republicans long for. Lugar is modest and reasonable. His time served worked against him. Because he has a house in Washington , he was declared to be of Washington. Getting important things done was no excuse. Gone are those halcyon days of George W. Bush when No Child Left Behind, tax cuts, the Patriot Act and TARP passed on bipartisan votes. This is a year when every Republican presidential candidate rejected the notion of trading $10 in spending cuts for each dollar in increased revenue. In other words: If a Democratic president favors something, it is automatically toxic. All polls show Lugar would have been the stronger candidate against a Democrat in the fall, but party purists would rather be right than win. Farewell, Mr. Lugar. Not now, but someday, you will be missed. ( Margaret Carlson is a Bloomberg View columnist. The opinions expressed are her own.) Read more opinion online from Bloomberg View. Today’s highlights: the View editors on Greece’s political deadlock and saving the Volcker rule ; Clive Crook on France and the EU ; William Pesek on Asia’s wealth divide ; Peter Orszag on the income swings of high earners ; Edward Glaeser on the new urban flight ; Ali H. Soufan on the USS Cole trial. To contact the writer of this article: Margaret Carlson at mcarlson3@bloomberg.net. To contact the editor responsible for this article: Michael Newman at mnewman43@bloomberg.net . |
2024-04-30 | Bloomberg | Aberdeen Says Unilever Offer Isn’t ‘Obvious’ Price to Sell | Unilever Plc’s offer to pay 600 rupees a share to raise its stake in Hindustan Unilever Ltd. (HUVR) isn’t high enough to spur an “obvious” sell decision for existing stockholders, said Aberdeen Asset Management Plc. (ADN) The U.K. money manager held 87.53 million shares in Unilever’s Indian unit, or 4.05 percent of equity, as of March 31, data compiled by Bloomberg show. That makes Aberdeen the fourth-biggest shareholder, the data show. The offer values Hindustan Unilever at 36 times projected earnings for the year ending in March 2014, versus 13 times for the benchmark S&P BSE Sensex Index, according to the average of 13 analyst estimates. “It’s just not clear cut,” James Thom, a Singapore-based money manager at Aberdeen, which oversees about $322 billion worldwide, said in a phone interview. “It may be about fair, may be worth a little bit more than that, but it’s not an obvious price to be giving up the stock.” Aberdeen is still discussing what to do with its shares, he said. Hindustan Unilever surged 17 percent to 582.85 rupees at 2:27 p.m. in Mumbai after Unilever said it will spend as much as 292.2 billion rupees ($5.4 billion) to boost its stake to 75 percent from 52.48 percent. The Anglo-Dutch company is seeking greater control of India ’s largest consumer-goods maker after this month reporting the slowest quarterly growth in two years as Europeans curbed spending. Hindustan Unilever reported a 15 percent jump in fourth-quarter profit yesterday, exceeding analyst estimates. India Confidence India’s economy grew 5 percent in the year through March, according to an estimate from the statistics agency. That’s less than the average of about 8 percent in the past decade. “The confidence they are showing in Hindustan Unilever, at a time when consumption in India is also slowing, is out of the world,” Ambareesh Baliga, a managing partner at Edelweiss Financial Services, told Bloomberg TV India today. He advises shareholders to sell part of their holdings in the offer. Unilever’s offer price is “good” and Bajaj Allianz Life Insurance Co. plans to sell some of its holding to Unilever, Sampath Reddy, the insurer’s chief investment officer, said in an e-mail. Bajaj Allianz has about $7 billion in assets. The offer, which opens in June, is being managed by HSBC Holdings Plc, according to an exchange filing. To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net ; Michael Patterson in Hong Kong at mpatterson10@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-08-30 | Bloomberg | Asian Stocks Advance Second Day as Syrian Concern Eases | Asian stocks rose, with the benchmark index gaining a second day, on receding prospects for an imminent strike against Syria. Energy shares retreated as oil extended losses. Hokkaido Electric Power Co. added 3.5 percent in Tokyo to lead utilities higher after forecasting a narrower loss. Inpex (1605) Corp., Japan’s No. 1 energy explorer, dropped 2 percent. Ping An Insurance (Group) Co., China’s second-largest insurer, gained 0.9 percent in Hong Kong after saying first-half profit climbed. The MSCI Asia Pacific Index rose 0.4 percent to 130.24 as of 10:09 p.m. in Tokyo, after swinging between gains of as much as 0.5 percent and losses of 0.1 percent. The gauge has declined 0.9 percent this week and a 1.5 percent this month. The MSCI Asia Pacific excluding Japan Index gained 1 percent. “The fact that attack on Syria is less likely is obviously a positive thing as far as sentiment goes,” Andrew Sullivan , director of sales trading at Kim Eng Securities in Hong Kong, said by telephone. “But we’ve also seen an impact on oil prices and gold. That’s part of the choppiness.” Japan’s Topix index slipped 0.9 percent even after data showed consumer prices rose at the fastest pace since 2008. Industrial production increased less than economists’ estimates. South Korea’s Kospi index added 1 percent. New Zealand’s NZX 50 Index gained 0.5 percent, and Australia’s S&P/ASX 200 Index advanced 0.8 percent. Hong Kong’s Hang Seng Index and China’s Shanghai Composite Index both added 0.1 percent. Taiwan’s Taiex Index increased 1.3 percent, while Singapore’s Straits Times Index slid 0.3 percent. India’s S&P BSE Sensex (SENSEX) climbed 1.2 percent. Utilities Advance Utilities gained the most among the 10 industry groups on the MSCI Asia Pacific Index. Hokkaido Electric rose 3.5 percent to 1,154 yen after projecting a first-half loss of 1 billion yen ($10 million) versus 48.6 billion yen a year earlier. Shikoku Electric Power Co. added 3.9 percent to 1,534 yen. Crude oil fell a second day after U.K. lawmakers rejected a motion by Prime Minister David Cameron seeking endorsement for military strikes against Syria, easing concern that oil supplies will be disrupted in the Middle East. President Barack Obama is struggling to marshal evidence backing charges that Syrian President Bashar al-Assad was responsible for the use of chemical weapons near Damascus last week, according to three U.S. intelligence officials familiar with the situation. Syrian opposition groups say 1,300 people died in the attack. Inpex lost 2 percent to 445,500 yen. China Petroleum & Chemical Corp., also known as Sinopec, fell 1.8 percent to HK$5.59. Cnooc Ltd., China’s biggest offshore oil and gas explorer, dropped 0.8 percent to HK$15.40. U.S. Growth Futures on the Standard & Poor’s 500 Index (SPX) advanced 0.2 percent today. The measure gained 0.2 percent yesterday as a report showed the U.S. economy grew 2.5 percent in the second quarter, up from an initial estimate of 1.7 percent and more than the 2.2 percent projected by economists. “We have a nice revision to the U.S. GDP, but the outlook remains very tough,” said Sullivan at Kim Eng Securities. “There are so many macro overhangs at the moment and a lot of trading investors are waiting on the sidelines.” Among other stocks that gained, Ping An Insurance rose 0.9 percent to HK$54.35. First-half profit increased 28 percent on higher investment and banking income. China Cosco Holdings Co., the nation’s biggest shipping company, added 3.8 percent to HK$3.56 in Hong Kong. Losses narrowed after asset sales helped offset a freight-rate slump. The loss in the six months through June was 990 million yuan ($162 million), compared with a 4.87 billion-yuan decline a year earlier. Regional Performance The MSCI Asia Pacific has risen 0.7 percent this year, lagging a 15 percent surge in the S&P 500. Investors have sold assets across the region on expectations the Federal Reserve will taper economic stimulus next month. The Asia Pacific index trades at 12.7 times estimated earnings, compared with 14.9 for the S&P 500 Index and 13.6 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net |
2024-11-03 | Bloomberg | Nuclear Power Benefits From Republican Wins, NRG Says | Electricity producers such as NRG Energy Inc. and Southern Co. will benefit as Republicans who won control of the U.S. House yesterday promote nuclear power as part of clean-energy legislation. Requirements for the use of renewable power to reduce carbon emissions and encourage U.S. energy independence may win passage if nuclear plants are added to the wind turbines and solar panels favored by environmentalists, said David Crane , chief executive officer of Princeton, New Jersey-based NRG. “A lot of the things we’re trying to do in Washington to move forward with zero- and low-carbon generation is something that at least the mainstream of the Republican Party wants to support -- nuclear power in particular,” Crane said in an interview. “It’s not just California and Oregon tree-huggers.” Republicans retook the House of Representatives yesterday with a net gain of at least 60 seats, their biggest increase since 1938. They also scored a net gain of at least six seats in the Senate, though Democrats retained control of that chamber. NRG, which owns part of a nuclear power plant in Texas, has applied for a federal loan guarantee to build two more reactors at the site. Crane was among utility executives who backed cap- and-trade legislation that passed the House under Democratic control last year, then languished in the Senate. Republicans called it an energy tax in disguise. President Barack Obama , who supported the cap-and-trade plan, said lawmakers must work together to better secure U.S. energy supplies and curb global warming pollution. “The smartest thing for us to do is to see if we can get Democrats and Republicans in a room who are serious about energy independence and are serious about keeping our air clean and our water clean and dealing with the issue of greenhouse gases, and seeing are there ways that we can make progress in the short term,” Obama said today in a news conference. Upton Backs Nuclear Representative Fred Upton , the Michigan Republican who is in line to head the House Energy and Commerce Committee, supports nuclear power as a way to create jobs in his state, which had a 13 percent unemployment rate in September, according to the Bureau of Labor Statistics. Upton would replace Representative Henry Waxman , a California Democrat who was co-sponsor of the failed cap-and- trade bill, which would have set limits on carbon emissions and established a market for the trading of pollution allowances. “Obama and his team have wanted a legislative solution,” said Josh Greene, a partner with the Washington law firm Patton Boggs LLP. “Obama told the nation today that perhaps there are other solutions, other ways to get us there, outside of cap-and- trade.” In this year’s elections, cap-and-trade was denounced in ads by candidates of both parties. Democratic Governor Joe Manchin of West Virginia, a coal-producing state, literally shot a hole through legislation labeled “cap-and-trade” in one television commercial for his Senate campaign. “Cap-and-trade, I think, is toast,” American Electric Power Co. CEO Michael Morris , who backed the House measure, said in an interview. “We’re looking for a realistic compromise that will give us all certainty about where we’re going.” EPA Regulation The prospect for compromise may be undercut by a fight over plans by the Environmental Protection Agency to impose its own restrictions on carbon emissions. While administration officials say Obama would veto legislation barring EPA Administrator Lisa Jackson from putting the limits in place, the U.S. Chamber of Commerce has urged lawmakers to attach a ban on EPA regulation to spending legislation during the lame-duck closing session of the current Congress. “Cap-and-trade was just one way of skinning the cat,” Obama said. “It was not the only way. It was a means, not an end, and I’m going to be looking for other means to address this problem.” House Republicans may lead investigations next year into the EPA’s justification for new rules on pollutants and potential damage to the economy, said Stephen Brown , a lobbyist for oil refiner Tesoro Corp. of San Antonio, which opposes EPA carbon regulation. “If you make sure that Lisa Jackson has to testify four out of five days a week, I don’t see how that creates an atmosphere for compromise,” Brown said. Renewable Standard Legislation setting a national renewable-energy standard has been championed by Senator Jeff Bingaman , a Democrat from New Mexico. His version would require utilities to get as much as 15 percent of their power from low-pollution sources such as solar and wind energy by 2021. Senator Richard Lugar , a Republican from Indiana who has worked with Democrats on legislative compromises in the past, said he plans to introduce renewable-energy legislation next year that would encourage construction of nuclear and “clean- coal” plants. Senator Tom Carper , a Delaware Democrat who sits on the Senate Environment and Public Works Committee, said legislation such as Lugar’s may be one way to “thread the needle” for a bipartisan compromise. “It’s pretty clear we still need to get something done on this front, and maybe the best we can do is a clean-energy standard that gives initial credit to nuclear and clean coal but eventually provides greater emphasis on true renewables,” Carper said. Environmental Groups Nuclear power remains a tough sell among some environmental groups. The U.S. has no long-term plan to dispose of spent reactor fuel, and building nuclear plants remains prohibitively expensive without government subsidies, said John Walke, clean- air director for the New York-based Natural Resources Defense Council. “Washington is a town of negotiation and compromises, and the nuclear and coal sectors have always been very successful feeding at the Washington trough,” Walke said in an interview. “But I don’t think you will have public policy being made on the representation that either nuclear power or coal power is renewable.” A renaissance in nuclear power may be stalled regardless of action by Congress, said Chris Gadomski , the lead analyst for nuclear power with Bloomberg New Energy Finance. “I don’t think you can legislate new nuclear, especially in an environment when there is a lot of unconventional natural gas to be tapped and the cost of natural-gas generating facilities are about one 10th of nuclear,” Gadomski said. Hydraulic Fracturing House Republicans also will resist efforts to limit hydraulic fracturing, a technique used in drilling for natural gas in which chemically treated water is pumped underground to loosen rock and let gas flow. The EPA is conducting a study of potential environmental impacts of the practice. Wind, solar and other renewable sources excluding hydroelectric power accounted for 3.8 percent of the total U.S. energy supply in the year ended in July, up from 3.4 percent in the same period a year earlier, according to the Energy Information Administration, the statistical arm of the Energy Department. The U.S. got 19.5 percent of its power from nuclear reactors in the recent year. Obama has called for increasing federal guarantees for new nuclear plants to $54 billion from $18.5 billion currently. Reactor Applications The Nuclear Regulatory Commission has received applications for 26 new reactors, according to the agency. Southern Co. has begun work on what may be the first new reactors to come online in the U.S. since 1996, said Steve Kerekes , a spokesman for the Washington-based Nuclear Energy Institute. Southern won a $3.4 billion federal loan guarantee to add two nuclear reactors to the Vogtle station near Waynesboro, Georgia. The company expects to receive an operating license late in 2011, Kerekes said. The Republican takeover of the House also puts Representative Doc Hastings of Washington state, an opponent of new restrictions on offshore oil and gas drilling, in line to take over the Natural Resources Committee. Hastings denounced a measure, passed by the House after the BP Plc oil spill in the Gulf of Mexico, that would remove a $75 million cap on liability for leaks and bar London-based BP from new U.S. leases. Landrieu Compromise The issue remains unsettled because the Senate never took up its version of the drilling bill. Under a compromise proposed by Senator Mary Landrieu , a Louisiana Democrat, companies would pay into an insurance pool based on how much offshore oil and gas they produce, with the fund paying for the first $10 billion in spill damages. While supporters of cap-and-trade legislation once envisioned sweeping legislation akin to Obama’s health-care overhaul, the president said he was reconciled to smaller steps. To contact the reporters on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net ; Jim Snyder in Washington at jsnyder24@bloomberg.net. To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net . |
