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China Reshuffles Leadership at Financial Regulators

October 30, 2011 by Leave a Comment

With a new generation of leaders set to take control of the country in 2012, the Communist Party was widely expected to replace its top banking and financial regulators as several of them neared retirement age.

Several of those changes, which were announced Saturday, come at a time of strong economic growth in China but continuing worries about soaring inflation, a depressed stock market and concerns that heavy lending by China’s biggest banks following the 2008 financial crisis is likely to lead to a huge number of nonperforming loans over the next three to five years.

To strengthen its controls, the Communist Party on Saturday appointed Shang Fulin, 60, as the new chairman of the powerful China Banking Regulatory Commission, according to the state-run Xinhua news agency.

Mr. Shang had been the head of the China Securities Regulatory Commission.

He replaced Liu Mingkang, 65, who had served as the nation’s top banking regulator since March 2003. He had reached retirement age.

Guo Shuqing, chairman of the China Construction Bank — one of China’s four big state-owned banks — was named to replace Mr. Shang as the nation’s top securities regulator.

Mr. Guo, 55, has led China Construction Bank since 2005, when the bank was listed in Hong Kong in one of the biggest initial public offerings in history.

Xiang Junbo, 54, resigned on Saturday as head of one of China’s other big state-owned banks, the Agricultural Bank of China. He was named Saturday as the chairman of the China Insurance Regulatory Commission, replacing Wu Dingfu.

The three men named Saturday are longtime government bureaucrats. They were appointed by the Communist Party Central Committee’s Organization Department.

Article source: http://www.nytimes.com/2011/10/30/business/global/china-reshuffles-leadership-at-financial-regulators.html?partner=rss&emc=rss

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Mario Draghi, Into the Eye of Europe’s Financial Storm

October 30, 2011 by Leave a Comment

MARIO DRAGHI was working the room as only Mario Draghi can.

The occasion was a gala at the Old Opera House here in honor of Jean-Claude Trichet, the most powerful central banker in Europe. But in some ways, the evening belonged as much to Mr. Draghi, the Italian who will succeed Mr. Trichet on Tuesday as the president of the European Central Bank in the midst of an economic maelstrom that threatens to tear apart the euro, if not Europe itself.

European leaders took a step toward resolving the crisis last Thursday, with an agreement from banks to take a 50 percent loss on the face value of their Greek debt. Far from heralding an end to the problems, however, the plan ushered in a crucial new phrase in the battle to avert financial disaster.

But despite the challenges awaiting him, Mr. Draghi was in fine form that night earlier this month. Over here, he chatted quietly with Angela Merkel, the chancellor of Germany and a main ally. Over there, he met with Christine LaGarde, the managing director of the International Monetary Fund. And everywhere, Mr. Draghi vowed that there would be no surprises on his watch.

It was vintage Draghi, a performance so subtle and politic that it seemed to please everyone. Which, it turns out, is the Draghi way: people often seem to see what they want to see in him.

One European central banker, for instance, predicted that Mr. Draghi would try to curtail a controversial central bank program intended to prop up financially weak nations like Greece, Ireland, Portugal, Spain and Italy — Mr. Draghi’s native country — by buying those nations’ government bonds on the open market.

The tactic, which in effect has turned the central bank into the lender of last resort from the Baltic to the Mediterranean, is deeply unpopular here in Germany, the Continent’s economic engine. Many here view the program as tantamount to a taxpayer-funded bailout of nations that should never have been let into the euro club to begin with.

But another high-ranking monetary official in Europe predicted just the opposite for Mr. Draghi: that he would be more willing to unleash the full power of the central bank. Both officials spoke on the condition they not be identified to avoid alienating him. Mr. Draghi declined to be interviewed for this article.

The question is whether Mr. Draghi, 63, can satisfy his competing constituencies as he confronts a euro-zone crisis that keeps testing the limits of policy-making.

“I can only guess where he will go with monetary policy,” says Carl B. Weinberg, the chief economist at High Frequency Economics in Valhalla, N.Y.

UNTIL last Thursday, when leaders outlined their latest plan, Mr. Trichet had long argued against a severe reduction in the value of Greece’s bonds. He had maintained that euro-zone economies must pay their debts, even if they are on the verge of insolvency, as Greece is.

Last July, in one of his first big speeches after his appointment had become official, and just before Greece would need a second bailout, Mr. Draghi seemed to break with Mr. Trichet.

