Europe Still at Odds Over the Workings of Its Bailout Fund

BRUSSELS — It has been referred to as “the bazooka” — the 500 billion euro European bailout fund that after much dispute will have its first board meeting on Monday.

Dreamed up two years ago by euro zone ministers and officials as a permanent weapon against any financial problems that might besiege the region, the $650 billion bazooka might eventually be aimed at Spain’s banking crisis. Or it could be wielded to scare off bond market speculators who might otherwise try to drive up the borrowing costs of beleaguered governments in Madrid or other euro zone capitals.

But as with many of the other improvised solutions to the euro zone’s problems, the bailout fund’s reality is less elegant than the theory behind it.

As euro zone finance ministers gather for their monthly meeting on Monday in Luxembourg, there is still considerable disagreement over how the fund — known officially as the European Stability Mechanism — will work and how effective it will be at raising money. There is no certainty, in other words, that the bazooka can be ready to fire in time to help countries like Spain that are already in the throes of crisis.

To begin with, the bazooka is being introduced with most of its financial ammunition not yet loaded. That is because the fund will be the euro zone’s first in which the initial money will be paid in by the 17 members of the European Union that are in the zone, rather than taking the form of government guarantees.

Each euro zone government will contribute start-up money in amounts roughly proportionate to the size of the country’s economy. But once they are all in by 2014, those contributions will total only 80 billion euros. The first installments, totaling 32 billion euros, are due this Thursday.

The bazooka is to achieve its full firepower of 500 billion euros by selling European Stability Mechanism bonds in the open market, with the government contributions serving chiefly as collateral. The 500 billion euros are then supposed to backstop euro zone governments by a variety of means, including providing loans, buying those countries’ bonds or providing precautionary lines of credit.

Euro zone member states have not yet agreed on the circumstances under which the fund will be used directly to prop up a country’s commercial banks — as Spain would like — to avoid piling even more debt onto national balance sheets. And until the fund starts selling bonds, there is no way of telling whether investors will buy them.

“Whether the E.S.M. will soon be in a position to lend to troubled sovereigns depends primarily upon market appetite for the vehicle’s bonds,” said Mujtaba Rahman, an analyst at the Eurasia Group. “This is the biggest unknown.”

Inaugurating the fund is not the only thing the euro zone finance ministers, who constitute the fund’s board of governors, will have on their agenda Monday, when they are expected to name Jean-Claude Juncker, Luxembourg’s prime minister, as chairman. They will also be grappling with other pressing euro zone business.

But it is the success, or its lack, of the rescue fund that could have the most lasting impact on the euro zone.

Markets rallied last month after the Federal Constitutional Court in Karlsruhe, Germany, cleared the way for German participation in the fund by ruling that such involvement would not conflict with national law. But the fact that the matter reached Germany’s highest court indicated the deep dissension in the country about the fund. Many Germans are already wary of paying to prop up countries like Greece and regard the rescue fund as a first step toward the common sharing of debt among euro zone members.

More recently, finance ministers from Germany, Finland and the Netherlands set off new alarms about the fund when they issued a statement proposing that any bank bailouts from it go only toward future problems — not to help clean up current messes. If that proposal gains traction, it could cast doubt on the terms of a bank bailout for Spain, which is expected soon to seek 40 billion euros in rescue loans for its most troubled banks.

“You can’t have these three countries bringing this confusion,” a European diplomat said Friday, speaking on condition of anonymity because talks on how the fund should operate were still going on. The rules “should be settled,” the diplomat said.

But getting any clarity this week seems unlikely.

Using the bazooka to shoot money directly into banks was part of a grand bargain struck in June, when euro area leaders agreed to subject their banks to more robust supervision led by the European Central Bank. Yet that part of the deal now threatens to come apart, too, because France and Germany are deeply divided over how many banks the central bank should oversee.

Even if direct assistance to banks becomes possible in the future and is made the bazooka’s primary function in attacking problems in countries like Spain, Ireland and Cyprus, analysts have cautioned that more money will be needed from the contributing governments.

That would be an unwelcome prospect in fiscally conservative northern countries like Finland, Germany and the Netherlands, where electorates have grown concerned about the cost of bailouts.

Another role for the fund is that of a buyer of government bonds, which would complement the program recently announced by the European Central Bank. The program is aimed at intervening in the bond markets to help hold down a government’s borrowing costs. In turn, that country would need to adhere to strictly monitored budgetary discipline.

At the meeting on Monday, the Spanish finance minister, Luis de Guindos, is expected to discuss additional budget-tightening measures recently announced by his government — which Spanish and some European officials hope can make the country deemed worthy of a bond-buying program. But Prime Minister Mariano Rajoy of Spain is unlikely to make any formal requests for assistance until after regional elections in Galicia, on Oct. 21, to avoid voter hostility associated with international lending programs.

Source & Image : New York Times

To Regulate Rapid Traders, S.E.C. Turns to One of Them

RED BANK, N.J. — As billions of shares course through the stock market each day, investors rely on the government to keep up with Wall Street’s rapid-fire traders.

But in an acknowledgment that the Securities and Exchange Commission has fallen behind the firms it regulates, the agency is turning to one of those high-frequency traders for help.

Tradeworx, a 45-person firm based in New Jersey, will dispatch its experts to Washington this month to tutor regulators on a sophisticated computer program that will give the S.E.C. its first real-time window into the stock market — something firms like Tradeworx have had for years. The S.E.C. program, designed by Tradeworx, is set to go into operation at the end of this year.

The program, called “Midas” by the S.E.C., is part of a broader effort at the agency to monitor the proliferation of new technologies and to crack down on practices that have given sophisticated traders an advantage over ordinary investors. The agency recently hosted public meetings on computerized trading to examine some of the recent failures in the market, like the malfunction at Knight Capital that wreaked havoc on stock prices in August. Last week, the Nasdaq exchange had to cancel errant trades after a technical problem caused shares of Kraft to soar.

The S.E.C.’s rudimentary technology has hobbled its ability to untangle these events and police the automated trading firms. With the Tradeworx program, the agency will gain access to every bid to buy stocks and every offer to sell shares on each of the nation’s 13 public exchanges. The system, akin to an X-ray machine for the stock market, could enable regulators to detect whether trading firms are overwhelming the market’s plumbing when they rapidly submit and cancel orders.

“The average person on the street thinks that the S.E.C. has these massive computers that all orders are going through,” said Gregg Berman, the agency official leading the effort. “That has not been the case, but we hope to now have that with this new system.”

Some industry experts have said that the Tradeworx program is the quickest and, at a cost of $2.5 million this year, the cheapest way for the agency to catch up with the high-speed trading industry, which has gone from being a niche player a decade ago to being responsible for more than half of all trading in American stocks today. But the initiative raises a new set of questions about whether the industry is the best source for unbiased information about the markets.

