Takata Said to Be Close to Deal With U.S. Over Deadly Airbags

Abstract: The auto parts maker Takata is nearing a sweeping settlement with federal prosecutors over airbags that can violently explode , according to two people briefed on the discussions. The devices have been linked to many deaths and injuries and prompted the largest recall in automotive history. A deal could come as early as the next few weeks, and Takata is expected to pay a penalty of up to $1 billion, the people briefed on the discussions said. One point that remains unresolved is whether there will be any guilty plea to criminal misconduct, either by the company or one of its subsidiaries. Such a plea would be an escalation of punishments against auto companies for defective products. In settlements with General Motors and Toyota Motor, for example, the companies agreed to pay large fines over defects , but did not plead guilty. Any broad agreement between Takata and the Justice Department would end one chapter in a long-running saga that has enraged drivers, disrupted the auto industry and brought the company to the brink of bankruptcy. While Takata still faces drawn-out legal battles, including a class-action lawsuit, it would no longer be under the cloud of a government investigation. Takata’s exploding airbags have been linked to at least 11 deaths and more than 180 injuries in the United States. Nineteen automakers are recalling 42 million vehicles to replace the airbags’ metal inflaters. The inflaters can overpressurize and rupture, shooting metal shards into a car’s cabin. The Justice Department has been examining whether the company made misleading statements and hid information about the defective airbags from clients. Takata has already acknowledged that it manipulated airbag test results, but has said that its conduct was unrelated to the airbag ruptures. Former Takata engineers have said that cost considerations drove the company to switch to a less expensive yet problematic propellant in its inflaters in the early 2000s. The propellant, ammonium nitrate, can break down over time, making it unstable and prone to unexpected explosions when exposed to moisture. The Airbag in Your Car Could Explode. This Is What You Should Do About It. Defective airbags made by Takata have been tied to 12 deaths and more than 180 injuries in the United States alone. The ensuing recall — the largest in automotive history — has turned out to be messy, confusing and frustrating for car owners. Autoliv, a rival airbag supplier, tested the compound in the 1990s and found it too dangerous to use as an airbag propellant, former engineers at the company have said. But Takata pushed ahead, manipulating test results it submitted to its biggest client, Honda. Even after a driver of a Honda Accord was injured in a 2004 airbag rupture in Alabama, neither Takata nor Honda sought the involvement of federal regulators, deeming the episode an anomaly. Mark Abueg, a Justice Department spokesman, declined to comment. A Takata spokesman in Tokyo said he could not comment. The news about Takata nearing a settlement with the government was first reported by The Wall Street Journal. A settlement with Takata that carried a financial penalty would be the latest in a string of fines levied against the auto industry by the federal government over faulty products. Toyota was fined $1.2 billion in 2014 amid accusations it concealed safety defects that could cause its cars to accelerate suddenly. But Toyota did not plead guilty, and the Justice Department agreed to defer prosecution of a wire fraud count for three years, provided that the automaker paid the penalty and submitted to a continuing independent review of its safety processes. Similarly, General Motors agreed in 2015 to pay a $900 million penalty for its decade-long failure to disclose a deadly ignition switch defect. The Justice Department also agreed under that settlement to defer prosecution for three years. But the extent of Takata’s lapses may embolden prosecutors. Internal emails obtained by The New York Times suggested brazen and widespread tampering with data as reflected in brash exchanges among Takata employees in Japan and the United States. “Happy Manipulating!!!” a Takata airbag engineer, Bob Schubert, wrote in an email dated July 6, 2006, in a reference to airbag test results. In 2010, as Takata and Honda assured regulators that the airbag explosions were a result of isolated manufacturing issues, the companies also enlisted the help of researchers at Pennsylvania State University to determine whether ammonium nitrate might have been central to the problem. Video In the course of reporting, The Times obtained video showing the potentially dangerous consequences of mishandling Takata’s airbags. Millions of vehicles with the airbags have been recalled worldwide. When the conclusion of the researchers’ 2012 study cast doubt on whether ammonium nitrate should be used in the inflaters, Takata dismissed the findings and waited more than two years before sharing them with regulators. As part of a 2015 consent order , the National Highway Traffic Safety Administration hit Takata with a $70 million penalty for its failure to promptly disclose the defect. The agency warned at the time that the penalty could increase by $130 million if Takata did not live up to the consent order’s terms, a condition that would make it a record civil punishment for the auto industry. Takata executives have also been called before congressional committees, alongside automakers, their biggest clients. A crucial question for Takata is what portion of the recall costs will ultimately be paid by its automaker customers, rather than by the company itself. Negotiations involving Takata, carmakers, potential investors and the supplier’s Japanese lenders are continuing. If Takata were to bear the full cost of the recall, the company would almost certainly face bankruptcy, depriving carmakers of a supplier that remains crucial to their global supply chains. Takata is one of just three major airbag manufacturers in the world and controls 25 to 30 percent of the market, according to industry researchers. The greater the share of recall costs that carmakers absorb, the more attractive Takata would be to potential investors. The airbag scandal and mounting recalls have already put the company under severe financial strain. It lost nearly $130 million last year, and has been scrambling for a much-needed cash infusion since then. Takata and its bankers at Lazard are still working on a financial turnaround plan. Under one possible scenario, the company would secure an investment from an outside group while filing for Chapter 11 bankruptcy protection, according to one of the people briefed on discussions with the government. The company hopes to announce the results of its investment process by February, though that timetable is fluid. Any financial rescue would probably lessen the influence of the Takada family, which founded the company in the 1930s and remains its largest shareholder. In June, the company’s chief executive, Shigehisa Takada, said he would step down . He is, however, still listed as chairman and chief executive, and a successor has yet to be named. Mr. Takada has largely stayed in the background as the company’s woes unfolded, leaving subordinates to face regulators, politicians and the media. He has not made a public appearance in the United States since the scandal began. At the company’s annual meeting last year, he apologized to victims but defended Takata’s airbags as fundamentally safe.

Takata
Fines
Justice Department
Automobile safety
Recalls and Bans


Concepcion Picciotto, Who Kept Vigil by White House for Three Decades, Dies

Abstract: President Obama’s closest neighbor died on Monday, just a few days after vacating the peace vigil encampment behind the White House that she had occupied for more than 30 years in what was considered the longest political protest in American history. The protester, Concepcion Picciotto, died in a Washington apartment she shared with three roommates not far from her Lafayette Square tent, said Schroeder Stribling, the executive director of N Street Village , which provides services to homeless women. Ms. Picciotto, who had been in declining health, was about 80. The cause of death has not been determined, the medical examiner’s office said Wednesday. Camped on a red brick sidewalk under a plastic tarp, Ms. Picciotto, a diminutive, weather-beaten Spanish immigrant and transplanted New Yorker, became a familiar sight to passers-by and tourists as she denounced nuclear weaponry and fended off those who dismissed her as daft. Her hand-lettered signs declared “Read My Lips, No New Wars” and “Live by the Bomb, Die by the Bomb.” Ms. Picciotto was also familiar to five presidents, though they ignored her. “Not a single president ever walked across the street from the White House to meet her or to recognize her quest for peace and justice,” the consumer advocate Ralph Nader, an admirer of hers, wrote in an email. Ms. Picciotto gained a measure of wider celebrity when she appeared in Michael Moore’s documentary film “Fahrenheit 9/11,” which was scathingly critical of President George W. Bush’s war on terror. Another admirer was Eleanor Holmes Norton, Washington’s nonvoting delegate to the House of Representatives. “During Picciotto’s more than 30 years of vigilance for nuclear proliferation and peace, many of her goals were achieved,” Ms. Norton, a Democrat, said in a statement, citing “a measured reduction” in atomic weapon proliferation, including the Obama administration’s recent accord with Iran. In 2011, Ms. Picciotto was honored by the Shafeek Nader Trust for the Community Interest, established by Ralph Nader and his sisters to honor their brother after his death. The group lauded her for “setting the highest standards for testing the authenticity of free speech protection under the Constitution.” To do so, she played a cat-and-mouse game for more than three decades with the United States Park Police, which prohibits demonstrators from sleeping on its property or leaving a protest site unattended. When she left to rest, volunteers would relieve her. That system broke down one day in 2013 when she took a break to grab a bite at a nearby headquarters for peace advocates and her scheduled stand-ins failed to show up. The park police moved in, took down her protest site and got rid of her signs. But after Ms. Norton intervened, Ms. Picciotto was allowed to retrieve her belongings and return to her camp. In interviews, Ms. Picciotto said she had been orphaned in Spain and raised by a grandmother. After arriving in the United States in 1960, she worked as a receptionist for a Spanish government commercial attaché in New York. She and an Italian immigrant she married (his name could not be learned) lived in the Gravesend section of Brooklyn and adopted an infant daughter, Olga, in Argentina in 1973. Ms. Picciotto said her husband had committed her to mental institutions to mask his nefarious dealings, which she did not specify, involving the adoption. Eventually, she was released, lost her daughter in a custody dispute and wound up in Washington, where she gravitated to William Thomas, who was conducting his own peace vigil along Pennsylvania Avenue. They were joined in 1984 by Ellen Benjamin, who became Mr. Thomas’s wife. He died in 2009. Ms. Stribling, who runs the women’s shelter, said Ms. Picciotto had visited the vigil site as recently as last Wednesday. Ms. Picciotto was ailing, she said, but after breaking her arm in a fall, she ignored a doctor’s advice to go to an emergency room. Ms. Stribling said the medical examiner’s office would probably seek out Ms. Picciotto’s former husband and daughter. She said she expected that Ms. Picciotto’s friends would gather for a memorial service and make sure that she was not buried in a pauper’s grave. Ms. Picciotto was, by most standards, eccentric, typically clad in a wig, helmet and head scarf as she proselytized for peace, “to stop the world from being destroyed,” while also complaining about unspecified persecution and conspiracies. Was she sane? “I no longer think in black-and-white terms,” Ms. Stribling, a social worker, replied when asked that question. “She was in the gray for sure. “What’s happening in the aftermath of her death is testimony that she did accomplish something. She was a person of passionate attachment to some ideas. You can call that sane or not, but it made a difference.”