“The solvency of sovereign states has ceased to be a foregone conclusion,” Mr. Draghi told bankers in Rome. It is too soon to tell whether he will adopt a more pragmatic, flexible approach at the central bank, which under Mr. Trichet came to be seen as rigid. It is the only major central bank that has not reduced interest rates to near zero.

Those closest to Mr. Draghi say his economic views have been shaped by his challenges at the Italian finance ministry in the 1990s, when Italy was expelled from the euro zone’s predecessor, the European Exchange Rate Mechanism and, like Greece today, came close to bankruptcy.

His record is not without controversy. In Italy and later, as a vice chairman for Goldman Sachs in Europe, Mr. Draghi was a proponent of nations and other institutions like pension funds using derivatives to more efficiently manage their liabilities. In some cases, many experts now contend, these transactions helped mask the finances of Greece and Italy before those nations were allowed into the euro.

People who know Mr. Draghi point to his time at the Massachusetts Institute of Technology in the late 1970s, when economists there emphasized taking a practical approach to solving economic problems, rather than hewing to a particular ideology.

“He is a pragmatist,” says Olivier J. Blanchard, the director of research at the International Monetary Fund who received his economic doctorate from M.I.T. in 1977, a year after Mr. Draghi.

Even so, Mr. Draghi is unlikely to challenge the founding dogma of the European Central Bank, which demands that it adhere to its German-inspired mandate to fight inflation. That he has been endorsed by Germany’s political and economic establishment suggests that he will be constrained from taking an unorthodox approach.

“I have a very high regard for him,” says Otmar Issing, the influential German economist and a former member of the central bank’s executive board.

Article source: http://www.nytimes.com/2011/10/30/business/mario-draghi-into-the-eye-of-europes-financial-storm.html?partner=rss&emc=rss

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Mortgages: Mortgages

October 30, 2011 by Leave a Comment

Those who are cash-poor can ask relatives for help. But some lenders advertise another option: If borrowers agree to accept a mortgage interest rate from a quarter to a full percentage point higher than they would ordinarily qualify for, they can receive credit toward their closing costs.

 Such mortgages are sometimes called no-closing-cost loans, though the term is misleading. The credit usually covers only fees charged by the mortgage broker or bank, like the loan origination fee, the underwriting expense, and the appraisal, according to Neil Diamond, a mortgage broker in Commack, N.Y.  That generally leaves title insurance, mortgage-recording taxes, insurance and escrowed taxes to cover, he said.

The amount of credit depends on total closing costs and other loan details. A rule of thumb is that for every one-eighth of a point increase in interest rate, borrowers receive a credit worth half a percentage point of the principal amount, said Jason Auerbach, a divisional manager for First Choice Loan Services in Manhattan. On a $400,000 30-year mortgage with a 4.125 percent base rate, the first one-eighth of a point increase would yield a $2,000 credit and so would the second, but the credit for the third would drop to about $400, he said, noting that some lenders set a 5.25 percent ceiling on rates.

With mortgage rates so low, Mr. Auerbach said, interest in “no-closing-cost” loans has increased.

While these mortgages can be helpful to some, borrowers should carefully review all the details. “It’s a sales technique,” Mr. Diamond said. “It can be positive and negative.”

The main downside, of course, is that the higher rate and monthly payment remain in place through the life of the loan. Therefore, Mr. Diamond said, borrowers must ask themselves what they can really afford.

Mr. Diamond suggests doing a side-by-side comparison of loans with and without the credit. If you were paying around $50 a month extra in interest charges to cover, say, $6,000 in closing costs, it would take you 120 months, or 10 years, before you began to pay more in monthly payments than you were saving on closing costs. So if you stayed in the home for seven to eight years — the national average in recent years, according to the National Association of Realtors — you would come out ahead with the higher rate.

But a higher mortgage payment with more going toward interest and less toward principal repayment could lead you to a higher debt-to-income ratio, Mr. Auerbach pointed out. This might affect some borrowers’ ability to qualify for the loan, or might leave them with less money for home improvements or purchases after they moved in.

Even so, a “no-closing-cost” loan can be useful for anyone who has found a home and does not want to wait to save thousands of dollars more to cover all the closing costs. It also can be worthwhile for “people who would rather hold onto their money,” Mr. Diamond said.

Nationwide, total closing costs on a $200,000 mortgage average $4,070, according to a recent survey from Bankrate.com. That represents an 8.8 percent increase over last year, and reflects higher lender fees. New York’s closing costs averaged $6,183, the highest in the nation. In New Jersey the average was $4,589; and in Connecticut, $3,843, according to Bankrate.com.

