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Qantas Grounds Its Worldwide Fleet Over Labor Dispute

October 29, 2011 by Leave a Comment

The industrial action, the culmination of months of simmering tension between workers and the airline, led to the immediate cancellation of 600 flights affecting 70,000 travelers, the airline said, forcing Prime Minister Julia Gillard’s beleaguered government to try to broker a settlement. An emergency meeting of the national workplace relations tribunal adjourned without any resolution on Sunday but was to resume later in the day.

More than 60 planes were in the air when the grounding was announced and they continued to their destinations, the company said. Passengers holding tickets were being rebooked onto other airlines at the airline’s expense, Qantas said.

“I’m looking at this dispute as prime minister and at its implications for our economy,” Ms. Gillard said at a news conference.

A series of labor disputes has hit the airline, the world’s 10th largest, as employees have voiced concern about jobs being moved out of Australia. Qantas has been forced to reduce and reschedule flights for weeks because of the actions, which have included strikes and refusal to work overtime.

Alan Joyce, the airline’s chief executive, said that its fleet of 108 aircraft in up to 22 countries would remain grounded until Qantas reached agreement over pay and work conditions with the unions representing pilots, mechanics and ground staff. Qantas employs about 35,000 people in Australia.

The decision drew sharp reaction from the government and labor unions.

A spokesman for the Australian Workers’ Union, one of the country’s oldest and largest unions with more than 135,000 members, criticized the airline’s decision to ground its fleet without notice. “Words can’t express our anger at the unilateral decision Qantas management has taken — as well as the impact it will have on all Qantas workers and the thousands of travelers now left stranded in Australia and around the world,” the national secretary of the group, Paul Howes, said.

“Unions rightly give 72 hours’ notice before industrial action, but Qantas management has given no notice before this wildcat grounding of their fleet,” he said in a statement on the union site.

The airline said that beginning Monday it would lock out all employees involved in the dispute, including pilots and the members of the engineers, catering and ground-handling associations. The grounding of the fleet will cost the airline an estimated $21 million a day. Qantas said it had already been losing $16 million a week in revenue as a result of the job actions.

“This is a very tense environment,” Mr. Joyce said at a news conference in Sydney. “Individual reactions to the lockout may be unpredictable.”

Barry Jackson of the Australian and International Pilots Association told Sky News that Qantas had “hijacked the nation.” Mr. Jackson added, “It’s forcing the government’s hand on this.”

The move immediately threw into disarray travelers’ plans. Australia’s Foreign Ministry was adding emergency staff in Canberra to help Australians who are stranded because of the cancellations.

The leader of Australia’s political opposition, Tony Abbott, wasted no time in weighing in, and he suggested Ms. Gillard’s Labor government was too close to the unions involved and was putting the country’s prestige at risk.

“There’s going to be massive public inconvenience, there’s going to be massive disruption to business and there’s going to be a very big hit on Australia’s international reputation because Qantas really is around the world, to a considerable extent, the face and the symbol of Australia,” he said in televised remarks.

Qantas has several flights a day from Sydney to Kennedy Airport in New York, and to Los Angeles, Dallas and Honolulu.

Near-empty airports and angry customers became a staple of Australian television on Saturday night, as frustrated travelers took to social networking sites like Twitter to vent their frustration.

“Plane door was closed then they announced we were not going,” Christine Walker, a Qantas passenger in Los Angeles, wrote on Twitter in response to a question about her flight.

Matt Siegel contributed reporting from Sydney.

Article source: http://feeds.nytimes.com/click.phdo?i=dfdd85c76dc34bc66799fd786bcd07ca

Filed Under: Business News Tagged With: , ,

Economic View: Ben Bernanke Needs a Volcker Moment

October 29, 2011 by Leave a Comment

What did Mr. Volcker do? He reasoned that because inflation depends on growth in the money supply, inflation would fall if he brought that growth down. And he believed that by backing up his commitment to lower inflation with a new policy framework, he would break people’s inflationary expectations. So the Fed began to explicitly target the rate of money growth.

Hitting that target required pushing interest rates to unprecedented levels. Unemployment rose past 10 percent, and Mr. Volcker was pilloried. At one point, farmers on tractors blockaded Fed headquarters to protest the high rates.

But the policy worked. Inflation fell from 11 percent in 1979 to 3 percent in 1983, and unemployment returned to normal levels. Even my father, who lost his job as a chemical plant manager in the 1981 recession, views Mr. Volcker as a hero. His bold moves ushered in an era of low inflation and steady output growth.

