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Treasury Nominee Weathers a Wave of Questioning

February 26, 2013 by Leave a Comment

As the Senate gears up to vote on the next Treasury secretary, President Obama’s choice for the job, Jacob J. Lew, has been forced to navigate through something of a political minefield.

As White House chief of staff and a former budget director, Mr. Lew has sought to show he has enough Wall Street experience to handle turbulent financial markets, but not enough to prevent him from reining in the powerful banking industry.

Mr. Lew, who is expected to win an initial nod from the Senate Finance Committee on Tuesday and sail on to approval in a full Senate vote, has battled a range of criticism, including questions about his lucrative tenure at Citigroup, a Cayman Islands investment and housing assistance he received as an administrator at New York University more than a decade ago.

To shore up his support, Mr. Lew has met privately in recent weeks with 41 senators and responded to 738 questions for the record. On Tuesday, he is scheduled to head to Capitol Hill for another meeting.

Much of the vitriol surrounding Mr. Lew’s nomination concerns the terms of his employment at Citigroup, which seemed to reward him for leaving the bank if he took a high-ranking position in government.

During Mr. Lew’s confirmation hearing, Senator Orrin Hatch, Republican of Utah, peppered Mr. Lew with questions about the terms of that contract, specifically challenging whether the contract violated the president’s efforts to “close the revolving door.”

Under the terms of Mr. Lew’s contract with Citi, he kept certain bonus compensation if he left for a “high level position with the United States government or regulatory body,” but not a competitor in the private sector, according to several people with direct knowledge of the contract.

Many of the most exacting questions have come from Senator Charles Grassley, Republican of Iowa, related to a money-losing investment in a fund based in the Cayman Islands.

Mr. Lew had a $56,000 investment in the Citigroup fund, leading to questions from Republican senators about whether the investment had been put there to dodge taxes.

At one point during the hearings, Senator Pat Roberts, Republican of Kansas, held up a huge picture of Ugland House, an office building in the Cayman Islands where thousands of companies, including Mr. Lew’s fund, have registered. The display struck a particularly discordant note because Mr. Obama has used the Ugland House as a symbol for tax havens in his first campaign for president.

“Well there’s a certain hypocrisy in what the president says about other taxpayers, and your appointment,” Mr. Grassley said during the hearing.

Mr. Lew responded by saying that he did not get any tax advantages because of the investment’s location and sold it for a loss.

Senator Grassley also pressed Mr. Lew for more details on hundreds of thousands of dollars in loans that New York University provided while he was an executive with the school.

“N.Y.U. provided the financing over a decade ago,” Mr. Lew wrote in a response to Senator Grassley’s follow-up questions, providing details on the dollar figures and construction of the financing. “During the intervening time period, I repaid the university and privately refinanced the mortgage on my home multiple times. I am still living in the same home today.”

Senator Grassley was not satisfied with Mr. Lew’s written responses, saying he still had concerns about the transparency of Mr. Lew’s compensation. “Mr. Lew has a lack of knowledge or a poor memory of some of the perks he received through his tenure at New York University and Citigroup,” the senator said in a statement. “Most people who receive a $1.4 million loan from their employer remember the terms.”

Privately, officials involved in the confirmation process called the spate of attacks on Mr. Lew politically motivated, arguing that the Cayman Islands criticisms are a direct reprisal for attacks leveled at Mitt Romney during the presidential campaign for his offshore bank accounts.

Much of the battle over Mr. Lew’s income and former status on Wall Street is inconsistent, the aides contended, pointing out that Republicans broadly backed Henry M. Paulson Jr., who left his position as chief executive of Goldman Sachs to become Treasury secretary in 2006.

This article has been revised to reflect the following correction:

Correction: February 25, 2013

An earlier version of this article incorrectly included one senator as a source of questioning about loans received by Jacob Lew while working at New York University. The questions came from Senator Charles Grassley alone; Senator Orrin Hatch did not join in raising them. The article also misstated when Mr. Lew worked on a Eugene McCarthy presidential campaign. It was while he was in grade school, not after he arrived in Washington.