Closing costs can be much higher on more expensive homes. Dianne Scalza, an associate broker with Netter Real Estate on Long Island, says that buyers in the West Islip area, for instance, typically pay $12,000 to $17,000.

Co-op owners may also benefit from the raise-the-rate approach when it comes to refinancing. Because the loan balance does not change, they most likely will not need board approval for a new mortgage, Mr. Auerbach said. 

Article source: http://feeds.nytimes.com/click.phdo?i=28996aaf9de6b3914bbaf726c12f8ec6

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The Haggler: A Cellphone Theft, and a $25,000 Phone Bill

October 30, 2011 by Leave a Comment

During a recent visit to the Omni Shoreham in Washington, the Haggler was awakened by the blast of a neighbor leaving his room at 6 a.m. And the racket never ceased, because at hotels — surprise! — people enter and exit rooms throughout the day and night.

A bit of research shows that hotel doors slam shut in part because they’re cheap to install and in part because of liability concerns. Owners worry that the doors won’t fully close, which could lead to thefts and other crimes, which could lead to lawsuits.

But, obviously, a mechanism exists that closes a door fully and quietly. The Haggler encountered it this summer at the Hyatt Regency in Albuquerque. The question is why these mechanisms aren’t far more common.

Remember when lousy mattresses were the norm in hotels? Then, in the late 1990’s, some hotels started upgrading their mattresses and boasting about them, as a way to stand apart from the competition. (Westin Hotels and Resorts was a pioneer, with its “Heavenly Bed.”) A few years later, good mattresses were the norm.

You know what we need now? A door war. The Haggler wants to see hotels swap out their wretched clangers for quiet doors, and pronto. By all means, give them goofy, trademarked names, like the “Dream Latch” or the “Shhhhh Lock.” The first to take up this challenge will be hailed as a corporate hero in this space.

O.K., on to our letter, which has nothing to do with doors:

Q. I was in South Africa in May and was assaulted by three people in Johannesburg who took my phone and other valuables. The next day, which was May 2, I filed a police report and, when I arrived back in the United States, I closed the account at the first available opportunity, which was May 4.

I’ve had a $39.99-a-month plan with T-Mobile for years. My bill for that month was $25,571.14. I told T-Mobile that I was mugged, and faxed an affidavit of the police report. I got some follow-up calls, but none of the callers knew the history of the case. The departments that were supposed to get back to me never did, and whenever I called T-Mobile to follow up, I was told that the concerned departments would call soon. That did not happen. Now T-Mobile has transferred the bill to a collections agency. Neither T-Mobile nor the agency has disputed my evidence, but they continue to harass me. Can you help? Hasham Mahmood

Washington

A. Let’s get to the most blazing question: How does anyone, thieves included, rack up $25,000 worth of cellphone charges in just three days?

Mr. Mahmood e-mailed his bill. What you see is that somehow a call would begin at, say, 5:08 p.m. and last for 21 minutes. A minute later, at 5:09, a new call would begin and last for 25 minutes. In one half-hour period on May 1, a dozen different calls were placed within 20 minutes, at a total cost of hundreds of dollars.

A rep from T-Mobile explained this mystery with two words: conference calling. Further elucidation was not forthcoming.

This is a timely topic because, two weeks ago, the Federal Communications Commission and wireless carriers agreed that within a year, carriers would start sending alerts to customers who are nearing their monthly limit for voice, text and data services. But even if that system were in place, it would not have helped in the peculiar circumstances encountered by Mr. Mahmood.

Now, there was a three-day lag between the theft of his phone and his close-my-account request. Mr. Mahmood, who works for the World Bank, explains that he didn’t know how to dial T-Mobile’s support number from South Africa and that he was busy flying home for much of the time that calls were being logged.

The Haggler thinks that he should have found a way to send up a semaphore signal to T-Mobile, perhaps via the Internet, while in South Africa. But here is the question for T-Mobile: When an account goes from $39.99 a month to $25,000 in three days, isn’t there some monitoring system that shuts the phone down, whether or not the owner calls?

There is, says Michelle Taylerson, the T-Mobile spokeswoman. And it actually shut down the phone on May 3, before Mr. Mahmood called to unplug his account.

So why did it take two days of multiple conference calls before that system kicked in? The company’s “Care Team” explained in an e-mail that  “typically it takes several days for a foreign carrier to transmit usage records back to us, so there was some delay in obtaining the records.”