Today, inflation is still low, but unemployment is stuck at a painfully high level. And, as in 1979, the methods the Fed has used so far aren’t solving the problem.

Mr. Bernanke needs to steal a page from the Volcker playbook. To forcefully tackle the unemployment problem, he needs to set a new policy framework — in this case, to begin targeting the path of nominal gross domestic product.

Nominal G.D.P. is just a technical term for the dollar value of everything we produce. It is total output (real G.D.P.) times the current prices we pay. Adopting this target would mean that the Fed is making a commitment to keep nominal G.D.P. on a sensible path.

More specifically, normal output growth for our economy is about 2 1/2 percent a year, and the Fed believes that 2 percent inflation is appropriate. So a reasonable target for nominal G.D.P. growth is around 4 1/2 percent.

Economic research showed years ago that targeting nominal G.D.P. has important advantages. But in the 1990s, many central banks adopted inflation targeting, a simpler alternative. As distress over the dismal state of the economy has grown, however, many economists have returned to the logic of targeting nominal G.D.P.

It would work like this: The Fed would start from some normal year — like 2007 — and say that nominal G.D.P. should have grown at 4 1/2 percent annually since then, and should keep growing at that pace. Because of the recession and the unusually low inflation in 2009 and 2010, nominal G.D.P. today is about 10 percent below that path. Adopting nominal G.D.P. targeting commits the Fed to eliminating this gap.

HOW would this help to heal the economy? Like the Volcker money target, it would be a powerful communication tool. By pledging to do whatever it takes to return nominal G.D.P. to its pre-crisis trajectory, the Fed could improve confidence and expectations of future growth.

Such expectations could increase spending and growth today: Consumers who are more certain that they’ll have a job next year would be less hesitant to spend, and companies that believe sales will be rising would be more likely to invest.

Another possible effect is a temporary climb in inflation expectations. Ordinarily, this would be undesirable. But in the current situation, where nominal interest rates are constrained because they can’t go below zero, a small increase in expected inflation could be helpful. It would lower real borrowing costs, and encourage spending on big-ticket items like cars, homes and business equipment.

Even if we went through a time of slightly elevated inflation, the Fed shouldn’t lose credibility as a guardian of price stability. That’s because once the economy returned to the target path, Fed policy — a commitment to ensuring nominal G.D.P. growth of 4 1/2 percent — would restrain inflation. Assuming normal real growth, the implied inflation target would be 2 percent — just what it is today.

Though announcing the new framework would help, it probably wouldn’t be enough to close the nominal G.D.P. gap anytime soon. The Fed would need to take additional steps. These might include further quantitative easing, more forceful promises about short-term interest rates, and perhaps moves to lower the exchange rate. Such actions wouldn’t just affect expectations; they would also be directly helpful. For example, a weaker dollar would stimulate exports.

Nominal G.D.P. targeting would make it more likely that the Fed would take these aggressive actions. Today, each Fed move generates controversy and substantial internal dissension. As a result, even though the central bank has taken some expansionary steps, they’ve often been smaller than needed and deliberately limited in duration.

Mr. Volcker faced a similar problem in October 1979. Each small rise in interest rates was a major battle. Committing to an overarching goal yielded more forceful action and less dissension within the Fed. Agreeing to a nominal G.D.P. target would do much the same today.

For evidence that adopting the new target could help fix the economy, look at the 1930s. Though President Franklin D. Roosevelt didn’t talk in terms of targeting nominal G.D.P., he spoke of getting prices and incomes back to their pre-Depression levels. Academic studies suggest that this commitment played an important role in bringing about recovery.

President Roosevelt backed up his statements. He suspended the gold standard and let the dollar depreciate. He got Congress to pass New Deal spending legislation and had the Treasury monetize a large gold inflow. The result was an end to deflationary expectations , leading to the most impressive swing the country has ever seen from horrible contraction to rapid growth.

Would nominal G.D.P. targeting work as well today? There would likely be unexpected developments, just as there were in the Volcker period. But the new target would have a better chance of meaningfully reducing unemployment than any other monetary policy under discussion.

Because it directly reflects the Fed’s two central concerns — price stability and real economic performance — nominal G.D.P. is a simple and sensible target for long after the economy recovers. This is very different from Mr. Volcker’s money target, which was abandoned after only a few years because of instability in the relationship between money growth and the Fed’s ultimate objectives.