David Lauer, a former employee of other high-speed trading firms, wrote in recent testimony to a Senate subcommittee that the Tradeworx program was “reminiscent of the fox guarding the hen house.”

“You don’t rely on the subject of your study to build the device you are going to be studying them with,” Mr. Lauer said in an interview after the hearing.

The S.E.C. said it sought out other bids and even considered building its own database, an effort that would have taken several years and cost millions of dollars more than the Tradeworx project. Mr. Berman added that the agency looked to Tradeworx only for data feeds that were the same no matter who provided them.

The chief executive of Tradeworx, Manoj Narang, argued that if he sold bogus data to the government, it would be obvious. More important, he said, the S.E.C. has few alternatives.

“Where else are they going to be able to get these capabilities?” Mr. Narang said. “They are not available from anywhere other than high-speed trading firms. We’re the only ones who possess it.”

Today, the S.E.C. relies on the official trading record, known as the consolidated tape, which includes the price of every trade executed on any of the nation’s stock exchanges. Most sophisticated trading firms bypass the official record by buying data directly from the exchanges. The firms compile a full record milliseconds before the consolidated tape is assembled and obtain a wider range of information, including orders that are submitted but never executed.

Mr. Berman said that data from Tradeworx would be used throughout the S.E.C., from the enforcement division looking to catch wrongdoing to the division of trading and markets that keeps daily watch over the markets. The data could allow the S.E.C. to analyze claims that some firms take advantage of their faster data feeds to jump in front of slower traders, and complaints that sophisticated traders can jam the system with so many orders that it slows down trading for others.

Mr. Berman, a former hedge fund co-manager and nuclear physicist, led the agency’s examination of the flash crash of 2010, when the Dow Jones Industrial Average plunged 5 percent in five minutes and then mostly recovered. He is now leading the broader effort to bring the S.E.C. into the modern world of trading. As the agency falls farther behind, he is helping to build a new Office of Research and Analytics, which is looking to hire people with experience on Wall Street and in computer programming. The agency is also moving closer to creating a so-called consolidated audit trail, which will allow regulators to see the identity of the firm behind every trade.

But any future efforts depend on the S.E.C. having access to the sort of basic data that Tradeworx will provide.

Source & Image : New York Times

Taming Volatile Raw Data for Jobs Reports

7:32 p.m. | Updated

CATHERINE RAMPELL

Dollars to doughnuts.

The unemployment rate fell to 7.8 percent in September, its lowest level since President Obama took office. With just a month to go before the election, the news seemed too good to be true, at least for some Mitt Romney supporters.

Almost immediately some conservative pundits began accusing the Labor Department, which released the jobs numbers on Friday, of cooking the books. After all, the household survey — the survey that the unemployment rate comes from — showed that the number of people with jobs rose 873,000 in September, though the gain had averaged 164,000 each month earlier this year.

These numbers are always tremendously volatile, but the reasons are statistical, not political. The numbers come from a tiny survey with a margin of error of 400,000. Every month there are wild swings, and no one takes them at face value. The swings usually attract less attention, though, because the political stakes are usually lower.

Look how noisy these numbers are, and always have been!

The numbers, by the way, are especially imprecise (and prone to revision) when the economy is making a turn, or when regular seasonal patterns start to change. And there is reason to believe that one particular seasonal pattern — the start of the college school year — may be partly responsible for the big swing in September.

One of the biggest sources of volatility in the last couple of months (and one of the major contributors to the big bump in job-getters in September) was the group of workers between 20 and 24 years old.

Historically, the employment levels for that group have dropped sharply in September, probably because many people in their early 20s are leaving summer jobs and going back to school.

For each year since 1948, the average level of employment for this group has fallen by 398,000 from August to September. In fact, before this year, employment for this age group had risen just two times in that period: 1954 (a gain of 5,000), and 1961 (a gain of 22,000).

This year was the third time on record that the number of people in this age group gained jobs in September, and the gain was big: 101,000.

Source: Bureau of Labor Statistics. Numbers are not adjusted for seasonality.

How to explain this major deviation from the historical trend, other than conspiracy theories?

If you look back at August, an unusually high share of this age group stopped working, compared with past employment patterns in August. From 1948 to 2011, the number of those 20 to 24 who had jobs fell by an average of 98,000 from July to August. This past August, it fell by 530,000, the biggest loss on record.

Over the last couple of decades, in fact, the job losses for this age group have been growing each August, suggesting that over time young people have been leaving their summer jobs earlier and earlier.

Source: Bureau of Labor Statistics. Numbers are not adjusted for seasonality.

In other words, seasonal patterns might be evolving — people starting school and leaving their summer jobs earlier in the summer — which has big implications for how the Labor Department digests and reports the monthly employment data.

The Bureau of Labor Statistics adjusts its raw survey data to correct for seasonal patterns, and since a decline in employment is expected for those 20 to 24, the economists at the bureau increased the level of employment for this group in the seasonally adjusted numbers.

Changes in seasonal patterns like this one can introduce more error into the headline numbers, and can at least partly explain why the overall change in household employment looked so much bigger in September than seems plausible. After seasonal adjustment, the increase in employment among those 20 to 24 was given as 368,000. That’s about 42 percent of the overall increase in employment growth for people of all ages. (After making seasonal adjustments on the August figures, the employment level for 20- to 24-year-olds was reported as declining by 250,000.)

All of which is to say the bureau aims to release the most informative numbers it can. But it is seeking to measure the state of the American job market quickly, based on surveys that are inherently incomplete — and the adjustments that are meant to fill in the gaps have their own shortcomings, particularly when seasonal trends change.

In case you still believe that the models the bureau uses are being manipulated to put President Obama in a better light, note that there are no political appointees currently serving in the Bureau of Labor Statistics. The employees are all career civil servants who have worked under both Republican and Democratic administrations. (The commissioner of the bureau is supposed to be a political appointee, but that position is vacant. The acting commissioner, John M. Galvin, has held the position since January, and he is a career civil servant.)

Economists at the Bureau of Labor Statistics regularly adjust the models they use to account for factors like seasonality and the number of new companies entering the economy, and the revisions are often very large.

Economists outside the bureau have been weighing in, too, both on how the latest numbers should be adjusted and what the next few months of jobs reports should look like. A paper presented last month as part of the Brookings Papers on Economic Activity series, for example, incorporated data on people flowing into and out of unemployment to forecast that the unemployment rate would most likely stagnate for a few months to come.

A version of this article appeared in print on 10/06/2012, on page B1 of the NewYork edition with the headline: Taming Volatile Raw Data for Jobs Reports.