O.K. Let’s stipulate that Mr. Mahmood’s situation is the sort of hard case that makes bad law, as lawyers say. And there were failures on both sides here. (The Haggler’s biggest criticism of T-Mobile is the cold shoulder it gave a customer with a legitimate beef about a budget-crushing bill.)

Should Mr. Mahmood nonetheless be on the hook for calls he did not make? T-Mobile took a second look at the matter and last week dropped its demand for $25,571.

“Our Care Team was able to re-evaluate the unusual occurrence and difficult situation Mr. Mahmood was in,” Ms. Taylerson wrote, “and therefore helped find a resolution that was beneficial for the customer.”

E-mail: haggler@nytimes.com. Keep it brief and family-friendly, and go easy on the caps-lock key. Letters may be edited for clarity and length.

Article source: http://feeds.nytimes.com/click.phdo?i=5a4f8f57ddf5bb72ad4648c2870366a7

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Strategies: Thomas Sargent, Nobel Winner, Rejects Philosophical Slogans

October 30, 2011 by Leave a Comment

I took that risk in a recent column about the two new Nobel laureates in economics, Christopher A. Sims of Princeton and Thomas J. Sargent of New York University. They received their awards for a lifetime of theoretical and statistical work on the cause-and-effect relationship between government policies and the economy. These are immensely complicated matters, and neither man is accustomed to boiling down his opinions into bite-sized morsels.

Professor Sims told me that some conservative commentators had gotten his views quite wrong. The Wall Street Journal editorial page, for example, implied that both professors opposed the interventionist economic policies of central banks and governments over the last few years.

Professor Sims said he actually approved of many of them — with qualifications, of course. An op-ed article, also in The Journal that day, called the pair “non-Keynesian,” a reference to the late British economist John Maynard Keynes. Professor Sims said he was not “non-Keynesian” at all.

When I talked to Professor Sims earlier this month, he wouldn’t speak for his colleague Professor Sargent (and I couldn’t reach him). Based on his voluminous published work, I wrote that Professor Sargent didn’t seem to belong in the noninterventionist camp to which he had been consigned. But I was going out on a limb.

It turns out that in some respects, I didn’t go far enough.

In telephone conversations last week, Professor Sargent said he felt insulted by people who call him “non-Keynesian” or “right wing,” terms that, he said, are based on a misunderstanding of his thinking. And he rejected attempts to categorize his views in simple slogans.

He doesn’t wear his political opinions on his sleeve. “They really don’t matter in my research,” he said. But because others have applied labels to him, he decided it was worth setting the record straight. He’s a Democrat, he said, “a fiscally conservative, socially liberal Democrat,” adding, “I think that budget constraints are really central.”

It’s important to consider the “incentive effects” of government policies, he continued. “There are trade-offs in efficiency and equality, and they lead to choices that aren’t easy,” he said.

For example, he has studied the effects of incentives on the behavior of the unemployed. With a colleague, Lars Ljungqvist of the Stockholm School of Economics and of New York University, he’s found that in some circumstances, increasing unemployment benefits may have the unintended consequence of prolonging unemployment. He’s definitely not opposed to unemployment benefits, he said, but believes that they should be designed to help people get back into suitable jobs so that they feel like full participants in the economy.

“The problem is, it’s not just whether you have unemployment insurance,” he said. “It’s what the duration is. And when it’s very long and very generous, it creates traps that are very hard to get out of.” This makes government policy tricky, but it doesn’t imply that the government should avoid intervening wisely on behalf of those without jobs, he said.

Professor Sargent described himself as a scientist, a “numbers guy” who is “just seeking the truth” as any good researcher does.

“If you go to seminars with guys who are actually doing the work and are trying to figure things out, it’s not ideological,” he said. “Half the people in the room may be Democrats and half may be Republicans. It just doesn’t matter.”

The “non-Keynesian” label irks him particularly. “That’s just off base,” he said. “Keynes was a very good economist. He was brilliant. He had wonderful insights. His work has inspired me many times.”

Professor Sargent’s own writings are sprinkled with pithy quotations from Keynes. In January 1986, the professor wrote a Wall Street Journal article, “An Open Letter to the Brazilian Finance Minister,” analyzing that nation’s fiscal crisis. In form and substance, it was explicitly modeled on a very similar letter written by Keynes to the French finance minister 60 years earlier. One point of this exercise, he said, “was to get people to actually read Keynes.”

Still, early in Professor Sargent’s career, he was known as one of the founders of the “rational expectations” school, which has sometimes been thought to be un-Keynesian. He says it actually “tied down an important loose end in the kinds of theories Keynes was building.” Keynes, he said, believed that expectations were all-important in determining economic activity, but didn’t have the mathematical tools needed to nail down all his concepts.