2024-12-20 | Bloomberg | Housing Poised to Bolster U.S. Growth as Sales Rise: Economy | Sales of previously owned homes climbed to a three-year high in November, reinforcing forecasts that the industry is set to contribute to U.S. annual economic growth for the first time since 2005. Purchases of existing houses increased 5.9 percent to a 5.04 million annual rate, the most since November 2009, the National Association of Realtors reported today in Washington. The median forecast of 82 economists surveyed by Bloomberg projected a 4.9 million rate. “Housing is going from being a powerful headwind to the economy to what will be a powerful tailwind,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “It turned around in 2012, and I think it’s going to take off in 2013.” Rising real-estate values are helping to lift consumer confidence, which rose to an eight-month high last week, according to the Bloomberg Consumer Comfort Index. Another report showed the economic outlook weakened in November, highlighting the risks posed by potential federal spending cuts and tax increases, after growth picked up more than initially reported in the third quarter. Stocks rose as House Speaker John Boehner said he expects to keep working on a budget plan with President Barack Obama. The Standard & Poor’s 500 Index climbed 0.6 percent to 1,443.69 at the close in New York. U.K. Sales In Europe today, U.K. retail sales unexpectedly stagnated in November as spending at department stores slumped the most in almost two years. Sales including fuel were unchanged from October, when they fell 0.7 percent, the Office for National Statistics said in London. Elsewhere, the Bank of Japan expanded its asset-purchase program for the third time in four months and will reconsider its objectives for inflation as incoming Prime Minister Shinzo Abe urges more action to end price declines. The U.S. economy grew at a 3.1 percent annual rate in the third quarter, compared with a previously estimated 2.7 percent advance, according to Commerce Department figures. The report reflected the first gain in state and local government spending in three years, more consumer purchases and a smaller trade gap. The index of leading indicators fell in November, pointing to a slowdown early next year. The Conference Board’s gauge of the outlook for the next three to six months dropped 0.2 percent after a revised 0.3 percent gain in October that was larger than initially reported, the New York-based group said. Buyer Credit Today’s report from the Realtors group showed sales were strongest since a first-time buyer credit was first due to expire in November 2009. Excluding the period influenced by the tax break, sales were the strongest since July 2007, before the recession began. The median home price increased 10.1 percent to $180,600 from $164,000 in November 2011. Sales of higher-priced houses are a growing share of the market, driving the advance, Lawrence Yun, NAR chief economist, said in a news conference as the figures were released. Improving values are helping to drive gains in consumer confidence. The Bloomberg Consumer Comfort Index climbed to minus 31.9 in the period ended Dec. 16, the highest level in eight months, from minus 34.5 in the prior week. The gauge is within a half point of a four-year high reached in April. Shoppers are spending in part as a result of housing-market gains, said Robert Hull, chief financial officer at Lowe’s, based in Mooresville, North Carolina. Gaining Confidence This year “represents the first year of growth across all of the core housing metrics: housing turnover, single-family starts and median home prices,” Hull said at a Dec. 5 investor conference. “These recent positive trends are helping consumers regain confidence in both their local housing markets and their home value.” Furniture sales at Pier 1 Imports Inc. (PIR) have been gaining momentum all year, president and chief executive officer Alexander Smith said. On Dec. 13, the company reported its 13th consecutive quarter of sales and profit growth. The improvement is due in part to “what we view as the very beginnings of a long-awaited recovery in the housing market,” Smith said on an earnings call. The job market remains an area of weakness for the economy, explaining why Federal Reserve policy makers this month said they would keep the benchmark interest rate near zero as long as unemployment remains above 6.5 percent, and if the Fed projects inflation of no more than 2.5 percent in one or two years. The number of Americans filing first-time claims for unemployment insurance payments rose for the first time in five weeks, Labor Department figures showed today. Jobless Benefits Applications for jobless benefits increased by 17,000 to 361,000 in the week ended Dec. 15. Economists forecast 360,000 claims, according to the Bloomberg survey median. Today’s home-sales figures are the latest evidence of strength in the industry at the heart of the last recession. The number of building applications issued in November rose to a four-year high, Commerce Department data showed yesterday. Residential construction may add to economic growth this year for the first time since 2005, boosting gross domestic product by 0.3 percentage point, according to Joseph LaVorgna , chief U.S. economist at Deutsche Bank AG in New York. That contribution may double next year and reach about 1 percentage point when related industries such as furnishings and remodeling are added, he said last week. “The housing recovery should pick up strength,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “Housing is going to add to growth.” To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-01-01 | Bloomberg | Urjit Patel Said to Be a Candidate for RBI Deputy Governor Post | India is considering economist Urjit Patel as one of three candidates for deputy governor at the nation’s central bank, a government official with direct knowledge of the matter said. The other candidates are World Bank economist Kalpana Kochhar and Subir Gokarn , with a decision probable today, the official said, asking not to be identified before an announcement. Gokarn was one of four deputy governors and was in charge of the monetary policy department until his three-year term ended on Dec. 31 after a one-month extension. Governor Duvvuri Subbarao has taken charge of that policy unit until further notice, the Reserve Bank of India said yesterday. The central bank has so far resisted calls from Finance Minister Palaniappan Chidambaram for cheaper credit, while signaling it may cut interest rates in coming months to help revive economic growth as inflation eases. Patel is an adviser to the Boston Consulting Group , a non- resident senior fellow at the Brookings Institution , an ex- International Monetary Fund economist and a former adviser to the Reserve Bank , according to the Brookings website. He didn’t answer questions when reached on his mobile phone and didn’t pick up subsequent calls. Gokarn didn’t answer calls to his office and home phones. Kochhar’s e-mail and phone number weren’t immediately available. The economic and policy research and statistics units will also report directly to Subbarao following the reallocation of responsibilities, the central bank said in its statement. The RBI said it expanded the portfolios of the three continuing deputy governors. K.C. Chakrabarty will look after the Deposit Insurance and Credit Guarantee Corporation, the department promoting the use of Hindi in banking and finance, and the Right to Information Division. Anand Sinha was given the communication and risk monitoring divisions, and Harun Rashid Khan the financial markets department. Subbarao has left the repurchase rate at 8 percent since a 50 basis-point cut in April. Inflation exceeding 7 percent for most of last year curbed his scope to lower the benchmark to spur Asia ’s third-largest economy. To contact the reporters on this story: Tushar Dhara in New Delhi at tdhara1@bloomberg.net ; Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net. To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net |
2024-06-27 | Bloomberg | U.S. May Personal Income and Spending (Text) | Following is the text of the U.S. disposition of personal income from the U.S. personal income and spending report released by the Commerce Department. Personal income increased $36.2 billion, or 0.3 percent, and disposable personal income (DPI) increased $29.2 billion, or 0.2 percent, in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $4.6 billion, or less than 0.1 percent. In April, personal income increased $37.7 billion, or 0.3 percent, DPI increased $27.9 billion, or 0.2 percent, and PCE increased $28.8 billion, or 0.3 percent, based on revised estimates. Real disposable income increased 0.1 percent in May, in contrast to a decrease of 0.1 percent in April. Real PCE decreased 0.1 percent, the same decrease as in April. 2011 Jan. Feb. Mar. Apr. May (Percent change from preceding month) Personal income, current dollars 1.1 0.4 0.4 0.3 0.3 Disposable personal income: Current dollars 0.5 0.3 0.4 0.2 0.2 Chained (2005) dollars 0.1 -0.1 0.0 -0.1 0.1 Personal consumption expenditures: Current dollars 0.4 0.8 0.6 0.3 0.0 Chained (2005) dollars 0.0 0.4 0.2 -0.1 -0.1 Wages and salaries Private wage and salary disbursements increased $14.1 billion in May, compared with an increase of $26.4 billion in April. Goods-producing industries' payrolls increased $4.1 billion, compared with an increase of $4.3 billion; manufacturing payrolls increased $2.9 billion in May; manufacturing payrolls was unchanged in April. Services-producing industries' payrolls increased $9.8 billion in May, compared with an increase of $22.2 billion in April. Government wage and salary disbursements was unchanged in May; government wage and salary disbursements increased $0.4 billion in April. Other personal income Supplements to wages and salaries increased $3.4 billion in May, compared with an increase of $3.8 billion in April. Proprietors' income decreased $1.7 billion in May, in contrast to an increase of $3.2 billion in April. Farm proprietors' income decreased $1.3 billion, the same decrease as in April. Nonfarm proprietors' income decreased $0.4 billion in May, in contrast to an increase of $4.5 billion in April. Rental income of persons increased $3.3 billion in May, compared with an increase of $2.9 billion in April. Personal income receipts on assets (personal interest income plus personal dividend income) increased $10.0 billion, compared with an increase of $6.0 billion. Personal current transfer receipts increased $9.3 billion, in contrast to a decrease of $1.8 billion. Contributions for government social insurance -- a subtraction in calculating personal income -- increased $2.2 billion in May, compared with an increase of $3.3 billion in April. Personal current taxes and disposable personal income Personal current taxes increased $6.9 billion in May, compared with an increase of $9.8 billion in April. Disposable personal income (DPI) -- personal income less personal current taxes -- increased $29.2 billion, or 0.2 percent, in May, compared with an increase of $27.9 billion, or 0.2 percent in April. Personal outlays and personal saving Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- increased $6.2 billion in May, compared with an increase of $30.3 billion in April. PCE increased $4.6 billion, compared with an increase of $28.8 billion. Personal saving -- DPI less personal outlays -- was $591.1 billion in May, compared with $568.0 billion in April. Personal saving as a percentage of disposable personal income was 5.0 percent in May, compared with 4.9 percent in April. For a comparison of personal saving in BEA national income and product accounts with personal saving in the Federal Reserve Boards flow of funds accounts and data on changes in net worth, go to http://www.bea.gov/national/nipaweb/Nipa-Frb.asp. Real DPI, real PCE and price index Real DPI -- DPI adjusted to remove price changes -- increased 0.1 percent in May, in contrast to a decrease of 0.1 percent in April. Real PCE -- PCE adjusted to remove price changes -- decreased 0.1 percent in May, the same decrease as in April. Purchases of durable goods decreased 1.7 percent in May, compared with a decrease of 0.3 percent in April. Purchases of motor vehicles and parts accounted for most of the decrease in May and more than accounted for the decrease in April. Purchases of nondurable goods decreased 0.3 percent in May, in contrast to an increase of 0.2 percent in April. Purchases of services increased 0.2 percent, in contrast to a decrease of 0.1 percent. PCE price index -- The price index for PCE increased 0.2 percent in May, compared with an increase of 0.3 percent in April. The PCE price index, excluding food and energy, increased 0.3 percent, compared with an increase of 0.2 percent. Revisions Estimates have been revised for January through April. Changes in personal income, current-dollar and chained (2005) dollar DPI, and current-dollar and chained (2005) dollar PCE for March and April -- revised and as published in last month's release -- are shown below. Change from preceding month March Previous Revised Previous Revised (Billions of dollars) (Percent) Personal Income: Current dollars 54.6 56.5 0.4 0.4 Disposable personal income: Current dollars 46.3 49.0 0.4 0.4 Chained (2005) dollars 1.4 0.0 0.0 0.0 Personal consumption expenditures: Current dollars 54.8 64.3 0.5 0.6 Chained (2005) dollars 12.2 17.1 0.1 0.2 April Previous Revised Previous Revised (Billions of dollars) (Percent) Personal Income: Current dollars 46.1 37.7 0.4 0.3 Disposable personal income: Current dollars 35.1 27.9 0.3 0.2 Chained (2005) dollars -3.4 -9.5 0.0 -0.1 Personal consumption expenditures: Current dollars 41.5 28.8 0.4 0.3 Chained (2005) dollars 5.0 -6.0 0.1 -0.1 Annual Revision of the National Income and Product Accounts As part of the annual revision of the national income and product accounts (NIPAs), revised estimates of personal income and outlays will be released along with estimates for June 2011 on August 2. Personal income, disposable personal income, and their components will be revised back to January 2008, and PCE and personal saving will be revised back to January 2003. The August Survey of Current Business will contain an article that describes the annual revision in detail. BEAs national, international, regional, and industry estimates; the Survey of Current Business; and BEA news releases are available without charge on BEAs Web site at www.bea.gov. By visiting the site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements. Next release -- August 2, 2011 at 8:30 A.M. EDT for Personal Income and Outlays for June To contact the reporter on this story: Alex Tanzi in Washington at atanzi@bloomberg.net To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net |