Concepcion Picciotto
White House
Obituary
Civil Unrest
Barack Obama


In France and Germany, Divergence on How to Recapitalize Banks

Abstract: European leaders are finally coming around to the view that banks must be compelled to replenish their capital reserves if the euro area is ever to emerge from the debt crisis . But whether the politicians can make it happen in a convincing manner is another question — especially given that Germany and France are already divided. Analysts are skeptical that even the richest countries will be able to agree on guidelines for a broad, coordinated effort, one impressive enough to remove all doubts about solvency in the event of a default by Greece or another sovereign debtor. In the first signs of a split, France wants to draw on the European bailout fund, the European Financial Stability Facility, to rebuild bank capital. German leaders think national governments should take the lead. “Only if a country can’t do it on its own should the E.F.S.F. be used,” Chancellor Angela Merkel said on Friday. But the sums required to armor banks against losses on government bonds — up to 300 billion euros, or about $400 billion, by some estimates — could jeopardize France’s top-notch credit rating. That would be a big political setback for President Nicolas Sarkozy before elections next May. These kinds of arguments are just what economists fear. A parochial approach will lead countries to try to seek advantage for their own institutions, as has often been the pattern in the past, critics say. In addition, most large European banks have extensive operations and therefore require pan-European oversight, they argue. “You need to have a European approach, which is tremendously difficult politically,” said Nicolas Véron, a senior fellow at Bruegel, a research organization in Brussels. “If it doesn’t happen, I am not very optimistic about the ability of European authorities to keep the crisis under control.” When Fitch Ratings cut Spain’s credit rating Friday by two levels, to AA- from AA+, it cited the “intensification” of the debt crisis along with slower growth and shaky regional finances, Bloomberg News reported. Fitch cited similar reasons for also downgrading Italy one level, to A+, while maintaining Portugal at BBB-, saying it would complete a review of that ranking in the fourth quarter. Meanwhile, grave problems at the French-Belgian bank Dexia, which is on the verge of its second taxpayer-financed bailout in three years, have dashed any illusions about the health of European banks. It was only in July that Dexia breezed through an official stress test that was supposed to expose vulnerable banks. It has become obvious that restoring the soundness of European banks is fundamental to resolving the debt crisis and removing a serious threat to the global economy. Christine Lagarde, managing director of the International Monetary Fund, has been urging a wholesale recapitalization for several months. In the United States, President Obama warned on Thursday that “the problems Europe is having right now could have a very real effect on our economy.” But no one has provided even rough details of how to compel banks to raise money on open markets if they can, and to provide government financing if they can’t. “Our experience is that if no one is talking about the details of something, it is because they do not exist,” Carl Weinberg, chief economist of High Frequency Economics, wrote in a note to clients Friday. “Let us just agree that there is no plan.” Mrs. Merkel and Mr. Sarkozy are expected to discuss the issue when they meet in Berlin on Sunday, along with their finance ministers. The European Commission expects to produce its proposal for a coordinated recapitalization within a week. Even if Dexia proves to be an isolated case, it is clear that investor confidence in the solvency of European banks is at a low ebb. European banks are reluctant to lend to one another, and United States lenders are reluctant to lend to European institutions. Banks have been unable to sell bonds to raise money. The danger is that European banks will run short of cash to lend to businesses and consumers, amplifying a recession that may already be under way. And in a vicious cycle, the threat of recession is further undermining faith in banks. Investors know that a recession will cause a surge in bad loans, adding to the potential damage if Greece defaults on its bonds. “The problem is not just bank capital, but first and foremost that of sovereign debt crisis intertwined with slow growth,” the Institute of International Finance, a banking industry organization, wrote in its monthly assessment of global capital markets. The report noted that shares of United States banks had begun to suffer because of perceptions that they are exposed to their European peers. On Thursday, the European Central Bank expanded its aid to banks that were having trouble raising money. It said it would allow banks to borrow as much money as they wanted for about a year at the benchmark interest rate, currently 1.5 percent. And it said it would spend 40 billion euros on a low-risk form of bank debt known as covered bonds. But, as Jean-Claude Trichet, the departing president, warned, the central bank can provide only temporary aid. The central bank is addressing banks’ liquidity problems — their need for cash day to day. But the E.C.B. cannot fix banks’ solvency problems, the lack of adequate reserves to absorb a big hit to their holdings of government bonds or losses from nonperforming loans. Before money market funds and other investors will start risking money on European banks again, they need to believe the banks are bulletproof. Calculations of how much more capital banks need depend on judgments about how bad things may get. Jon Peace, a banking analyst at Nomura, counts at least 25 large publicly traded banks that would need more capital if they fully recognized losses in the value of their holdings of European government bonds. The list includes big names like Commerzbank and Deutsche Bank in Germany, UniCredit in Italy, and Société Générale and BNP Paribas in France. In addition, there may be dozens, if not hundreds, of other undercapitalized banks that fall below the radar of analysts because they do not have publicly traded shares, like German landesbanks, or because they are too small. Larger institutions like Deutsche Bank or UniCredit would probably be able to sell new shares. But with bank share prices depressed, it is not an opportune time for even the most credible banks to go to markets. European leaders plan to debate the issue on Oct. 17 and 18 in Brussels. In addition, governments have asked the European Banking Authority to prepare its own estimate of bank capital needs. Finance ministers have agreed to share information on their own capacity to finance aid to banks when they meet next month. Given the weight of opinion in the euro zone, the European Commission is likely to side with Mrs. Merkel and argue that the bailout fund should be used for bank recapitalization only as a last resort — unless Mr. Sarkozy can persuade the chancellor otherwise on Sunday. Germany’s position puts France in a tight spot, though. French banks are some of the most exposed to troubled government debt. Relatively small increases in capital reserves are unlikely to convince the financial markets. But if France were to lose its triple-A credit rating, that would also cause problems for the bailout fund, since France is the second-largest guarantor of the rescue fund, after Germany. “Merkel has made it clear that she doesn’t see why German taxpayers’ money should be used to rescue French banks which are in competition with her own,” said an official in Brussels, who declined to be quoted by name. “France argues that it has made substantial guarantees to the fund and thinks it should be able to use it.”

