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DealBook: Intel to Invest in Research and Development in Brazil

February 28, 2013 by Leave a Comment

SAO PAULO – Intel plans to invest $152 million in Brazil over the next five years in research and development, the chip manufacturer said on Wednesday. In doing so, the company will partner with the Brazilian government, which has made increasing the country’s software output a top priority.

The direct investment will go toward increasing head count and resources internally but also paying for research at seven Brazilian universities, the president of Intel Brazil, Fernando Martins, told DealBook on Wednesday. Those in the initial group include Unicamp, the University of Sao Paulo and the University of Brasilia.

The Brazilian government is expected to match Intel’s investment, Mr. Martins said. Last year, President Dilma Rousseff said the Brazilian government would spend at least $254 million to stimulate software development. That figure is expected to grow and does not even include Brazil’s national development bank’s initiatives. Transitioning to an innovation-based economy is an important issue in this commodity-export dependent economy.

Brazil is Intel’s third-largest market, Mr. Martins said. Additionally, its venture capital arm, Intel Capital, has long been active here, making its first investment in 1999. Since then, it has invested approximately $100 million in more than 25 companies, according to Dave Thomas, head of Intel Capital.

But the company is far from alone these days as other technology giants have also recently bet on Brazil’s capabilities as a software and software solutions provider. Microsoft last November said it would open a research center in Rio de Janeiro, investing $102 million over up to four years. Also last year Cisco said it planned to invest $508 million over four years.

Article source: http://dealbook.nytimes.com/2013/02/27/intel-to-invest-in-research-and-development-in-brazil/?partner=rss&emc=rss

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Veiled Warning to Britain From a Bloc Leader

February 28, 2013 by Leave a Comment

BRUSSELS — The man who represents the 27 leaders of the European Union warned Thursday of widespread opposition to steps that may be necessary to keep Britain as a member of the bloc.

Herman Van Rompuy, the president of the European Council, said he saw “no impending need to open the E.U. treaties” to address the complaints of countries like Britain that are outside the euro zone and that object to “federal Euroland” rules governing the bloc.

“Nor do I feel much appetite for it around the leaders’ table,” Mr. Van Rompuy said in a speech he delivered Thursday evening
in London at the Policy Network, a center-left research organization.

An aide to Mr. Van Rompuy said the comments were meant to underline that there was no immediate need to change treaties to ensure the stability of the euro and that the comments were not referring to any demands for treaty change that Britain may seek in the future.

Still, Mr. Van Rompuy’s remarks appeared to be a pointed warning to Prime Minister David Cameron, who in January promised British voters a referendum within the next five years on whether to stay in the bloc on revised membership terms, or to leave.

Mr. Cameron’s stance is widely regarded as a bet that his country is big and important enough to win concessions from the bloc, including a change in the European Union treaty if necessary. But a number of European leaders, as well as critics in Britain, have also warned that Mr. Cameron could lose that gamble and end up overseeing the country’s voluntary exclusion from the bloc.

Mr. Van Rompuy also faulted the British approach as overly confrontational in a European Union that has a long tradition of consensual decision-making.

“How can you possibly convince a room full of people when you keep your hand on the door handle?” said Mr. Van Rompuy, without naming Mr. Cameron.

“How to encourage a friend to change, if your eyes are searching for your coat?” he added.

In the speech, Mr. Van Rompuy said that “leaving the club altogether, as a few advocate, is legally possible” but that such a move “would be legally and politically a most complicated and unpractical affair.”

Mr. Van Rompuy’s remarks began soon after Mario Monti, the departing Italian prime minister, warned during a speech in Belgium of renewed dangers to the European Union on its southern fringe.

Mr. Monti was roundly defeated during the weekend in elections that left no party with a majority in the new Parliament in Rome. The ballot also showed the emergence of the anti-establishment Five Star Movement, founded three years ago by the comedian Beppe Grillo, and the resurgence of Silvio Berlusconi, who was forced from office in November 2011 after a collapse in confidence in his ability to run the country.

In his speech, Mr. Monti, who described himself as a fervent supporter of budgetary discipline, said that one of the main problems the European Union faced was that reforms associated with such policies took a long time to bear fruit.

“If the gains from virtue are not seen, the insistence on virtue may be short-lived,” he told an audience of antitrust lawyers at a conference in Brussels, where he formerly served as the bloc’s commissioner for competition policy.