Source & Image : New York Times

Ways to Play a Recovery in Housing

WALL STREET prides itself on seeing things before they are broadly apparent. But, sometimes, even the shrewdest investors get ahead of themselves. The stock market, the old joke goes, has predicted nine of the last five recessions.

Today, Wall Street seems highly confident that housing is on a clear path to recovery. Homebuilder stocks have been some of the strongest market performers all year.

“It does appear we’ve turned the corner and a housing recovery is under way,” said Bradley B. Thomas, an analyst at KeyBanc Capital Markets, who looks to the combination of new-home and existing-home sales. In August, sales in both categories improved over the same month the previous year. It was the 14th consecutive month when the combined total showed year-over-year gains, Mr. Thomas says.

“We continue to expect recovery over the next three to five years, if not five to 10 years,” he projects.

But in some ways, the housing situation is still murky. Yes, sales of new and existing homes, along with prices in many areas, have been rising. But, as Mr. Thomas points out, new home construction in August still remained 49 percent below the average monthly level for the last 30 years. And despite the Fed’s persistent push to lower mortgage rates, credit remains tight. A large inventory of likely foreclosures continues to hang over the market.

None of this has damped the animal spirits propelling shares of homebuilders like Toll Brothers — which climbed from just over $20 at the beginning of the year to $33.25 at the end of the third quarter. And the Pulte Group, a $6 stock late last year, more than doubled. So have the homebuilder stocks come too far, too fast? Has the easy money already been made? Are there better ways to play a developing recovery?

Donald W. Hodges, a manager of the Hodges Pure Contrarian fund, has ridden the homebuilder surge through his large position in Pulte, which represents over 8 percent of his portfolio. Mr. Hodges says he picked up the Pulte shares, which traded at $15.50 on Sept. 30, at an average cost of about $7.80. He says he believes that the shares could go sideways for a while but that he likes them for further gains over the long haul.

“If a person were a trader — which I’m not — he might trade out,” Mr. Hodges says. But he says he thinks the housing recovery has just begun and should support further long-term gains for homebuilders like Pulte.

“I think it’s still early in the game,” he says. And he sees large homebuilders picking up market share as smaller ones keep dropping off. “The small guy just doesn’t have the staying power,” he says. “I think the business will end up more and more in the hands of the bigger companies.”

One fund manager who has been lightening up on large homebuilder positions is Jerome Dodson. He is sole portfolio manager of the Parnassus Fund and lead portfolio manager of the Parnassus Small-Cap fund. In recent months, Mr. Dodson has reduced his homebuilder positions by roughly half. Parnassus Small Cap has sold 600,000 shares of Pulte and 100,000 shares of Toll Brothers, and the Parnassus Fund has sold 550,000 shares of Pulte, 250,000 shares of D. R. Horton and 100,000 shares of Toll Brothers.

The funds trimmed positions, he explains, because homebuilders had reached target prices. Parnassus bases share-price targets on such valuation metrics as price-to-earnings, price-to-sales and price-to-book-value ratios.

Though Mr. Dodson has scaled back his bets, the two Parnassus funds are still banking on further housing gains. Before the sales, Pulte, D. R. Horton and Toll Brothers shares comprised roughly 15 percent of the Parnassus Fund portfolio. Even after the heavy selling, they comprised 7.4 percent as of Aug. 31.

Such large positions are justified, he says, because target prices may be raised as the housing recovery gains momentum. And he thinks it will. “We’re early in the recovery — very early,” he says.

Mr. Dodson explains how a homebuilder like Pulte, which exceeded its original target price, could still move higher. He estimates that Pulte will earn 50 cents a share in 2012. That would mean a rich P/E ratio of 31, more than Pulte would normally command. But he says he believes Pulte could eventually earn much more.

“In my view, they could earn $1 to $1.50,” he explained. This would be possible, he reasons, even without a revival of the unsustainably loose credit conditions that produced the housing bubble.

Source & Image : New York Times

Foxconn Denies Report of Unrest at iPhone Factory

BEIJING (AP) — Foxconn Technology Group denied on Saturday that production was affected at a Chinese factory that makes Apple’s iPhones, although both state media and an overseas labor watch group said some workers halted production lines on Friday, apparently over higher quality control standards.

China Labor Watch, based in New York, reported that 3,000 to 4,000 workers at the Foxconn plant in Zhengzhou in central China went on strike Friday over increased quality control demands and having to work during an extended national holiday.

The state news agency Xinhua, quoting a spokesman for the management committee of the Xinzheng Comprehensive Bonded Area where the plant is, said some production lines were halted Friday when workers persuaded quality inspectors to skip work to show dissatisfaction over higher quality standards.

In a statement on Saturday, Foxconn, which is based in Taiwan, said production at the Zhengzhou plant continued without interruption. It denied any strike or work stoppage.

Foxconn said there were two isolated, small-scale disputes between production line workers and quality assurance personnel on Monday and Tuesday.

Xinhua said some workers were unhappy when Apple strengthened quality inspections of the iPhone 5 after consumer complaints regarding aesthetic flaws in the phone. In the Xinhua report, the spokesman was unable to provide a specific number of workers involved.

Source & Image : New York Times

California Struggles With High Gas Prices

Drivers in Southern California awoke Friday to find that their gasoline prices had spiked by nearly 20 cents a gallon overnight as a result of fuel shortages caused by a series of refinery disruptions in recent weeks.

Some gas stations around the Los Angeles area were forced to shut off their pumps because of rationing by suppliers, and they displayed makeshift signs explaining that the shortages were not their fault. Drivers formed long lines at stations that did have gas, with some stations raising prices to more than $5 a gallon for regular gasoline.

“What are they doing to us?” said Marilyn Tucker, a FedEx employee, as she stopped pumping at a central Los Angeles gas station at $37, well before the tank of her sedan was full. “It’s just ridiculous.”

Prices had been rising for several days, making California the most expensive state for gasoline. On Friday, Californians paid an average of $4.49 a gallon for regular — 70 cents above the national average. Nationally, gas prices have risen less than half a penny a gallon over the last week, with prices now easing in many states.

Supplies of refined petroleum products on the West Coast are now at their lowest levels since 2008, while national inventories are about normal.

The immediate cause of the California price rise was a power failure at Exxon Mobil’s Torrance, Calif., refinery on Monday that shut down some production units at the 150,000-barrel-a-day facility. The company on Friday said the refinery had resumed normal operations. Supplies on the West Coast had already been tight because of an Aug. 6 fire at Chevron’s 245,000-barrel-a-day Richmond, Calif., refinery, which has still not been restored to full production.