Desperate times call for bold measures. Paul Volcker understood this in 1979. Franklin D. Roosevelt understood it in 1933. This is Ben Bernanke’s moment. He needs to seize it.

Christina D. Romer is an economics professor at the University of California, Berkeley, and was the chairwoman of President Obama’s Council of Economic Advisers.

Article source: http://feeds.nytimes.com/click.phdo?i=b66bea0151c7703bad70d06a7daeacda

Filed Under: Economy News Tagged With: , ,

Fair Game: A Foreclosure Settlement That Wouldn’t Sting

October 29, 2011 by Leave a Comment

While the exact terms remain under wraps, some aspects of this agreement — between banks on one side, and the federal government and a raft of state attorneys general on the other — are coming into focus.

Things could change, of course, and the deal could go by the boards. But here’s the state of play, according to people who have been briefed on the negotiations but were not authorized to discuss them publicly.

Cutting to the chase: if you thought this was the deal that would hold banks accountable for filing phony documents in courts, foreclosing without showing they had the legal right to do so and generally running roughshod over anyone who opposed them, you are likely to be disappointed.

This may not qualify as a shock. Accountability has been mostly A.W.O.L. in the aftermath of the 2008 financial crisis. A handful of state attorneys general became so troubled by the direction this deal was taking that they dropped out of the talks. Officials from Delaware, New York, Massachusetts and Nevada feared that the settlement would preclude further investigations, and would wind up being a gift to the banks.

It looks as if they were right to worry. As things stand, the settlement, said to total about $25 billion, would cost banks very little in actual cash — $3.5 billion to $5 billion. A dozen or so financial companies would contribute that money.

The rest — an estimated $20 billion — would consist of credits to banks that agree to reduce a predetermined dollar amount of principal owed on mortgages that they own or service for private investors. How many credits would accrue to a bank is unclear, but the amount would be based on a formula agreed to by the negotiators. A bank that writes down a second lien, for example, would receive a different amount from one that writes down a first lien.

Sure, $5 billion in cash isn’t nada. But government officials have held out this deal as the penalty for years of what they saw as unlawful foreclosure practices. A few billion spread among a dozen or so institutions wouldn’t seem a heavy burden, especially when considering the harm that was done.

The banks contend that they have seen no evidence that they evicted homeowners who were paying their mortgages. Then again, state and federal officials conducted few, if any, in-depth investigations before sitting down to cut a deal.

Shaun Donovan, secretary of Housing and Urban Development, said the settlement, which is still being worked out, would hold banks accountable. “We continue to make progress toward the key goals of the settlement, which are to establish strong protections for homeowners in the way their loans are serviced across every type of loan and to ensure real relief for homeowners, including the most substantial principal writedown that has occurred throughout this crisis.”

Still, a mountain of troubled mortgages would not be covered by this deal. Borrowers with loans held by Fannie Mae and Freddie Mac would be excluded, for example. Only loans that the banks hold on their books or that they service for investors would be involved.

One of the oddest terms is that the banks would give $1,500 to any borrower who lost his or her home to foreclosure since September 2008. For people whose foreclosures were done properly, this would be a windfall. For those wrongfully evicted, it would be pathetic. Roughly $1.5 billion in cash is expected to go into this pot.

The rest of the cash that would be paid by the banks is expected to be split this way: the federal government would get about $750 million, state bank regulators about $90 million. Participating states would share about $2.7 billion. That money is expected to finance legal aid programs, housing counselors and other borrower support. If 45 states participated, that would work out to about $60 million apiece.

Article source: http://feeds.nytimes.com/click.phdo?i=a4d2c8d4c0369136b1651afdd98360f5

Filed Under: Economy News Tagged With: , ,

Economix Blog: Weekend Business: Podcast: European Debt, Bank Settlement Talks, Fed Policy and Jim Collins

October 29, 2011 by Leave a Comment

European leaders reached agreement this week on a far-reaching package aimed at resolving the Greek debt problem, recapitalizing vulnerable banks and bolstering the euro zone’s financial rescue fund. Stock markets around the world rallied on the news.

But in the new Weekend Business podcast, Nelson Schwartz, a Times financial writer, says that the details of the plan are vague — and that many questions remain. There have been several European rescue packages, with euphoric reactions in the market, but the mood has dampened after each one, he says, and it may well do so again.