2024-05-18 | Bloomberg | Institutional Investors Beat REITs as Top Buyers of U.S. Office Properties | Institutional investors overtook publicly traded real estate investment trusts as the largest acquirers of U.S. office buildings in the first quarter, a sign of widening demand that may push property prices up. Buyers including pension funds, insurance companies and sovereign-wealth funds added a net $1.39 billion to their office-building holdings in the first quarter, compared with $1.1 billion for REITs, according to data from CoStar Group Inc. (CSGP) Their shift to acquisitions signals that, after being net sellers last year, they are beginning to expand their holdings. “Hopefully that means that they’re down to their core portfolio and they’re going to start adding to it,” Christopher Macke, senior real estate strategist at Washington-based CoStar, said in a telephone interview. “Assuming that the institutional folks continue their net buying and the REITs continue that as well, that should portend a positive direction for pricing in commercial real estate.” Demand for commercial real estate is rising as the economy improves and yields remain low for fixed-income investment alternatives. Institutions were larger purchasers of office buildings than REITs were in three of four quarters last year, Macke said. They also were bigger sellers. Investment-grade commercial property prices rose 2.2 percent in March from a year earlier, CoStar data show. Office sales more than doubled in the first quarter from a year earlier to $10.2 billion, according to Real Capital Analytics Inc., a New York-based real-estate data provider. JPMorgan Chase One of the largest deals so far this year included an institutional investor. The investment-management unit of JPMorgan Chase & Co. (JPM) , along with developer Steve Samuels, bought Boston ’s Landmark Center, an office and retail complex near Fenway Park, for $530.5 million. “Investors right now have a strong interest in core real estate,” said Roy Rendino, chief executive officer of the Chicago-based National Council of Real Estate Investment Fiduciaries , a trade group for institutional investors. Credit is more available to real estate investors as insurers and other financiers increase the amount of money devoted to mortgages. Commercial and apartment-building loan origination surged to $118.8 billion last year, up 44 percent from 2009, according to an April 25 report by the Washington- based Mortgage Bankers Association. CMBS Comes Back The revival of the commercial mortgage-backed securities market also is boosting credit availability. Sales of new commercial mortgage bonds are surging as investors seek higher yields with the Federal Reserve holding its benchmark interest rate at record lows. Wall Street firms have arranged $8.6 billion of bonds tied to property loans in 2011, compared with $11.5 billion during all of last year, according to data compiled by Bloomberg. Issuance may climb to $45 billion this year, according to JPMorgan. It plummeted to $3.4 billion in 2009, during the financial crisis, from a record $234 billion in 2007, Bloomberg data show. Purchases of office, retail and other real estate by REITs may slow this year as prices for some properties surge, Craig Guttenplan, senior REIT analyst at CreditSights Inc. in London , said in a telephone interview. “A lot of them are going to be net sellers just because of where valuations are,” he said. The proceeds from sales by REITs may be used for redeveloping properties or construction, Guttenplan said. Debt, Stock Offerings REITs raised $22 billion from debt and stock offerings in the first quarter, the highest total in data going back to 1988, according to the National Association of Real Estate Investment Trusts. About $7.7 billion of that total was raised by Health Care REIT Inc. (HCN) and HCP Inc. (HCP) and was related mainly to acquisitions. REITs are facing increased competition for office properties, mainly in such major markets as New York and Washington , which is resulting in higher prices, Macke said. Some pension funds are increasing their allocations to real estate as they search for higher yields and hedges against inflation, said Kenneth Rosen, chairman of Berkeley, California- based Rosen Real Estate Securities LLC. “We think it’s a good time to do it,” he said. To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net |
2024-08-29 | Bloomberg | Insurers Add Risk, Sacrifice Liquidity in Hunt for Yield | U.S. life insurers, a group led by MetLife Inc., are turning to riskier and less-liquid assets as they work to increase investment income amid near record-low interest rates , Moody’s Investors Service said. Portfolio managers are adding high-yield bonds, commercial mortgages and bank loans to boost income, while attempting to limit risk if rates do rise, according to the ratings firm. “Insurers are naturally searching for yield,” said Ann Perry, a senior credit officer at New York-based Moody’s. “They are devoting or allocating a little bit more money to high-yield investments, to alternatives.” Life insurers build investment portfolios to back payouts on long-term obligations such as annuities and policies that provide cash to survivors when customers die. They’ve struggled to maintain investment income as the Federal Reserve pledged to keep interest rates low through at least late 2014, sending the average yield on the 10-year Treasury to 1.81 percent in the second quarter of this year, compared with 3.19 percent in the same period a year earlier. “They’re not trying to garner yield simply by going out further on the yield curve,” said Joel Levine, an associate managing director at Moody’s. “Many companies view the direction of rates ultimately to be going up and you don’t want to be long.” MetLife, the largest U.S. life insurer, said the average yield on its $367.1 billion of fixed-maturity securities fell to 4.76 percent as of June 30 from 4.94 percent a year earlier. Junk Bonds Chief Executive Officer Steven Kandarian has focused on private lending to corporations, saying rates are higher with less liquid securities. The New York-based firm boosted its allocation to U.S. corporate bonds to 30.1 percent of fixed- maturity holdings from 28.3 percent a year earlier and limited foreign holdings, according to its second quarter financial supplement. American International Group Inc. (AIG) , the bailed-out insurer, purchased $7.1 billion of mortgage investments this year from the Maiden Lane III vehicle created to aid in its rescue as it works to boost yields, the New York-based firm said this month. The assets “are very good for this company on the yield basis going forward, especially in this lower interest rate environment,” CEO Robert Benmosche said on an Aug. 3 conference call with analysts. U.S. life insurers increased their high-yield allocation to 8 percent of corporate bonds last year from about 6 percent in 2010, while reducing holdings of bonds rated A or higher to 49 percent from 50 percent, JPMorgan Chase & Co. analysts led by Eric Beinstein wrote in an Aug. 24 research report. Among the 20 largest life insurers, 33 percent of $1.9 trillion in total assets was allocated to corporate bonds and 22 percent to structured products such as mortgage-backed securities, JPMorgan said. Mortgages comprised 12 percent. “Recent yield pressure has driven life insurance companies to increase the portion of their holdings to lower-rated bonds and emerging markets corporate issuers,” the analysts wrote. To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-02-27 | Bloomberg | Esure Plans London IPO as Founder Reduces Stake | Esure Group Plc , the U.K. motor insurer started by Direct Line Insurance Group Plc (DLG) founder Peter Wood, said it plans an initial public offering as its chairman reduces his holding. The company plans to raise 50 million pounds ($76 million) in the offering of new shares, while Wood, the chairman, and Tosca Penta Investments LP will also sell stock, the company said in a statement today. The company, based in Surrey, England, will use the money to repay a loan from Tosca, which it received during its management buyout from Lloyds Banking Group Plc (LLOY) in 2010. Wood is taking advantage of rising equity markets in the beginning of 2013 as he seeks to build a more diverse base of investors. A successful share sale would follow Royal Bank of Scotland Group Plc ’s IPO of Direct Line, the U.K.’s biggest home and motor insurer, which raised 787 million pounds for the lender in October. Direct Line is up 12.2 percent since then. Esure is going public after reporting full-year pretax profit more than doubled to 115.5 million pounds. The general insurer seeks to beat its competitors by targeting safer drivers such as people over the age of 30 and women, who it sells to through its Sheila’s Wheels brand. “Our record of outperformance is down to our granular understanding of risk, our conservative underwriting approach and our speed in reacting to change,” Wood said in the statement. Deutsche Bank AG, JPMorgan Cazenove , Canaccord Genuity and Numis Securities Ltd. are advising on the offering. To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-09-03 | Bloomberg | London Walkie Talkie Owners Probe Tower’s Car-Melting Ray | The owners of the 37-story tower known as the Walkie Talkie in the City of London financial district are investigating a light beam cast by the building that’s so intense it melted parked cars. Land Securities Group Plc (LAND) and Canary Wharf Group Plc are examining the phenomenon and, along with the City of London , have blocked three parking spaces around the building at 20 Fenchurch Street that may be affected, the companies said in a statement after the market closed yesterday. The glare from the skyscraper, whose nickname derives from the tapering design that’s responsible for the beam, has melted parts of vehicles, City AM newspaper reported yesterday. “We are taking the issue of light reflecting from 20 Fenchurch Street seriously and are looking into the matter as a priority,” Land Securities and Canary Wharf Group said in the statement. The light beam, which depends on the sun’s elevation in the sky, lasts about two hours a day at this time of the year, the companies said. Preliminary modeling indicates it will be present for two to three weeks. Being in the stream of light was “like walking through a wall of heat,” James Graham, a consultant at Hydrogen Group Plc (HYDG) , a recruiting firm located near the building, said in an interview. “I hope it hasn’t damaged my eyes.” Diffused Light The companies said they’re “consulting with local businesses and the City to address the issue in the short term while also evaluating longer-term solutions to ensure the issue cannot recur.” The developers may have to apply a finish to the outside of the glass that diffuses light rather than reflecting it at full intensity, said Koen Steemers, head of Cambridge University ’s department of architecture. “It probably wouldn’t affect the transparency of the glass, but would slightly scatter the reflected solar radiation,” he said. The Walkie Talkie, designed by Uruguayan architect Rafael Vinoly, is due to be completed next year. Tenants have signed up to occupy 52 percent of the building and contracts for a further 4 percent of the space are awaiting legal confirmation, Land Securities said on July 17. The building is popular with companies from the insurance industry because it’s close to the Lloyds of London building. Markel Corp. (MKL) , Ascot Underwriting Inc. and Kiln Group Ltd. have signed as tenants. “The developer has moved very quickly to meet and discuss with anyone affected,” the City of London Corporation said in a statement on its website. “They have compensated a car owner, spoken to local businesses and explored temporary solutions, perhaps including partial screening.” To contact the reporter on this story: Patrick Gower in London at pgower@bloomberg.net To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net |
2024-02-03 | Bloomberg | Niesr Says U.K. in a Recession as It Forecasts 2012 Contraction | The U.K. economy has slipped back into a recession and will grow less than previously forecast over the next two years, the National Institute for Economic and Social Research said. Gross domestic product will fall 0.2 percent this quarter after declining by the same amount in the three months through December, the institute said in a report in London today. It forecasts that the economy will shrink 0.1 percent this year and grow 2.3 percent in 2013, compared with previous projections in October for growth of 0.8 percent and 2.6 percent respectively. Bank of England policy maker Adam Posen said yesterday there is an argument for officials to expand their so-called quantitative easing program by 75 billion pounds ($119 billion) next week. Niesr, which said there are “downside” risks to the U.K. outlook, cut its forecasts for global growth and said the euro area faces a “mild recession” as leaders struggle to end the region’s debt crisis. “The flat economy is only temporary, but that is dependent” on “decisive action” in the euro area, said Simon Kirby , a senior research fellow at Niesr. “Risks are still weighted to the downside.” Niesr, which sees the U.K. economy growing 0.1 percent in the second quarter of 2012, revised its unemployment forecasts. It now sees the jobless rating averaging 8.9 percent this year and 8.5 percent in 2013, compared with 8.7 percent and 8.2 percent previously. Chancellor of the Exchequer George Osborne should consider a short-term stimulus to support the economy, according to Niesr. Jonathan Portes, director of the institute, said the government should spend at least 15 billion pounds on infrastructure programs and cut National Insurance contributions. The global economy will expand 3.5 percent this year and 4 percent in 2013, Niesr said. The 2012 estimate is between 0.75 percentage point and 1 percentage point below what the group would consider trend growth, so could be described as a “world recession,” Niesr senior research fellow Dawn Holland said. To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net |
2024-02-24 | Bloomberg | Consumer Comfort in U.S. Climbed to Highest Level Since 2008 | Press Release Forty-Nine Percent of Those Polled In Index Held Positive Views on Their Financial Situations New York, February 24 -- Consumer confidence climbed last week to the highest level since April 2008 as Americans grew less pessimistic about their finances. The Bloomberg Consumer Comfort Index, formerly the ABC News U.S. Weekly Consumer Comfort Index, was minus 39.2 in the period to Feb. 20, compared with minus 43.4 the prior week, a report today showed. Forty-nine percent of those polled held positive views on their financial situation, the most in a year. The biggest two-month drop in the jobless rate since 1958 may be helping lift households’ spirits, boosting the odds that spending, which accounts for about 70 percent of the economy, will keep growing. Higher gasoline prices will remain a hurdle as political tensions in oil-exporting countries push up the cost of crude. For full CCI results, see: http://www.bloomberg.com/cci Improving sentiment “may give consumers the shot in the arm they need to step up spending,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Rising gasoline prices will impact the index with a lag. Consumers will be forced to adjust spending patterns.” Less unemployment, a growing economy and increases in stocks are helping offset negative forces, including higher fuel costs and a troubled housing market, said Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg. Readings of minus 40 have historically been the threshold indicating Americans think a recovery from recession has begun, he said. The index’s gain is “a significant advance in its struggle to return to levels associated with economic growth,” Langer said in a statement. “There are still miles to go.” The four-point gain last week follows a five-point increase in early January. The gauge dropped five points in the week ended Feb. 6, the biggest setback since January 2010. Movements of that magnitude are unusual because the index is based on a four-week average, Langer said. Nonetheless, the gauge is mimicking the shifts seen in a 10-week span in mid- 1993, when the economy was also recovering from a recession. The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 18 and over. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three. The share of households with a positive view of the economy rose to 15 percent, the most since September 2008, from 14 percent the prior week. Those saying it was a good time to buy needed items rose to 27 percent, compared with 25 percent the previous week. Macy’s Inc., the second-biggest U.S. department-store chain, is among companies counting on shoppers to keep spending. The Cincinnati-based retailer this week reported earnings that beat analysts’ estimates as it controlled costs and sold exclusive holiday gifts. “We are entering the year with building momentum, which gives us confidence that we should have another strong year,” Karen Hoguet, chief financial officer, said on a conference call with investors on Feb. 22. Women registered the sharpest advance in confidence last week, gaining 8.5 points, the biggest increase since July 2007, to minus 42.6. The reading for men was little changed. Survey respondents’ views varied sharply based on income levels, today’s report showed. The index for Americans earning less than $15,000 a year was at minus 68.6 last week, compared with minus 76.6 the week before. For those making more than $100,000, the index improved to minus 0.3 from minus 4.6. Confidence improved to minus 24.5 among those holding a full- time job, compared with minus 52.1 for part-timers. Fewer Americans filed applications for unemployment insurance payments last week, figures from the Labor Department showed today. The number of claims decreased to 391,000 from 413,000 the prior week. Gasoline prices and the comfort index have moved in the same direction 98 percent of the time since 2004, according to calculations by Bloomberg’s Brusuelas. Changes in the four-week average of claims for jobless benefits have been in sync with the comfort gauge about 72 percent of the time. The comfort index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative. The margin of error is 3 percentage points. The responses are broken down by participants’ sex, age, income level, race, region of residence, political affiliation, marital and employment status. Field work for the index is done by SSRS/Social Science Research Solutions in Media, Pennsylvania. Contact: Meghan Womack, +1 212-617-8514, mwomack4@bloomberg.net |
