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Cyprus Makes Fitful Progress on Bank Bailout Deal

March 23, 2013 by Leave a Comment

Yet, with so many obstacles in the negotiations, the prospect of a default, and even a possible exit from the euro currency union, could not be ruled out.

After passing a portion of a revamped bailout agreement late Friday, the Cypriot Parliament on Saturday was still considering the rest of the package, including a tax of up to 25 percent on large, uninsured bank deposits. It was searching for an agreement before Sunday night, when euro zone finance ministers are scheduled to meet in Brussels.

Cyprus’s president, Nicos Anastasiades, was scheduled to fly to Brussels on Sunday.

All parties were working against a deadline imposed by the European Central Bank, which has said it will cut off crucial short-term financing to Cyprus’s teetering commercial banks on Monday if a bailout deal is not reached by then.

A crowd, estimated at around 2,000 people, marched toward Parliament in the early evening, far more than the hundreds who had gathered there to protest in recent days. Many were demonstrating against the imminent closure of Laiki Bank, which will cost thousands of jobs, as well as the government’s proposal to nationalize state-run pensions.

A cutoff of central bank financing and the absence of a bailout agreement could cause Cypriot banks to collapse. It could also lead to a disorderly default on the government’s debt, with unpredictable repercussions for the euro monetary union, despite the country’s tiny economy.

The central bank, the European Commission and the International Monetary Fund — the so-called troika of lenders — agreed last weekend to arrange a 10 billion euro loan, or $12.9 billion, for Cyprus if the country could come up with 5.8 billion euros of its own money. But the source of Cyprus’s contribution remains elusive. The original proposal, to impose a one-time tax on all bank deposits in the country, met with domestic outrage and international criticism, and Parliament rejected it on Tuesday.

Asked on Saturday whether Cyprus had a backup plan if a deal is not reached, a government spokesman, Christos Stylianides, said, “We are doomed to find a solution, or else everything is ruined.”

European Union leaders “may conclude that it is best to let Cyprus default, impose capital controls and leave the euro zone,” Nicolas Véron, a senior fellow at Bruegel in Brussels and a visiting fellow at the Peterson Institute for International Economics, said in a recent assessment. “But such a move would violate the promise of European leaders to ensure the integrity of the euro zone no matter what and potentially set off a chain reaction, including possible bank runs in other euro zone member states, starting with the most fragile ones, such as Slovenia and, of course, Greece.”

In a sign of how chaotic the process has become, even the timing of the meeting of the euro zone’s 17 finance ministers, known as the Eurogroup, was uncertain until Saturday afternoon, when the Dutch finance minister, Jeroen Dijsselbloem, who leads the group, said on his Twitter account that it would be held on Sunday at 6 p.m. in Brussels.

In Friday’s voting, members of the Cypriot Parliament agreed to restructure the nation’s largest and most troubled bank, Laiki Bank, by splitting off its troubled assets into a so-called bad bank. Accounts with no problems would be transferred to the nation’s largest financial institution, the Bank of Cyprus. Lawmakers also voted to require that any bank on the verge of bankruptcy be split in the same way.

They agreed to come up with a portion of the bailout money by nationalizing the pensions of state-owned Cypriot companies, even though Germany, whose political and financial clout dominates euro zone policy, has already indicated it opposes the move.

Parliament was still deciding whether to vote on Saturday or Sunday, ahead of the Eurogroup meeting, on a crucial new proposal that would skim 22 to 25 percent of bank deposits above 100,000 euros through a new tax on Laiki Bank account holders.

Another idea floated was to take at least 10 percent from uninsured deposits above 100,000 euros at all Cypriot banks.

The finance ministers and the troika on Saturday were still calculating how much money those deposit-tax alternatives would raise for the government.

“The good news is that banks were shut last week, and so depositors couldn’t cut up their money into smaller accounts to avoid any tax,” said one European Union official, who spoke on the condition of anonymity. “But it’s sure that depositors did do this before, so this needs to be assessed.”

At the insistence of the central bank, lawmakers also voted on Friday to impose capital controls to limit withdrawals and bank account closings once Cyprus’s banks reopen. The current plan is to reopen them on Tuesday morning, after a nine-day emergency holiday meant to prevent a classic run on the banks.

But without a bailout, the banks would probably be unable to open.

Earlier in the week, lawmakers rejected a previous deal brokered last weekend by President Anastasiades, the Eurogroup and the troika. “If it had been up to Anastasiades, then we’d already have an agreement,” said one European Union official, who spoke on the condition of anonymity because there may be talks with the Cypriot leader in Brussels this weekend.

The situation is “becoming critical,” the official warned, and “could end with an exit from the euro zone.”