Gretchen Morgenson discusses the settlement talks under way between financial institutions that may be responsible for mortgage foreclosure misconduct and, on the other side, state attorneys general and the federal government. As she writes in her Sunday Business column, actual cash payments of $1,500 are envisioned in a possible settlement for people who were erroneously evicted from their homes. This may strike people who have lost their homes as a low figure, she suggests.

In a conversation with David Gillen, Jim Collins discusses a new book, “Great by Choice: Uncertainty, Chaos, and Luck — Why Some Thrive Despite Them All,” which he wrote with Morten T. Hansen. An article adapted from the book appears in Sunday Business.

And Christina Romer, the Berkeley economist who was chairwoman of the Council of Economic Advisers, discusses her suggestions for a new approach at the Federal Reserve. In the Economic View column in Sunday Business, she recommends that Ben S. Bernanke, the Fed chairman, take bold action, much as Paul Volcker did when he was the chairman years ago. Mr. Volcker began to target the growth of the money supply in his fight to curb inflation. Now, she says, the Fed should begin to target nominal growth of the gross domestic product in an effort to restore vitality to the economy.

You can find specific segments of the podcast at these junctures: Europe’s debt accord (35:33); news headlines (28:22); Jim Collins (25:16); the mortgage settlement talks (15:17); Christina Romer (10:06); the week ahead (2:01).

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Article source: http://feeds.nytimes.com/click.phdo?i=0ca9c94c9994184beb4caa721616ddaa

Filed Under: Economy News Tagged With: , ,

Corner Office: Lynn Blodgett: Lynn Blodgett of ACS, on Entrepreneurship in a Big Company

October 29, 2011 by Leave a Comment

Q. What were some early lessons for you?

A. I come from a family of nine kids — six boys and three girls. Because it was a large family, we didn’t have a lot. One of the things that we did every Christmas was that my parents would say we had to earn our Christmas money. And so they were the venture capitalists.  They’d give us $5, and then we would go buy wholesale wrapping paper and take orders and resell them and turn that $5 into $25.   

It was a great thing, because you learned about customers, learned about keeping your word, getting the orders delivered on time. 

Q. What about your first kind of formal management role? 

A. We worked for my parents, and I did kind of supervisory things there, and then worked for the company that bought my parents’ business and actually ended up running that business.   

Q. What was the company?

A. My parents started a computer business back in the ’60s and grew that into a nice little regional business.  There’s a story behind that. Earlier, my mother worked for the phone company and worked at night, and she had a baby daughter, her seventh child — her name was Nancy. When she was four months old, her heart stopped. And I was 10 years old. I grabbed her and went to my brother, who was 12, and we got her to this clinic and they got her heart started again.  But she had a lot of brain damage from that, so she had to have somebody taking care of her and feeding her all of the time. [She died at 13 from cardiac arrest.]   My mother wanted to work, but she needed to be at home, and so she leased a key punch machine, put it in my sister’s bedroom and started to do data entry, and that’s where many of the principles that we operate on today were formed — how to compensate people, data controls and process control. 

All the kids in our family learned data-entry key punching in my sister’s bedroom, literally at my mom’s knee.  We grew up on a computer farm, as my parents called it, because it was back in the ’60s and it was one of those rare moments when, as key punch machines evolved into computers and our business grew, we were able to associate with these brilliant people from M.I.T. and Harvard . It was a wonderful education. 

Q. You mentioned that you ran your parents’ business after it was sold. How old were you, and how many employees did you have?

A. I was 27, and we had close to 1,000. 

Q. How did you handle that big leap into management?

A. You know, I just used a lot of the stuff we really kind of formulated back in my sister’s bedroom.  We eventually had a key punch machine in each of our bedrooms, so the trick question was, well, how do you pay the kids?  Because if you pay hourly, you’re going to have to have a lot of verification and that kind of thing.  So they came up with an incentive system that was essentially self-policing.  I believe that a really important management principle is that if you get the incentives aligned, people will motivate themselves far better than you’ll ever motivate them. But, again, you have to get the incentives right.   

Q. Just the financial incentives? 

A. It’s not only financial.  It’s being able to feel like they have a level of control over their destiny, that they are valued in what they do, that they’re being successful, that they’re contributing.  Those things are actually probably more important than the money.  But you’ve got to get the money right, too.   

Q. So how did it work in your house with the key punch machines?

A. I was terrible. I’ve never been a good typist. But all my brothers and one of my sisters were exceptional.  So my brothers resented me for getting paid the same as they did even though they did three times as much. Pretty soon my mom and dad both said: “Well, we have to make this more fair. We have to tie it more to what you do.” And because it’s a computer, it can provide all the evidence of the work — productivity and quality — that’s accomplished. 