California typically has substantially higher gasoline prices than most of the country because of its tough environmental regulations and high taxes. Gasoline supplies are traditionally tight this time of year as refiners do maintenance work to switch from summer to fall gasoline blends mandated by the California pollution-reduction regulations. But this year, energy experts say, the local gasoline market is particularly chaotic because of the refinery shutdowns.

Refining experts said the rationing and exceedingly high prices would probably last a couple of weeks at the most. Tom Kloza, chief oil analyst at the Oil Price Information Service, said California customers might get some relief in the next few days because traders were suddenly lowering the prices of their bulk sales almost as fast as they were raising them over the last few days. He said the wholesale price for gasoline on the West Coast dropped 50 cents on Friday from a high of $4.25 a gallon.

“The prices are incredibly erratic,” Mr. Kloza said. “It’s gone from incredibly excessive pricing to just plain excessive.”

In Southern California, Costco Wholesale outlets and other unbranded stations were particularly hard hit by the shortages because refineries normally supply their branded customers first because they pay a higher premium for locking in guaranteed supplies. Valero Energy, along with other refiners, temporarily halted spot sales of gasoline to some of its California customers.

“California requires a specific blend of gasoline that only the refineries on the West Coast make,” said Bill Day, a spokesman for Valero. “So when there is a shortage of that blend, you can’t just send supplies from somewhere else.”

Gasoline prices largely depend on the price of crude oil. Global oil prices have eased somewhat since the beginning of the year, despite turmoil in the Middle East and sanctions on Iran. The easing is attributed to slowing economic activity around the world and increased supplies coming from several countries including Iraq, Libya, Saudi Arabia and the United States.

Across the country, gas prices remain high. The $3.79 average price for a gallon of regular is 39 cents higher than it was a year ago, although the price has come down 3 cents over the last month.

Nationally, Mr. Kloza said, the price of a regular gallon of gasoline should ease to about $3.50 between now and December, which would put prices fairly similar to a year ago.

High gasoline prices have frequently been a political issue, but President Obama may get a break this year because several swing states like Florida, Ohio, Virginia, North Carolina, Nevada and New Hampshire have gasoline prices that are relatively low compared with the national average.

On Friday, in central Los Angeles, motorists expressed a combination of frustration, resignation and anger.

“I’m not happy about it,” said Michael Eisenhower, 52, a television costume designer, as he stared at the digits rising to nearly $40 to fill up his sport utility vehicle. He stopped short of topping off as he complained that his wages were not rising as fast as the price of gas.

“I’ve been putting in a reasonable amount of gas, enough for two days or so,” he said. “It’s my way of budgeting what I have to work with each week.”

Source & Image : New York Times

G.M.A.’s Sam Champion to Wed Rubem Robierb

Sam Champion, the weather anchor of ABC’s “Good Morning America,” said Friday that he planned to marry his fiancé, Rubem Robierb, at the end of the year.

Mr. Champion first mentioned his plans in a New York Times story about another couple’s wedding. It marked his first public statement about his sexuality.

Mr. Champion is the first co-host of a network morning television show to publicly identify as gay. He is expected to talk about his upcoming wedding on Monday’s “G.M.A.”

In a statement on ABCNews.com, Mr. Champion said Friday, “We are thrilled and so excited and thank everyone for their good wishes.”

The acknowledgment of Mr. Champion’s sexual orientation came a few months after Anderson Cooper, the CNN host, went public with his sexual orientation through an e-mail message to the blogger Andrew Sullivan. A number of other public figures have gone public with their relationships this year in seemingly casual ways, reflecting (and perhaps accelerating) public acceptance of gays and lesbians.

Mr. Champion’s sexual orientation was no secret to the staff of “G.M.A.,” nor to his colleagues and competitors in the media industry. He exuberantly showed off his engagement ring to colleagues the day after becoming engaged and brought Mr. Robierb to parties with fellow co-hosts. But he didn’t speak publicly about it.

That changed last weekend when Mr. Champion and Mr. Robierb attended the wedding of Thomas Roberts, an MSNBC anchor who is also gay. Jacob Bernstein wrote the following in a Sunday Styles section article about the wedding, published online on Friday afternoon:

Among the 170 or so guests at the reception was Sam Champion, the weather anchor at ABC’s “Good Morning America.” He took a turn on the dance floor with his partner, the photographer Rubem Robierb.

“We’re getting married New Year’s Eve in Miami,” Mr. Champion said in the spirit of the moment.

Mr. Robierb corrected him: “We’ll do it here officially, and then have a party in Miami.”

ABC followed up with a short story on its own Web site.

Source & Image : New York Times

Pig Farmers Face Pressure on the Size of the Sty

ELDRIDGE, Iowa — Sow 44733 had broken the shoulder of one of her pen mates, rousted another who was huddled in the corner and was chewing on the ear of a third.

Other sows in the pen sported abrasions, torn ears and bloody tail stumps — all souvenirs of her attentions.

It was that kind of behavior that led hog farmers like Tom Dittmer to isolate sows in individual stalls called gestation crates that are barely bigger than the pigs themselves.

“The reason the industry switched to crates wasn’t because we wanted to harm our animals,” Mr. Dittmer said. “We did it because we thought it was what was best for the animals.” The move also kept the price of pork reasonably low for consumers, he said.

This year, however, Mr. Dittmer and fellow hog farmers are under increasing pressure from corporate pork buyers and animal rights groups to return to the old way of doing things: putting sows in group housing. In the last week of September alone, three companies — Dunkin’ Donuts, ConAgra Foods and Brinker International, which operates Chili’s — announced that over the next decade, they would no longer buy pork derived from pigs housed in gestation crates.

This week, the Bruegger’s bagel chain joined them. That brought the number of fast-food companies and food retailers that have made such commitments this year to 32 — a stunning victory for the Humane Society of the United States, which has worked for years to persuade pork producers to make the change. The National Pork Producers Council said it did not know how much pork these companies bought but estimated it might be about one-fifth of the pork produced.

Farmers like Mr. Dittmer resent the tactics, saying they worry that the move will be unsustainably costly for them and result in soaring pork prices for consumers.

“What I don’t like is some big restaurant chain in Chicago that knows nothing about raising animals is telling us how to raise pigs,” said Glen Keppy, a retired pig farmer whose sons finish raising Mr. Dittmer’s pigs for market, referring to McDonald’s, which promised in February to stop buying pork from pigs born in gestation crates. “Would they tell Microsoft how to make computers?”

Research is mixed about which type of housing is best for the animals’ welfare, according to a review done by a task force convened by the American Veterinary Medical Association. But the Humane Society and other animal advocates maintain that housing sows in gestation crates is cruel.