Mr. Monti said that “strategy at the E.U. level” was in danger of being undermined by “the most simplistic, some would say populistic” trends, adding the caveat that he was not referring to the elections in Italy.

Article source: http://www.nytimes.com/2013/03/01/business/global/eu-leader-suggests-europe-will-not-change-to-satisfy-critics.html?partner=rss&emc=rss

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U.S. Economy Expanded Slightly in 4th Quarter

February 28, 2013 by Leave a Comment

Output expanded at an annual rate of 0.1 percent, which is basically indistinguishable from no growth at all and which is far below the growth needed to get unemployment back to normal. But at least the economy did not shrink, as the Commerce Department estimated in January, when the first report suggested that output had contracted at an annual rate of 0.1 percent.

The department’s latest estimate for economic output, released on Thursday, showed that growth was depressed by declines in military spending (possibly in anticipation of the across-the-board spending cuts that are to begin on Friday) and in how much companies restocked shelves.

“The good news with business inventories is that what they take away in one quarter they tend to add to the next,” said Paul Ashworth, chief North American economist at Capital Economics, referring to the measure of this restocking process. “So there’s a good chance that first-quarter numbers will be better than originally thought.”

The growth in output was revised upward from the original estimate partly thanks to updated, and improved, data on business investment and net trade. Imports were lower than previously reported and exports were higher.

Economists expect government spending to continue to drag on the economy this year, especially if Congress does not avert the spending cuts, which would shave around 0.6 percentage point off growth. Many hope that even if the cuts go through, Congress will quickly reverse them.

“They can always change their minds when they have to renew the continuing budget resolution at the end of this month or in April or May,” said Mr. Ashworth. “My expectation is that at most the cuts stay a month or two, and in most departments, with a wink or a nod, they won’t do anything crazy.”

Even if government does lop off $85 billion in the so-called sequester, as current law states, the private sector will offset most of this drag, thanks to the housing recovery and other sources of strength. Forecasts for the first quarter call for annual growth of 2.4 to 3 percent.

Monetary stimulus from the Federal Reserve, while under fire from some Republicans, is also helping offset the fiscal contraction.

“With monetary policy working with a lag and still being eased, the boost to the economy is probably still growing,” said Jim O’Sullivan, chief United States economist at High Frequency Economics.

The combination of monetary expansion and fiscal tightening has helped lead to a painfully slow decline in the unemployment rate. The jobless rate stood at 7.9 percent in January. The recent end of the payroll tax holiday is also expected to hold back consumer spending and with it job growth.

The Labor Department reported on Thursday that first-time claims for unemployment benefits decreased by 22,000, to 344,000, last week. The less-volatile four-week moving average fell to 355,000 from 361,750.

“I think it’s largely steady as she goes for employment,” said Jay Feldman, an economist at Credit Suisse, of the indications from the latest growth report. “I still think we’re in kind of a 175,000-jobs-a-month clip for a while, but with some downside risks later in the year from the sequester.”

Article source: http://www.nytimes.com/2013/03/01/business/economy/us-economy-barely-grew-in-fourth-quarter-revision-shows.html?partner=rss&emc=rss

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Economix Blog: A Closer Look at College Completion Rates for Full-Time Students

February 28, 2013 by Leave a Comment

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

In response to my post on Tuesday about college completion rates, a reader named Mark Elliott wrote in with a good point: that some of these students are enrolled part time, so maybe it’s not so unrealistic for them to take longer than six years to graduate.

Fair, although if you break down the figures by part-time/full-time status and school, I would argue that the completion rates are still not particularly impressive.

Source: National Student Clearinghouse Research Center. Source: National Student Clearinghouse Research Center.

For full-time students who originally enrolled at a four-year public institution — in other words, a school whose curriculum is designed for graduation within four years — one in five did not graduate within six years. For their counterparts at private four-year schools, about one in seven didn’t graduate within six years.

The record at two-year schools is much worse. For full-time students who originally enrolled at two-year schools, only about half had graduated with some degree within six years — that is, within three times the advertised schooling duration. (Of those who graduated within six years after enrolling at a two-year school, for most their first degree was a two-year degree. About 12 percent of those who started out at a two-year school received their first degree from a four-year school.)

As other readers observed, there are a lot of reasons that students are not finishing their programs on time, if they ever do. Academic struggles, debt and family responsibilities all play roles. The perceived opportunity cost of not graduating also matters, even though over the long run a college degree brings in a much higher return than the cost of the debt associated with it.