What happened with that incentive program was that I learned very quickly that that was not for me. I was never going to make any money doing that job. And so this notion of self-nominating is crucial in management. If you can get a person to self-select, that’s a lot better than a supervisor having to come and say “You know, Lynn, you’re just not good.” 

Article source: http://www.nytimes.com/2011/10/30/business/lynn-blodgett-of-acs-on-entrepreneurship-in-a-big-company.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Luck Is Just the Spark for Business Giants

October 29, 2011 by Leave a Comment

And maybe that’s true — if you just want to be merely good, not much better than average. But what if you want to build or do something great? And what if you want to do so in today’s unstable and unpredictable world?

Recently, we completed a nine-year research study of some of the most extreme business successes of modern times. We examined entrepreneurs who built small enterprises into companies that outperformed their industries by a factor of 10 in highly turbulent environments. We call them 10Xers, for “10 times success.”

The very nature of this study — how some people thrive in uncertainty, lead in chaos, deal with a world full of big, disruptive forces that we cannot predict or control — led us to smack into the question, “Just what is the role of luck?”

Could it be that leaders’ skills account for the difference between just meeting their industry’s average performance (1X success) and doubling it (2X)? But that luck accounts for all the difference between 2X and 10X?

Maybe, or maybe not.

But how on Earth could we go about quantifying something as elusive as “luck”? The breakthrough came in seeing luck as an event, not as some indefinable aura. We defined a “luck event” as one that meets three tests. First, some significant aspect of the event occurs largely or entirely independent of the actions of the enterprise’s main actors. Second, the event has a potentially significant consequence — good or bad. And, third, it has some element of unpredictability.

We systematically found 230 significant luck events across the history of our study’s subjects. We considered good luck, bad luck, the timing of luck and the size of “luck spikes.” Adding up the evidence, we found that the 10X cases weren’t generally “luckier” than the comparison cases. (We compared the 10X companies with a control group of companies that failed to become great in the same extreme environments.)

The 10X cases and the control group both had luck, good and bad, in comparable amounts, so the evidence leads us to conclude that luck doesn’t cause 10X success. The crucial question is not, “Are you lucky?” but “Do you get a high return on luck?”

Return on luck: We call it ROL.

SO why did Bill Gates become a 10Xer, building a great software company in the personal computer revolution? Through one lens, you might see Mr. Gates as incredibly lucky. He just happened to have been born into an upper-middle-class American family that had the resources to send him to a private school. His family happened to enroll him at Lakeside School in Seattle, which had a Teletype connection to a computer upon which he could learn to program — something that was unusual for schools in the late 1960s and early ’70s.

He also just happened to have been born at the right time, coming of age as the advancement of microelectronics made the PC inevitable. Had he been born 10 years later, or even just five years later, he would have missed the moment.

Mr. Gates’s friend Paul Allen just happened to see a cover article in the January 1975 issue of Popular Electronics, titled “World’s First Microcomputer Kit to Rival Commercial Models.” It was about the Altair, designed by a small company in Albuquerque. Mr. Gates and Mr. Allen had the idea to convert the programming language Basic into a product that could be used on the Altair, which would put them in position to be the first to sell such a product for a personal computer. Mr. Gates went to college at Harvard, which just happened to have a PDP-10 computer upon which he could develop and test his ideas.

Wow, Bill Gates was really lucky, right?

Yes, he was. But luck is not why Bill Gates became a 10Xer. Consider these questions:

• Was Bill Gates the only person of his era who grew up in an upper middle-class American family?

• Was he the only person born in the mid-1950s who attended a secondary school with access to computing?

Jim Collins is the author of the worldwide best seller “Good to Great.” This article was adapted from “Great by Choice: Uncertainty, Chaos, and Luck — Why Some Thrive Despite Them All,” which was written with Morten T. Hansen and published this month.

Article source: http://www.nytimes.com/2011/10/30/business/luck-is-just-the-spark-for-business-giants.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

The Saturday Profile: Hara Kefalidou Pushes Back Against Perks

October 29, 2011 by Leave a Comment

IN her tiny office here, Hara Kefalidou rolled her eyes remembering the days just after her letter was first published in the conservative daily Kathimerini.

In that letter, Ms. Kefalidou, a newly elected member of Parliament, called on her fellow legislators to give up some of their vaunted perks, including free cars, the $425 fee for attending committee meetings and double pensions.