Liz Alderman reported from Nicosia, Cyprus, and James Kanter from Brussels. Andreas Riris contributed reporting from Nicosia.

Article source: http://www.nytimes.com/2013/03/24/business/global/cyprus-makes-fitful-progress-on-bank-bailout-deal.html?partner=rss&emc=rss

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Snapchat, a Growing App, Lets You See It, Then You Don’t

February 8, 2013 by Leave a Comment

More than 60 million photos or messages are sent each day through an app called Snapchat and then, after they are viewed for a few seconds, the missives vanish. That disappearing act — and a volume that is over a tenth of the well-established Facebook’s — has made the tiny start-up a technology hit, amassing millions of users and the backing of some of the most respected names in Silicon Valley, even though it doesn’t make any money.

Because images sent through the application self-destruct seconds after they are opened, Snapchat is being embraced as an antidote to a world where nearly every feeling, celebration and life moment is captured to be shared, logged, liked, commented on, stored, searched and sold. For people who don’t want to worry about unflattering pictures or embarrassing status updates coming back to haunt them, the app’s appeal seems obvious. 

Many young people are growing tired of the polished profiles and the advertising come-ons of Facebook, recent surveys have shown. Moreover, young Facebook users are becoming acutely aware of the permanence of the content shared through the Web — and its repercussions later in life. As perceptions of social media change, other start-ups, including Wickr and Vidburn and Facebook’s own Poke, have recently released messaging and video products that self-destruct after a set period of time.

“It became clear how awful social media is,” said one of Snapchat’s founders, Evan Spiegel, 22. “There is real value in sharing moments that don’t live forever.”

The Snapchat service, which started two years ago but has steadily gained users, has been painted as a popular way for people, especially teenagers, to send naughty pictures. But Mr. Spiegel and his co-founder, Bobby Murphy, 24, say Snapchat is gaining traction for more than R-rated exchanges. Mr. Murphy describes the service “a digital version of passing notes in class.”

“You can’t build a business off sexting,” said Mr. Spiegel, using the term for sending racy pictures via text message chats. “It’s such a specific-use case. This is about much more than that.”

Sean Haufler, 21, a computer science major at Yale who uses Snapchat, said he thought it was “dumb” when his younger sister, a high school student, first told him about it. But he began to realize that it was a much more intimate way to communicate with friends. The emotional weight of the content is heavier, he said, because messages are direct and personal. Plus, he said, “the time limits make people more comfortable.”

“People are very self-aware when it comes to their Facebook profiles,” he said. “All the content is very manicured and curated, the best possible portrait of yourself.”

Facebook has certainly taken notice of the desire for impermanence, especially as Snapchat, according to Nielsen statistics, attracted 3.4 million users in December, more than twice as many as the month before. Mark Zuckerberg, the Facebook chief executive, met with the company in December, according to Snapchat’s founders. Shortly after, Facebook started a similar product called Poke.

It was, if nothing else, an endorsement of the idea that the short-lived might have lasting value. In an interview in East Palo Alto, Calif., Peter Deng, Facebook’s director of product management, said Poke was in line with the company’s strategy of experimenting. “The demand comes from real life,” he said. “People want something that is more lightweight than a message and less permanent.”

Snapchat operates far from the world of Silicon Valley in a beach house in Venice Beach. Nonetheless, the start-up has caught the eye of Silicon Valley financiers.

Scott D. Cook, the founder of Intuit and a prominent entrepreneur and investor, has taken the Snapchat founders under his wing, and the start-up recently raised $13.5 million in venture financing, led by Benchmark Capital, which values the company at $60 million to $70 million even without an established revenue stream.

Mitch Lasky, who led Benchmark’s cash infusion, said he first heard about the app from his 16-year-old daughter. “I started hearing Snapchat in the same context as Twitter, Instagram and Facebook,” he said. “That got me curious.”

His firm was aware of the company’s seedier reputation with sexting, but the partners “saw the bigger picture” for the company’s potential foothold in the world of social media.

“People are looking to communicate in a real way,” Mr. Lasky said. “The real self, as opposed to the projected self. That was the piece that resonated the most with me.” Some backers see the possibility of Snapchat making money by allowing advertisers to send coupons or fashion ideas.

Article source: http://www.nytimes.com/2013/02/09/technology/snapchat-a-growing-app-lets-you-see-it-then-you-dont.html?partner=rss&emc=rss

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Unemployment Deepens the Loss from Hurricane Sandy

December 28, 2012 by Leave a Comment

Not far away, the cash register at Fast Break, a local deli, is silent, its employees out of work. Next door, Browns Hardware will be shut until at least February.