A new study, for example, finds that men are less willing to tolerate loan debt than women are. The authors argue that in the short term men without college degrees can find jobs that pay about the same salary as those for college graduates, which makes going directly to work and forgoing additional debt a very tempting proposition. The same short-term career options are generally less available for women. (Women who drop out of college are more likely to work in low-paying service jobs, while male dropouts are more likely to find positions in higher-paying, male-dominated fields like manufacturing, construction and transportation.)

Article source: http://economix.blogs.nytimes.com/2013/02/28/a-closer-look-at-college-completion-rates-for-full-time-students/?partner=rss&emc=rss

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High & Low Finance: Report Lays Out Plan to Reduce Government Role in Home Financing

February 28, 2013 by Leave a Comment

It is amazing just how few people think it can.

“For the foreseeable future, there is simply not enough capacity on the balance sheets of U.S. banks to allow a reliance on depository institutions as the sole source of liquidity for the mortgage market,” stated a report on the American housing market this week, issued by a group that was filled with members of the housing establishment.

The panel, which included Frank Keating, the president of the American Bankers Association and a former governor of Oklahoma, does not see that as an indictment of the American banking system, which would much rather trade leveraged derivatives than keep a lot of mortgage loans on its books.

“Given the size of the market and capital constraints on lenders, the secondary market for mortgage-backed securities must continue to play a critical role in providing mortgage liquidity,” added the report, issued by a housing commission formed by the Bipartisan Policy Center, a group that was begun by former Senate majority leaders from both parties. The group thinks investors will not be willing to finance enough mortgages — particularly 30-year fixed-rate loans — without a government guarantee.

The report does an excellent job of analyzing the history of the American housing finance system, as well as looking at the government’s efforts over the years to promote and subsidize rental housing. It calls for changes in those policies as well, aimed at assuring that those with very low incomes “are assured access to housing assistance if they need it.”

But those rental proposals are unlikely to lead to legislation any time soon, said Mel Martinez, one of four co-chairmen of the housing panel. Mr. Martinez, a former Republican senator from Florida and housing secretary under President George W. Bush, said in an interview that any proposal calling for spending government money, as this one does, would face tough sledding in Congress.

But he said it was possible that changes in the housing finance system, which is widely criticized on both sides of the aisle, had a better chance of getting approval.

Certainly, one principle enunciated by the panel will get wide support: “The private sector must play a far greater role in bearing housing risk.” But the details show that the panel still thinks sufficient money can be found for housing only if Uncle Sam remains the ultimate guarantor for most home mortgages.

Currently, the government backs about 90 percent of newly issued mortgages, more than ever before. The proportion fell in the years leading up to 2007 as subprime loans proliferated and then soared after that market collapsed.

Since then, the Federal Housing Administration has expanded its role in backing home loans on the low end of the scale. But most mortgages are purchased by either Fannie Mae or Freddie Mac, the government-sponsored enterprises that the government took over after the housing bubble burst.

So-called jumbo mortgages, that is, mortgages too large to qualify for purchase by Fannie or Freddie, account for most of the rest. Some mortgages are put into securitizations that have no government guarantee, but many jumbo mortgages end up being owned by the banks for the long term.

The F.H.A. appears to be more cautious than it used to be. The report notes that last year the average FICO score for an F.H.A. or Department of Veterans Affairs loan was close to 720 on a range of 300 to 850. That is about what the average Fannie Mae and Freddie Mac borrower had in 2001.

The commission, whose other co-chairmen were George J. Mitchell, the former Senate Democratic leader; Christopher S. Bond, a former Republican senator; and Henry Cisneros, who served as housing secretary under President Bill Clinton, wants to preserve the F.H.A., but orient it more to those who need the most help. It would phase out Fannie and Freddie — something that is politically necessary — but replace them with something that sounds sort of similar.

The new organization would be called a “public guarantor.” It would guarantee that investors in mortgage-backed securitizations would not lose money, much as Fannie and Freddie now do. But its responsibility would come after that of a “private credit enhancer,” which sounds like a monoline insurer that would make payments to securitization holders if the underlying mortgages were performing badly. That organization would be regulated by the public guarantor, and only after it goes broke — something that should happen only if housing prices fall more than they did in the recent crisis — would the public guarantor be responsible for making investors whole.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

This article has been revised to reflect the following correction:

Correction: February 28, 2013

An earlier version of this column misstated the potential proportion of new mortgages that Mr. Martinez said he believed would eventually be financed by private capital. It is 40 to 55 percent, not 40 to 50 percent.