It was not an idea they immediately embraced. She soon found herself being lectured by party leaders about her lack of judgment. “I was so alone,” she said. “People that I really admired called and said in private in a paternalistic way: ‘O.K., you said what you had to say. Now, move on.’ ”

The letter — and her eventual decision to give up some of her own perks, including her free Mercedes — catapulted her into the headlines here, some praising her for her boldness. But it has also unleashed a torrent of criticism from fellow politicians who have called her an opportunist and a hypocrite.

Ms. Kefalidou, 46 and five months pregnant with her first child, says it just seemed obvious to her that lawmakers needed to make sacrifices, too. After all, her country was near bankruptcy and the government was asking Greek citizens to pay higher taxes, even as their wages, benefits and pensions were being cut.

“Consider for a minute the trade-off that I suggest,” she wrote in her letter, which was published in January, adding, “perhaps we will convince people to consider us as worthy leaders instead of privileged hangers-on.”

Ms. Kefalidou put the spotlight on an inventory of questionable perks, some widely in use. Why, she asked, should members of Parliament get extra pay for sitting on committees? Was that not part of the job? (In fact, in recent years, some legislators, sitting on four or five committees had doubled their salaries with the fees.) And why extra pay for summer meetings?

Some of the privileges Ms. Kefalidou dragged into the spotlight seemed to defy common sense. For instance, a lawmaker who is also a physician and fails to be re-elected, is entitled to a job running a hospital — even if he has never run so much as a clinic before, she said.

“That is an entitlement I don’t understand,” she said. “That cannot be right.”

And was it right, she asked, that members of Parliament should be entitled to two pensions — one attached to their profession and another after they have served just two terms in the legislature?

Ms. Kefalidou, a member of the governing Pasok party, had hoped her letter would prompt organized, institutional action — an intelligent review of salaries and privileges. But months followed and nothing along those lines emerged.

Meanwhile, her fellow legislators shunned her and newspapers, including the Kathimerini, started referring to her as the “attention grabbing” Hara Kefalidou.

Some politicians made ranting about her a part of the national political dialogue — pointing out that she was the daughter of a politician and “a scion” herself.

Letters and e-mails from her constituents buoyed her spirits, she said. “They applauded,” she said. “They were very supportive.”

Ms. Kefalidou grew up in Drama, a small city in northern Greece, an area of farming and light manufacturing, though in recent years much of the industry departed for former Eastern bloc countries like Bulgaria.

Her father was a veterinarian and a member of Parliament who retired from politics in 1989. Politics, she said, is in her blood like a virus.

But she studied mechanical engineering and left Drama for Athens. She ran for local office and worked on public-works projects — antiflooding measures, homes for the elderly, public parks.

“Very tangible things,” she said, clearly seeing that as a plus.

Nikolas Leontopoulos contributed reporting.

This article has been revised to reflect the following correction:

Correction: October 28, 2011

An earlier version of this article incorrectly described Kyriakos Mitsotakis as the leader of an opposition party.

Article source: http://www.nytimes.com/2011/10/29/world/europe/hara-kefalidou-pushes-back-against-perks-in-greek-parliament.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

After Solyndra Case, Ex-Businessman to Review Energy Loans

October 29, 2011 by Leave a Comment

In enlisting Herbert M. Allison Jr., a former executive who helped the Bush and Obama administrations rescue the financial system, the White House indicated some concern that it needed to get out ahead of the Congressional investigation into the loan portfolio of the Department of Energy and, in particular, the half-billion-dollar loan to the California manufacturer, Solyndra.

But officials also indicated that the White House would oppose any subpoena of additional internal records related to Solyndra. The administration has given more than 70,000 documents to Republicans investigating what they characterize as the first scandal related to the economic-stimulus package early in the Obama administration.

The White House contends that those documents show that the decisions related to Solyndra and other loan recipients were based on merit and made by nonpolitical career staff members following proper procedures.

In a statement, the White House chief of staff, William M. Daley, said Mr. Allison would analyze “the current state of the Department of Energy loan portfolio, focusing on future loan monitoring and management.” Mr. Allison is to issue a public evaluation and any recommendations in 60 days and can bring in outside experts to help him.

Mr. Daley said Mr. Allison was chosen not only for his résumé, but because “he is tough, always tells it like it is.”