Article source: http://www.nytimes.com/2013/02/26/business/economy/treasury-nominee-works-to-address-concerns.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Verizon Wireless Abandons $2 Fee After Consumer Outcry

December 31, 2011 by Leave a Comment

The consumer vitriol, which cascaded across Twitter and onto blogs and petitions all around the Web, struck a chord with a company that was clearly not expecting it.

“The company made the decision in response to customer feedback about the plan, which was designed to improve the efficiency of those transactions,” Verizon Wireless said in a statement referring to the reversal.

That a company with revenue of $15 billion in the most recent quarter would have to quickly change course over such a small fee suggests something particular about its business and others like it.

Similar to fee-bedeviled airline passengers with little choice on many nonstop flights, or bank customers who do not want to spend hours untangling automated payments so they can switch institutions, Verizon Wireless customers have limited options because they are locked into multiyear contracts. And they apparently did not like being told that it would cost money to pay money to the company.

The consumer outcry may also reflect the national mood — and some companies’ misreading of it, according to some analysts.

“I just think people are sick of being nickeled and dimed by big companies,” said Edgar Dworsky, founder of ConsumerWorld.org. “And it’s just baffling to me why a company like Verizon Wireless or Bank of America doesn’t do market testing on something like this first. It doesn’t take a genius to figure out that there is going to be a backlash.”

What was surprising about the Verizon Wireless rollback was how quickly it occurred. It took consumers about a month to persuade Bank of America to rescind its plan to charge a $5 monthly fee to people who used their debit card for purchases.

But with Verizon Wireless, the corporate change of heart took only a day, even though it is the week after Christmas when companies often drop bad news in the hope that fewer people are paying attention.

“The multiplication effect with things like Twitter is incredible,” said Ron Shevlin, senior analyst at the Aite Group in Boston. “And because of the national mood, it hits the boiling point really quickly.”

Verizon Wireless may also been have moved to change its mind when the Federal Communications Commission put out word earlier Friday that it thought the company’s actions merited closer scrutiny.

If the company had taken a different tack, it might have succeeded in convincing consumers that some kind of fee increase was necessary, Mr. Shevlin said.

“The easy thing would have been to be more explicit about what the costs were that were causing it to add this fee,” he said.

The company, for instance, might have explained how few people were going to pay the fee, which was supposed to be for one-time credit or debit card payments by phone or on the company’s Web site. It also could have explained how much higher the costs were, on a percentage basis, to accept payments in that way, versus regular, monthly credit card billing, which would have remained free.

Verizon Wireless declined a request for much of this information on Thursday and did not respond to follow-up requests on Friday.

Mr. Shevlin also said that Verizon Wireless, like Bank of America before it, said it was responding to customer feedback. But both companies seemed to have missed the opportunity to get accurate feedback before putting the fees in place.

“Why not post it on your Facebook page?” he said. “Maybe the feedback would have been just as bad, but then you’re seen as heroes for listening to feedback ahead of time. These firms are not reading the mood or living in the real world.”

Mr. Dworsky is on Verizon’s consumer advisory panel (and did not know about the fee ahead of time). But he said he chose to speak out about the move anyway, saying that he had a bigger concern about what the Wireless unit’s failed move portends.

“Who is going to try to tack on a fee next for using a credit card?” he said. “Is it the local grocery store? A department store? That is the bigger worry.”

Mr. Dworsky, a former assistant attorney general for consumer protection in Massachusetts, spent Friday morning reading credit card merchant agreements and various federal regulations in the hope that the proposed surcharge was actually against the rules.

“I’m glad this got killed in its infancy,” he said. “But I don’t think we’ve seen the end of it. Hopefully, the collective consumer voice will be able to change the next company’s planned fee.”