Article source: http://www.nytimes.com/2013/03/01/business/report-lays-out-plan-to-reduce-government-role-in-home-financing.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Economix Blog: For Fed Presidents, Economics Is Local

February 28, 2013 by Leave a Comment

The Federal Reserve’s dissenters often are portrayed as ideologically motivated. They are said to oppose the Fed’s stimulus campaign because they are more worried about inflation, or less worried about unemployment, than their peers.

But it is fascinating to consider that the four Fed districts whose presidents have dissented most frequently are also the Fed districts that had the fastest economic growth between 2008 and 2011, the most recent year for which data is available.

“Specifically, the four fastest-growing districts since the crisis erupted have been Dallas, Minneapolis, Kansas City and Richmond,” the Citigroup economists Nathan Sheets and Robert A. Sockin wrote in a research note earlier this month. “Presidents from these four districts have cast a historically significant 28 dissents for tighter policy since the fall of 2007, the vast majority of such dissents.” (I first learned about the note from a blog post by Victoria McGrane of The Wall Street Journal.)

The Chicago Fed’s district, by contrast, had the weakest growth, and its president, Charles Evans, has twice dissented in favor of doing more. He played a key role in pushing the Fed to undertake the latest expansion of its stimulus campaign.

This linkage of region and outlook only goes so far, as the authors are quick to concede. The Boston Fed’s district ranked fifth in growth, but its president, Eric Rosengren, is a leading proponent of additional asset purchases. The Philadelphia Fed’s district ranked near the bottom of the growth table, but its president, Charles Plosser, has dissented over concerns about inflation. And the president of the Minneapolis Fed, Narayana Kocherlakota, has left the ranks of conservative dissenters to become the only Fed official who still wants to do more.

Still, the pattern is striking. The evidence suggests regional presidents are seeing the national economy through the lens of local experience. Which, as it happens, is exactly what they are supposed to be doing. The Fed’s structure was meant to ensure that regional perspectives were heard. It seems to be working.

Article source: http://economix.blogs.nytimes.com/2013/02/28/for-fed-presidents-economics-is-local/?partner=rss&emc=rss

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Bucks Blog: Corporate America Weighs In on Treatment of Gay Couples

February 28, 2013 by Leave a Comment
The Cost of Being Gay

A look at the financial realities of same-sex partnerships.

Gay couples face a host financial and legal complications because of the federal law that bans same-sex marriage. As a result, they often end up having to pay more for a host of things — tax preparation, health benefits and estate planning, among other things.

So it’s not terribly surprising that the law complicates things for same-sex partners’ employers, too, especially when a couple’s union may be recognized in a particular state, but not in the eyes of the federal government. Not only does that leave plenty of room for error in the administration of employee benefits, it also forces employers to treat their employees differently simply because of their sexual orientation.

As a result, more than 200 companies — among them giants like Citigroup, Apple, Mars and Amazon — as well as city governments, law firms and others, are arguing that the law that bans same-sex marriage imposes serious administrative and financial costs on their operations. The companies filed a supporting brief with the Supreme Court on Wednesday, urging it to overturn a section of the Defense of Marriage Act that denies federal benefits and recognition to same-sex couples.

“It puts us, as employers, to unnecessary cost and administrative complexity, and regardless of our business or professional judgment forces us to treat one class of our lawfully married employees differently than another, when our success depends upon the welfare and morale of all employees,” they wrote in the brief.

We’ve documented these inequities and complications as part of the “Cost of Being Gay” series on Bucks. For instance, gay employees who add their partners to their health benefits are taxed on the value of that coverage (if the partner is not considered a dependent) since their unions are not federally recognized. Opposite-sex married couples are not subject to the tax, so some employers have attempted to equalize the playing field by covering the extra costs for same-sex employees. We’ve tracked these efforts on a chart, which can be found here.

We’ve also written about the errors that can arise when organizations have to keep track of those extra taxes, including Yale University‘s failure to withhold the proper amount of income for a group of workers.

Then, there are the variety of questions that are easily answered for married employees with opposite-sex spouses, but not so straightforward for gay employees: If I get married, can I automatically add my spouse to my health insurance outside the annual “open enrollment” period? Will my partner even be covered? What about our children?