Today, Professor Sargent says that in some ways he actually is a Keynesian, but he qualified that claim, too. “I’m happy to say I am a Harrison-Kreps-Keynesian,” he said, citing work by two scholars at Stanford, J. Michael Harrison and David M. Kreps. They developed a theory of speculative investor behavior and stock-bubble formation that subtly modifies rational expectations “in a beautiful way” and “captures Keynes’s argument, makes it rigorous, and pushes it further,” he said.

Fundamentally, he said, “What I really don’t like is oversimplification.” He tries to think things through, he said, and avoid having “one slogan fighting another.”

Article source: http://feeds.nytimes.com/click.phdo?i=dd2c6598b8b075b605b7f5d456740df6

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DealBook: Trick or Treat, Wall Street Style

October 29, 2011 by Leave a Comment

Halloween is sure to have a contingent of Occupy Wall Street-inspired costumes this year.Rob O’Neal/Florida Keys News Bureau, via Associated PressHalloween is sure to have a contingent of Occupy Wall Street-inspired costumes this year.

This weekend, thousands of Americans will cobble together Wall Street-themed costumes in preparation for Halloween. (Pre-emptive note: dressing in a suit and tie and labeling yourself “The One Percent” is not as clever as you think.)

DealBook is here to help. Here with: our seven best finance-themed costume ideas, with tips on how to pull them off at your parties this weekend.

Zombie MF Global: Dress in tattered rags, tape “FOR SALE” signs to all your appendages, and wear a necklace that says “Credit Lines.” Tap it repeatedly. Have two friends dressed as ratings agencies follow you around, telling everyone at the party how ugly you are.

Sexy Judge Jed S. Rakoff: Wear a long black robe with nothing underneath, and tell other partygoers you can “neither confirm nor deny” that you’re looking for love.

Reed Hastings of Netflix: Walk around the party grabbing people’s drinks, splitting them into two cups, then offering to sell the cups back to them for $7.99 apiece. When people complain, wait until half the party has gone home, then cut the music and issue your heartfelt apologies.

The Volcker Rule: Tell your party’s host you’ll arrive in a three-piece suit. Show up in a 1,300-piece suit filled with holes. Find the guy doing keg stands in the corner, and make him fill out a form indicating the proposed length of his keg stand and the likelihood he’ll fall over.

Kweku Adoboli: Sneak into the party through the back door and shovel two billion pieces of candy corn from the host’s candy bucket into your backpack. Replace them with two billion triangle-shaped pieces of orange construction paper.

John Paulson: Dress in gold. Punch yourself repeatedly all night.

The European Debt Negotiations (group costumes): Dress one person in a toga and sandals and shave 50 percent of his head. Have another arrive hours late, dressed as an Italian prime minister, with a dozen young girls in tow. The rest of the group should spend the night yelling at the Italian, while a person dressed as Spain pours cyanide in the punch bowl.

Article source: http://feeds.nytimes.com/click.phdo?i=595174e79b43edc2cc798c14faf4898d

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DealBook: Groupon Weighs Raising Its I.P.O. Price

October 29, 2011 by Leave a Comment

Groupon headquarters in Chicago.Tim Boyle/Bloomberg NewsGroupon headquarters in Chicago.

It appears that investors are flocking to Groupon’s forthcoming initial public offering like customers to one of the daily deal giant’s coupons.

The company is considering raising the price of its shares above its current expected range of $16 to $18 a share, people briefed on the matter told DealBook on Friday. That would value the online coupon pioneer at potentially more than $12 billion.

Behind Groupon’s deliberations, these people said, is heightened demand from potential investors. The company’s executives and bankers, led by Morgan Stanley, Goldman Sachs and Credit Suisse, have completed the first week of a multistate road show. The presentation team has been pitching institutional investors about the three-year-old start-up’s business prospects, describing them as primed for enormous growth.

On Friday, Groupon held a presentation before a crowd of more than 300 people at the St. Regis Hotel in Midtown Manhattan.

Groupon’s management and executives had not reached a final decision to raise the offering price as of Friday night, these people said. Should they move ahead, the new price range would likely be disclosed in an amended prospectus on Monday.

A representative for Groupon declined to comment.

Such a move would be only the latest shift in expectations for the offering, the latest in a new generation of Internet start-ups that has captured the public’s fancy. But the road to going public has been rocky for Groupon, as critics seized upon several accounting revisions as potential concerns for the company’s health.