The story is much the same throughout the region, where residents who lost their jobs as a result of Hurricane Sandy are streaming into career centers in New York and New Jersey, desperate for a paycheck.

“Here, it’s like anyone who didn’t lose his home lost his job,” said Juan Colon, 57, who worked at Madelaine for 26 years.

The devastating storm, which destroyed many businesses, left tens of thousands of New York and New Jersey residents unemployed. How long they will remain jobless is uncertain. In some cases, they may be able to resume their old jobs as their employers get back on their feet, assuming those businesses reopen.

The latest jobs reports from New York and New Jersey, for November, suggested the toll the storm took on the local labor force — New York State lost 29,100 private jobs, while New Jersey lost 8,100.

In the same month, New Jersey processed an unprecedented number of first-time claims for unemployment insurance: 138,661, surpassing the previous record of 83,518 established in December 2009, which came at the height of the recession. And in New York, 158,204 individuals filed initial claims for unemployment, nearing the record set in January 2009, also at the height of the recession.

The unemployment problem has eased a bit as “Grand Reopening” signs have popped up at mattress stores, gas stations and other businesses. And the number of people filing for unemployment for the first time has slowed significantly in recent weeks.

But there are still many people struggling to pay their bills, finding themselves out of a job at a time when the overall unemployment picture remains bleak.

“We were spared the storm, but not the repercussions,” said Hector Valle, 57, who lives on Staten Island. The hurricane left Mr. Valle’s home untouched, but dealt his family a mighty blow: His wife worked at Bellevue Hospital Center as a nurse’s assistant for the last 25 years. When the hurricane shuttered Bellevue, she was transferred to Woodhull Medical Center — a move that caused her to lose her overtime work, as well as part of her night differential pay.

The couple’s income fell to $1,400 a month from $2,200 a month.

“There’s nobody coming to my house to help,” said Mr. Valle, who has been unemployed for three years, “because they’re like, ‘You’re fine.’ We’re not fine.”

Those most affected are the people who already have trouble finding jobs: older workers, single parents with child-care concerns and immigrants who speak little English.

And the storm has further handicapped many of those looking for new work: Interview outfits lie moldy in Dumpsters; computers have been destroyed, résumé files gone forever. Many lack access to transportation. “There are a lot of barriers to employment, from no phone to no home,” said Thomas Munday, director of a city-run Workforce 1 Career Center on Staten Island.

When they do get jobs, many residents will face new, longer commutes, and fewer benefits.

At the Madelaine chocolate company this month, Jorge Farber, the president and chief executive, shuffled past ribbons of ruined Reese’s foil, wearing yellow rubber shoe covers slicked with slime. He intends to reopen, but could not estimate a date.

The company is the largest employer in the Rockaways, and normally pumps out 100,000 pounds of chocolate a day. It was started 64 years ago by two men fleeing the Holocaust, and about a quarter of its employees are Haitian immigrants. Many had family members who died in the 2010 Haitian earthquake.

Some of the laid-off employees have packaged chocolate here for decades. For them, Mr. Farber said, the company is a good provider: Line workers, many of whom do not speak English, make about $15 an hour, plus benefits. It would be difficult for them to find new jobs with the same salary and benefits.

Over nearly three decades, Mr. Colon rose to a supervisor position, earning about $900 a week.

When the storm left him without a job, he signed up for unemployment benefits. But he is getting only $325 a week, he said.

“I don’t know what I will do,” said Mr. Colon, who lives in a fourth-floor apartment in Far Rockaway with his wife, 22-year-old daughter and a grandchild. “Nobody can survive on $300.”

There is no telling when the company will be able to bring him back.

Some may find work related to hurricane recovery. New York State qualified for a federal grant that will allow it to hire 5,000 temporary cleanup workers for jobs that last about six months and pay $11 to $15 an hour. The city has already hired 788 people to fill some of those temporary jobs, according to Angie Kamath, deputy commissioner of work force development for the city’s Department of Small Business Services. And it will hire 400 more in the coming weeks, she said.

“We hope and expect that that number will continue to grow,” Ms. Kamath said. “The state has every intention to go after additional funding.”

The storm’s aftermath has also created private jobs. Areas hit by hurricanes almost always see a temporary boost in employment because of rebuilding activities, said Allison Plyer, chief demographer at the Greater New Orleans Community Data Center, which tracked employment after Hurricane Katrina. “There will be no doubt billions of dollars of private and flood insurance to rebuild homes and businesses,” she said.

But few of those jobs will last. Many will go to out-of-state contractors. And not everyone who is out of work can fill labor-intensive cleanup positions.

Ms. Plyer also cautioned against using the experience of Hurricane Katrina to predict what will happen after Hurricane Sandy.