Mr. Allison, a former president of Merrill Lynch and former chief executive of the insurance company TIAA-CREF, was tapped by the Bush administration in September 2008, with the financial sector near collapse, to lead the mortgage-finance giant Fannie Mae when it was forced into a government conservatorship. In 2009, he was nominated by President Obama and confirmed by the Senate to be assistant Treasury secretary for financial stability and to oversee the bank bailout, the Troubled Asset Relief Program. He left in September 2010 when it had become evident that big banks would repay their loans, with interest.

Like Mr. Obama, Mr. Daley, in his statement, stressed that the president remained committed to government investments in clean energy, to create jobs and to compete with foreign rivals.

“And while we continue to take steps to make sure the United States remains competitive in the 21st century energy economy, we must also ensure that we are strong stewards of taxpayer dollars,” Mr. Daley said.

The Energy Department program comprises 40 projects worth $36 billion, including guarantees for large nuclear-power loans and for development of electric vehicles.

Scrutiny has focused on a portfolio with a total loan value of about $16 billion that relates to 28 renewable-energy projects at companies engaged in biofuels, wind farms, battery storage, solar energy generation and solar-panel manufacturing like Solyndra was trying before it declared bankruptcy in September. The company, which received $528 million, is also under investigation for possible fraud by the Federal Bureau of Investigation.

On Friday the leaders of the Republican-controlled House Energy and Commerce Committee — Representatives Fred Upton of Michigan, the chairman, and Cliff Stearns of Florida, the chairman of the oversight subcommittee — announced that the committee would meet on Thursday to vote on whether to subpoena internal White House communications related to the Solyndra loan and its restructuring in 2010.

The Republican majority on the committee has been seeking evidence that the White House ordered the Energy Department to approve the loan guarantee to Solyndra, but so far it has mostly found expressions of intense interest from the White House over the timing of the approval.

Specifically, the committee is now seeking communications from the start of the administration involving some of Mr. Obama’s closest advisers. While the White House has not yet tried to exercise executive privilege to withhold material, any subpoenas could prompt a legal showdown with Republicans.

“Subpoenaing the White House is a serious step that, unfortunately, appears to be necessary in light of the Obama administration’s stonewall on Solyndra,” Mr. Upton and Mr. Stearns said in a joint statement.

The White House said it stood by an Oct. 14 letter to the two lawmakers from one of Mr. Obama’s lawyers, Kathryn H. Ruemmler. She wrote that the White House, the Energy and Treasury Departments and the budget office had taken part in nine briefings to Congressional staff, testified at hearings and produced more than 70,000 pages of documents with nothing to indicate “the White House intervened in the Solyndra loan guarantee to benefit a campaign contributor.”

Stopping short of an invocation of executive privilege, Ms. Ruemmler said the committee’s request for more material “implicates longstanding and significant institutional Executive Branch confidentiality interests.”

John M. Broder contributed reporting.

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YouTube Plans to Create New Online Channels

October 29, 2011 by Leave a Comment

The channels will receive programming from a long list of media companies, including big television production companies like FremantleMedia as well as small start-ups like Maker Studios, YouTube said.

“Today, the Web is bringing us entertainment from an even wider range of talented producers, and many of the defining channels of the next generation are being born, and watched, on YouTube,” Robert Kyncl, YouTube’s global head of content partnerships, wrote in a blog post.

Parts of the plan have been well known in Hollywood for months. YouTube, a unit of Google, has made no secret of the fact that it wants to create an alternative to cable television on the Internet. It offered cash advances to prospective producers that totaled more than $100 million, according to people with knowledge of the plan who were not authorized to speak publicly.

The investments in the channels reflect Google’s belief that the Internet is the third phase of the television business, after network TV (with a few channels) and cable TV (with hundreds). “We’re not going from three to 300 channels but to millions of channels,” Mario Quieroz, head of Google TV, said in a recent interview. “The Web is essentially infinite content.”

Mr. Quieroz said that YouTube is not trying to compete with cable. “Like when the cable channels came to TV, we don’t believe the Web is going to replace linear TV,” he said. “This is designed to be complementary to cable TV.”

But the six-year-old site has gradually set itself up as a hub for professionally produced, made-for-the-Web material, in addition to the torrent of amateur video that is posted daily. YouTube even bought camera equipment and editing software for some of its top producers. Those purchases, made in the form of grants, were described as a way to improve the quantity of TV-quality content on the site.

The forthcoming channels will increase the number of shows that viewers can watch on big-screen TV sets as well as laptops and tablets. Some of the channels will come online in November, according to people involved in the productions, but many others will not be ready until 2012.