Next week, Groupon is expected to visit prospective investors out west, including in cities like Los Angeles and Denver. Its bankers expect to price the I.P.O. on Nov. 3 and its stock to begin trading the next day.

Article source: http://feeds.nytimes.com/click.phdo?i=667106d7241b00cd5aa0de7cdbbaae6e

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DealBook: MF Global Put Up for Sale, This Weekend Only

October 29, 2011 by Leave a Comment

8:13 p.m. | Updated

MF Global is racing to sell itself before the markets reopen on Monday, with its stock and bond prices nearly in a free fall.

The pressures on MF Global, a commodities and derivatives brokerage firm, and its chief executive, Jon S. Corzine — once the chief of Goldman Sachs and a former New Jersey governor — are enormous. With two major credit ratings agencies having cut their ratings on the firm to junk status, a sale of some kind appears to be MF Global’s only hope for survival.

In the space of only a week, MF Global has shed two-thirds of its market value. Its shares plunged 16 percent on Friday to $1.20, after having briefly dipped below $1 earlier in the day. And its five-year bonds tumbled to 49 cents, according to data from Trace research service.

By Friday afternoon, MF Global executives had become focused on selling the entire firm by Sunday evening, according to a person briefed on the matter who spoke on the condition of anonymity because the discussions were private. Other possibilities, including a sale of just its futures brokerage arm, remained on the table but were becoming less likely.

So far, MF Global has identified fewer than five suitors, a list that includes other brokerage, banking and private equity firms, this person said. Yet while the goal remained to strike a deal before the markets resumed on Monday, it is possible that a deal won’t be reached.

Speculation grew on Friday about who would be interested in buying some or all of MF Global. Several major banks have considered making a bid, especially if they could buy the firm’s well-regarded futures brokerage operations at a low enough price, according to people briefed on the matter. But it was unclear whether any would make a formal offer.

A spokeswoman for MF Global, Tiffany Galvin, declined to comment.

By Friday afternoon, MF Global still had sufficient liquidity to finance its operations, having drawn down a $1.3 billion revolving credit facility, this person added. While more clients had moved their money to other brokerage firms, this person said that the amount remained in the low single digits.

That may not matter if the firm cannot reach a sale over the weekend. While major exchanges around the world said on Friday that MF Global remained a member in good standing, clients and trading partners are generally wary of doing business with a junk-rated brokerage firm.

On Friday, analysts and industry executives were gloomy about MF Global’s survival prospects.

“We continue to believe that in this market environment, selling the entire business could be challenging,” Niamh Alexander, an analyst with Keefe, Bruyette Woods, wrote in a research note.

For now, the firm is focused on selling itself rather than preparing for any sort of bankruptcy filing, the person briefed on the matter said.

Jon S. CorzineLucas Jackson/ReutersJon S. Corzine

One thing is clear: Any outcome would spell the end of Mr. Corzine’s tenure atop MF Global. He became the firm’s chief executive last year, returning to the financial sector for the first time in more than a decade after having been ousted as Goldman Sachs’s chief executive in 1999.

Mr. Corzine’s chief goal was to transform MF Global into a full-fledged investment bank, in large part by taking on riskier trading using the firm’s own capital. The strategy backfired, however. In the year and a half since Mr. Corzine took over, the firm has earned money in only two out of six quarters.

Among the biggest millstones around the firm’s neck is the $6.3 billion worth of bonds issued by Italy, Spain, Belgium, Ireland and Portugal that it holds. Analysts became uneasy with those holdings as Europe’s debt crisis deepened, culminating in the initial credit rating downgrade by Moody’s Investors Service on Monday.

MF Global’s problems were exacerbated with its announcement of a $186 million loss for its second quarter on Tuesday. By Thursday, Moody’s and another agency, Fitch Ratings, had officially cut the firm’s credit rating to junk status.

Article source: http://feeds.nytimes.com/click.phdo?i=2c640b6afa77cfcbe53bc1b9be39a184

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Most Presidential Candidates Are Not the 99 Percent

October 29, 2011 by Leave a Comment

A look at the finances of those vying for the presidency shows that almost all of them rank at the very top of the country’s earners. In other words, they are the 1 percent.

The possible exceptions are Representative Michele Bachmann of Minnesota and Representative Ron Paul of Texas, whose annual household earnings may not exceed the estimated cutoff of $700,000 for the top 1 percent, and Gov. Rick Perry of Texas, who has yet to file a financial disclosure.