2024-05-24 | Bloomberg | Lloyds Names Aviva’s Strauss as Insurance Head, Replacing Kane | Lloyds Banking Group Plc (LLOY) has hired Toby Strauss, chief executive officer of Aviva Plc (AV/) ’s U.K. life insurance business, as group director for insurance, the bank said in an e-mailed statement yesterday. Strauss, who takes over from Archie Kane, who is retiring, will join Lloyds on Oct. 3 and be responsible for running the bank’s life and pensions unit as well as overseeing the insurance division, Lloyds spokesman Ross Keany said by phone yesterday. Rosie Harris, divisional risk officer, insurance, will take on the role of managing director, general insurance, according to the statement. “Both of these appointments will further strengthen the senior team and build on the foundations that will enable us to deliver on our longer-term plans,” CEO Antonio Horta-Osorio said in the statement. The appointment of Strauss may be a sign that the bank plans to retain its Scottish Widows insurance arm, the Financial Times reported earlier. Horta-Osorio is due to announce the results of a strategic review at the end of June, the FT said. Strauss’s appointment follows an announcement in March that Kane would be retiring. Harris will report to Strauss, while Strauss will report to Horta-Osorio, the statement said. To contact the reporter on this story: Blanche Gatt in London at bgatt@bloomberg.net To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net . |
2024-07-11 | Bloomberg | Shanghai Economic Test Zone Lures Imitators From China Ports | Shanghai ’s test zone for trade and investment reforms is attracting attention from Chinese port cities that want to mirror its role, as Premier Li Keqiang pledges to keep opening up the world’s second-biggest economy. Xiamen in the southeast may be included in the pilot program, China Securities Journal reported today, citing a person it didn’t identify. In the north, Tianjin has begun plans to reclaim 40 square kilometers of land for a free trade zone, and is seeking government approval, the 21st Century Business Herald reported yesterday, also citing an unidentified person. Li signaled this week his determination to press on with policy changes, just as a squeeze in credit and weakness in exports threaten to drag 2013 economic growth to a 23-year low. China ’s government may unveil 21 initiatives for creating a Hong Kong-like zone in Shanghai as soon as this week in a possible template for nationwide reforms, the South China Morning Post reported today. “The question now is whether reform will be fast enough, not whether reform will happen,” said Yao Wei, China economist at Societe Generale SA in Hong Kong. While China and the publications use the term “free trade zone” to refer to the new areas, the meaning is more akin to a free-market zone subject to less regulation and interference, rather than an area of duty-free trade. People’s Bank of China Governor Zhou Xiaochuan said in a speech last month that the central bank will optimize financial conditions in Shanghai to fit with the test zone. Tianjin will invest as much as 60 billion yuan ($9.8 billion) to reclaim the land over the next five years, according to the Business Herald newspaper. Taiwan Proximity Xiamen’s advantages as a free-trade zone include the neither-big-nor-small size of its economy and its proximity to Taiwan , according to the China Securities Journal, which is published by the official Xinhua News Agency. The newspaper cited an “expert” it didn’t identify. Calls today to the Tianjin commerce bureau’s press office and Xiamen economic development bureau went unanswered. A person at the Shanghai municipal government’s press office, who declined to give her name citing official policy, said the office has no information on policies for the Shanghai free-trade zone or when they’ll be announced. The Li-led State Council, or cabinet, on July 3 said it approved a plan to set up the nation’s first pilot free trade zone in Shanghai, describing it as an important move to adapt to global economic and trade development and open up further. The government has yet to give details on the plan. Video Games One part of the plans for Shanghai’s free trade zone may include ending a 13-year-ban on the manufacturing and sale of video-game consoles in China, on the condition that companies such as Sony Corp. and Nintendo Co. make their products in the new Shanghai area, according to the South China Morning Post. The newspaper cited people it didn’t identify who reviewed documents on the policies for the zone. Foreign companies would be permitted to set up wholly owned health-insurance operations and foreign-shipping firms could establish cargo joint ventures, the South China Morning Post reported. China already has a financial zone in the Qianhai district in Shenzhen, which borders Hong Kong. The area was created by the State Council in 2010. The government said in June 2012 it would make Qianhai a test ground for freer yuan usage and capital-account convertibility. --Kevin Hamlin, Penny Peng, with assistance from Emma Bi in Hong Kong, Zhang Dingmin in Beijing, Alfred Cang in Shanghai and Sunil Jagtiani in New Delhi. Editors: Scott Lanman, Paul Panckhurst To contact Bloomberg News staff for this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net |
2024-12-07 | Bloomberg | Obama Tax Deal Wins Praise From Business-Lobby Critics (Update1) | President Barack Obama won praise from business groups that have criticized his labor, health and financial regulatory policies after he agreed to extend tax cuts for all Americans and cut workers’ payroll taxes. Obama’s deal with Republicans in Congress to maintain for two years the Bush-era tax cuts that are to expire this month and give businesses more write-offs on research and machinery costs will boost the economy by removing uncertainty that led to the complaints from executives, Bruce Josten, chief lobbyist for the U.S. Chamber of Commerce, said today. The agreement “is one of the best steps Washington can take to eliminate the uncertainty that is preventing our employers from hiring, investing, and growing their businesses,” Josten said in an e-mail. It will “go a long way toward helping our economy break out of this slump and begin creating American jobs.” The Chamber, the largest Washington lobbying group, spent more than $30 million on political advertising in this year’s election, mostly to support Republican candidates. The Chamber said a “tsunami” of regulations from Obama on health care, labor and the environment have undercut economic growth and cost the American economy jobs. “The president made the right decision for the country and the economy by not increasing taxes in what is still the worst recession and jobs crisis since the Great Depression,” said Daniel DiMicco, chief executive officer of steelmaker Nucor Corp. ‘Incent Businesses’ AT&T Inc. Chief Financial Officer Rick Lindner said the economy is too fragile to resume tax rates in place before the Bush cuts took effect. “You need to incent businesses to grow,” Lindner said today. After almost a week of negotiations with lawmakers led by Treasury Secretary Timothy Geithner and budget director Jack Lew, Obama announced last night he’ll accept a deal that would keep current tax rates for high-income taxpayers for two years in exchange for extending federal unemployment insurance for the long-term jobless and cutting the payroll tax by $120 billion for one year. Executives credited the Republican victories in the Nov. 2 election, in which they won control of House and added to their seats in the Senate, for forcing a shift in strategy by an administration they blamed for undercutting companies. “He is anti-business,” Mike Jackson, chief executive officer of AutoNation Inc., said in an interview. “He had to be dragged kicking and screaming. It took a shellacking to get him here.” Obama Vow Obama had sought to maintain the lower tax rates on the first $200,000 of an individual’s annual income and first $250,000 in yearly earnings for married couples filing joint returns. The president now faces criticism for abandoning his pledge to extend tax cuts only for middle-income Americans. The tax cuts were adopted during the George W. Bush administration. Representative Chris Van Hollen of Maryland, a member of the Democratic leadership, said today on Bloomberg Television that he had “serious reservations,” and House Speaker Nancy Pelosi faulted extending the top tax rates. The deal “gives us the time to have this political battle without having the same casualties for the American people that are my No. 1 concern” Obama said today at a White House news conference. The compromise, if approved by Congress, will boost the economy, help stock markets and signal a pullback from Washington’s mounting interference in the economy since Obama took office in 2009, Thomas Lee, chief equity strategist for JPMorgan Chase & Co. in New York, said in an e-mail. ‘Something Sensible’ “The most important thing is that Washington is going to do something sensible, rather than all the crazy things we’ve seen” in the past two years, William Dunkelberg, the chief economist of the Nashville, Tennessee-based National Federation of Independent Business, said in an interview. The group, representing U.S. small-business owners, fought Obama’s health-care legislation and sought to head off legislation that passed the House of Representatives to regulate carbon emissions. In early 2009, Dunkelberg said he advocated a full suspension of the payroll tax, which funds Social Security and Medicare, in place of Obama’s stimulus package of tax cuts and government infrastructure projects. Obama’s deal with the Republicans includes a 2 percentage point cut in the payroll tax, representing a savings of about a third on the 6.2 percent share of the tax workers normally pay. ‘Little More Stimulus’ “The consumer will get a little more stimulus, and they will spend it,” Dunkelberg said in an interview. Obama also endorsed allowing full deduction for equipment purchases that now are written down over time. The proposal would accelerate $200 billion in tax savings for companies in the first year and benefit 1.5 million companies and several million individuals who run businesses, according to White House estimates. Such a reduction will help both the companies investing in new machinery and the makers of that equipment, said Dorothy Coleman, the vice president for tax policy at the Washington- based National Association of Manufacturers. “That’s a two-for for manufacturers,” Coleman said in an interview. Some business leaders say they are worried that the tax deal will add to the U.S. deficit. “It seems that we will have less revenue and higher expenditures,” Peter Huntsman, the chief executive of Huntsman Corp., said in an e-mail. “This will lead to a path to economic destruction. I can only hope their next battle will be addressing our growing imbalance of revenues and expenditures.” To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net To contact the editor responsible for this story: Steve Geimann at sgeimann@bloomberg.net |
2024-12-31 | Bloomberg | House Planning No Budget Vote Means Tax Increases Start | The U.S. House of Representatives doesn’t plan any votes on the federal budget tonight, meaning that Congress for now will fail to avert $600 billion in tax increases and spending cuts set to start at midnight. Taxpayers and investors won’t see immediate effects of the changes, which would accumulate over a matter of months. Congress could reverse them by acting retroactively early in 2013. There are signs it may do that. Earlier today, Senate Minority Leader Mitch McConnell said lawmakers were “very, very close” to a deal to avert the budget changes, known as the fiscal cliff. The Kentucky Republican called on lawmakers to “pass the tax-relief portion” of a budget agreement being negotiated that would continue lower tax rates for all but the highest earners. The only House votes still scheduled for today are on non- budget items, according to the chamber’s schedule. Republicans left open the option to return if needed. House Republicans gathered in a private conference meeting late this afternoon in Washington time, and Senate Republicans also were meeting. “I don’t see how you get something voted on today,” said Representative Mike Rogers, a Michigan Republican. Even if the Senate gets a ”hand-shake deal,” the consensus among lawmakers is that it would be “really hard” for a vote to occur before midnight, Rogers told reporters. Lengthy Dispute After more than 17 months of bickering, Congress and President Barack Obama have yet to finalize an agreement to avert the fiscal cliff. Even if a deal is reached and can get through both chambers of Congress in coming days, it would be more limited than Obama and leaders of both parties sought. It also would set up another fight early in 2013 over the budget and the federal debt ceiling. Obama said before McConnell spoke that a deal to avert tax increases and spending cuts starting tomorrow was “within sight,” though it hadn’t been completed. “It appears that an agreement to prevent this New Year’s tax hike is within sight, but it’s not done,” Obama said in nationally televised remarks to a group of what the White House described as middle-class taxpayers. He urged people to “keep the pressure on over the next 12 hours or so; let’s get this thing done.” Automatic Cuts The president said the main sticking point was how to avoid the automatic federal spending cuts set to begin tomorrow. Those “may not always be the smartest cuts” and would affect defense as well as government services such as the Head Start education program, he said. The Standard & Poor’s 500 Index rallied 1.7 percent to 1,426.20 at 4 p.m. in New York. The 10-year Treasury yield increased six basis points, or 0.06 percentage point, to 1.76 percent at 2 p.m. in New York, according to Bloomberg Bond Trader prices. Under a proposed deal, income tax cuts would be extended for annual income up to $450,000, said an official who spoke on condition of anonymity, with rates rising to 39.6 percent on income above that. Expanded unemployment insurance would be continued through 2013. Senate Majority Leader Harry Reid , who controls the chamber’s floor schedule, hasn’t signed off on any potential deal, according to a Democratic aide. No deal could reach the floor without Reid’s approval. Democratic Resistance Some Senate Democrats expressed resistance toward an income threshold for increased tax rates that would be higher than the $250,000 they and Obama have been seeking. Senator Tom Harkin , an Iowa Democrat, said on the Senate floor that he doesn’t support a $450,000 income threshold, signaling that any deal reached by Vice President Joe Biden and McConnell could lose the votes of some Democrats. “This is one Democrat that doesn’t agree with that -- at all,” Harkin said on the Senate floor. “We’re going to lock in forever the idea that $450,000 a year is middle class in America?” Harkin didn’t answer directly when asked later whether he might use Senate rules to block a deal he didn’t agree with, saying only that there could be “extended debate.” Capital gains and dividend rates would rise to 23.8 percent for top earners, including taxes as part of the 2010 health-care law, according to the official. Estate Taxes Estate tax rates would rise to 40 percent on amounts above $5 million per person. Extensions of business tax breaks would