Earlier efforts to convert the pork industry have had mixed success. Cargill, the nation’s third-largest pork processor, owns about one-quarter of the sows that produce pigs for the company and began putting them in larger group pens about a decade ago. Smithfield Foods recommitted to transitioning to pens last year, after first promising it would do so in 2007 and then changing its mind. Tyson Foods and JBS, the two other large processors, have refused to budge.

So the Humane Society — armed with graphic videos of workers abusing dead piglets and of sows in gestation crates so small they cannot turn around, suffering from shoulder lesions and nervous disorders — took its case to the big consumer brands. It accomplished in months what it had been unable to achieve in years of prodding the major processors.

But now some of the independent farmers who supply those processors are fighting back.

Pat Hord and his family have put windows in some of their barns in north central Ohio to let visitors see for themselves how their 18,000 sows fare.

“There is a lot of misunderstanding and misinformation about what we do and how pigs get bred in crates,” Mr. Hord said. “It’s not anyone’s fault. It’s just that no one is on the farm anymore.”

Mr. Dittmer recently invited a reporter for a tour of Grandview Farm, which was founded by his great-grandfather in 1917 and is now home to 6,000 sows that he often calls “my girls.”

“I’m nervous about this, I have to say,” Mr. Dittmer said as he began the tour. “I’m afraid of becoming a target for the animal rights people. But if I’m going to hand this on to the next generation, which is the plan, I feel like people need to understand why we do things this way.”

When Mr. Dittmer began farming with his father in the 1970s, he said, their 150 sows lived in pastures like most pigs at the time, taking shelter under individual huts in the glaring heat of summer and wintering in barns.

Source & Image : New York Times

From Jack Welch, a Conspiracy Theory

9:50 a.m. | Updated

Well, that didn’t take long. Just a few minutes after the jobs report for September was released, showing a drop in the unemployment rate, conspiracy theories began flying around Twitter that the Obama administration had manipulated the data or strong-armed the Bureau of Labor Statistics in some way. Even Jack Welch, the former chief executive of General Electric, chimed in:

Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers

— Jack Welch (@jack_welch) 5 Oct 12

The response to Mr. Welch was just as swift, and as harsh:

I cannot believe a serious person like Jack Welch is suggesting BLS cooked these numbers. Disgraceful.

— Ben White (@morningmoneyben) 5 Oct 12

BTW Isn’t Jack Welch about the last person on earth who shd talk about organizations manipulating numbers to impress markets?

— davidfrum (@davidfrum) 5 Oct 12

love ya jack but here you’ve lost your mind @jack_welch Unbelievable jobs #s. the Chicago guys will do anything..can’t debate, change #s

— Austan Goolsbee (@Austan_Goolsbee) 5 Oct 12

The labor secretary, Hilda L. Solis, also responded to Mr. Welch’s comment in an appearance on CNBC. “It’s really ludicrous to hear that kind of statement,” she said. “We have to look at across the board, not just one month.”

Ms. Solis added: “I have the highest regard for our professionals that do the calculus.”

Source & Image : New York Times

With Banks Skittish, Europe’s Private Equity Firms Look Elsewhere

Bill RobinsonMatthew Sabben-Clare, a partner at the London-based private equity firm Cinven.

LONDON — As the sovereign debt crisis has slammed Europe, Cinven has had to get creative to finance buyouts.

When the London-based private equity firm wanted to buy CPA Global this year for $1.5 billion, Cinven looked beyond banks, the usual source of money. Along with debt from HSBC and JPMorgan Chase, it secured almost $200 million of higher-interest loans from nontraditional lenders. It also had to spend roughly $600 million of its own cash.

“The debt markets have been challenging since 2007,” said Matthew Sabben-Clare, a partner at Cinven. “There’s a degree of selectivity by the banks over geographies and certain industries. Banks are more regionally focused than before.”

Europe’s financial woes are forcing private equity firms like Cinven to revise their deal-making playbooks.

As banks pull back, private equity firms are increasingly turning to high-yield bonds, mezzanine loans and other types of debt that carry higher interest rates. Some are appealing directly to institutional investors like pensions and sovereign wealth funds to finance specific deals.

Sebastian Derungs/Agence France-Presse — Getty ImagesApax, a private equity firm, issued almost $1 billion of high yield bonds to acquire Orange Switzerland.

Given the tight credit, most firms are having to put up more capital to get deals done. Cash now accounts for more than 50 percent of the average European buyout, according to the data provider S.&.P. Capital I.Q. Five years ago, that number was 33 percent. In the United States, cash represents 38 percent of the average buyout, mainly because firms have access to a variety of financing options, like capital markets.

Private equity firms “are having to widen the net to find the loan financing they need,” said Kristian Orssten, head of European high-yield and loan capital markets at JPMorgan Chase in London. “Many lenders in Europe are getting to grips with their own funding challenges.”

The financing troubles for buyouts are reflected in the weak deal-making environment.

Although firms are raising money to buy distressed assets in Europe, many have remained on the sidelines as the debt crisis continues. So far this year, European acquisitions by private equity firms have totaled $23.2 billion, a 38 percent decline from the same period in 2011, according to Thomson Reuters.

Firms have pulled some deals altogether, fearing that asset prices could fall even further. After months of negotiations, Blackstone and BC Partners dropped their $3.2 billion bid for the frozen-food company Iglo after failing to come to terms with its private equity owner, Permira, according to people with direct knowledge of the matter who declined to speak publicly.

In  good times, European buyout firms relied heavily on cheap bank lending. Flush with cash, the Continent’s financial institutions provided almost 80 percent of financing on deals, often keeping the debt on their own balance sheets instead of selling it off to other investors.

But as the debt crisis worsened, banks curbed their lending in an effort to meet stricter capital requirements, which penalize firms for holding risky investments like debt connected to private equity deals. Firms like Deutsche Bank and Royal Bank of Scotland have sold loans at a discount to other investors to shed unwanted assets.

Even when banks are willing to finance deals, they are limiting their bets. Local banks are focusing mostly on deals in their home countries, and they are often willing to finance only a portion of the buyouts.

As a result, private equity firms are often tapping multiple lenders, even when the costs of a buyout are less than $1 billion. To finance its £465 million ($749 million) acquisition of the British company Mercury Pharma, Cinven capitalized on its 20-year relationships with certain banks, securing £235 million of financing from a consortium of firms, including Lloyds Banking Group.

With banks being selective, private equity firms have had to tap other markets.

High-yield debt investors, in search of better yields, have been receptive. The European private equity firm Apax issued almost $1 billion of high-yield bonds in February as part of its $2.1 billion acquisition of the telecommunications company Orange Switzerland. Intelsat, one of the world’s largest satellite operators, owned by a BC Partners-led group, raised $1.2 billion this year in an effort to refinance its debt.