Buddy Roemer, the former governor of Louisiana, probably does not make the cut either, which may be one reason Mr. Roemer paid a visit to the protest encampment in Zuccotti Park in Manhattan to express his solidarity.

But Mitt Romney, whose fortune, totaling as much as a quarter of a billion dollars, dwarfs those of his rivals; Jon M. Huntsman Jr., whose father owns a global chemical company; Newt Gingrich, a successful author; Herman Cain, a businessman who reports earnings of over $1.2 million; and Rick Santorum, the former senator, who took in over $700,000 last year, are all solidly in the 1 percent, as measured by assets, income or both.

The wealth is not limited to Republicans. Though President Obama was not in the 1 percent in 2006, before his entry to presidential politics, he earned between $1.8 million and $6.8 million last year, largely from book royalties.

The gap between the candidates and the electorate is especially striking in an election season in which the economy is foremost in people’s minds and politicians are trying to demonstrate that they can feel the pain. Many people believe that those responsible for the financial crisis escaped punishment with the help of political allies.

Democrats have more or less embraced the Wall Street protesters, while Republicans have wavered between dismissing them and trying to redirect their anger from Wall Street to the White House.

The protesters are far from the only potential voters disturbed by the growing wealth divide. In a recent New York Times/CBS News poll, 69 percent of respondents said that Republican policies favored the rich. Twenty-eight percent said the same of Mr. Obama’s policies, while only 23 percent thought his policies favored the middle class. Sixty-six percent said the country’s distribution of wealth should be more even.

The wealth of the candidates exacerbates the sense that politicians are far removed from middle-class American lives. “You want to know that elected leaders understand the consequences of their political decisions,” said Kathleen Hall Jamieson, the director of the Annenberg Public Policy Center at the University of Pennsylvania. “Does that candidate understand what I’m going through right now? What my family is going through? Do they know what it’s like to lose your home, to lose your job?”

Of course, presidential politics has long been a sport for the rich, and candidates need not be middle-class themselves to convince voters that they understand. Some, like Mr. Cain and Mr. Perry, may win people over with their stories of ascent from humble beginnings.

But even bootstraps are not strictly necessary. “A rich person can represent the 99 percent,” said Judy Goldstock, a retired social worker protesting in Zuccotti Park. “Look at Kennedy.” 

Mr. Romney has scolded his audiences at times for “attacking people based on their success.” And Mr. Cain proclaimed, “If you don’t have a job and you’re not rich, blame yourself.” (Or, he later amended,
blame Mr. Obama.)

The 99 percent meme has shifted the debate from the days when President Obama spoke of raising taxes on families that made more than $250,000. “Many people could see a future in which they might make $250,000,” Ms. Jamieson said. “Very few can see a future in which they would be a member of the 1 percent.”

The alienation is evident in a study of mothers who shop at Wal-Mart, where pollsters found that the women did not believe their elected officials could understand what it was like to be consumed by the price of milk, gasoline and college tuition.

“We asked, ‘If your elected officials knew about your life what would they do?’ And somebody said, ‘Cry,’ ” said Margie Omera, the founder of Momentum Analysis, a Democratic polling firm that along with Public Opinion Strategies, a Republican firm, has been tracking the women since May 2010. “They always want to know, ‘When is my bailout going to come?’ ”

In focus groups, the women discussed the satisfaction they derived from watching “Undercover Boss,” a reality show in which top executives take a turn at the bottom of the ladder in their own companies.

Membership in the 1 percent can be measured by wealth or by income. By household wealth, the cutoff point would be a projected $9 million in 2010, according to an analysis of the Federal Reserve Board’s Survey of Consumer Finances by Edward Wolff, an economist at New York University. The cutoff for annual household income would be about $700,000, Mr. Wolff said. (Using Internal Revenue Service figures, which count earnings differently, the Congressional Budget Office puts the earnings cutoff at $350,000 for the 1 percent in 2007.

At Zuccotti Park, protesters described the 1 percent variously as people who “can just make money with money,” “the ones so interested in making profits that they’re willing to lay off hundreds of thousands of people a year,” and “anyone who doesn’t create a product.”

Even by the numbers, though, it is hard to tell precisely where the candidates stand. The majority have not released tax returns, and their financial disclosure forms give only a range of assets and income. Mrs. Bachmann’s income was listed at $280,000 to $840,000, and Mr. Paul’s was $360,000 to $1.1 million, which included their Congressional salaries of $174,000.