What other administrative and benefit-related issues do same-sex couples face in the workplace? Please share your thoughts in the comment section below.

Article source: http://bucks.blogs.nytimes.com/2013/02/28/corporate-america-weighs-in-on-treatment-of-gay-couples/?partner=rss&emc=rss

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Bucks Blog: A Look at Repayment Options for Private Student Loans

February 28, 2013 by Leave a Comment

Agence France-Press — Getty Images

2:45 p.m. Updated / To correct a statistic on households with student debt and to correct the date by which comments are due.

The federal government is looking into ways to help consumers burdened with private student loans — including potential ways to help them refinance their debt at lower interest rates.

The Consumer Financial Protection Bureau recently published a formal request for information from consumers, lenders and others involved in the student loan market, seeking “more detailed information on ways to encourage the development of more affordable loan repayment mechanisms for private student loan borrowers.”

Rohit Chopra, the agency’s student loan ombudsman, said in a recent call with reporters that the request is an “important first step” in the agency’s quest to make student-loan repayment more flexible and easier for borrowers.

The request follows a report last fall from Mr. Chopra about complaints the agency had received from borrowers of private student loans.

Student debt, Mr. Chopra reiterated, is no longer an exception but the norm: 40 percent of households headed by someone under 35 have student debt. Student debt tops $1 trillion, and some policy makers are concerned that it may affect the ability of young people to qualify for other loans, like those for cars and for buying first homes.

While the bulk of student debt is made up of federal student loans, more than $8 billion in private loans are in default, according to the agency’s research. Private loans are those made outside the federal student loan program. Most private loans are more expensive than federal loans, and lack certain borrower protections offered by federal loans, including income-based repayment plans for borrowers facing financial difficulty and options for borrowers in default to get back on track.

Some borrowers have expressed frustration that there are limited options for refinancing their student debt at currently low market rates, as borrowers can often do with home loans. Unlike a mortgage, however, which is secured by a home, a student loan is not secured by specific collateral — so interest rates tend to be higher.

But while student loans may never be available at rates as low as those available for mortgages, there are ways to measure relative risk with such loans that could still lower their cost, Mr. Chopra said. For instance, he said, while a loan made to a college freshman may be considered one level of risk requiring a certain interest rate, that risk level decreases after the student graduates, gets a job and demonstrates a steady repayment record — and that person may be then eligible for a lower rate.

Responses to the request for information will be accepted until April 8.

Do you think it makes sense to offer refinance options for student loans?

Article source: http://bucks.blogs.nytimes.com/2013/02/28/a-look-at-repayment-options-for-private-student-loans/?partner=rss&emc=rss

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You’re the Boss Blog: Is Obama’s QuickPay Initiative Beginning to Work?

February 28, 2013 by Leave a Comment
Searching for Capital

A broker assesses the small-business lending market.

If you had to pinpoint the most important financial issue confronting small businesses, what would you say? I suspect many would argue it’s that banks aren’t lending. For many small-business owners, however, I think the primary issue is that their customers are taking longer and longer to pay them, which creates tough cash-flow and working-capital problems.

President Obama took a stab at solving this problem in 2011. He issued an executive order requiring federal agencies to pay small-business suppliers of goods and services within 15 days of receiving a valid invoice, down from 30 days. Because the federal government awards nearly $100 billion in federal contracts to small businesses each year, the potential impact was huge. Initially, however, the program applied only to prime contractors. And critics pointed out that the payment window did not begin until an invoice was actually approved, which could add weeks or even months to the cycle.

Last July, the QuickPay program was revised to include subcontractors. It now holds all federal contractors to the 15-day standard, “with the understanding that those prime contractors will similarly accelerate payments to their small-business subcontractors.” The Office of Management and Budget encourages prime contractors to pay their subcontractors faster, to renegotiate existing contracts to this end and to negotiate all future contracts to this end. Presumably, the federal government will enforce its updated policy by prioritizing prime contractors that pass these quicker payments along to their subcontractors.

The good news is that we are starting to see results. For several months, I have been working with a client who is a defense contractor and is trying to get an asset-based loan secured by his receivables and inventory. As we were moving through the loan process and completing his audit, everything changed. The government began paying him faster than he had ever been paid before, and as a result, his receivables balance fell dramatically.

This actually created an unexpected problem in that he had planned to borrow against those receivables. But this is what I call a high-quality problem. We will solve it by taking out a loan against his equipment, and because his cash is turning over faster, his cost of financing will go down.