“The high-yield market in Europe is exploding,” said a partner from a leading European private equity firm, who spoke on condition of anonymity. “It’s attracting a lot of institutional investors who are chasing high returns.” The amount of European high-yield bonds connected to investments from private equity firms has risen 49 percent, to $13.5 billion, since 2007, according to the data provider Dealogic.

Private equity firms are also stepping in to fill the void. The Scandinavian firm EQT Partners turned to a consortium of financial players, including Kohlberg Kravis Roberts, for around $510 million of mezzanine financing for its $2.3 billion acquisition of the German medical supplies company BSN Medical in June.

“As bank funding has become more expensive, it has opened up an opportunity for new types of financing,” said Sachin Date, head of private equity for Europe, the Middle East, India and Africa at the accounting firm Ernst & Young in London.

But such debt carries its own set of risks. Generally, loans from nontraditional lenders carry higher interest rates, which can be costly for companies, especially in the current economic conditions. If the financial burden became too high, it could force borrowers to default on their loans and exacerbate the region’s woes.

“The crisis has hit much harder than people had expected,” said Nicolas de Nazelle, a managing partner at the private equity adviser Triago in Paris.

Source & Image : New York Times

91 Are Charged With Fraud, Billing Millions to Medicare

WASHINGTON (Reuters) — Ninety-one people including doctors, nurses and other medical professionals were charged criminally after an investigation of Medicare fraud that involved $430 million in false billing in seven cities, officials said on Thursday.

It was the government’s second big raid in recent months after a similar investigation in May involving $452 million in possible fraud in Medicare, the health program for the elderly and disabled.

The accusations include billing the government for unnecessary ambulance rides in California, writing prescriptions for patients in Dallas who did not qualify for them and paying kickbacks like food and cigarettes to patients in Houston if they attended programs for which a hospital could bill.

The investigation is part of an effort by the Obama administration to find health care savings.

Indictments against the 91 defendants were unsealed on Thursday after a coordinated investigation led by the departments of justice and of Health and Human Services, officials said. Most of the 91 surrendered or were arrested.

Those charged were trying to make a living by defrauding Medicare and its sibling program, Medicaid, which insures the poor, the officials said.

Of the 91 people charged this week, 33 were involved in false billing in the Miami area. In separate cases, people were accused of improperly billing the government for home health and mental health services.

Officials said they had found an additional $42 million in improper claims at a Houston hospital, Riverside General, where they earlier said they had found $116 million in fraud.

In those cases officials said patients had received cigarettes and other kickbacks if they attended a partial hospitalization program. Some patients watched TV instead of receiving services there, the government said.

Riverside General’s president was among seven employees facing charges on Thursday.

Later on Thursday, a Riverside General clerk read a statement by phone saying the hospital’s board was “saddened as to the tactics utilized against this hospital” but backed its president, Earnest Gibson III. The board was awaiting legal advice and had no further comment, she said.

Source & Image : New York Times

What to Look For in Friday’s Jobs Report

CATHERINE RAMPELL

Dollars to doughnuts.

The monthly jobs report usually gets a lot of attention, but the September numbers due on Friday are likely to absorb an outsize amount of oxygen because of the election just over a month away.

Here are some crucial details economists and analysts are likely to be looking for in the report.

One note of caution: The jobs report numbers are volatile and subject to major revisions months or even years afterward, so it’s a good idea not to read too much into any one report, Friday’s included. Last week, in fact, the Labor Department released preliminary revisions to the jobs numbers for the 12 months ended in March 2012 suggesting that the economy added 386,000 more jobs than originally believed.

1. The number of jobs that employers added to their payrolls.

Economists are predicting job growth of 113,000, far below the economy’s long-term trend and too slow to absorb just those coming of age into the labor force.

The pace of job growth the last few months has been somewhat lackluster, with the economy adding an average of 87,000 jobs a month since April, after averaging 226,000 jobs in the first three months of this year.

It’s not clear what accounts for the slowdown; some analysts have attributed it partly to the unusually warm weather last winter, which may have caused employers to hire earlier than usual and so kept them from needing to add workers in the spring.

In any case, if we continue to have the same pace of job growth that we’ve seen so far this year (an average of 139,000 jobs monthly over the course of 2012), it will take nearly three years before the economy regains the number of jobs it had before the recession began in December 2007. We have 3.4 percent fewer jobs today than we did then, even though the number of working-age people has increased.

If we want to close the jobs gap fully — that is, add enough jobs to absorb new entrants to the labor force as well as the already unemployed — it will take more than a decade at this pace.

2. The unemployment rate.

This number refers to the unemployed as a share of Americans who want jobs and are actively looking for work. It excludes people who are out of the work force altogether and who are not applying for jobs.

It always gets a lot of attention, although economists play it down because it is based on a somewhat volatile survey. Economists are forecasting that the unemployment rate will again be 8.1 percent, reflecting the slow job growth.

3. The number of people joining or leaving the labor force.

This is based on the same noisy survey that the unemployment number comes from, and you can expect talk about it on Friday, particularly if the size of the labor force falls.

Usually in a recovery, many who were sitting on the sidelines decide to re-enter the labor force and start looking for work. In August, however, the share of Americans in the labor force fell, which is why the unemployment rate ticked down. (And that’s a bad reason for the unemployment rate to fall; we want it to fall because people who wanted jobs found them, not because people who wanted jobs stopped looking for work.)

We don’t know why the number of people in the labor force declined. It’s possible that more people than usual decided to enroll in school in August. A surprisingly large share of people who dropped out of the labor force in August did so after being employed, as opposed to unemployed.

4. The broader unemployment rate.

This number includes the people who are out of work and looking for a job (the traditional unemployed), as well as two other groups of “shadow unemployed”: people who want to be working full time but can only find part-time work, and people who want to work but are no longer looking because they’ve been discouraged by their prospects. This group is sometimes referred to collectively as the “underemployed.”

This number has bounced around a bit this year, ranging from 14.5 percent to 15.1 percent. It was 14.7 percent in August. If the number goes up, you can expect to hear a lot of commentary about how the economy is worse than everybody thinks.

5. Government payrolls.

While the private sector has been adding jobs for 30 consecutive months, the public sector has been hemorrhaging workers almost every month for roughly the same period. There are fewer government workers today than there were when President Obama took office, because of job losses at the state and local levels. In August, governments at all levels shed 7,000 jobs.

Government job losses are weighing on the economy, since laid off government workers have less money to spend at private sector businesses, causing those businesses to retrench as well.