European Sovereign Debt Crisis (2010- )
Banking and Financial Institutions


Optimism, and Caution, as Spain Attracts Investment

Abstract: MADRID — Like other Spanish builders, Fomento de Construcciones y Contratas, or F.C.C., had struggled to convince investors that it could extract itself from Spain’s housing market quagmire. In the last six months, the management of F.C.C. was on an almost continual investor road show in the world’s financial capitals. The campaign finally yielded fruit Oct. 21, when the company announced the sale of 6 percent of its equity to Bill Gates, the co-founder of Microsoft, for 113.5 million euros, or $154 million. Two days after Mr. Gates’s purchase, as it happens, the Bank of Spain said the country had pulled out of recession and returned to growth of 0.1 percent in the third quarter after nine consecutive quarters of contraction. Both announcements appeared to confirm what many Spanish executives and the government of Prime Minister Mariano Rajoy had been asserting for months: that Spain deserved its place back in the sunshine. There are, of course, plenty of clouds still hanging over Madrid — so many that on Wednesday the Spanish economy minister, Luis de Guindos, warned against triumphalism, telling members of the Spanish Senate that, at a time of near-record joblessness of 26.6 percent, nobody should claim that “all is well.” Overall growth is expected to remain anemic for several years. Still, the speed of the turnaround in investor sentiment has been striking. “What is truly remarkable is that Spain is suddenly flavor of the month, when until recently investors smelled a rat here,” said Gonzalo Díaz-Rato, who advises international funds on buying Spanish assets. Three weeks ago on a visit to New York, Emilio Botín, the chairman of Banco Santander, told reporters that Spain was in “a fantastic moment.” He added: “Money is arriving from everywhere.” Although Mr. Botín’s optimism raised eyebrows back home, especially among ordinary Spaniards struggling with austerity budgets and joblessness, most indicators add credence to his assessment. Foreign direct investment doubled in the first eight months of this year to €19.4 billion, according to Mr. de Guindos, the economy minister. That was thanks in part to Ford and other carmakers that have been expanding production here. For all of 2012, foreign direct investment had fallen to €21 billion, from €30 billion in 2010, when Spain briefly returned to growth. Spanish banks, whose loan defaults forced Spain to negotiate a European bailout last year, have since then been able to sell assets and reduce by three-fourths the level of exposure to troubled real estate loans they had before the rescue. Last month the main Spanish stock market index climbed to its highest level since July 2011, although it has since slipped back a bit. And Friday, the credit rating agency Fitch upgraded Spain’s outlook to stable from negative. How far can this Spanish recovery continue? “Very” is the answer that Arcano, a Spanish wealth advisory and asset management firm, provided in a report published in October. The analysis compared the situation of Spain with that of Germany a decade ago, when Berlin managed to turn around its current-account deficit — a broad measure of a country’s trade performance — and embark on an export surge that has more recently allowed Germany to weather the financial crisis better than most other European nations. “Spain is now in a position to achieve that kind of German recovery,” said Ignacio de la Torre, a partner at Arcano. Aiming to ride this wave of optimism, the government has revived a privatization program that was shelved two years ago because of Spain’s downturn. In coming months, it is expected to sell as much as 60 percent of Aena, the national airport management company. Analysts value Aena at about €15 billion, but that includes a debt of €12 billion. But the fact that Spain has been in and out of recession since the start of the crisis — briefly returning to growth in 2010 before sinking into its banking crisis — has also left some economists skeptical about the staying power of the latest recovery. Simon Tilford, chief economist at the Center for European Reform in London, raised doubts about the sustainability of Spain’s recovery, including its export performance and ability to rein in debt. “The root of the problem is that Spain is attempting to do two contradictory things: pull off an internal devaluation within the euro zone to bolster trade competitiveness, while ensuring that its debt burden remains sustainable,” Mr. Tilford said. “By depressing domestic demand and inflation, the former undermines the latter.” With the euro up 8 percent against the dollar since July, any euro zone exporter is having a harder time now pricing its goods or services competitively on the world market. In the case of Spain, however, this has been offset by a fall in labor costs, now about 25 percent below Italy’s, according to the Arcano study. In a sign that Spanish manufacturing is becoming more attractive, Crown Holdings, an American packaging company based in Philadelphia, agreed on Thursday to buy Mivisa, a Spanish maker of food cans, for €1.2 billion in cash. While acknowledging the pickup in foreign direct investment, Mr. Tilford still concludes that in Spain’s case, “overall business investment remains very depressed.” Indeed, the foreign money coming into Spain in recent months has mostly involved funds that specialize in purchasing distressed companies or property-related assets — whether mortgage portfolios or actual office buildings — rather than the broad-based merger and takeover transactions of the sort that Spain witnessed before the crisis. One of the largest precrisis deals was a three-year-long takeover battle for Endesa, a Spanish energy company, which ended in early 2009 when the Italian giant Enel took a controlling stake for €11.5 billion. “This is the next frontier, but we’re not there yet,” said Mr. Díaz-Rato, the investment adviser. Over all, he said, “my view is that the Spanish situation was probably not as terrible as it was perceived to be last year, nor are we now as solid as some seem to think.” Among the foreign investors involved in a recent property asset deal with Spanish banks were the investment firms Cerberus Capital Management, Centerbridge Partners and TPG. TPG took control in September of the real estate servicing arm of La Caixa, one of Spain’s largest banks, which is based in Barcelona. In all, Spanish banks have cut their exposure to real estate to about €110 billion worth of property assets, down from €400 billion in 2008, after offloading about €50 billion of their most troubled housing assets to state-controlled Sareb, a so-called bad bank that was set up last year. With house prices down on average about 40 percent from their 2007 peak, foreigners have been among the main property buyers recently. The number of housing transactions involving foreigners in Spain climbed 17 percent in the second quarter from a year earlier, according to data from Spain’s public works ministry. But as with much of the rest of Europe, the banking credit squeeze has continued. Bank lending to the small and medium-size enterprises that form the backbone of the Spanish economy has fallen 66 percent from precrisis peak levels, according to a report published in October jointly by Bain, a consulting firm, and the Institute of International Finance. Spain’s weakened banks, simply put, are not yet eager to start lending again — particularly to smaller companies. For many Spanish companies, the alternative has been to issue bonds or convertible debt to private equity firms and other investors. For instance, K.K.R. agreed in April to lend €320 million to Uralita, a building materials company. Such rescue financing, however, remains a distant prospect for Fagor, a maker of household appliances that employs 5,700 people but has now become Spain’s latest corporate casualty. On Wednesday, Mondragón, which is Fagor’s parent company, announced it would pull the plug on the insolvent appliance business. Even amid a Spanish recovery, Mondragón concluded that in the case of Fagor, pouring more money in “cannot guarantee its future.”


Economy and Geopolitics Decide Where Oil Goes Next

Abstract: NOW that the price of crude oil has crossed the $100-a-barrel threshold, and then retreated slightly, what direction will it take now? Many experts say it will go up, then down, and then maybe up again. That, anyway, has been the pattern of the last several years of volatile prices. The arguments for even higher oil prices are well known. The economies of China and India are booming and hungry for energy. Oil fields in Mexico, the United States and several other oil producers are drying up, tightening world supplies. President Hugo Chávez of Venezuela is using oil as a political weapon. Rebels in Nigeria are creating havoc in some of Africa’s most productive oil fields. The war in Iraq rages on. The dollar is weakening, causing hedge funds and traders to flee to oil and other commodities as a safe haven. But all those factors were in play last summer when the price fell to about $60 a barrel, before it rallied at the end of the year. The price touched $100 on Wednesday and surpassed that briefly on Thursday before retreating after the government reported higher-than-expected heating oil and gasoline supplies. The price settled at $99.18 a barrel, down 44 cents. “Predicting oil prices continually demonstrates the perils of prophecy, because oil prices are the derivative of what happens in the global economy and global geopolitics,” said Daniel Yergin, chairman of Cambridge Energy Research Associates. Mr. Yergin said he could foresee oil prices surging as high as $150 in the next few years or falling as low as $40. John Richels, president of the Devon Energy Corporation, an international oil and gas company based in Oklahoma City, said $150 a barrel was possible, but so was $55. “We have to make investments based on our outlook over a long period of time,” he said. “It is tough.” Central to the question of where oil prices will go is the effect of high prices on the consumption and development of alternative fuels. Large amounts of public and private investment are going into solar, wind and biofuel development, but so far they are making only a slight contribution to energy supplies. Scientific and engineering leaps, like developing the atomic bomb or sending a man to the moon, can be made relatively quickly, but they are still measured in years. Until now, most economists have been surprised that the rise in oil prices — from as low as $11 less than a decade ago — has not had a greater effect on American consumers. But with oil prices rising at an increasingly rapid rate over the last few months in conjunction with the housing market slump and credit squeeze, many economists now wonder whether oil prices could tip the economy into a recession. A recession, of course, would curb oil demand. That would push oil prices right back down again, or so the theory goes, as fewer consumers drive to the mall, companies produce and ship less and world trade slows. “If we are slowing down, we will not be buying as much goods from China and services from India,” said Addison Armstrong, director for market research at Tradition Energy, an energy broker that deals with banks and hedge funds. “My forecast for 2008 is that crude prices will average $75 a barrel, and that is based on a scenario of a slowing economy in the United States.” But Mr. Armstrong and other experts cautioned that a protracted insurgency in Nigeria, a punishing hurricane season or other unpredictable events could take oil prices up even more. So why are oil prices going up now? The military situation in Iraq is arguably improving, and Iraqi oil exports are beginning to flow again. Tensions with Iran have eased a bit. There are forecasts for a mild late winter in the United States, which should help bolster oil and gasoline inventories going into the spring and summer driving season. Many experts say the answer lies in the investment decisions of traders and hedge funds. With the markets in equities, housing, credit and currency shaky in the United States, traders are betting on oil and other commodities as a perceived safe haven. Phil Flynn, a vice president and market analyst with the Alaron Trading Corporation in Chicago, said the recent interest rate cuts by the Federal Reserve had underscored for traders the depths of the country’s economic risks and led them to buy oil futures. Mr. Flynn said he thought that oil prices were more likely to fall than rise, “because I think the factors that drove us to today are unlikely to repeat in 2008.” He added that he thinks the dollar will find a bottom in 2008 and that the problems in housing are already priced into the markets. But most experts say that if oil prices do go down, they will probably not go down very far or for very long. Mr. Richels of Devon Energy said that consumers in Europe and Japan were not feeling the same pressure as Americans because their currencies have been strengthening and not weakening. “There is still a lot of demand that is outside of the United States,” Mr. Richels said. “There is increasing oil consumption, particularly in the developing nations, and oil is getting more difficult to find.”

Oil (Petroleum) and Gasoline
International Trade and World Market
Economic Conditions and Trends
United States Economy


Garry Kasparov Cleared in Pussy Riot Rally

Abstract: A Russian court unexpectedly acquitted Garry Kasparov , the opposition leader and former world chess champion, on Friday of participating in an unauthorized rally. Mr. Kasparov was detained Aug. 17 during a rally for the feminist punk band Pussy Riot outside the Moscow court where three of its members were being sentenced to two years in prison. Mr. Kasparov was violently rounded up by several riot police officers and thrown into a police van along with dozens of other protesters. But the court, where the band members had been sentenced, cleared him of charges regarding the rally.