I hope that the QuickPay program will become a model for the private sector as well. Last year I spoke at a TedXNewWallStreet program about an idea for a 10-Day Pay Initiative where Fortune 1000 companies would treat their small-business suppliers the same way. Since we wouldn’t be able to require this by law, I suggested we turn to social media and good old-fashioned shame to get the job done. We would do this by creating a Web site where small-business owners could post their invoices as proof of slow payment. Then, as consumers, we could see how suppliers treat small businesses and pick the ones we want to support.

The reality is that if the government and Fortune 1000 companies pay their small-business suppliers faster, it won’t hurt the big companies, and it will open up opportunities for small businesses and entrepreneurs to grow and add jobs.

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

Article source: http://boss.blogs.nytimes.com/2013/02/28/is-obamas-quick-pay-initiative-beginning-to-work/?partner=rss&emc=rss

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Europe Union Agrees on Plan to Limit Bankers’ Bonuses

February 28, 2013 by Leave a Comment

BRUSSELS — The European Union took a big step Thursday toward putting strict limits on the bonuses paid to bankers, hoping to discourage the risk-taking behavior that set off the financial crisis.

If the measure, opposed by the British government, becomes European law, the coveted bonuses that many bankers receive would be capped at no more than equal to their annual salaries, starting next year. Only if a bank’s shareholders approved could a bonus be higher — and even then it would be limited to no more than double the salary.

The move, part of a package of banking regulations known as Basel III that is aimed at reducing the danger of big bank failures, was hailed Thursday by some European lawmakers.

‘’We’ve achieved the most comprehensive banking reform in the European Union,’’ said Othmar Karas, an Austrian member of the European Parliament who helped find a compromise in a late-night negotiating session with representative from E.U. member states and the European Commission.

A majority of the Union’s 27 member nations would need to approve the rules for them to take effect.

The agreement, which would also apply to those working at overseas offices of European banks, is a potential blow to Britain. Its economy partly relies on generous remuneration packages to ensure that the City of London remains the biggest financial center in Europe and serves as an overseas base for big banks from the United States and Asia.

‘’We need to make sure that regulation put in place in Brussels is flexible enough to allow those banks to continue competing and succeeding while being located in the U.K.,’’ David Cameron, the British prime minister, said Thursday while visiting Riga, the capital of Latvia.

Mr. Cameron said Britain would ‘’look carefully’’ at the final proposal before deciding how it would address the issue with other European governments.

The agreement on the proposed banking rules reflects the global backlash against the lavish compensation in the financial sector that many politicians say rewarded risky trading and investments that triggered the financial crisis. Voters in Switzerland, which is not an E.U. member, will go to the polls this weekend for a referendum that will decide whether shareholders should have more control over executive compensation.

The limits on bonuses would also apply to bankers employed by E.U. banks but working outside the bloc, in New York, for example. The E.U. authorities are drafting separate rules that could restrict remuneration at private equity firms and hedge funds.

‘’This legislation was resisted tooth and nail by the industry,’’ said Philippe Lamberts, a Belgian member of the Parliament’s Green bloc.

While the battle has often been portrayed as pitting Britain against the Continent, Mr. Lamberts said, the reality has been that ‘’many in Paris, as well as Frankfurt and Berlin, were not too happy’’ about what was happening in Parliament, but were glad to let Britain take the heat for leading the opposition.

The law is intended to reduce the financial incentives that led bankers to take risky bets, like those made on subprime housing debt in the United States during the credit bubble. But some critics of the legislation have warned that institutions might defeat the intent of the legislation by simply raising bankers’ base pay.

Mark Boleat, the policy chairman at the City of London Corp., which is the voice of London’s financial center, said Thursday that ‘’removing flexibility from pay arrangements in this highly cyclical industry would seem counterintuitive, especially if it leads to higher fixed salaries.’’

Some bankers said the rule posed the question of why the bonus cap would not apply to other industries where staff members stand to gain large bonuses. Stephen Hester, the chief executive of Royal Bank of Scotland, told BBC radio on Thursday morning that he did not think ‘’bankers should be treated as special creatures in any way.’’

David Jolly contributed reporting from Paris.

Article source: http://www.nytimes.com/2013/03/01/business/global/european-union-agrees-on-plan-to-cap-banker-bonuses.html?partner=rss&emc=rss

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