The channels, like other professional content on YouTube, will be free for viewers and supported by advertisers. Rather than signing the top TV studios, which have so far been reluctant to offer Google free Web content, YouTube has recruited up-and-coming digital studios like Electus and Vice, as well as established brands like the Wall Street Journal, Thomson Reuters and WWE, the wrestling producer.

Production companies associated with celebrities like Madonna, Rainn Wilson, and Shaquille O’Neal are also on YouTube’s list of participants, as are online video outlets like Demand Media and the TED Conferences. 

“We’re looking for the next generation of MTVs, HBOs, just like cable,” added Rishi Chandra, the director of product management for Google TV.

Earlier on Friday, Google announced a new version of Google TV, including a new version of YouTube that looked more like TV. Google also added easier search tools so people searching for cooking shows or sports events could see shows available on cable, YouTube or Web apps like those from Amazon.com, Netflix and HBO.

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Hulu and Netflix Gain an Advantage With Anime

October 29, 2011 by Leave a Comment

The show, “Naruto: Shippuden,” a Japanese anime set in a fantasy land reminiscent of Okayama Prefecture in Japan, represents a growing business for Hulu, the streaming video service.

As Hulu and other streaming services like Netflix grapple with Hollywood studios and TV networks to acquire rights for expensive prime-time series, they’ve found easy-to-get content in anime and other niche foreign programming.

What the stylized form of Japanese animation lacks in mass appeal it makes up for in price. Hulu typically pays anime distributors only a portion of advertising revenue. Netflix pays a relatively small licensing fee.

In contrast, earlier this month Netflix announced a deal worth an estimated $1 billion to gain access to shows on the CW network. On Friday, Hulu struck a five-year deal worth significantly less to broadcast CW shows like “Gossip Girl” and “Vampire Diaries.”

Typically shown with subtitles and known for characters with wide glimmering eyes and elongated bodies, anime stands at the center of Hulu’s strategy to differentiate itself from TV watched the old-fashioned way. “Networks might be happy to get a show that 20 million people kind of like,” said Andy Forssell, Hulu’s senior vice president for content. “We’re more interested in finding a show that a million people love to death.”

In Japan, anime varies from children’s programming to sports, romantic comedies and even public service announcements and pornography. The shows that resonate in the United States tend to be action-driven, with lots of violence, as well as sexually provocative shows. The small but avid audience is made up of mostly male viewers aged 18 to 34. Distributors said comedies, sports shows and anything aimed at women tend to not work.

Hulu has 9,500 episodes of anime titles. Earlier this month it signed a deal with the anime distribution company FUNimation Entertainment to show five new subtitled series within 48 hours of their original broadcast in Japan. Netflix offers 4,000 anime episodes for streaming.

This month four of the top 40 titles on Hulu and its subscription service, Hulu Plus, are anime. “Naruto: Shippuden,” a continuation of the popular “Naruto,” which shows the young ninja leave his village to train, is the sixth most popular series on Hulu Plus, competing with episodes of “Family Guy” on Fox and “The Office” on NBC.

Hulu is expanding its offering of foreign shows with similarly devoted audiences. In May, a Hulu executive flew to Seoul to attend a presentation by South Korean broadcasters and producers. Held at the luxurious Shilla Hotel, the lecture, titled “The Potential for Korean Drama in the U.S. Market,” reinforced Hulu’s push into Korean dramas. It now offers 90 different shows.

They appeal largely to non-Korean viewers who listen to Korean pop music or love soapy dramas, according to Suk Park, co-founder of DramaFever.com, a Web site that streams Korean dramas in North America and struck the deal with Hulu. The company is seeking other trendy Asian programs to bring to the United States. (Hulu, coincidentally, has Chinese roots. The company was named after the Mandarin words that roughly translate to the “holder of precious things” and “interactive recording.”)

This month, Hulu, a joint venture of the NBCUniversal division of the Comcast Corporation, News Corporation, Walt Disney and Providence Equity Partners, announced a deal to carry Spanish-language telenovelas and other shows from Univision, the most-watched Spanish-language network in the United States.

Internet streaming services have upended the business model for Japanese animation. A decade ago when the genre exploded among the young comic book set in the United States, viewers mostly watched pirated versions. These online videos posted on fan Web sites with sloppy English subtitles left the Japanese anime industry powerless to profit from even the most popular titles overseas.

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