Pussy Riot
Kasparov Garry
Decisions and Verdicts
Russia
Demonstrations Protests and Riots
Music


Tucson School District Tailors Program to Struggling Hispanic Students

Abstract: TUCSON — The forecast for the year ahead is dire, so officials in the public school district here, the oldest in the state, summoned parents to an urgent meeting one evening to lay out the options: close schools and increase class sizes or impose across-the-board pay cuts, making it harder for the district to recruit quality teachers. In the auditorium at Cholla High Magnet School, Bryant Nodine, the planning program manager for the Tucson Unified School District, peered into the audience and pleaded for suggestions. “We need your help,” he said. The district needs to find at least $17 million in savings, about 7 percent of the money in its general fund, he said, to balance its budget for 2013-14 school year. Meanwhile, at the district’s central offices, Maria Figueroa was busy sifting through résumés and rearranging her calendar to squeeze in one more interview. As the director of a new program intended to help the district’s perennially struggling Hispanic students, by far the majority of the enrollment, Ms. Figueroa enjoys a rare distinction: she has jobs to fill and money to hire. She also has a big task — mending the fences broken by the dismantling of the Mexican-American studies department last school year after an acrimonious debate over the politics of its curriculum and the type of activism it had promoted. A 2010 law banning lessons that fostered racial resentment and solidarity among members of a single ethnic group, drafted as legislators worked to frame the state’s controversial immigration bill, eventually killed the program. Facing persistent financial problems, the school district buckled under the threat of millions of dollars in fines. Instead of classes about historical realities and the everyday experiences of Mexican-Americans, once a hallmark of the department, Ms. Figueroa’s program will offer tutoring to Hispanic students who are teetering on the edge of failure. In place of discussions about race and identity, it will recruit mentors from among Hispanic business leaders and college graduates to talk to students. The overarching goal is as basic as it is fundamental. “We’re going to teach the kids that they need to stay in school, that school is important,” Ms. Figueroa said. For about 30 years, the district has been under a federal desegregation order aimed at doing just that, as well as improving achievement among its minority students. But it has seen limited success at great cost — $1 billion, based on its estimates. Part of the financing has come from commercial property taxes in the district. Officials have used the money to pay for teachers, playground monitors and other everyday expenses in schools under the desegregation order, shifting costs to try to offset layoffs throughout the district. It has not always worked, and schools have faced budget woes as the district has struggled against shrinking enrollment, declining state financing and mounting competition from charter schools , which have opened at greater numbers in Arizona than in any other state. At $62 million, the desegregation pot for the 2013-2014 school year makes up 11 percent of the district’s budget. It is also where Ms. Figueroa’s program gets its financing. She is hiring someone to help teachers handle behavior problems among students, as well as 14 people to guide the mentoring and tutoring services offered by her program, known as Mexican-American Student Services. It is a return to the past. Tucson’s Hispanic studies department was born 14 years ago, offering a curriculum that Ms. Figueroa defined as “culturally relevant” and the same type of services her program is offering. (The services were dropped somewhere along the way, she said, even as similar programs remained available to African-American, Native-American and Asian students through each of their respective departments, which evolved from the settlement over the desegregation order in 1978, as well as community pressure.) Ms. Figueroa, a longtime teacher and elementary school principal, had a hand in designing the curriculum back then. In its last iteration, when the department came to be known as Mexican-American studies, it used literature as a basis for personal essays, discussions and projects of the type José González, who taught a course named American Government Social Justice Project, encouraged his students to do, like fixing a problem they found at their school. One of the most memorable, Mr. González said, was a plan to get students more involved in decisions about what and how they should learn. “It was an exercise in empowerment for kids who never knew they had a voice,” he said. The district has now given someone else the role of creating a multicultural curriculum to offer a “balanced presentation of diverse viewpoints on controversial issues” related to Mexican-American history and culture, according to a memorandum. Ms. Figueroa said she did not know what it would look like. “It’s not my department,” she said. “The content of the material is important, but you have to get past the lack of skills our children have in reading and reading comprehension if you want to make a meaningful impact,” Ms. Figueroa added. About 800 students were enrolled in the Mexican-American studies department at last count, district officials said. They outperformed their peers on Arizona’s state standardized tests in reading (by 45 percentage points), writing (by 59 percentage points) and math (by 33 percentage points). If it is improving achievement the district was looking for, its proponents have argued, the department should have been expanded. Seven books were removed from classrooms when the classes were scrapped — shuttled to a warehouse and later disbursed among school libraries, where they remain. They were titles like “Pedagogy of the Oppressed” by Paulo Freire, which argues that students are co-creators of knowledge, and “Occupied America: A History of Chicanos” by Rodolfo Acuña, which discusses the role of race and class divisions in relations between Anglos and Mexicans in the American Southwest. District officials said that covering the fines — 10 percent of the district’s share of state aid to schools, or about $15 million — or paying to appeal the case would have meant diverting money from the classrooms, so they chose to comply with the law. Besides, Ms. Figueroa said, in a district that enrolls 50,800 students, roughly 32,000 of them Hispanic, the classes had too small an impact. The district has serious challenges. Some 19,000 seats, in buildings and portable classrooms, are empty. Half of the schools are operating in the red. And the projected deficit could rise to $50 million if voters reject a permanent extension of a statewide 1-cent increase in the sales tax in November. At the public meeting late last month, Mr. Nodine, the planning manager, told parents, “We want to cut to create something new” to “increase and improve performance.” He asked them to write down suggestions; a final decision should be announced in December. The question, he said, is how to do that when programs meant to help achievement, like full-day kindergarten, are now under threat.

Mexican-Americans
Education (K-12)
Teachers and School Employees
Tucson (Ariz)


China Deports American Jailed on Spy Charges

Abstract: BEIJING — An American geologist who was imprisoned for more than seven years on a vague charge of “illegally procuring state secrets” has been deported by China and arrived home in Houston on Friday, according to a human rights organization in the United States. Senior American officials, including President Obama and three American ambassadors to China, had for years urged top Chinese Communist Party and government officials to release the American, Xue Feng. But China showed little leniency, and Mr. Xue served all but 10 months of his eight-year prison sentence. Through most of the past decade, Mr. Xue’s case has been a frustrating one for the American government and has been cited by human rights groups as an example of the vagaries of the Chinese legal system. The fact that the Chinese government refused to release Mr. Xue ahead of or during Mr. Obama’s visit to Beijing in November 2009 despite intense behind-the-scenes diplomatic talks revealed at the time how little leverage the United States has had in recent years in human rights advocacy in China. Mr. Obama personally lobbied for Mr. Xue’s release during the visit, to no avail. The case also underscored China’s unwillingness, in legal proceedings, to recognize the status of Chinese who have given up their Chinese citizenship and become citizens elsewhere. Mr. Xue was born in China but was a naturalized American citizen and had lived in the United States since earning a Ph.D. at the University of Chicago. Other Chinese-born Americans, including Hu Zhicheng , an automotive engineer, have suffered similar fates as Mr. Xue. At the time of Mr. Xue’s release, no other American was serving a prison sentence for endangering state security, according to the human rights organization, the Dui Hua Foundation, which is based in San Francisco and often works for the release of political prisoners. In November 2012, Chinese officials granted Mr. Xue a 10-month reduction in his sentence for good behavior. He was first detained in Beijing on Nov. 20, 2007, and placed in a detention center under the watch of the Ministry of State Security, which oversees espionage and counterespionage matters. This status, “residential surveillance,” lasted for more than one year and was not counted in the eight-year sentence, Dui Hua said. Mr. Xue was formally detained in February 2008, tried in July 2009 and then sentenced on July 7, 2010. His years in formal detention before the sentencing were counted in the time served, as is normally the case in China. Mr. Xue was working for IHS , an American energy and engineering consulting company, until he resigned in July 2007, several months before he was detained. While in the employ of IHS, he had introduced the company to an oil industry database that he believed was commercially available. After IHS bought the database, Mr. Xue was detained. American Embassy officials were not allowed to see him for weeks. When he finally did meet with embassy officials, Mr. Xue told them of how he had been mistreated and tortured , and he showed them cigarette burns from interrogators on his arms. Chinese officials have wide powers in categorizing items as state secrets, and they often do so retroactively, after a person has already been detained. Many foreign officials and scholars say China’s state secrets charges are often used for political purposes. On Friday, Chinese prosecutors announced they were charging Zhou Yongkang , a former head of the domestic security apparatus and a political enemy of Xi Jinping, the Chinese president and party chief, with leaking state secrets, bribery and abuse of power.