continue through the end of 2013. The measure would permanently prevent an expansion of the alternative minimum tax. The Senate Finance Committee in August approved extending miscellaneous tax breaks through 2013, including benefits for wind energy , corporate research and multinationals’ overseas finance operations. The potential deal also would avert a cut in Medicare payments to doctors through 2013. Biden and McConnell discussed a possible two-month delay in the spending cuts, while Senate Democratic leaders had been pushing for at least a yearlong extension, according to a congressional aide close to the negotiations. A two-month pause in the automatic cuts would require $24 billion in additional savings that Republicans are demanding in exchange. Republicans insisted that the delayed spending cuts be offset with savings elsewhere in the budget and that new revenue should be used to reduce the deficit. ‘Hands Off’ Rogers said House Speaker John Boehner has been “hands off” in the Senate negotiations. He said if a deal includes averting automatic cuts, it would need to include spending cuts in exchange for those. “When it comes here we’ll figure out what we can pass,” Rogers told reporters of a deal. “If we don’t have real spending cuts, I don’t think it could pass the House of Representatives.” Boehner, an Ohio Republican , has previously said he would bring any budget legislation passed by the Senate to the House floor, though members may decide to amend it. Tax cuts first enacted during George W. Bush ’s presidency are scheduled to expire tonight. Obama and other Democrats have sought to extend the reductions for married couples’ income up to $250,000 a year while letting tax rates rise for income above that amount. Republicans oppose tax rate increases for any income level. Recession Prediction Allowing the fiscal changes to take effect would cause a recession in the first half of 2013, according to the Congressional Budget Office. In the event the Senate can’t reach a compromise, Obama has asked Reid to ready a bare-bones bill for a vote today to extend expanded unemployment benefits and tax cuts on family income up to $250,000. If Congress does nothing, taxes will rise in 2013 by an average of $3,446 for U.S. households, according to the nonpartisan Tax Policy Center in Washington. Tax filing for as many as two-thirds of U.S. taxpayers could be delayed into at least late March. Defense spending would be cut, and the economy would probably enter a recession in the first half of 2013, according to the Congressional Budget Office. To contact the reporters on this story: Roxana Tiron in Washington at rtiron@bloomberg.net ; Margaret Talev in Washington at mtalev@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-06-24 | Bloomberg | Jobless Claims Drop From Two-Month High | The number of Americans applying for jobless benefits declined last week from a two-month high, pointing to an improvement in the labor market that is taking time to develop. Initial jobless claims decreased by 19,000 to 457,000 in the week ended June 19, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance fell, while those getting extended benefits rose. Payrolls have risen every month this year, yet the pace of private hiring hasn’t been strong enough to spur self-sustaining gains in consumer spending. The government next week may report the U.S. lost jobs in June for the first month this year after the government dismissed temporary census workers, according to economists’ estimates. “The trend certainly has been towards improvement in the labor market,” said Jim O’Sullivan, global chief economist at MF Global Ltd. in New York. “The question is to what extent the improving momentum has been disrupted by the turmoil in the markets. It’s possible the labor market has lost a little momentum.” Companies are showing little concern about boosting investment in new equipment, figures from the Commerce Department also showed today. Orders for durable goods excluding transportation rose 0.9 percent in May, the third gain in the past four months, indicating manufacturing will help maintain the economic recovery. Stocks Down Stock-index futures trimmed earlier losses after the reports. The contract on the Standard & Poor’s 500 Index fell 0.4 percent to 1,083 at 8:53 a.m. in New York, indicating shares may slip for a fourth day, on concern the European debt crisis will slow global growth. Treasury securities rose, pushing the yield on the benchmark 10-year note down to 3.09 percent from 3.12 percent late yesterday. Economists forecast jobless applications would fall to 463,000 from an initially reported 472,000 for the prior week, according to the median of 42 projections in a Bloomberg survey. Estimates ranged from 445,000 to 485,000. Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates. Average Claims The four-week moving average, a less volatile measure than the weekly figures, dropped to 462,750 last week from 464,250 the prior week, today’s report showed. That puts it at about the 463,000 claims a week averaged so far this year, indicating firings have leveled off rather than slowed in 2010. The number of people continuing to receive jobless benefits decreased by 45,000 in the week ended June 12 to 4.55 million. The continuing claims figure does not include the number of Americans receiving extended or emergency benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by about 45,000 to 5.3 million in the week ended June 5. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 3.5 percent in the week ended June 12 from 3.6 percent the prior week. Twelve states and territories reported a decrease in claims, while 41 reported an increase. These data are also reported with a one-week lag. Fed Policy Federal Reserve policy makers yesterday reiterated a pledge to keep the benchmark interest at a record low for an “extended period” and signaled the fallout from the European debt crisis poised a risk for economic growth. They acknowledged the labor market was “improving gradually,” even as employers are reluctant to boost hiring. The economy lost 8.4 million jobs during the recession that began in December 2007, the biggest employment slump in the post-World War II era. From January through May, company payrolls grew by 495,000 workers. A Labor Department report July 2 may show total payrolls fell in June as census neared completion, allowing the federal government to cut temporary jobs associated with the decennial population count. Claims around 450,000 are consistent with private companies adding about 100,000 jobs a month, JPMorgan Chase & Co. chief economist Bruce Kasman said in a note to clients before the June 17 report. That is fewer than the 116,000 a month average growth in the five years to December 2007, when the recession began. Claims and Payrolls Initial claims would have to average 425,000 to 430,000 for private payrolls to rise by the 175,000 a month that JPMorgan economists are forecasting for the second half of the year, Kasman said. Local governments are among employers cutting staff to trim budget deficits. Newark, New Jersey’s largest city, plans to fire hundreds of workers and seek concessions from unionized employees to help close a $180 million budget deficit, Mayor Cory Booker said. “The cost of holding onto the employees we have right now is growing at a rate that we cannot keep up,” Booker said last week during his monthly call-in show on a local radio station WBGO. “There will be hundreds of layoffs and this is something that is going to be incredibly difficult. This is not the economy you want to be laid off in.” Manufacturers are leading private hiring. Toyota Motor Corp. is planning to complete a plant in Blue Springs, Mississippi, and hire 2,000 workers to begin production of Corollas by the end of next year, the world’s largest automaker announced on June 17. The company had mothballed the project 18 months ago as U.S. sales collapsed. At least 2,000 additional jobs with suppliers are likely to result from the plant project as well, said Mississippi Governor Haley Barbour. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net Claims around 450,000 are consistent with private companies adding about 100,000 jobs a month, JPMorgan Chase & Co. chief economist Bruce Kasman said. Photographer: Jamie Rector/Bloomberg June 24 (Bloomberg) -- David Strasser, analyst at Janney Montgomery Scott LLC, speaks about the outlook for U.S. consumer spending and investment strategy in Wal-Mart Stores Inc. and McDonald's Corp. Strasser speaks on Bloomberg Television's "InBusiness with Margaret Brennan." (Source: Bloomberg) //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-04-26 | Bloomberg | Flowers Said to Move to London in Push to Buy Local Banks | J. Christopher Flowers , founder of private-equity firm JC Flowers & Co., has moved to London from the U.S. to take advantage of what he sees as more investment opportunities in Europe, according to a company official. While Flowers still has a residence in the U.S., he will mainly live in Europe for the time being, said the official for the New York-based company, asking not to be named. JC Flowers & Co. makes private-equity investments in financial companies. It is seeking to buy financial-services companies including banks and insurers in the U.K., Ireland, Spain, Italy, France, Poland and Germany, Flowers said during an interview at the SuperReturn International conference in Berlin in March. “There will be significant consolidation in the banking industry in Europe and the process is being considerably accelerated by the crisis,” he said at the time. Flowers’s move to London was reported earlier by the Financial Times. The firm is investing out of its third fund, which closed at $2.3 billion in 2009. In October, JC Flowers agreed to buy insurance broker Fidea NV from KBC Groep NV (KBC) , the recipient of 7 billion euros ($9.3 billion) in Belgian rescue funds, for 243.6 million euros. The firm also invested in the U.K.’s Kent Reliance Building Society. To contact the reporter on this story: Sabrina Willmer in New York at swillmer2@bloomberg.net To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net |
2024-12-28 | Bloomberg | Mistry at Tata Helm as Investors Query $500 Billion Goal | Cyrus Mistry, who takes charge today at Tata, India ’s biggest business group, may face an uphill battle if he is to meet his predecessor’s vision of boosting revenue fivefold to $500 billion in the next decade. Mistry, 44, becomes chairman of Tata Sons Ltd., the holding company for the salt-to-software group, just as slower economic growth damps demand for products from steel to cars. Ratan Tata , who steps down on turning 75 after two decades at the helm, built the business into a $100 billion global conglomerate through acquisitions including the U.K.’s Corus Group Plc and Jaguar Land Rover. Tata succeeded his uncle in 1991 as India’s economy was opening up. “It is not an easy task to grow fivefold in this global economic scenario,” said Shishir Bajpai, senior vice president at IIFL Wealth Management Ltd. in Mumbai. “The bar is set high for Mistry to deliver. Ratan Tata took a group well known in the domestic markets global, now Mistry has to take it forward.” The change of guard marks a rare opportunity to shape the group of more than 100 companies , whose expansion has mirrored India’s emergence as a global economic power and ranks Tata above Japan ’s Panasonic Corp. and Swiss food giant Nestle SA by sales. At stake is the equivalent of about 6 percent of India’s gross domestic product, and the future of firms including Tata Steel Ltd. (TATA) , India’s biggest producer of the alloy, and Tata Motors (TTMT) Ltd., the nation’s No. 1 automaker by revenue. Biggest Shareholder Mistry’s performance could also weigh on his family’s fortune: along with his billionaire father, Pallonji Shapoorji Mistry, and his brother, the chairman’s family owns about 18 percent of Tata Sons. Little is known about the London Business School management postgraduate’s leadership style or strategic vision, and the man chosen by a select search panel in November 2011 has so far shied away from the media and investors. “I haven’t heard from him on company plans, so I don’t know” how Mistry will lead, Koen Vanderauwera, a Luxembourg- based bond-fund manager at KBC Asset Management SA that holds the debt of Tata Steel and Tata Power Ltd., said in a phone interview. “I’ll wait and see what kind of announcements he makes, how he comments.” The $500 billion revenue vision for Tata in 2021 was outlined by Ratan while addressing his top executives in April, and confirmed by Tata Sons director R. Gopalakrishnan. Group spokesman Debasis Ray declined to comment on the vision or Mistry’s plans for Tata. “Such matters are internal to the company,” Ray said in an e-mailed reply to a query. Textile Trading Mistry and the Tatas follow the Zoroastrian religion and belong to the small Parsi community, which originated in Persia and found sanctuary centuries ago in India. The Tata group was founded by Ratan’s great grandfather Jamsetji Nusserwanji Tata, who started a textile-trading business in 1868 and then built the country’s first steel mill and hydroelectric plant. He also built the Taj Mahal Palace & Tower hotel in Mumbai, which was damaged in the November 2008 terrorist attacks. Mistry will also need all the project-handling skills honed at running the construction business at his family’s Shapoorji Pallonji & Co. to sustain profitability even as many of Tata’s key companies battle adverse market conditions or regulatory changes. “Revenue without sustained profits and a high return on invested capital is of no use,” Neeraj Monga, head of research at Toronto-based Veritas Investment Research Corp., said by e- mail. The group’s biggest businesses, steel and automobiles, are both cyclical industries and maintaining profitability is a challenge, said Monga. Steel, Autos For a group that includes Tata Consultancy Services Ltd. (TCS) , India’s largest software company, Tata Motors, owner of the Jaguar and Land Rover luxury marques, and Tata Global Beverages Ltd., the local partner of Starbucks Corp., sales and profit growth is slowing at its biggest businesses. Profit growth at Tata Motors decelerated to the slowest pace in four quarters in the three months ended Sept. 30 and sales growth slowed to the least in three years amid waning demand for luxury vehicles in Europe. Tata Steel posted an unexpected loss even as sales growth stayed below 5 percent for the third straight quarter. “It’s not easy to grow fivefold organically, so Mistry at some point will have to pull a multibillion dollar surprise acquisition,” said Jagannadham Thunuguntla , head of research at New Delhi-based SMC Global Securities Ltd. “He has to be careful because the group’s experience on this front has been mixed.” Overseas Acquisitions Tata Steel, which acquired Corus for $12.9 billion in 2007, making it the group’s biggest overseas purchase, reported a loss of 3.64 billion rupees ($66 million) in the three months ended Sept. 30 as weak demand in Europe and China cut prices of the alloy. The steelmaker plans to restructure its U.K. business, cutting 900 jobs and closing 12 sites, it said in a Nov. 23 statement, to shore up margins in a market dogged by overcapacity. In contrast, Tata Motors’ 2008 acquisition of Jaguar Land Rover from Ford Motor Co. for $2.3 billion helped boost the Indian automaker’s sales almost fivefold over four years. That pace of growth may be hard to sustain as Europe struggles to recover from a debt crisis. Tata Steel shares have climbed 28 percent in Mumbai trading this year, outperforming the BSE India Sensitive Index’s 26 percent advance. The steelmaker’s shares fell 0.5 percent to close at 428.55 rupees in Mumbai trading. Tata Motors has surged 74 percent, making it the best performer on the 30-company benchmark index. The automaker’s shares gained 0.3 percent to close at 310.05 rupees. ‘Minds Open’ “We should always keep our minds open to acquisitions,” Mistry told recruits in comments that were viewable in a video on one of the group’s websites. “We would, in each company as part of its own strategy, look at M&A for growth but not as a must have.” Purchases overseas have also proved harder in the past year with Tata’s recent attempts failing to clinch a deal. Orient-Express Hotels Ltd. (OEH) , owner of New York ’s 21 Club restaurant and Hotel Cipriani in Venice , last month rejected a takeover offer by Tata’s Indian Hotels Co., saying the bid undervalues the company. In April, Tata Communications Ltd. (TCOM) decided against making an offer for Cable & Wireless Worldwide Plc after failing to agree on a price. Mistry can look to fund acquisitions by tapping the cash pile at Tata Consultancy Services, the group’s most valuable company by market value, in which Tata Sons holds 74 percent. The Mumbai-based software exporter had 79.2 billion rupees in cash and short-term investments on Sept. 30, according to data compiled by Bloomberg. Still, Tata’s new head may opt to look within and consolidate holdings to bolster profitability instead of continuing to pursue acquisitions, according to Tarun Kataria, chief executive officer at Religare Capital Markets Ltd. “Cyrus takes over the reigns of a highly regarded but sprawling conglomerate at a time of great global uncertainty and muted economic growth,” Mumbai-based Kataria said in an e-mail. “His very deliberate focus will likely be on consolidation, deleveraging, exiting certain businesses and bringing related businesses under a unified whole.” To contact the reporters on this story: Bhuma Shrivastava in Mumbai at bshrivastav1@bloomberg.net ; Siddharth Philip in Mumbai at sphilip3@bloomberg.net To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net |