The disclosures exclude the candidates’ homes and other noninvestment property, as well as the salaries of their spouses. Most disclose income over a period longer than a year, from which The New York Times calculated annual earnings. The candidates were likelier to rank in the elite in income rather than in assets. Mr. Cain’s net worth topped out at $6.6 million, for example, and Mr. Santorum’s at $2.6 million.

Mr. Perry appears to be among the least affluent of the leading candidates. He earns $150,000 a year as governor, and his wife makes $60,000 a year at a nonprofit organization. But the couple have made money in real estate deals, including one that pushed their income above $1 million in 2007. Various news organizations have estimated the Perrys’ net worth at just over $1 million.

Article source: http://feeds.nytimes.com/click.phdo?i=b0249a6203a544ccfeef3078852558d3

Filed Under: Business News Tagged With: , ,

Square Feet | The 30-Minute Interview: Michael F. McNally

October 29, 2011 by Leave a Comment

Mr. McNally also serves on the senior executive team of Skanska AB of Sweden, the parent company. Skanska USA is involved in several projects in the city, including the rebuilding at the World Trade Center.

Interview conducted and condensed by VIVIAN MARINO

Q Skanska USA recently moved its headquarters to the Empire State Building, becoming one of the first big tenants there since its renovation.

A Yes, we’re one of the first single-floor tenants. We have somewhere near 25,000 square feet, all on the 32nd floor. We moved in almost exactly two years ago.

The space is LEED platinum. Green actually saves you money as long as you look in terms of life cycle, like any investor would. We save about 50 percent of our energy here over what we spent at our former space on Madison Avenue, which was about the same size.

Q What is the rent per square foot?

A I think it’s about $50. We have a 15-year lease.

Q So how is business?

A Good. Our backlog is up; the work that we have in front of us has increased. We’re working on over 1,000 projects right now. We are very happy with where we are, but very nervous about where things are headed.

Q How much of your business is in New York?

A Skanska worldwide does about $18- to $19 billion worth of work. We do about $5.5 billion every year in the United States, and somewhere around $2 billion of that is in New York. We’ve got 33 offices around the country; New York by far is the biggest. Of the 1,000 projects, I would say 100 of that is in New York.

Q Let’s talk about some of these projects.

A We’re the construction managers for the Brooklyn Bridge Park. We’re rehabbing the Brooklyn Bridge — repainting, redoing the surfaces in the ramps. That started about a year ago. I think it’s maybe about a year away from completion.

We’re doing two things at the World Trade Center: the underground part of the PATH station, then the steel on the Calatrava entrance hall. We’re also working at the United Nations; the U.N. for whatever reason doesn’t like us talking about it. The No. 7 subway line extension was another job we got this year.

Some of the other big ones: the Croton Water Filtration Plant in the Bronx and the Catskill/Delaware Water Treatment Plant in Westchester. We finished the new Meadowlands stadium a year ago.

Q Do you root for the Jets or Giants there?

A You don’t want to print that! I’m a Patriots fan.

Q Skanska built Gillette Stadium, too, in Foxborough, Mass.

 

A Yes.

Q Was that your most memorable project?

A As a sports fan, I loved all the stadiums, especially the Gillette Stadium experience, for the Patriots.

Q Are you doing any new commercial developments in New York?

A We only started the commercial development unit a couple of years ago in four cities: Seattle, Houston, D.C. and Boston.

New York is tough from a development standpoint because there’s a lot of competition, so we didn’t try to do that here. If the right opportunity comes up, we will jump in.

The thing for us that has made the commercial development part of our business work is that we don’t borrow money. We use our own money. That’s allowed us to get a toehold in markets.

Q What happens after the developments go up?

A We’ll sell them, mainly to institutional investors who are looking for a return. What we’ll do is, we’ll build them and then we’ll lease them out completely and then we will sell them.

Q Switching gears, about a year ago there was a federal investigation of fraud by one of Skanska USA’s business units in public works projects.

A It had to do with the use of disadvantaged business enterprises as subcontractors. We wound up settling with the Department of Justice for around $19 million. Believe me, we’ll never have that issue ever again!

Q Do you travel to Sweden often?

A About every other month.

Q Do you understand the language?

A A little bit. I bought the Rosetta Stone program, and then I would go to some meetings very proud that I knew a sentence or two and they would all laugh. So I gave up.

Q Say something in Swedish.

A Drick vatten. Drink water.

Article source: http://feeds.nytimes.com/click.phdo?i=4eed3a2afbd562d6607180762113fa51

Filed Under: Business News Tagged With: , ,
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