China
Xue Feng
Dui Hua
Spying and Intelligence Agencies
US Foreign Policy


Sect Mothers Say Separation Endangers Children

Abstract: Ruth Edna Fischer was first allowed to see her 2-year-old daughter, from whom she had been separated after the raid on their polygamist ranch in Texas, at the child’s hospital room. The child had been taken there because of severe dehydration and malnutrition, Ms. Fischer said. “Hannah looked like a little orphan sitting on the couch,” Ms. Fischer said. “Her hair was stringy and she was in a diaper, a pair of dirty socks and a hospital gown.” The second visit two weeks later at a state office in Angleton, Tex., was worse. The girl would not even meet her mother’s gaze. “It was like she hardly remembered me,” said Ms. Fischer, who has four children in state custody. As they await a ruling by the highest court in Texas on whether child-welfare authorities had the right to take 468 children from the ranch early last month, the mothers have started speaking out more forcefully about what they think the separation has already done to their children. The mothers and their lawyers are undoubtedly trying to make their best pitch for public sympathy as the Supreme Court of Texas deliberates on the fate of their children. Last Thursday, an appeals court in Austin found that the Texas Department of Family and Protective Services had illegally removed the children without sufficient evidence that they were in immediate danger. On Friday, state officials asked the higher court for an emergency order that would allow them to keep all but a dozen children in their custody. The dozen children were returned to their parents under the condition that they have continuing supervision. The Supreme Court denied the stay on Friday, but said it would consider the case over the weekend. No decision has been issued yet. Many child-welfare experts across the nation, who have as a group watched the high-profile Texas case closely, say the raid on the polygamist ranch diverged sharply from the recommended practices both in Texas and elsewhere in the country. They say a growing body of research supports the contention of the mothers that forceful removal can have both significant short-term and long-lasting harm, particularly for younger children. Some studies have found that the wide-ranging effects include anxiety, extreme distrust of strangers and, in the future, higher rates of teenage pregnancy and juvenile incarceration. Through their lawyers and in personal interviews, the mothers have been spilling tales of toddlers who have forgotten toilet training and 3-year-olds who cling to them frantically during visits. Ms. Fischer’s child became dehydrated as a result of a fever. It is because of the growing national consensus about the scarring effect of removal on children, even if only temporarily, that federal law — to which all state law must defer — demands that children be removed only if “reasonable efforts” to keep them at home have been made. Many states, like Oregon and Tennessee, have gone even further to protect children from the trauma of removal by giving families intensive in-home services first, and then, if the child is taken, having conferences with the parents, kin and friends from the community within 48 hours to help smooth the transition. Some experts in Texas state law and procedure say the state not only violated minimum national standards, which are written into the Texas Family Code, but they also violated due process considerations. These were essentially the findings of the appeals court. “They made no effort to keep the children there at the ranch,” said Johana Scot, executive director of the Parent Guidance Center in Austin, which helps advocate for the rights of parents who have had their children taken into foster care. “And even worse, they did not give the families individual hearings, which they are also required to do by the code,” Ms. Scot said. “They’ve really botched this.” Marleigh Meisner, a public information officer for the Texas Department of Family and Protective Services, said she could not discuss any particulars of this case. But in the filing to the Texas Supreme Court last Friday, the state held that because the parents had declined to identify which children belonged to whom, they could not at first be treated individually. Further, the state asserted that all children were at risk because they were being indoctrinated into a pattern of sexual abuse — the young girls as victims, and the boys as predators. Last Friday, to bolster its case, the state made public a picture of what it said was the now-imprisoned leader of the church, Warren S. Jeffs, kissing a 12-year female child on the lips. The state’s raid on the Yearning for Zion ranch of the Fundamentalist Church of Jesus Christ of Latter-day Saints , or F.L.D.S., came on April 3 after someone called an abuse hot line and said that she was a 16-year-old child bride being abused by her older husband at the ranch in Eldorado, Tex., which is about 45 miles south of San Angelo. The state raided the ranch and conducted an extensive investigation of the sect’s files and found that numerous girls under the age of 16, some as young as 13, had been impregnated by older men. The caller has not been found. Lawyers for the families say Texas officials overstepped the law in removing the children from their families; some three-quarters of the children were under age 10 and presumably not at “imminent risk” of abuse, which is the standard, according to federal law. Less draconian options, which the state did not employ, could have included removing all the men from the ranch or only the teenage girls, the lawyers have argued. Steven D. Cohen, a senior associate at the Baltimore-based Annie E. Casey Foundation, a national child-advocacy organization, said that while he could not say whether Texas officials acted improperly in taking the children from their mothers, he did think that they had violated numerous standards of best practice widely used elsewhere. “Breaking all of the ties to several parental figures and siblings, and taking them to a remote and unfamiliar place raises many red flags about trauma and its effect on children,” Mr. Cohen said Experts say younger children, who often do not have a sense of the passage of time, can be particularly hard hit by such separations. About 100 of the children removed from the sect were 2 years old or younger. Shelly Greco, a court-appointed lawyer for a 14-month-old girl removed from the ranch, says the child had been up crying uncontrollably many nights because she was so abruptly weaned. Numerous studies in recent years show that the effects of removal can be long lasting, often not showing up fully for a decade of more. In one study, Joseph J. Doyle, an economist with the Sloan School of Management at M.I.T., found that children removed from their parents and taken into foster care, even for a relatively short period, were three times as likely to grow up to be juvenile offenders or have a teenage pregnancy than were children from similarly troubled homes who had been left with their parents. Professor Doyle said Texas was far from alone in erring on the side of removal. “From the caseworker’s point of view, the incentive is to take the kid,” he said. “That’s the safer choice, because it is unlikely that if something terrible happens in foster care they would be blamed. Whereas if something were to happen at home, the caseworker would be blamed.” But Lori Jessop, one of a few mothers from the ranch who were reunited with their children in a court-brokered agreement last Friday, said she had already seen the impact of this situation. Ms. Jessop said her three children were suffering from night terrors and a fear of strangers, among other problems. She said that when her 4-year-old daughter recently saw a picture of a bus, like the one used to transport the children when they were in foster care, she started to cry. “It’s affected her a lot,” Ms. Jessop said. “Everybody that she sees, especially adult men, she calls them policemen.”


Fordham Rallies From 21-point Deficit to Beat St. John’s

Abstract: Marvin Dominique made two free throws with 1 minute 31 seconds left and host Fordham overcame a 21-point second-half deficit to beat St. John’s, 84-81, on Saturday night. Fordham (5-4) trailed by 60-39 with 16:12 to play, but the Rams used a 15-3 run, capped by a layup from Chris Gaston with 6:08 left, to take a 74-73 lead. St. John’s (5-3) regained the lead, at 81-80, on free throws by Paris Horne with 1:38 left, but Dominique answered with two free throws and Brenton Butler added a jumper to close it out. Butler, who went 5 of 9 from 3-point range, led the Rams with 22 points. Gaston had 15 points and 13 rebounds. Dwight Hardy finished with 30 points and 3 steals for St. John’s. DUKE 84, ST. LOUIS 47 Nolan Smith scored 15 of his 22 points in the first half as No. 1 Duke (10-0) posted its 20th straight victory and 25th in a row at Cameron Indoor Stadium. Coach Mike Krzyzewski moved one victory behind North Carolina’s Dean Smith on the men’s career list with 878; the only coach ahead of them is Bob Knight, with 902. TENNESSEE 83, PITTSBURGH 76 Scotty Hopson sliced through No. 3 Pittsburgh’s man-to-man defense for a career-high 27 points and No. 11 Tennessee dealt the Panthers their first nonconference loss in Pittsburgh in nearly six years. The Volunteers (7-0) opened leads as large as 21 points against the Panthers (10-1). SYRACUSE 100, COLGATE 43 Rick Jackson had 18 points and 10 rebounds, his eighth double-double of the season, for No. 8 Syracuse, which defeated visiting Colgate for the 45th consecutive time. It matched the largest margin of victory for the Orange (10-0) in Jim Boeheim’s 35 years as coach. NOTRE DAME 83, GONZAGA 79 Carleton Scott scored a career-high 23 points and Ben Hansbrough made four free throws in final 12 seconds for No. 23 Notre Dame (9-1). Visiting Gonzaga (4-5) lost to a top 25 team for the fourth time this season. RUTGERS 63, AUBURN 54 Dane Miller had 17 points and 10 rebounds and Rutgers (6-2) overcame an early deficit in a SEC-Big East Invitational game in Pittsburgh. The game was a homecoming for Mike Rice, who is in his first season at Rutgers. Rice led Robert Morris, a Pittsburgh-area team, to a near-upset of Villanova in the N.C.A.A. tournament last season. COLUMBIA 76, BRYANT 72 Agho Noruwa scored 20 points for host Columbia (6-4), which has won three in a row and five straight at home. MONMOUTH 78, HARTFORD 74 Gary Cox scored a career-high 23 points and Phil Wait had a career-high 16 rebounds to lead host Monmouth (4-5), which trailed by 15-0. HARVARD 87, BOSTON U. 71 Christian Webster scored 18 points to lead six players in double figures for host Harvard. The Crimson (7-2) shot 71.4 percent (15 for 21) in the second half. IONA 87, FAIR. DICKINSON 66 Mike Glover scored 20 points and grabbed 12 rebounds as host Iona won its seventh in a row. Glover has six double-doubles this season for the Gaels (7-3). Fairleigh Dickinson (3-5) had 23 turnovers. IN OTHER GAMES Seven Seton Hall players scored in double figures in the Pirates’ 104-79 win at Massachusetts. ... Jimmy Gray made a layup with five seconds left, his only points, as visiting Binghamton defeated Manhattan, 70-69. ... Julian Boyd scored 23 points and added 13 rebounds to help host Long Island beat Lafayette, 85-80. ... Shane Gibson had 19 points and 9 rebounds and Sacred Heart pulled away late in the second half for a 75-66 win at Stony Brook. ... Nick Leon scored 14 points for St. Peter’s in a 51-50 victory at Wagner. Women SYRACUSE 75, OHIO STATE 66 Erica Morrow scored a season-high 27 points as host Syracuse toppled No. 6 Ohio State. The Buckeyes (7-1) lost to the Orange (8-0) for the first time in 10 meetings. Syracuse entered the game first in the nation in points allowed, at 43.8 a game, and it held Ohio State to 38.7 percent shooting, including 8 of 30 (26.7 percent) from 3-point range. IN OTHER GAMES Da’Shena Stevens scored 17 points and Shenneika Smith added 15 to lead No. 20 St. John’s (9-1) to a 73-49 win in Rhode Island. ... No. 9 West Virginia (10-0) defeated Prairie View, 71-39, for its 25th straight victory at home.