If the so-called “fiscal cliff,” which includes cutting $109 billion across the board from the federal budget, materializes at the end of this year, we can expect more government layoffs to follow. The Congressional Research Service recently synthesized a group of studies that estimated that the “sequestration” of federal funds would lead to the elimination of direct, indirect and “induced” jobs of 907,000 because of military spending cuts; 34,000 from cuts to the National Institutes of Health budget; 80,500 from cuts to education spending; and 500,000 from cuts to Medicare.

Source & Image : New York Times

Walmart Workers Stage a Walkout in California

Several dozen Walmart workers in Southern California staged a one-day strike on Thursday, according to workers and union officials, a move that culminated in a rally of some 250 workers and supporters in front of a Walmart store in Pico Rivera.

The strikers, who union officials said came from nine Walmarts in the Los Angeles area, said they were mainly protesting what they said was management’s frequent retaliation against employees who spoke up about working conditions.

Several of the workers, who said this was the first-ever strike against Walmart in the United States, also said they were protesting low wages and short hours.

Manuela Rosales, 25, who works in the cellphone department of the Pico Rivera store, said she walked out on Thursday, missing her afternoon shift, because “when we speak out, they cut my hours in retaliation and they have me pull pallets, which is very hard work.” She added, “I’m a single mom and I can’t afford them cutting my hours.”

Ms. Rosales said that about 30 of the 100 or so workers from her store’s morning shift walked out on Thursday.

Walmart, the nation’s largest retailer, sought to play down the job action, with a company spokesman saying it was a mere rally and not a real strike.

“You can count on less than one hand the number of associates that we are aware of who left their post to participate in the rally,” said Dan Fogleman, the Walmart spokesman. “That’s very few when you consider the more than 12,000 people that we employ in L.A. County.”

The rally outside the Pico Rivera store was boisterous, with workers carrying signs that read, “Stand up, live better,” and “On strike for the freedom to speak out.” The workers, who are not unionized, maintained that they were striking against unfair labor practices, specifically illegal retaliation, a claim that could protect them from being punished for walking out.

The walkout and rally were organized by Organization United for Respect at Walmart, or OUR Walmart, a group of several thousand Walmart workers that is closely affiliated with the United Food and Commercial Workers Union.

Dawn Le, a union spokeswoman, said 71 Walmart workers who were scheduled to work Thursday signed in to show participation in the strike and rally.

The rally attracted several prominent supporters, including Charles Calderon, majority leader of the California State Assembly; the Rev. Eric P. Lee, president of the Los Angeles chapter of the Southern Christian Leadership Conference; and María Elena Durazo, executive secretary-treasurer of the Los Angeles County Federation of Labor.

“Nobody is going to stop us from speaking out,” Ms. Durazo said. “Walmart may sell jeans and video games and all that, but the biggest product they sell in this country and this world is poverty.”

Mr. Fogleman said the rally was just the union’s “ latest publicity stunt.”

“Our stores in the community are staffed up and open for business,” he said. “This event is not a factor.”

Mr. Fogleman also denied that this was the first strike against Walmart in the United States, pointing to a 2006 protest by 100 workers at a store in Hialeah Gardens, Fla.

Thursday’s walkout occurred three weeks after several dozen employees at warehouses that serve Walmart walked off the job in California and Illinois to protest what they said were onerous conditions, including toiling in warehouses that they said sometimes heat up to 120 degrees. The California job action included a 50-mile, six-day march by warehouse workers from Ontario, Calif., to Los Angeles City Hall.

Mr. Fogleman said Walmart does not manage those warehouses but takes accusations of workplace problems very seriously. He said Walmart has sent people to those warehouses, and any legitimate problems have been addressed.

Source & Image : New York Times

Glut of Solar Panels Poses a New Threat to China

BEIJING — China in recent years established global dominance in renewable energy, its solar panel and wind turbine factories forcing many foreign rivals out of business and its policy makers hailed by environmentalists around the world as visionaries.

But now China’s strategy is in disarray. Though worldwide demand for solar panels and wind turbines has grown rapidly over the last five years, China’s manufacturing capacity has soared even faster, creating enormous oversupply and a ferocious price war.

The result is a looming financial disaster, not only for manufacturers but for state-owned banks that financed factories with approximately $18 billion in low-rate loans and for municipal and provincial governments that provided loan guarantees and sold manufacturers valuable land at deeply discounted prices.

China’s biggest solar panel makers are suffering losses of up to $1 for every $3 of sales this year, as panel prices have fallen by three-fourths since 2008. Even though the cost of solar power has fallen, it still remains triple the price of coal-generated power in China, requiring substantial subsidies through a tax imposed on industrial users of electricity to cover the higher cost of renewable energy.

The outcome has left even the architects of China’s renewable energy strategy feeling frustrated and eager to see many businesses shut down, so the most efficient companies may be salvageable financially.

In the solar panel sector, “If one-third of them survive, that’s good, and two-thirds of them die, but we don’t know how that happens,” said Li Junfeng, a longtime director general for energy and climate policy at the National Development and Reform Commission, the country’s top economic planning agency.

Mr. Li said in an interview that he wanted banks to cut off loans to all but the strongest solar panel companies and let the rest go bankrupt. But banks — which were encouraged by Beijing to make the loans — are not eager to acknowledge that the loans are bad and take large write-offs, preferring to lend more money to allow the repayment of previous loans. Many local and provincial governments also are determined to keep their hometown favorites afloat to avoid job losses and to avoid making payments on loan guarantees, he said.

Mr. Li’s worries appear to be broadly shared in Beijing. “For the leading companies in the sector, if they’re not careful, the whole sector will disappear,” said Chen Huiqing, the deputy director for solar products at the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.

The Chinese government also wants to see the country’s more than 20 wind turbine manufacturers, many of which are losing money, consolidate to five or six. “Wind does not need so many manufacturers,” said Mr. Li, who in addition to drafting renewable energy policies is the president of the Chinese Renewable Energy Industries Association.

Chinese solar company executives blame their difficulties partly on the United States’s decisions last spring to impose antidumping and anti-subsidy tariffs on solar panel imports, and on the European Union’s recent decision to start its own antidumping investigation of imports from China.

“It is not a Chinese industry problem, it is a global solar industry problem,” said Rory Macpherson, a spokesman for Suntech Power, one of the largest Chinese solar panel manufacturers. “It is primarily the result of an imbalance between supply and demand, and the U.S. and E.U. trade investigations.”

Mr. Li said the solar industry’s problems were the result of overcapacity in China, and not the fault of trade restrictions.

Yet he insisted that if the Chinese government could turn back the clock and revisit past renewable energy decisions, it would not do anything differently.

The problem lies in the eagerness of Chinese businesses to rush into any new industry that looks attractive and swamp it with investments, he said. Chinese companies and their bankers are then far more reluctant than Western companies to admit defeat for investments that prove unprofitable.