2024-08-30 | Bloomberg | Swiss Stocks Little Changed; SMI Heads for Weekly Loss | Swiss stocks were little changed, even as the benchmark index headed for weekly and monthly losses, as investors awaited a report on euro-area economic confidence. Zurich Insurance Group AG (ZURN) , Switzerland’s largest insurer whose chairman quit, rose 1.4 percent. Clariant AG (CLN) added 0.9 percent. Nestle SA (NESN) , the world’s biggest food company, advanced 0.6 percent. The Swiss Market Index (SMI) increased less than 0.1 percent to 7,766.72 at 9:35 a.m. in Zurich. The measure is heading for its biggest weekly loss since November 2012 amid concern that any military action by the U.S. against Syria may escalate into a larger conflict. The SMI lost 0.7 percent this month. The broader Swiss Performance Index increased 0.2 percent today. A report at 11 a.m. in Brussels may show euro area economic confidence rose to the highest level since March 2012. The index of executive and consumer sentiment climbed to 93.8 in August, from 92.5 in July, economists forecast in a Bloomberg survey. Data in the U.S. may show business activity in the world’s biggest economy expanded in August. The MNI Chicago Report’s business barometer increased to 53 from 52.3 in July, according to the median forecast of 53 economists in a Bloomberg survey. To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-01-17 | Bloomberg | Libya Is Messy. So Was Eastern Europe in 1991. | Two years ago, I was the son of a broken nation. For almost 40 years, I fought to bring freedom and basic human rights to Libya, only to see the regime of Muammar Qaddafi gain acceptance into the international community as the oppression continued. I despaired of ever seeing my country free. Fast-forward less than a year, and I found myself racing down a desert road to Tripoli with a coroner’s report on my lap. As deputy prime minister of the newly liberated Libya, I was returning to the capital with confirmation that Qaddafi was dead and Libya’s 42-year nightmare was over. Our path from a brutal autocratic regime to a fledgling democracy has been swift, but we have a long road ahead of us and many people outside Libya do not acknowledge or appreciate just how difficult our challenges are. It has been just two years since the emergence of the Arab Spring and the start of Libya’s Feb. 17, 2011, uprising. Too many in the U.S. and Europe have rushed to judge the ultimate outcome of these revolutions. Grandiose statements that the Arab Spring has either failed or succeeded are premature and unhelpful. Berlin Wall Before passing judgment on the region, look at the ex- communist states of central and eastern Europe and their progress toward post-Soviet democracies. Where were they two years after the Berlin Wall fell ? They were at war in Yugoslavia , still struggling to overthrow the regime in the Soviet Union , and in various states of economic free fall in the former Warsaw Pact countries. Despite the close ties that many of these nations enjoyed with western Europe, some of their economies and governments remain in flux to this day. More than 20 years on, the question of whether that “Eastern Spring” was an unalloyed success remains unanswered. There are vital things that our friends in the U.S. and Europe can provide to help speed us along our path to democracy and prosperity in Libya. First among them is the understanding that there will be no overnight solutions. Libya’s revolution is distinct from those in Tunisia and Egypt in important ways. First, our release from dictatorship required a protracted and bloody war. Second, in both Tunisia and Egypt , the Arab Spring deposed the heads of state, but left the basic institutions of government intact. In Libya, that vital state apparatus barely existed under Qaddafi’s regime. For that reason, the new Libya has far fewer pieces to work with in building an effective governing structure. Lastly, in both Egypt and Tunisia, a powerful, patriotic, national army remained to protect the sovereignty of the state. Today, Libya still lacks an effective central government, as well as a strong national army and an internal-security force to protect its borders and cities. Moreover, the revolution has left a civilian population that is armed to the teeth and very reluctant to relinquish its weapons. Despite all this, what should surprise and encourage observers is that most of Libya remains relatively safe for people to go about their daily lives. Almost all of Libya’s 6.4 million residents are Arabs and Sunni Muslims. This small, homogenous population, coupled with Libya’s strong social ties (largely due to the positive impact of Libya’s tribal structure), virtually eliminates the possibility of Libya descending into sectarian conflict. As a sign of progress, 80 percent of eligible voters stood in line last year to vote for their local governments and the national assembly in Tripoli for the first time in more than 40 years. On Aug. 8 , with tears of joy in my eyes, I had a front- row seat to witness the peaceful transfer of power from the National Transitional Council to the newly elected national assembly, a first for Libya. Tragic Death The process of building a politically stable and economically prosperous Libya will be long. Many from outside Libya have already contributed greatly to our nascent state. Chief among them was my dear friend Christopher Stevens, the U.S. ambassador, who worked tirelessly for the cause of a free and democratic Libya until his tragic death in Benghazi last year. Chris knew that Libya’s future is one of almost limitless potential that cannot be fulfilled in a day. Not only does Libya have vast oil and gas reserves, it also sits on enormous, untapped deposits of mineral wealth and enjoys one of the longest, most pristine coastlines on the Mediterranean Sea. Its strategic geographical position means that it is uniquely poised to be an important link between Europe and Africa. Capitalizing on these immense resources to grow and diversify the Libyan economy will allow the nation to become a powerful force for stability and prosperity in North Africa. Already, the Libyan economy supports 2 million Egyptian workers, and harnessing new sources of income will enable our economy to look westward to Tunisia and the reservoir of unemployed skilled labor that it possesses. But first things first. Achieving security and political stability is paramount if Libya is to fulfill its economic potential. On both of these fronts, the U.S and Europe can help by providing access to their rich experience and technical skills. To secure Libya, we need to create effective internal security and border-patrol capabilities as quickly as possible. Building these forces from scratch would take too much time, prolonging the residual violence in Libya. On the political front, Libya is also starting from scratch. Stable, inclusive democracy is not possible without robust civil and political institutions that allow all Libyans to have a voice in the future of their country. Due to Qaddafi’s ban on any form of political or civic organization, we have little experience creating -- let alone participating in --these institutions. Again, the expertise that established democracies have can spur Libya along the path to a stable and free society. Libya’s Search There is a verse in the Koran that beautifully captures the challenges facing Libya today: “Feed them when they are hungry, and protect them from fear.” At its most basic, this is what Libya is searching for: peace, security and prosperity. Libya’s quest is no different from those of its Arab Spring neighbors or the rest of humanity. We all seek the promise of safety and food on the table. With hard work, good intentions and help from our friends, we can realize that promise. The Libyan people paid a heavy price for their freedom and now hope to create a stable state that accepts, and contributes to, the global community at large. That, surely, is a goal worth the patience of our friends. (Ali Tarhouni was minister for oil and finance in Libya’s National Transitional Council and later deputy prime minister and interim prime minister. The opinions expressed are his own.) To contact the writer of this article: Ali Tarhouni at altarhouni@gmail.com. To contact the editor responsible for this article: Marc Champion at mchampion7@bloomberg.net . |
2024-09-13 | Bloomberg | Mizuho Securities Consumer Finance Analyst Niwa to Leave Firm | Kouichi Niwa, an equity analyst at Mizuho Securities Co., will leave the brokerage on Sept. 16, said Toshimitsu Okano, a Tokyo-based company spokesman. Niwa covers consumer finance and insurance firms at Tokyo- based Mizuho Securities, a unit of Japan ’s third-biggest bank by market value. He was ranked fifth by the Nikkei Veritas newspaper this year. Mizuho will continue to analyze the companies covered by Niwa, Okano said. To contact the reporter on this story: Takako Taniguchi in Tokyo at ttaniguchi4@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-05-07 | Bloomberg | Euro Strength Intact as Contagion Ends Aussie Dollar Haven | The euro is confounding bears predicting a meltdown as it gets an unexpected boost from the economic and political turmoil gripping Europe. The 17-nation currency has risen about 1 percent against nine peers from this year’s low on Jan. 16, while the dollar slid 2.3 percent, data compiled by Bloomberg show. Futures traders are trimming bets that it will fall against the dollar, while options show investors are less bearish. Europe’s common currency is trading more than 8 percent above the average against the dollar since its 1999 creation even after Spain, Greece, Italy and Portugal slid into recession and Nicolas Sarkozy became the first French president in 30 years to fail to win re-election amid a region-wide backlash against austerity. The turbulence is infecting economies including Australia and Sweden, regarded as havens, prompting policy makers in those countries to cut interest rates , weakening their currencies. “The euro’s pretty much hanging in there,” Eric Busay, a currency and international fixed-income money manager in Sacramento at California Public Employees’ Retirement System, the largest U.S. public pension, with $235 billion in assets, said in an telephone interview on April 30. “When central banks are cutting rates, as they are in several countries, there is clearly not a great reason to be bullish on those currencies.” Bears Defied The shared currency’s resilience since the debt crisis started in Greece in October 2009 has defied investors including billionaire George Soros , who said in January that German-driven austerity plans in Europe risk creating “tensions that could destroy the European Union.” Bets made at Intrade.com show a 39.5 percent chance of a country exiting the European Union by Dec. 31, 2013, down from 65 percent in November. Francois Hollande , 57, defeated Sarkozy, getting about 52 percent against about 48 percent for the incumbent, according to estimates by four pollsters. Hollande has advocated a more aggressive European Central Bank role in spurring growth, a measure opposed by Germany. Greek voters flocked to anti-bailout parties, throwing doubt on whether the two main parties can form a government strong enough to implement spending cuts to ensure the flow of bailout funds. According to projections based on partially counted ballots on state-run NET TV, Pasok and New Democracy would fall one short of the 151 seats needed to win a majority. ‘Currencies Can Fall’ The euro declined 1.3 percent last week to $1.3084 and was 1.8 percent lower at 104.49 yen. Europe’s common currency has averaged about $1.20 since it was introduced in January 1999, and over the last two years has ranged from $1.1877 in June 2010 to $1.4940 in May 2011. The shared European currency weakened 0.3 percent to $1.3047 at 11:04 a.m. New York time, after dropping to $1.2955, the lowest level in more than three months. Strategists say the worst may be over. The median of 48 estimates in a Bloomberg survey is for the euro to trade at $1.30 by year-end. It will buy 106 yen, a separate survey showed. “In a weakening global environment, countries that can cut rates will do so and their currencies can fall,” Kit Juckes, head of foreign-exchange research at Societe Generale SA in London , said in a telephone interview on May 1. “Europe is an economy with a currency that isn’t expensive, with not much scope or appetite for cuts.” Rate Decision Traders drove the euro higher on May 3, before it ended little changed, as the ECB kept rates on hold and President Mario Draghi said policy makers didn’t discuss a cut. It depreciated 0.1 percent the past three months based on Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies, while Australia’s dollar dropped 4.6 percent, the yen 2.4 percent, Sweden’s krona fell 1.2 percent and New Zealand’s dollar 3.6 percent. Euro estimates are little changed from current levels even after Spain said last week its gross domestic product contracted 0.3 percent in the first quarter, putting the euro region’s fourth-largest economy into its second recession since 2009. At least eight European leaders have either resigned or lost elections since the start of the debt crisis as austerity measures contributed to the region’s economic slowdown. Dutch Prime Minister Mark Rutte faces elections in September after his coalition government collapsed last month amid a dispute over spending cuts. ‘Adverse Shocks’ International Monetary Fund Managing Director Christine Lagarde said April 19 in Washington that Europe is the “epicenter” of risks to global growth. The economy of the nations that share the euro will probably contract 0.3 percent in 2012 after expanding by 1.4 percent in 2011, the IMF said April 17. The Washington-based lender predicted world growth would slow to 3.5 percent from 3.9 percent last year. Europe will remain “a potential source of adverse shocks for some time,” Reserve Bank of Australia Governor Glenn Stevens said on May 1 as policy makers reduced their benchmark by 50 basis points, or 0.50 percentage point, to 3.75 percent. The bigger-than-forecast cut drove the so-called Aussie down as much as 1.35 percent against the euro, the biggest intraday drop since November. Sweden’s central bank has reduced borrowing costs twice since December, to 1.5 percent from 2 percent, as the economy shrank 1.1 percent in the fourth quarter, exceeding the 0.3 percent contraction in the euro zone. Two out of six Riksbank board members called for a cut to 1 percent at the April meeting, when the main rate was kept unchanged, minutes of the gathering showed on May 2. U.S. Recovery There’s a 36 percent chance the Riksbank cuts the main rate at its next meeting on July 4, up from 19 percent on April 26, according to a Credit Suisse Group AG index based on swaps. The odds of Australia’s central bank lowering its rate at its next meeting was 89 percent, the Credit Suisse measure showed. Support for the euro may wane should the U.S. recovery gather pace, reducing the odds that the Federal Reserve will undertake a third round of stimulus that weakens the dollar. Manufacturing in the U.S. expanded in April at the fastest pace in 10 months, data from the Institute for Supply Management showed on May 