Duke University
College Athletics
Basketball
Smith Nolan
St. Louis University


Meant to Be a Safety Net, Bank Custodians Tangle Investors

Abstract: In the wake of a series of Ponzi schemes — the most notable being the Bernard Madoff fraud — the Securities and Exchange Commission voted last month to tighten the rules and make it much harder for money managers to misappropriate client funds. “Where an independent custodian holds client assets, the risk of client assets being misused is limited,” said Mary Schapiro, the commission chairwoman. A custodian holds the securities purchased by a money manager, assuring that they exist and that the money realized when they are sold is properly applied. Mr. Madoff’s firm served as custodian for its investments, meaning that he was free to not really invest the money that came in from customers. There was a similar arrangement in the Bayou hedge funds run by Samuel Israel. Both Mr. Madoff and Mr. Israel are now in prison. “At a stroke,” said John C. Coffee, a Columbia law school professor, in testimony to a Senate committee, “this requirement eliminates the ability of the manager to recycle funds from new to old investors.” Well, it should. Some of the people who lost money in the Madoff fraud had a custodian agreement with a bank. So far, they are worse off than they would have been if they had not had such an agreement. And therein lies a tale raising the question of just what a custodian needs to do. It also shows the perverse effect of a federal law that has kept that group of victims, some of whom lost only a few hundred dollars, and others who lost millions from filing a class-action suit. If some of the victims do not file their own suits, or join in the existing litigation, they could fail to recover any money even if the bank is later held to be liable. The bank is Westport National Bank, a unit of Connecticut Community Bank. It had a deal to funnel money into the Madoff fund from small pension funds and from individual retirement accounts , in return for fees based on the value of the holdings. The form signed by clients was called a custodian agreement, and it said the bank “shall maintain adequate records indicating the ownership by the principal of investments with BLMIS and held by the bank as custodian for the principal.” The client was called the principal, and the initials stood for Bernard L. Madoff Investment Securities. On its face, argues David S. Golub, a lawyer in Stamford, Conn., representing about 20 of Westport’s clients, that contract means Westport promises to take custody of the assets Madoff bought on behalf of the clients, something that did not happen. It is diverting, if nothing else, to speculate on what might have happened had Westport demanded to hold the assets as custodian. Since the assets did not exist, Mr. Madoff presumably would have had to refuse to do business with Westport. Might an explanation of that decision have prompted questions leading to a disclosure of the fraud years earlier? We’ll never know. As it is, the only source of recovery so far for Madoff victims is payments from the Securities Investor Protection Corporation, the government-created brokerage insurance company. That insurance has a limit of $500,000 per account. Had Westport’s customers dealt directly with Madoff, each of them would be eligible for that amount, or for their total losses if that figure was lower. But SIPC views Westport as having one account, so $500,000 is the maximum for all Westport’s customers combined. What is Westport’s view of the merits of the case? So far, that is not on the record. “We feel we acted properly,” said Richard T. Cummings Jr., the president of Westport’s parent company, when I spoke to him briefly this week. But he declined to go into details. The lawsuit filed by Mr. Golub has bounced around. He filed it as a class-action suit in state court in Connecticut. The bank got it moved to federal court and argued there that it was really a securities class-action suit, which under federal law could not be heard in state court. A federal judge agreed in part, dismissing part of it and sending the rest back to state court. The judge ruled that it could not be heard as a class-action suit at all. Unless that ruling is overturned on appeal, a victory for Westport customers would do nothing for customers who did not sue. The arguments so far have centered on whether the case fell under a federal law called the Securities Litigation Uniform Standards Act of 1998. That law was passed to stop class-action lawyers from using state courts to litigate securities suits that would not be allowed in federal court. The result, for someone reading filings in the Westport case, is reminiscent of Alice in Wonderland. The bank says that because the alleged conduct is outrageous, the case must be thrown out. “WNB’s allegedly fraudulent statements led plaintiffs to believe that their security holdings were safeguarded by a trusted bank,” the bank’s lawyers argued. That meant it was a securities law complaint, and thus should be dismissed. The bank added that the clients chose Mr. Madoff, and that in suing the bank they were simply looking for a “deep pocket” because they had no hope of recovering money from the real culprit. Mr. Golub said in an interview that he did not think there was a strong securities case against the bank, and so did not want to file one. The violation of state contract law is clear, he argued. But the judge concluded the case did have securities aspects, and thus could not be heard as a state class action. The account statements Westport’s clients received over the years did not say what securities they owned. Instead, the bank issued reports as if there were two funds, BLM1 and BLM2, in which clients had stakes. The customers were told they had shares of one security or the other, and were assessed fees based on the value reported by Mr. Madoff. If this case ever goes to trial, the bank might argue that it simply acted as a bookkeeper for its clients, and had no responsibility for the accuracy of the valuations. If that is true, it will raise questions of just what value customers got from signing a custodian agreement. The bank was told regularly by Mr. Madoff what securities were held on behalf of Westport’s clients, but the bank did not choose to relay that information to the clients until after the Ponzi scheme was exposed. Then the bank sent out a notice telling clients the most recent information it had. The list was evidently produced a little hurriedly; it included shares of “Exxon Mobile” and “Goldman Sacchs.” There were some holdings of stock index options, but mostly it was a list of blue-chip stocks, with the largest positions in Exxon, General Electric, AT&T and Johnson & Johnson. Whether or not Westport is legally liable, it would have been nice if it had, just once, asked to see proof that those shares really existed. That is, after all, one reason that custodians exist.

Ponzi Schemes
Securities and Exchange Commission
Securities and Commodities Violations
Frauds and Swindling
Madoff Bernard L


Samak Sundaravej, Former Thai Prime Minister, Dies at 74

Abstract: BANGKOK (AP) — Samak Sundaravej , a firebrand right-wing politician and television cooking show host who served a brief and tumultuous term last year as prime minister of Thailand , died Tuesday in Bangkok. He was 74. His death, after a long battle with liver cancer, was confirmed by Navachamol Sangkaew, an official at Bumrungrad International Hospital. Mr. Samak had a four-decade political career in which he was associated with military-backed, authoritarian governments. Critics accused him of helping to stir up the bloody lynching of students by anti-Communist vigilantes and the police at Thammasat University in Bangkok in 1976, which led to a military coup. He became prime minister after agreeing to act as a stand-in for Thaksin Shinawatra, who was ousted in a 2006 military coup and barred from politics. As the proxy for Mr. Thaksin, who was living in exile, Mr. Samak became the focus of street rallies by anti-Thaksin protesters who demanded his resignation. Before being named prime minister he was best known to many Thais for “Tasting and Complaining,” the cooking show he hosted for seven years. Ironically, it was his television job that was his ultimate political undoing: a court ruled in September 2008 that his acceptance of payments for appearing on the program while he was prime minister constituted a conflict of interest, and removed him from office. Mr. Samak began his political career in Bangkok in 1968, aligning himself with the conservative faction of the middle-of-the-road Democrat Party. He gravitated toward the extreme right after the country’s 1973 student revolution toppled a military dictatorship, serving in a Democrat-led cabinet while at the same time undermining its power. His vitriolic rhetoric on radio and at rallies helped stoke anti-Communist sentiment in 1976, prompting mobs to kill and brutalize scores of leftist student activists at Thammasat University. The official death toll was 46, but some estimates put it in the hundreds. Appointed interior minister after the army forced out the elected government, he oversaw the arrests of many dissidents and shuttered newspapers critical of his ways. When Mr. Samak served in a short-lived military-backed government in 1992 as deputy prime minister, he publicly justified the use of force against pro-democracy demonstrators in Bangkok’s streets that left dozens dead. After serving as mayor of Bangkok from 2000 to 2004, Mr. Samak emerged as a strong supporter of Mr. Thaksin, with whom he had many enemies in common. When Mr. Thaksin was ousted and his Thai Rak Thai party dissolved, Mr. Samak agreed to step in as leader of its People’s Power Party replacement, which he led to victory in a December 2007 election and, weeks later, the start of his almost eight months as prime minister.