After Hurricane Katrina, residential areas were destroyed, while New Orleans’s business district remained relatively intact. Businesses bounced back, but the housing stock and the area’s population did not, leaving employers seeking workers. “Unemployment rates sunk to their lowest level,” Ms. Plyer said, continuing: “All the McDonald’s were offering signing bonuses. You couldn’t find anyone to work for them.”

“Katrina entailed a massive population displacement that basically emptied out the city,” she added.

On Staten Island, unemployed residents inundated a city-operated career center in St. George after the storm. About 500 people showed up during two days to apply for 240 storm cleanup jobs. (Normally 350 individuals will seek employment assistance during a five-day week.)

Mr. Valle, who once worked as a customer service representative, waited outside the center hoping to land one of those cleanup jobs. He left when all the positions had been filled.

“That was like an audition for ‘American Idol,’ ” he said. “I have never been in line with 500, 600 people for a job in my life.”

His wife, he said, had been their support for the last three years. “Sandy just yanked that from under us,” he said.

Article source: http://www.nytimes.com/2012/12/28/nyregion/unemployment-deepens-the-loss-from-hurricane-sandy.html?partner=rss&emc=rss

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Grübel Resigns at UBS After Adoboli Rogue Trading Scandal

September 24, 2011 by Leave a Comment

The resignation was a dramatic fall for Mr. Grübel, who came to be known as “Saint Ossie” for reviving Credit Suisse, another Swiss banking giant, before he was hired out of retirement two and a half years ago to do the same at UBS.

Mr. Grübel decided that the $2.3 billion loss as a result of unauthorized trades by a midlevel employee had made it impossible to run a bank that has lurched from crisis to crisis in recent years and desperately needs to repair its reputation.

“I did not take the step of resigning lightly,” he wrote in an e-mail to staff on Saturday. “I am convinced that it is in the best interests of UBS to approach the future with a new leader.”

He also said the trading scandal had “worldwide repercussions, including political ones.”

The case has added to a global debate about whether there should be more stringent regulations for banks that are so big or interconnected — like UBS — that their problems can spread distress throughout the financial system. In 2008, for instance, UBS required a bailout from Swiss taxpayers after sustaining billions of dollars in losses.

UBS is one of Europe’s biggest banks, and the trading scandal provided another shock to a financial system that is already in a fragile state. European banks have been facing increasing difficulty maintaining the trust of investors and international lenders, making it difficult for them to raise the money they need to do business.

UBS reiterated on Saturday that it had enough capital to cover the trading loss not to seriously threaten the overall health of the bank.

If anything, the UBS episode strengthens the hand of regulators who have called for tighter regulation and insisted that Switzerland’s two biggest banks, UBS and Credit Suisse — whose combined assets are four times the size of the Swiss economy — be required to keep more capital in reserve than smaller banks.

The biggest banks, advocates of tighter regulation maintain, still do not have their risks under control and have not learned the lessons of the 2008 financial crisis.

The chairman of UBS, Kaspar Villiger, said the top priority for the bank was to overhaul its investment banking operation, which has been troubled for years. UBS plans to scale back the unit, which is run by Carsten Kengeter, by cutting parts of the business that require more capital, like credit.

UBS named Sergio P. Ermotti, head of Europe, the Middle East and Africa, as the interim chief executive.

The search for a new chief executive could take up to six months, Mr. Villiger said.

Initially, after a 31-year-old trader in the bank’s London office, Kweku M. Adoboli, was arrested on Sept. 15 and accused of making billions of dollars in unauthorized trades dating to 2008, Mr. Grübel seemed to hold out the possibility of staying at UBS.

“If you ask me whether I feel guilty, I would say no,” he told Der Sonntag, a Swiss newspaper, in the days after Mr. Adoboli’s arrest.

But when the board started one of its annual meetings in Singapore on Wednesday, he began to consider resigning. Mr. Villiger said that in a string of discussions and chats in the days that followed he tried to persuade Mr. Grübel to stay, but he added that Mr. Grübel ultimately felt that resigning was the right thing to do.

The board members then flew back to Zurich from Singapore and the decision to accept Mr. Grübel’s resignation was made on a conference call, Mr. Villiger said.

Mr. Grübel, 67, will not receive a severance payment and there is a six-month notice period, Mr. Villiger said.

During his tenure, Mr. Grübel managed to return UBS to profit by reversing client money outflows at its private banking business and by reducing costs by cutting thousands of jobs.

Julia Werdigier reported from London and Jack Ewing from Frankfurt, and Susanne Craig contributed reporting from New York.

Article source: http://www.nytimes.com/2011/09/25/business/ubs-chief-oswald-grubel-resigns-over-trading-scandal.html?partner=rss&emc=rss

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