1. Four Fed presidents said the same day that more so-called quantitative easing through bond purchases probably won’t be needed. American employers added 115,000 workers last month, fewer than forecast, while the jobless rate fell to a three-year low of 8.1 percent as people left the workforce, the Labor Department said on May 4. Growing Backlash The euro may also weaken if Europe’s economy slows enough to cause policy makers to cut their refinancing rate. “The ECB is facing a lot of pressure to ease,” Guillermo Felices, head of European currency strategy at Barclays Plc in London, said in an interview on May 1. “Eventually they will have to ease given the pressures on the economy.” He sees a decline in the euro to $1.20 in the next year. The backlash against austerity measures is growing. Spain’s largest unions led marches involving thousands of protesters in 55 cities April 29. Riots have broken out in Greece in response to government cuts in pensions and wages. Spain’s 10-year bond yield has jumped about 60 basis points this year, or 0.6 percentage point, to 5.73 percent. Italian yields, at 5.43 percent, are 1 percentage point above their average over the past decade. Spain’s IBEX 35 Index of stocks is down 20 percent this year, while the broader Euro Stoxx 50 Index has lost 2.9 percent. German Economy Europe’s common currency is getting support as surveys signal that Germany’s GDP, the region’s largest, will expand for a third consecutive year. That may prompt the ECB to keep borrowing costs unchanged as it seeks to tame inflation that’s been above its target of just below 2 percent since December 2010. Draghi took over as ECB president in November, and reversed the two rate increases made by his predecessor Jean-Claude Trichet in April and July. He has kept the rate at 1 percent the past five meetings while pumping about 1 trillion euros into the banking system by providing three-year loans in two longer-term refinancing operations, or LTROs, in December and February. He will keep the rates on hold through at least the third quarter of 2013, based on the median prediction of analysts in Bloomberg News surveys. Shorts Decline The loans “took the risk of a devastating bank failure more or less off the table,” Omer Esiner , chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage, said in a May 3 telephone interview. “While they didn’t necessarily address the underlying issues of the credit crisis, they did kind of ring-fence euro’s banking sector from further deterioration. That was positive overall for the euro.” The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro against the dollar compared with those on an advance -- so-called net shorts |
2024-01-12 | Bloomberg | Airport Bonds Attractive After AMR Corp. Filing, Friedland Says | AMR Corp. (AMR) , the parent company of American Airlines , filed for bankruptcy in November, which prompted Fitch Ratings to place negative outlooks on three of its biggest hubs. Eric Friedland, who previously worked at the ratings company, said the pessimism surrounding airport bonds presents an opportunity to buy the debt. Friedland, now head of municipal research at Schroders Plc (SDR) in New York, also discussed credit ratings, bond insurance and the upcoming elections for today’s issue of the Bloomberg Brief: Municipal Market newsletter. Q: Is there one type of municipal debt in particular you’re looking at in 2012? A: One sector a lot of people point to is the essential- service revenue-bond sector: water, sewer and public power. What makes those attractive now is investors are somewhat isolated from bad policy decisions that governments may make. Another is airport bonds. Because of what’s happened with a couple of major airlines, people have shied away from the airport sector. Many airports do not serve as hubs, and are more origination and destination airports, so the performance is more tied to the local economy than a given airline. The airport sector has been painted with a wide brush and considered weak when its performance actually might be better than expected. Q: What are your thoughts on the recalibration of 2010, when rating companies adjusted their criteria for municipal debt to make it more comparable to corporate debt, resulting in higher ratings for many issuers? A: I’m not in favor of it. It was very confusing for the market, especially since each of the rating agencies handled it a bit differently. Even though the rating agencies did their best to explain that this wasn’t an upgrade based on credit, it was still confusing for investors to see credits getting higher ratings when the economy was turning south. It also created credit compression at the higher levels. At a time when investors were depending more on the rating agencies to make credit distinctions, it was hard just to look at ratings because it seemed like issues were being rated more similarly. Also, you don’t want to have a situation where you wait too long and have a multi-notch downgrade. That’s the worst thing a rating agency could do. Investors will start to lose confidence quickly if they see that. Q: Would you agree that credit is the most important factor for investors right now? A: Credit is definitely a much bigger portion of performance attribution. Performance used to be driven by what happened in the Treasury market and general macro trends. Now it is definitely tied to an individual credit. It’s also what happened with bond insurance. In 2005, bond- insurance penetration was about 50 percent, so there was a huge portion of the bond market rated AAA, and it was very homogeneous. For an individual investor, it didn’t really matter what the individual credit was, because the bond insurers were taking just about all the credit risk. Now bond insurance has evaporated, with the exception of Assured Guaranty. Q: What counts as a default: missing a payment, dipping into reserves, or both? A: Nonpayment of debt service. If I was choosing between a bond that had a reserve fund and one that didn’t, all things equal I would want the bond with the reserve fund. The reserves are there for the purpose of shortfalls. Certainly drawing on reserves in many cases counts as a technical default, but I wouldn’t put that in the same category as a nonpayment. Q: What’s your outlook for 2012? A: Volume is definitely going to be higher than this year, maybe 10 to 15 percent. States were the big credit surprise last year. They went into the year with large budget gaps but their solutions were more meaningful than anyone expected them to be. They’re coming into this budget cycle not in a good position, but in a better position than people thought they would be in. It’s a double-edged sword, though, because one of the things they did to balance their books was cut funding to local governments. That’s one area we’re going to be looking at closely and be cautious. Q: How do you think the 2012 election cycle will affect the municipal bond market , if at all? A: The consensus is nothing meaningful will be done this year, so the market has bought itself a year. Look at Obama and the Democrats: On one hand, they talked about capping the tax-exempt levels, which would be a negative to the muni market. On the other hand, they’ve made proposals to tax wealthy individuals at higher rates, which would be viewed as a positive because it would make after-tax yields more attractive. It’s clear the federal deficit is not going to be solved any time soon. Because of that, munis are going to be in the crosshairs and the target of any solution to increase revenue. To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net. To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net |
2024-07-09 | Bloomberg | China Stocks Rebound `Imminent' After Finding Bottom: Technical Analysis | A rebound in Chinese stocks , the worst performers in Asia this year, may be imminent after reaching a near-term low, CIMB Group Holdings Bhd. said, citing two technical indicators. The Shanghai Composite Index fell on July 2 to as low as 2,319.74, which is “probably a near-term bottom,” CIMB analysts Nigel Foo and Kong Seh Siang wrote in a report today. The gauge’s daily Moving Average Convergence/Divergence indicator and relative strength index are signaling a possible rebound in the index, according to the analysts. “The daily MACD and RSI have been showing positive divergence signs since May, signaling an imminent change in the downtrend,” the analysts wrote. The Shanghai Composite has dropped 26 percent this year amid concern that policy tightening and Europe’s sovereign-debt crisis will hurt the nation’s economic growth. The index added 0.1 percent to 2,416.68 as of 10:31 a.m. local time. Should the Chinese stock index fall below this week’s low of 2,319, the CIMB analysts have a target of 2,270 to 2,280 points, according to the report. Nomura Holdings Inc. said this week the CSI 300 Index, which tracks yuan-denominated shares traded on the Shanghai and Shenzhen exchanges, is in a “good position” to recover after it touched the bottom band that marked this year’s downward trend. Its 14-day RSI, a gauge of how rapidly prices gain or decline, also suggests Chinese stocks are “oversold,” according to a July 7 report by Nomura analysts Kenneth Chan, Tacky Cheng and Desmond Chan. Stocks elsewhere in Asia outside of Japan have already started rebounding after finding a “near-term bottom” this week, according to the CIMB analysts. The MSCI Asia excluding Japan Index, which has climbed 3 percent from the July 6 low of 453.63, may extend gains to between 469 and 472, which is the 50 percent and 61.8 percent retracement of its June decline, the analysts said. The 472 level also marks its 200-day simple moving average resistance, they said. To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net July 8 (Bloomberg) -- Paul Ramscar, director wealth management at Financial Partners, talks with Bloomberg's Rishaad Salamat about the outlook for global economy. Ramscar also discusses the outlook for gold, and U.S. and China stocks. (Source: Bloomberg) //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-12-08 | Bloomberg | Obama Seeks $60.4 Billion to Assist Sandy Recovery | President Barack Obama asked Congress for $60.4 billion to pay for damage caused by superstorm Sandy, putting the disaster relief request from northeastern states into the middle of a debate over the federal deficit. While the amount is less than the $83 billion in assistance that regional officials sought, governors Chris Christie of New Jersey and Andrew Cuomo of New York welcomed the accord with the White House yesterday on the funding package. Obama’s request “will enable our states to recover, repair, and rebuild better and stronger than before,” Christie, a Republican, and Cuomo, a Democrat, said in a joint statement. At a briefing in Manhattan , Cuomo said the aid would give states flexibility in how the money is spent and help cover the cost of efforts to protect infrastructure from future storms. “This is the first good news New York has had in a while,” Cuomo said. “This is a very big deal for New York.” The supplemental spending request follows weeks of lobbying by officials from the states hardest hit by the storm and comes as Obama and Republicans in Congress are locked in negotiations over how to avoid more than $600 billion in higher taxes and spending cuts set to begin in January. The goal is to agree on a plan to shrink the federal deficit, which has exceeded $1 trillion in each of the past four years. Rebuilding Needs The Northeast is still working to rebuild since Sandy, the biggest Atlantic storm on record, pounded the region Oct. 29 with winds reaching 100 miles (160 kilometers) an hour. The storm flooded seaside communities from New Jersey to Rhode Island , damaged tens of thousands of homes, and crippled subways and electric utility systems. In a letter outlining the funding plan, Office of Management and Budget Acting Director Jeffrey Zients said the money would be used to repair damage to homes and infrastructure and help prepare for future storms. “Our nation has an obligation to assist those who suffered losses and who lack adequate resources to rebuild their lives,” Zients wrote. The funding includes $17 billion to help homeowners, along with $6.2 billion to repair the public transportation infrastructure in the New York City area. Housing, Mitigation The request includes $11.5 billion in disaster relief funding and $15 billion for block grants to assist homeowners and businesses in covering rebuilding and repair costs not underwritten by the Federal Emergency Management Agency , private insurance or Small Business Administration loans. Restoration projects that would be paid for range from $2 million for roof repairs of Smithsonian Institution buildings in Washington, Virginia and Maryland , to $6 million to restock food banks and soup kitchens drained by demand from Sandy victims. Almost $13 billion, or more than a fifth of the money sought, would be used to mitigate future natural disasters, including $5.5 billion to make public transportation systems “more resilient” to wind and flooding. The request also seeks to reduce flood risks with more than $3.8 billion for the Army Corps of Engineers and $400 million for the U.S. Fish and Wildlife Service, to enhance natural ecosystems. New York Representatives Nita Lowey , a Democrat, and Peter King , a Republican, said more money will be needed later. First Step “This robust package is a major first step that we will work to pass as quickly as possible in Congress to help devastated communities, families and businesses,” they said in a joint statement. New York Mayor Michael Bloomberg said it’s now up to Congress to take swift action “in a bipartisan fashion.” “We need a full recovery package to be voted on in this session of Congress,” Bloomberg said in a statement. “Any delay will impede our recovery.” The mayor is the founder and majority owner of Bloomberg News parent Bloomberg LP. A spokesman for House Speaker John Boehner , Michael Steel , said the Ohio Republican has the request “and will review it.” Christie, who met with Boehner while in Washington, said he’ll “use every tool” to secure federal recovery funding. New Jersey gets the worst return on its federal tax dollar of any U.S. state and its residents have underwritten disaster responses across the U.S., the governor said. “These are not wants: These are needs,” Christie said. “Speaker Boehner has told me that offsets isn’t the direction in which the House Republican Conference will be moving,” he said, referring to balancing new spending with cuts elsewhere. The aid plan follows weeks of lobbying by New York and New Jersey officials. Obama and Christie talked for about 30 minutes Dec. 6 at the White House and the president spoke with Cuomo by telephone. If approved, the request would be less than the $110 billion directed to the Gulf Coast after Hurricanes Katrina and Rita hit in 2005, according to the Government Accountability Office, a nonpartisan research arm of Congress. To contact the reporters on this story: Lisa Lerer in Washington at llerer@bloomberg.net ; Roger Runningen in Washington at rrunningen@bloomberg.net. To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net . |