Samak Sundaravej
Thailand
Deaths (Obituaries)
Politics and Government


In Newtown, Conn., a Stiff Resistance to Gun Restrictions

Abstract: People in the rural, hilly areas around Newtown, Conn., are used to gunfire. In one woodsy stretch, southeast of downtown, the Pequot Fish and Game Club and the Fairfield County Fish and Game Protective Association, where members can fish in ponds and hunt pheasant, lie within a mile of each other, and people who live nearby generally call them good neighbors. But in the last couple of years, residents began noticing loud, repeated gunfire, and even explosions, coming from new places. Near a trailer park. By a boat launch. Next to well-appointed houses. At 2:20 p.m. on one Wednesday last spring, multiple shots were reported in a wooded area on Cold Spring Road near South Main Street, right across the road from an elementary school. Yet recent efforts by the police chief and other town leaders to gain some control over the shooting and the weaponry turned into a tumultuous civic fight, with traditional hunters and discreet gun owners opposed by assault weapon enthusiasts, and a modest tolerance for bearing arms competing with the staunch views of a gun industry trade association, the National Shooting Sports Foundation, which has made Newtown its home. The place that witnessed one of the worst mass killings in United States history on Friday, leaving 20 schoolchildren and 8 adults dead, is a bucolic New England town comfortable with its firearms, and not an obvious arena for the nation’s debate over gun control. But the legislative battle right here shows how even the slightest attempts to impose restrictions on guns can run into withering resistance, made all the more pointed by the escalation in firepower. “Something needs to be done,” said Joel T. Faxon, a hunter and a member of the town’s police commission, who championed the shooting restrictions. “These are not normal guns, that people need. These are guns for an arsenal, and you get lunatics like this guy who goes into a school fully armed and protected to take return fire. We live in a town, not in a war.” The gunman’s mother, Nancy Lanza, had collected several weapons, including powerful handguns and a semiautomatic rifle that she and her son, Adam, were fond of shooting, and it remains unclear where they took their target practice. Much of the gunfire and the explosions reported by residents to the police in recent months came from a spot less than three miles from their house. Police logs identified the spot as one of the town’s many unlicensed gun ranges, where the familiar noise of hunting rifles has grown to include automatic gunfire and explosions that have shaken houses. “It was like this continuous, rapid fire,” said Amy Habboush, who was accustomed to the sound of gunfire but became alarmed last year when she heard what sounded like machine guns, though she did not complain to the police. “It was a concern. We knew there was target practice, but we hadn’t heard that noise before.” Earlier this year, the Newtown police chief, Michael Kehoe, went to the Town Council for help. The town had a 20-year-old ordinance aimed at hunters that included a ban on shooting within 500 feet of occupied dwellings, but the chief complained that the way the law was written had left him powerless to enforce the rules or otherwise crack down on the riskiest shooting. The police department logged more than 50 gunfire complaints this year through July, double the number for all of 2011, records show. Some of the complaints raised another issue. Gun enthusiasts here, as elsewhere in the country, have taken to loading their targets with an explosive called Tannerite, which detonates when bullets strike it, sending shock waves afield. A mixture of ammonium nitrate and aluminum powder, Tannerite is legal in Connecticut, but safety concerns led Maryland this year to ban it. Mr. Faxon, the police commission member, who is a lawyer, said he wrote the new ordinance, which would have imposed additional constraints on shooting, including limited hours, and a requirement that any target shooting range, and the firearms that would be used there, be approved by the chief of police to make sure they were safe. This was no liberal putsch, Mr. Faxon said; three of the five commission members are Republicans, and two members are police officers. “I’ve hunted for many years, but the police department was getting complaints of shooting in the morning, in the evening, and of people shooting at propane gas tanks just to see them explode,” Mr. Faxon said. The proposal was submitted to the council’s ordinance committee, whose chairwoman, Mary Ann Jacob, would play a heroic role on Friday. Ms. Jacob is a librarian aide at Sandy Hook Elementary School, where she is credited with protecting many lives by throwing two rooms crowded with children into lockdown as the gunfire erupted. “We’re growing,” Ms. Jacob said in an interview on Saturday, describing a town where hikers and mountain bikers now compete with gun owners for use of the many trails and wooded areas. “The police chief is not looking to change behavior or go after a group of people, but rather he’s trying to give his officers the ability, if an incident occurs, to react appropriately. Right now, if you’re standing on your property and my house is 20 feet away, you can shoot.” The first meeting took place on Aug. 2, with about 60 people crowding into the room. Some spoke in favor of the new rules, the meeting minutes show. But many voiced their opposition, citing the waiting lists at established gun ranges. Among the speakers was a representative of the National Shooting Sports Foundation, who was described as saying he believed there was a greater danger of swimming accidents. “No privileges should be taken away from another generation,” he said. The president and spokesman of the group did not respond to messages left Sunday. Citing the continuing investigation, the group said on its Web site it would not be commenting on the massacre, but that “our hearts go out to the families of the victims of this horrible tragedy in our community.” A second committee gathering in September drew such a large crowd that the meeting was moved into a high school cafeteria, where the opposition grew fierce. “This is a freedom that should never be taken away,” one woman said. Added another, “Teach kids to hunt, you will never have to hunt your kids.” “No safety concerns exist,” the National Shooting Sports Foundation spokesman said, according to the minutes. The proposed ordinance was shelved, and Ms. Jacob said the committee was in the midst of researching a more limited rule, perhaps one restricted to making the existing ban on firing weapons within 500 feet of an occupied building more enforceable. “Five hundred feet!” Mr. Flaxon said in an interview. “A BB gun can go that far.” Newtown residents said many of the ranges in the area have long waiting lists of people eager to join, which has led to the profusion of informal ranges. On High Rock Road, where many gunfire complaints originated, what appeared to be three or more gun ranges were set back from the road. The owner of one, Scott Ostrosky, said he and his friends had been shooting automatic weapons since he bought the 23-acre property more than 12 years ago. It is safe, he said, because his land is sandwiched between two other gun ranges, the 123-acre Pequot hunting club and the 500-acre Fairfield club. The explosions his neighbors hear are targets that are legally available at hunting outlets. “If you’re good old boys like we are, they are exciting,” he said. He said he was distraught at the school massacre but said guns should not be made the “scapegoat.” “Guns are why we’re free in this country, and people lose sight of that when tragedies like this happen,” he said. “A gun didn’t kill all those children, a disturbed man killed all those children.”

Firearms
Gun Control
School Shootings
Lanza Nancy
Newtown (Conn)
Newtown Conn Shooting (2012)


Children in U.S. Are Eating Fewer Calories, Study Finds

Abstract: American children consumed fewer calories in 2010 than they did a decade before, a new federal analysis shows. Health experts said the findings offered an encouraging sign that the epidemic of obesity might be easing, but cautioned that the magnitude of the decline was too small to move the needle much. And while energy intake has not changed considerably for adults in recent years, fewer of their calories are coming from fast food, researchers said. Obesity rates for adults have plateaued after years of increases. A third of adults are obese. The results of the research on childhood consumption patterns, the only federal analysis of calorie trends among children in recent years, came as a surprise to researchers. For boys, calorie consumption declined by about 7 percent to 2,100 calories a day over the period of the analysis, from 1999 through 2010. For girls, it dropped by 4 percent to 1,755 calories a day. Image Balanced meals at the Blue School in Lower Manhattan. A drop in carbohydrate consumption drove the decline, research showed. Credit Ruth Fremson/The New York Times “To reverse the current prevalence of obesity, these numbers have to be a lot bigger,” said Marion Nestle, professor of nutrition, food studies and public health at New York University. “But they are trending in the right direction, and that’s good news.” National obesity rates for children have been flat in recent years, but some cities have reported modest declines. The new evidence of a lower calorie intake for children may also foreshadow a broader national shift, experts said. “A harbinger of change is a good phrase,” said R. Bethene Ervin, a researcher at the Centers for Disease Control and Prevention and one of the authors of the report. “But to see if it’s really a real trend we would obviously need more years of data.” A drop in carbohydrate consumption drove the decline, a point of particular interest for those who study childhood obesity. Sugars are carbohydrates, and many argue that those added to food like cereal and soda during processing are at the heart of the childhood obesity epidemic. Dr. Ervin said it was not clear whether such added sugars alone were behind the carbohydrate decline. Image A salad for lunch at the William H. Ziegler Elementary School in North Philadelphia. The calorie drop surprised researchers. Credit Jessica Kourkounis for The New York Times Over all, calories from fat remained stable, while those from protein increased and those from carbohydrates fell. The calorie decline was most pronounced among boys ages 2 to 11, and among teenage girls. Carbohydrate consumption declined among white and black boys, but not among Hispanic boys. Among girls, whites were the only group that consumed fewer calories from carbohydrates. Another surprise, researchers said, was the decline in calories coming from fast food among American adults. Those calories fell to 11.3 percent of adults’ total daily intake in 2010, down from 12.8 percent in 2006. The decline was sharpest among 40- to 59-year-olds, said Cynthia L. Ogden, a C.D.C. researcher who oversaw the research, which comprised two studies, one on caloric intake for children and the other on fast-food consumption among adults. For the analysis, called the National Health and Nutrition Examination Survey, people were interviewed in their homes and at mobile examination centers around the country. Americans eat about a third of their calories outside the home, according to federal data, and some demographic groups still get a lot of calories from fast food. Blacks between the ages of 20 and 39 consumed more than a fifth of their calories from fast food, the highest share for any group. The lowest rate was among older people, ages 60 and above, who got 6 percent of their daily caloric intake from fast food. Obese people also consumed more fast food, researchers found.

Children Calories Obesity Research Nutrition


For Indiana Voters, Talk of Change May Fall Flat

Abstract: KOKOMO, Ind. — With all the talk among the Democratic presidential hopefuls about change, they may wish to consider this as they wander Indiana : People here practically revolted a few years ago when their governor, Mitch Daniels, pushed to change to daylight saving time like most of the country. Change, it seems, may not carry quite the same political magic in this state as it has elsewhere. “We hold onto a lot of traditional values,” said Brian L. Thomas, 39, as he bought a cup of coffee along the courthouse square here on Wednesday. “Saying you’re ready to change is probably not the best or only thing you would want to say around these parts. Frankly, we want it to be like it used to be.” Many of the two dozen voters interviewed in this central Indiana manufacturing city of 46,000 expressed queasiness over the notions of change that both Democratic candidates have proudly pledged elsewhere. Though residents bemoaned economic conditions that have taken away thousands of factory jobs and given the state the 11th-highest rate of foreclosures, they also said they worried about doing things — anything — very differently. “What are we going to change to?” asked Ron O’Bryan, 58, a retired auto worker who said he was still trying to decide which Democrat to vote for in the May 6 primary. “You mean change to some other country’s system? What do you think they mean?” Jeremy Lewis, a 28-year-old window washer, said simply, “Old-fashioned can be in a good way.” As the Democratic presidential hopefuls turned to Indiana as a new battleground in the fight for the nomination, they find themselves facing a different audience in places like Kokomo, a blue-collar city in the middle of endless expanses of farms north of Indianapolis. In some ways, these are voters not so unlike those in other Rust Belt states, like Pennsylvania, but with an added dose of nostalgia and a practical, Midwestern sensibility. “We are manufacturing workers, farmers, beer drinkers, gun owners, pickup drivers,” said Karen Lasley, 64, who was volunteering on Wednesday morning in Senator Hillary Rodham Clinton ’s field office in Kokomo (one of 28 Mrs. Clinton has opened around the state along with Senator Barack Obama ’s 22, including one just down the street). “We are full of pride for this country.” Politically, though, Indiana is by no means monolithic: its terrain is more of a quilt, as elaborate as its tangled time-zone map, complicating matters for the campaigns as they decide where to devote time and money. Northwest Indiana, often viewed as an extension of suburban Chicago and sharing Chicago’s television market, is seen as strong territory for Mr. Obama, who lives on the South Side of Chicago. Indianapolis, the state capital, which includes a large segment of Indiana’s 9 percent African-American population, is also expected to lean toward Mr. Obama. In the blue-collar, rural parts south of Indianapolis, where the residents often have stronger links to Kentucky than to Illinois (or even Indiana), Mrs. Clinton is expected to have the advantage. As with so many recent primaries, no one — here or elsewhere — ever anticipated that Indiana’s presidential primary would matter much. For 40 years, the primary here has come too late, so the change comes as a shock to voters who rarely had seen presidential campaign advertisements, to political organizers and to overwhelmed election registrars. And unlike some other states, including Pennsylvania, Indiana has mostly been ignored in general elections, too. It has long been written off by both parties as so reliably Republican in presidential races as to not be worth much note. After 1936, a Democratic presidential candidate has won the general election here only once, Lyndon B. Johnson in 1964. “Every year, two minutes after our polls close, they declare Indiana for the Republicans and that’s that,” Bob Stephenson, the local Democratic chairman said. “This is really something special to have people listening.” There are 72 delegates at stake, and this is an open primary; in practice, anyone may choose a Democratic ballot, though state officials say technically there is a provision allowing voters to be challenged if they are believed to be switching party affiliations at the polls. Some 4.3 million voters are registered in the state, including 200,000 new voters this year. More than 50,000 people have already cast ballots in early voting. Mr. Stephenson has fretted over whether there will be enough ballots printed here to handle the expected onslaught of voters and has struggled to find enough poll workers who are not already volunteering for the Clinton or Obama campaigns. Around the state, the candidates are battling for endorsements. Lee H. Hamilton, the former congressman, has endorsed Mr. Obama, while Mrs. Clinton has the support of Senator Evan Bayh, and Dan Parker, the state party chairman. Some political analysts here, though, played down the significance of the state party’s political apparatus for getting out the vote. Even Greg Goodnight, the new mayor of Kokomo, said he had been astonished by the telephone calls he had been getting lately: Mr. Obama and Mrs. Clinton each sought his blessing. He shows visitors a separate letter from former President Bill Clinton, still in its envelope, on his desk, but he has yet to take sides. Mr. Goodnight and others here say the race is certain to hinge on the economy. Indiana has lost about one in six of its manufacturing jobs since 2001, and Kokomo has similarly struggled. One plant here employed 300 people not long ago, Mr. Goodnight said; today, 20 workers tend to a warehouse of products imported from other countries. “Indiana and Kokomo are a good reflection of the rest of the country,” said Mr. Goodnight, a Democrat who once worked in a factory and whose office bookshelf includes a biography of Harry S. Truman; “Dude, Where’s My Country?” by Michael Moore; and the Bible. “Places like Kokomo cannot handle even four more years of these economic policies.” Everyone in this town — everyone of a certain age, at least — seems to remember exactly where they were the last time a presidential primary election in this state counted for anything. Some recall skipping class or slipping out of work. The year was 1968, and the eventual winner, Robert F. Kennedy, came right through Kokomo and spoke on the courthouse square.