Article source: http://feeds.nytimes.com/click.phdo?i=219b22c410c33996130c38a714818d05

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British Premier, Cameron, Defends Veto on Europe Treaty

December 13, 2011 by Leave a Comment

As members of the Labour opposition shouted “Where’s Clegg?” — a reference to Deputy Prime Minister Nick Clegg, a Liberal Democrat, who, angry about the veto, was conspicuously absent from Parliament — Mr. Cameron, a Conservative, seemed at pains to offer soothing words to those afraid that he had so alienated his European allies that Britain was bound to leave the European Union altogether.

“Britain remains a full member of the E.U., and the events of the last week do nothing to change that,” Mr. Cameron said. “Our membership of the E.U. is vital to our national interest. We are a trading nation, and we need the single market for trade, investment and jobs.”

After vitriol poured out at Mr. Cameron over the weekend — from the Labour Party, from prominent Liberal Democrats in the coalition government, from European diplomats — Monday’s session was oddly anticlimactic. Buoyed by the compliments of anti-European backbenchers in the Conservative Party, who said they would have vetoed the treaty themselves if Mr. Cameron had signed it, the prime minister appeared relaxed and self-assured, exuding the easy confidence that is one of his strongest political assets.

He told Parliament, as he has said all along, that he exercised Britain’s veto because the proposed treaty changes, meant to avert future European economic disaster by strengthening fiscal discipline, gave no assurances to safeguard the future of London’s financial services industry, a critical part of the British economy.

“The choice was a treaty with the proper safeguards or no treaty,” he said. “The result was no treaty.”

Mr. Cameron’s veto left Britain standing alone in Europe. All the other 26 European Union countries either agreed to the proposals, which will be negotiated according to intergovernmental agreements, or said they would seek the approval of their parliaments back home.

Ed Miliband, leader of the Labour opposition, said Mr. Cameron had isolated Britain, a dangerous move at a time when European cooperation was essential. He also questioned Mr. Cameron’s purpose, given that the treaty changes seemed likely to go ahead anyway.

“It’s not a veto when the thing you wanted to stop goes ahead without you,” Mr. Miliband said, to shouts of approval from his fellow party members. “That’s called losing. That’s called being defeated. That’s called letting Britain down.”

Olli Rehn, the European commissioner for economic and monetary affairs, said Britain could hardly wall off its financial industry, the bustling City of London. “I regret very much that the United Kingdom was not willing to join the new fiscal compact, as much for the sake of Europe and its crisis response as for the sake of British citizens and their perspectives,” Mr. Rehn said. “We want a strong and constructive Britain in Europe, and we want Britain to be at the center of Europe, and not on the sidelines. If this move was intended to prevent bankers and financial corporations in the City from being regulated, that is not going to happen.”

Mr. Rehn also offered a reminder that Britain had approved “the six-pack of new rules tightening fiscal and economic surveillance” that goes into force on Tuesday. “The U.K.’s excessive deficit and debt will be the subject of surveillance like other member states,” he said, “even if the enforcement mechanism mostly applies to the euro area member states.”

There had been some worry that Mr. Cameron would face trouble from his own anti-European Union party members, including many who called over the weekend for the government to seize the opportunity to claw back powers from Brussels. But all was conviviality on Monday, with even the most hard-line Conservatives praising the prime minister. Although Mr. Cameron faced a few gentle questions about whether to hold a national referendum on Britain’s membership in the European Union, something the anti-Europe faction dearly wants, he batted them briskly away.

And the Liberal Democrats — at least those other than the missing Mr. Clegg — pulled back from their tough language over the weekend, mildly attacking Mr. Cameron while giving assurances that the important thing was to ensure a good relationship with Europe and to keep the coalition government together.

Reporting was contributed by Alan Cowell from London, Rick Gladstone from New York, Steven Erlanger from Paris, Nicholas Kulish from Berlin, and Stephen Castle from Brussels.

Article source: http://feeds.nytimes.com/click.phdo?i=d74557484a0e40cdd6ef3c19951c4fc3

Filed Under: Business News Tagged With: , ,