2024-12-31 | Bloomberg | Hedge Funds Cut Bullish Bets to Lowest Since June: Commodities | Hedge funds cut bullish commodity bets to a six-month low as mounting concern that slowing economic growth will erode demand drove prices toward the first fourth-quarter retreat since the global recession. Speculators reduced net-long positions across 18 U.S. futures and options by 11 percent to 675,625 million contracts in the week ended Dec. 24, the lowest since June 19, U.S. Commodity Futures Trading Commission data show. Gold holdings reached a four-month low, while those for copper dropped for the first time in five weeks. Investors are the most bearish on natural gas since May. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 2.9 percent since Sept. 30, the first retreat for the period since 2008. Japan and the 17-nation euro area are already back in recessions and the Congressional Budget Office has warned the U.S. risks going the same way unless policy makers agree on averting more than $600 billion of automatic tax increases and spending cuts scheduled to start next month. “We don’t have sustained, healthy global growth,” said Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama. “It’s easier to not to make that bullish bet and either just sit on the sidelines or go on the short side of a ledger.” 2012 Returns The S&P GSCI is up 0.3 percent this year. The MSCI All- Country World Index of equities climbed 13 percent, while the dollar slid 0.5 percent against a basket of six trading partners. Treasuries returned 2.3 percent, a Bank of America Corp. index shows. The Conference Board’s index of U.S. sentiment fell to 65.1 from 71.5 in November, the lowest in four months, figures from the New York-based private research group showed Dec. 27. The gauge was projected to drop to 70, according to the median in Bloomberg’s survey of economists. Sales of new houses rose less than forecast in November, the Commerce Department said Dec. 27. The French economy grew less than initially reported in the third quarter, while Japan’s industrial output in November tumbled more than forecast to the lowest since the aftermath of the 2011 earthquake, separate government reports showed Dec. 28. Contracts outstanding across the members of the S&P GSCI are headed for the biggest monthly contraction since June. Stimulus Measures Increasing government and central bank stimulus measures will bolster commodity demand, said Evan Smith , who helps manage about $500 million of assets at U.S. Global Investors Inc. in San Antonio. Japan’s premier Shinzo Abe said Dec. 26 he would push for “bold monetary easing.” Minutes of the Bank of Japan (8301) ’s November meeting showed that a board member suggested conducting open-ended asset purchases. The Federal Reserve said Dec. 12 it would buy $45 billion of Treasury securities a month from January, adding to $40 billion a month of existing mortgage-debt purchases. The European Central Bank and China have also pledged to do more to bolster growth. Chinese industrial companies’ profits rose for a third month in November, the National Bureau of Statistics said Dec. 27. The Asian country, the biggest consumer of commodities from copper to soybeans, is poised to snap a seven-quarter slowdown as growth accelerates to 7.8 percent in the three months ending today, according to the median of 35 economist estimates compiled by Bloomberg. They expect China to keep accelerating for at least the next six months. China Growth Manufacturing in China expanded at a faster pace in December, according to the final reading of a Purchasing Managers ’ Index from HSBC Holdings Plc and Markit Economics released today. The 51.5 figure is the highest since May 2011 and compares with the 50.9 preliminary reading published Dec. 14 and 50.5 in November. A reading above 50 indicates expansion. “There is evidence that the Chinese economic deceleration has now turned,” said Chad Morganlander, a Florham Park , New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $130 billion of assets. “Global growth expectations will slowly start improving in the second and third quarter, which will gin up commodity prices.” Money managers withdrew $188 million from commodity funds in the week ended Dec. 26, according to Cameron Brandt , the director of research for Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Gold and precious-metal funds had a net outflow of $451 million. Investors cut bullish wagers on copper by 39 percent to 14,988 contracts, the lowest in three weeks, the CFTC data show. Stockpiles monitored by the London Metal Exchange rose for a fourth week to 318,050 metric tons, the highest since February. Natural Gas Bets on a decline for natural gas climbed to 89,820 contracts, from a net-short position of 64,285 a week earlier. Crude-oil holdings climbed 11 percent to 134,834 contracts, the highest since Oct. 23. Gold wagers dropped 9.3 percent to 101,922, the lowest since Aug. 14. Prices fell for five weeks in New York trading, the longest slump since January 2010. Bullion is still headed for a 12th straight annual gain, a streak that will end next year, Goldman Sachs Group Inc. said in a Dec. 5 report. A measure of net-longs for 11 U.S. farm goods tumbled 11 percent to 402,260 contracts, the lowest since June 12, CFTC data show. The S&P GSCI Agriculture Index of eight farm products slumped 1.1 percent last week, the fourth consecutive loss. Funds are holding a net-short position in wheat of 11,899 contracts, up from 6,433 a week earlier and the most bearish outlook since May. As of Dec. 20, U.S. exporters shipped 13.2 million tons for delivery in the 12 months that started June 1, 13 percent less than a year earlier, U.S. Department of Agriculture data show. “Commodities are getting caught in a risk-asset slide,” said Jack Ablin , who helps oversee about $66 billion as chief investment officer of BMO Private Bank in Chicago. “Traders want to coast through the end of the year flat instead of watching prices bounce around like a Ping-Pong ball.” To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net |
2024-04-15 | Bloomberg | Citizens South Banking, J&J, Papa John’s: U.S. Equity Preview | Shares of the following companies may have unusual moves in U.S. trading on April 18. Stock symbols are in parentheses. Citizens South Banking Corp. (CSBC) : The Gastonia, North Carolina-based lender agreed to assume the deposits of New Horizons Bank, after the East Ellijay, Georgia-based company was closed by banking regulators, the Federal Deposit Insurance Corp. said. Johnson & Johnson (JNJ) : The world’s largest health products company is in talks to acquire Synthes Inc. (SYST VX) for $20 billion, the Wall Street Journal reported, citing people familiar with the transaction. Papa John’s International Inc. (PZZA) : The pizza maker that announced on Feb. 28 that Chief Financial Officer David Flanery would retire and be succeeded by Lance Tucker said J. Jude Thompson resigned as president and co-chief executive officer to pursue other opportunities. Park National Corp. (PRK) : The Newark, Ohio-based banking company reported first quarter earnings excluding some items of $1.29 a share, beating the average analyst estimate by 32 percent, Bloomberg data show. To contact the reporter on this story: Stephen Kleege in New York at skleege@bloomberg.net. To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net . |
2024-06-26 | Bloomberg | Wenzhou Shadow Banks Unhurt by China Crunch as Rates Steady | China ’s efforts to rein in shadow banking, which contributed to the nation’s worst credit crunch in at least a decade, haven’t driven up costs for borrowers in at least one place: Wenzhou. On June 20, as the nation’s banks demanded a record 30 percent to lend to each other for one day, small businesses in the export hub paid 23.42 percent for one-month loans from pawn shops, small lending companies and individuals, according to data from a local government-backed agency. That’s almost unchanged from this month’s average of 23.17 percent. Stable borrowing costs in the coastal city that’s a bellwether for informal lending may support policy makers’ argument that the economy has enough financing. Premier Li Keqiang has urged banks to make better use of existing credit and the central bank has injected cash into particular lenders, rather than easing total funding, even after money-market rates jumped to a record and stocks entered a bear market. “If you look at the growth rate of money supply or total social financing, it’s quite obvious that the economy isn’t short of liquidity,” said Rainy Yuan, a Shanghai-based analyst at Masterlink Securities Corp. (2856) “It’s just not where it should be.” Regulators are seeking to halt Chinese banks’ increased use of interbank borrowing and short-term deposits known as wealth management products to finance long-term loans and investment in trusts, some of which are held off-balance sheets. The crackdown may damage the economy by shrinking the non-bank funding that smaller companies rely on, Barclays Plc said on May 20. Shadow Banking China’s aggregate financing , which tallies bank loans, corporate bonds, equity raising and other off-balance-sheet credit to provide a broad picture of funding, surged 50 percent in the first five months to a record 9.1 trillion yuan ($1.5 trillion), the central bank said this month. About a third of that went to entrusted loans, trust lending and bills, which together with underground lending are known as shadow banking. Shadow lending flourishes in China because an estimated 97 percent of the nation’s 42 million small businesses can’t get bank loans, according to Citic Securities Co., and savers are seeking higher returns than banks pay on deposits. The industry may be valued at 36 trillion yuan, or 69 percent of gross domestic product , JPMorgan Chase & Co. estimated last month. China last year picked Wenzhou, a city of 9 million residents and 400,000 small businesses, for a pilot program to curb informal lending after more than 80 businessmen committed suicide or declared bankruptcy over six months. The Wenzhou Private Lending Registration Center , the first in the country to monitor underground loans, matches borrowers with lenders and tracks data from 350 sources. Lighters, Eyeglasses The weighted average lending rate for loans from one month to one year in Wenzhou, whose entrepreneurs make products ranging from cigarette lighters to eyewear, stood at 15.6 percent in the week ended June 21, down from a five-week high of 17.2 percent for the previous seven days, according to the registration center. While smaller manufacturers and businesses have been relatively unscathed by the liquidity crunch, Michael Shaoul , chairman of Marketfield Asset Management LLC says regulators’ efforts to rein in credit will tighten financing for real estate projects. ‘Bull’s Eye’ “The bull’s eye is on the Chinese housing market and the Chinese construction industry ,” Shaoul said in an interview on Bloomberg TV today. “When a central bank really starts to address excess credit creation in an economy, it’s always the sector which has done the best which suffers the most.” New home prices in Beijing, Shanghai and Guangzhou posted the biggest gains in May since at least January 2011, as 69 of the 70 cities tracked by the government showed increases last month, the most since August 2011, according to the statistics bureau. Total liquidity in China’s banking system is “reasonable,” the People’s Bank of China said in a statement dated June 17 and published June 24. Money-market rates are fluctuating because of rapid loan growth, the demand for cash during a public holiday this month, companies making tax payments and banks meeting mandatory reserve requirements , the central bank said yesterday. Wealth Management Regulators are requiring trust funds and sellers of wealth management products -- financial instruments used by banks to collect deposits for periods from 30 days to a year -- to shift assets into publicly traded securities, tightening funding for property developers and local-government financing vehicles. The China Banking Regulatory Commission in March told banks to cap investments of client money in debt that isn’t publicly traded at 35 percent of all funds raised from the sale of wealth management products. The squeeze on the interbank market is “emblematic of some of the shadow banking issues coming to the fore as well as some of the tight liquidity associated with wealth management product issuance, and the crackdown on some shadow channels,” Charlene Chu, a Beijing-based analyst at Fitch Ratings , said on June 18 in an interview with Bloomberg TV. The outstanding amount of wealth management products rose by 500 billion yuan to 13 trillion yuan in the first five months of this year, accounting for 16 percent of the nation’s deposits, according to estimates published by Fitch on June 10. Such products increased by 4 trillion yuan last year, the ratings company said. “What you will see happening from this point on is, the amount of total social financing starts to decelerate very quickly in China,” Marketfield’s Shaoul told Bloomberg TV’s Zeb Eckert. “The effect of this change in policy is going to be fairly dramatic in the next few months.” To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-08-17 | Bloomberg | Australian Wages Grew Faster Last Quarter | Australian wages grew at a faster pace in the second quarter as pay rose in mining and financial industries, underscoring the Reserve Bank ’s concern about inflation and the need for higher productivity. The wage price index, which measures hourly pay rates excluding bonuses, advanced 0.9 percent from the previous three months, when it gained 0.8 percent, the statistics bureau said today in Sydney. That matched the median forecast in a Bloomberg News survey of 17 economists. Three central bank officials and the RBA board in the past month have called attention to boosting productivity, which is typically the federal government’s role, to maintain income growth. The RBA has held the nation’s benchmark interest rate for eight meetings at 4.75 percent, a developed-world high, to gauge the effects of the largest mining boom in more than a century on prices. “Falling productivity and faster wage growth increase unit labor costs that feed into broader inflation pressures and that’s concerning the Reserve Bank,” said Matthew Circosta, an economist at Moody’s Analytics in Sydney. “Declining productivity has been highlighted regularly in recent RBA statements and today’s report will only add to their fears.” The Australian dollar after the report bought $1.0466 as of 1:02 p.m. in Sydney, from $1.0446 before the data and $1.0486 yesterday in New York. Labor productivity growth since 2003-2004 has been about 1.5 percentage points below the rate seen over the preceding three decades, the RBA said in its quarterly monetary policy statement released Aug. 5. ‘Weak’ Productivity At the central bank board’s meeting Aug. 2, policy makers noted Australia ’s “weak” productivity gains and said a record level of export prices relative to import prices -- called the terms of trade -- has kept incomes elevated. “The task facing monetary policy in future would become more difficult if a continuation of poor productivity growth were combined with an expectation of growth in nominal wages and profits at the same sorts of rates seen over the past two decades,” minutes of the policy meeting said. In a July 26 speech, RBA Governor Glenn Stevens said sustaining the growth rate of inflation-adjusted incomes in Australia will depend on higher rates of productivity. “The thing that Australia has perhaps rarely done, but that would, if we could manage it, really capitalize on our recent good fortune, would be to lift productivity performance while the terms of trade are high,” Stevens said. Annual Growth Today’s report showed the wage price index advanced 3.8 percent in the second quarter from a year earlier, after a revised 3.9 percent increase in the first quarter. Economists forecast a 4 percent gain from a year earlier. Hourly rates of pay in wholesale trade advanced 4.7 percent from a year earlier, the biggest gain among the 18 industries surveyed by the statistics bureau, the report showed. Compensation at financial and insurance companies rose 4.5 percent, while mining and manufacturing gained 4.1 percent. Pay at hotels and restaurants increased by the least, up 3 percent. RBA Assistant Governor Philip Lowe and Jonathan Kearns, director of economic research, released a paper this week cautioning about “complacency bred by good economic times.” “For Australia to fully capitalize on the new possibilities, both businesses and government need to be focused on improving how things are done and addressing inefficiencies in regulation and business practices,” Lowe and Kearns wrote in their paper. Mining Bonanza The government forecasts mining investment of A$76 billion ($79 billion) this fiscal year as companies seek to meet demand from India and China. Australia’s jobless rate held at 4.9 percent in April, May and June before rising to 5.1 percent last month. The RBA raised rates seven times from October 2009 to November last year to help contain inflation. The local dollar reached $1.1081 on July 27, the highest level since it was freely floated in 1983. “A key reason why productivity is weak is because both the mining sector and utilities companies have been hiring more staff and output hasn’t increased to the same extent,” said Craig James , a Sydney-based senior economist at Commonwealth Bank of Australia (CBA) , the nation’s biggest lender. “So the Reserve Bank won’t just accept the latest wage figures and conclude all is right with the world.” To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net |
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