Indiana
Presidential Election of 2008
Primaries and Caucuses
Democratic Party
Politics and Government
Economic Conditions and Trends
Blue Collar Workers
Clinton Hillary Rodham
Obama Barack


G.M. to Suspend Making Chevy Volts for 4 Weeks

Abstract: General Motors will stop making the gas-electric hybrid Chevrolet Volt for four weeks in June and July because of slow sales and to deal with a change to an all-new version of the car. The company says the Detroit-Hamtramck plant that makes the Volt and four other cars will probably stay open through the summer despite plans for the Volt. The factory is also undergoing construction so it can build a new full-size Cadillac CT6 and the 2016 Volt starting late in the summer. Sales of electric and hybrid cars have slowed this year, largely because of low gasoline prices. Through March, G.M. sold only 1,874 Volts, down 48 percent from a year ago.


With Profits Dropping, High-Speed Trading Cools Down

Abstract: The hottest new thing on Wall Street is cooling down. High-frequency trading firms — the lightning-quick, computerized companies that have risen in the last decade to dominate the nation’s stock market — are now struggling to hold onto their gains. Profits from high-speed trading in American stocks are on track to be, at most, $1.25 billion this year, down 35 percent from last year and 74 percent lower than the peak of about $4.9 billion in 2009, according to estimates from the brokerage firm Rosenblatt Securities. By comparison, Wells Fargo and JPMorgan Chase each earned more in the last quarter than the high-speed trading industry will earn this year. While no official data is kept on employment at the high-speed firms, interviews with more than a dozen industry participants suggest that firms large and small have been cutting staff, and in some cases have shut down. The firms also are accounting for a declining percentage of a shrinking pool of stock trading, from 61 percent three years ago to 51 percent now, according to the Tabb Group, a data firm. It is a swift reversal for trading firms that have often looked to other investors like profit machines, thanks to high-powered software and superfast data connections that can take advantage of small changes in the price of a stock. High-speed trading is far from disappearing from the market, but the struggles facing these firms have been greeted with enthusiasm by some traditional traders and investors who have viewed the firms as formidable adversaries, or worse, market manipulators that create sudden spikes and drops in share prices. Peter Costa, a longtime trader on the floor of the New York Stock Exchange , said the fading presence of the firms could “restore some order to stock markets.” Regulators are still grappling with whether the rise of high-speed firms has been a net benefit or loss for investors, so it is hard to pinpoint what effect the decline of these firms will have on the markets. Many market experts have argued that the technical glitches that have recently hit the market have been a result of a broader trend of the market splintering into dozens of automated trading services and a lack of human oversight. The challenges facing speed-focused firms are many, the biggest being the drop in trading volume on stock markets around the world in each of the last four years. This has made it harder to make profits for traders who quickly buy and sell shares offered by slower investors. In addition, traditional investors like mutual funds have adopted the high-speed industry’s automated strategies and moved some of their business away from the exchanges that are popular with high-speed traders. Meanwhile, the technological costs of shaving further milliseconds off trade times has become a bigger drain on many companies. Among the firms scaling back is the Chicago Trading Company, which this year earned a spot on a government committee formed to explore the emerging phenomenon of high-speed trading. Since then, the company has been making cuts to its New York office, according to people with direct knowledge of the moves. The company’s chief executive, Eric Chern, said some employees had been moved to Chicago and 10 had left the firm. He declined to comment directly on the changes, but he did say that “the market environment always plays a factor in all our decisions.” Douglas Cifu is the president of Virtu Financial, a big player in the industry. “There was this mythology that you could get 90 computers, some Harvard Ph.D.’s and you would turn on your machines and make money,” he said. “It’s just not the case.” Virtu has not cut back, but it has acquired smaller firms that were struggling to continue operating on their own. Last month, Virtu bought Nyenburgh, a company that specialized in the most popular type of high-speed trading, known as market making, of European stocks. At the same time that the firms are making trims, regulators around the world have increased their scrutiny of high-speed traders, and the structure of the financial markets has continued to shift. Executives at the trading firms worry that new regulations could curtail business even more, but so far regulators in the United States have taken few steps to rein in trading practices. The diminishing presence of these traders in the markets has not hurt the overall performance of stock prices. Leading indexes have been on a steady climb for the last few years. For high-speed traders, rising prices are actually a part of the problem: climbing stock markets tend to be calmer stock markets, providing fewer trading opportunities for high-speed firms. Several studies have found that the primary impact of high-speed firms has been a steady decline in the cost of placing trades for ordinary investors. Now that the high-speed firms are shrinking from the market, there are some indications that trading costs may again be rising. For the firms themselves, the declining revenues and climbing costs have led to talk of mergers and consolidation. Bart Lijnse, the head of Nyenburgh, which is based in the Netherlands and was acquired by Virtu last month, said that a small firm like his could not afford the big technological costs of remaining competitive in the industry. “In order to compete, you need to be like a global firm,” Mr. Lijnse said. The contraction is also pushing the firms to move into trading of other financial assets, like international stocks and currencies. High-speed firms accounted for about 12 percent of all currency trading in 2010; this year, it is set to be up to 28 percent, according to the consulting firm Celent. But executives at several high-speed firms said that trading in currencies and other assets was not making up for the big declines in their traditional areas of United States stocks, futures and options. Sun Trading in Chicago bought a firm that allowed it to begin the automated trading of bonds earlier this year. That did not make up for the 40 employees the company cut in 2011. The firm’s chief financial officer, Chris Malo, said his team was preparing for the possibility that the high-speed trading business would only become more challenging. “People think it’s easy money, and it’s not,” Mr. Malo said. Like most such firms, Sun Trading is privately held and does not disclose its financial results. But Timber Hill, which is one of the few high-speed firms that releases its financial results publicly, provides a unique window into the trends. The firm’s founder, Thomas Peterffy, said that firms like his “had a field day” in 2008 and 2009. Share prices were plummeting, and the volatile conditions were ideal for high-speed firms. In addition to the high volume of trades in those years, share prices were moving around wildly, allowing computer programs to take advantage of dislocations in prices. Timber Hill, which trades stocks but specializes in options, made a $328 million profit, before taxes , in 2009. Since then, though, the amount of stock trading done by Timber Hill fell 27 percent between 2009 and 2010 and 38 percent between 2010 and 2011. Mr. Peterffy said that the much larger problem had been the rising cost of technology required to stay in a business that is not producing more revenues. One example is the data sold by the exchanges. Until recently, most firms bought a data package from Nasdaq that cost about $1,000 a month and gave traders a feed that includes all orders submitted to the exchange. In August, Nasdaq introduced a new, more comprehensive data package that costs about $25,000 a month. Many firms say that they have to sign up for new technologies if their competitors do. “It gives no benefit to anyone, that’s what I find so frustrating,” Mr. Peterffy said. In the first half of this year, Timber Hill’s earnings were only about a quarter of what they were in 2009. Mr. Peterffy has departed from many of his competitors by calling for regulators to slow down the markets. At the same time, he has been preparing for the challenges by bulking up the other business he leads, Interactive Brokers, which takes and executes orders for retail investors. The work Timber Hill does, Mr. Peterffy said, “is a good business for us, but there are no barriers to competition and it’s not going to last forever.”

Virtu Financial
Timber Hill
High Frequency Trading Flash Orders
Stocks and Bonds