Mr. Li added that banking regulators had not yet decided what to do about banks’ exposure to the solar sector. The central government tried without success to learn from local and provincial government agencies how much of the solar industry’s bank debt they have guaranteed, Mr. Li said.

Source & Image : New York Times

Presidential Debate Drew More Than 70 Million Viewers

The first of three presidential debates between President Obama and Mitt Romney reached more than 70 million viewers on Wednesday night.

Nielsen, a television measurement company, said 67.2 million viewers watched on television at home — the highest number for a first debate since 1980. That year, 80.6 million watched the only debate between President Jimmy Carter and the Republican presidential candidate, Ronald Reagan.

A few second- and third-round presidential debates since then have attracted more than 67 million viewers, including the second debate of the 1992 cycle. Nonetheless, Wednesday’s totals were surprisingly high by almost any standard.

About 52.4 million viewers tuned into the first debate in 2008, according to Nielsen, though that debate was held on a Friday night, typically a lower-rated night of the week. About 62.5 million viewers tuned into the first debate in 2004, which similarly featured an incumbent president and a challenger.

Nielsen’s total for Wednesday’s debate did not count people who watched outside the home (in offices, bars or airports) or who watched in other countries. Nor did not count any of the millions of people who had access to the debate on computers, tablets or phones. CNN.com, for instance, said it recorded 1.2 million live streams of its debate coverage around the world. YouTube, the Web video giant, said its partners had “millions of live-streamed views of the debates,” but declined to release specific numbers.

Of the 11 traditional channels that televised the debate and subscribed to Nielsen ratings, ABC was the most-watched, with almost 11.3 million viewers during the commercial-free debate, Nielsen said. NBC and CBS were close behind, with 11.1 million for NBC and 10.6 million for CBS.

Fox News Channel was as big as any broadcaster, with about 10.4 million viewers during the debate (up from 8.2 million in 2008 and 9.6 million in 2004). The Fox broadcast network attracted about 6.9 million; CNN, 6 million; and MSNBC, 4.7 million. (Fox News, MSNBC and CNN all skew toward older viewers, but interestingly, CNN had a surge of 18- to 34-year-old viewers for the debate — nearly 1.5 million, versus 882,000 for Fox News and 772,000 for MSNBC.)

More than 2.6 million Spanish-language viewers watched on Univision, and another 248,000 watched on Telemundo, according to Nielsen. (Telemundo showed the debate on a tape delay.) The lowest-rated of all the channels with the face-off was Current TV, Al Gore’s fledgling liberal cable channel, which had about 100,000 viewers.

Another measurement company, Rentrak, found that the total audience for the debate was remarkably stable from 9 to 10:30 p.m. The company, which tracks viewership behavior in one million homes, found a slight uptick at 10 p.m.

TiVo, which tracks the rewinding behavior of digital video recorder owners, found that the most-rewound moment of the debate came at 9:27, when Mr. Romney mentioned his plan to cut funding from PBS (and gave Big Bird a shout-out). About 250,000 viewers watched the debate on PBS.

Source & Image : New York Times

Steve Jobs’s High School Girlfriend to Publish Memoir

Chrisann Brennan was one of Steve Jobs’s first serious loves, his high school girlfriend and the mother of his daughter Lisa. Now Ms. Brennan will tell the story of her relationship with Mr. Jobs, the Apple co-founder who died in 2011, in a new memoir to be published next year. St. Martin’s Press, part of Macmillan, said on Thursday it had acquired the rights to an untitled memoir by Ms. Brennan, who is now a painter based in the San Francisco Bay Area.

After meeting him at Homestead High School in Cupertino, Calif., Ms. Brennan later lived with Mr. Jobs in a cabin, meditated with him and attended lectures. “At 17, Steve had more than a touch of the cool sophistication of a Beat poet,” Ms. Brennan wrote in an article in Rolling Stone after his death. While in her early 20s, she became pregnant and gave birth to their daughter, who is known as Lisa Brennan-Jobs. Mr. Jobs initially denied paternity of his daughter but later developed a closer relationship with her.

St. Martin’s said Ms. Brennan’s memoir would cover a range of subjects, including her relationship with Jobs, the founding of Apple and “Jobs’s enormous appeal, energy and drive as well as his developing ambition and ruthlessness in business and personal dealings.”

Source & Image : New York Times

Fact-Checking Obama’s ‘Kiss’ to Wall Street

Did Mitt Romney catch President Obama smooching with Wall Street?

The Dodd-Frank regulatory overhaul, the Obama administration’s response to the 2008 financial crisis, was designed to be a slap in the face to Wall Street after big banks nearly toppled the economy. But Mr. Romney, attacking the president on Wednesday night in their first debate of the campaign season, claimed Dodd-Frank was “the biggest kiss that’s been given to New York banks I’ve ever seen.”

That argument might seem strange to Wall Street. If Mr. Obama is cozying up to Lloyd C. Blankfein and Jamie Dimon, that is news to them. Most big bank executives find Mr. Obama disengaged, even aloof. And some never forgave the president for his unflattering depiction of them as “fat cats.”

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As for Dodd-Frank, Wall Street has spent three years – and hundreds of millions of dollars – trying to kill or tame the law. Mr. Dimon, a Democrat who runs JPMorgan Chase, once said new rules stemming from Dodd-Frank “would damage America.” (He supports other aspects of the law).

Mr. Romney on Wednesday said he supported some regulation but also called for the repeal of Dodd-Frank. When pressed to explain what would replace the law, the Republican nominee declined to provide specifics.

Hiroko Masuike/The New York TimesA crowd gathered at the Jane Hotel in Manhattan on Wednesday to watch the first debate.

Despite being one of Mr. Obama’s signature accomplishments, Dodd-Frank has played a back seat to health care and broader economic issues on the campaign trail. But the debate on Wednesday brought Dodd-Frank to the forefront.

For his part, Mr. Obama defended the law and attacked an era of deregulation that he said enabled Wall Street recklessness. “Does anyone out there think that the big problem we had is that there was too much oversight and regulation of Wall Street?” Mr. Obama said.

Mr. Romney countered with a common criticism of Dodd-Frank, that it labels some financial institutions as “systemically important.” Mr. Romney called this policy “an enormous boon” for Wall Street because “it designates a number of banks as too big to fail, and they’re effectively guaranteed by the federal government.”

It was this rule that Mr. Romney seemed to interpret as a big kiss to the banks. “I wouldn’t designate five banks as too big to fail and give them a blank check.”

Mr. Romney’s claims echoed the concerns of Republican lawmakers, who say that Dodd-Frank enshrines several banks as so important that the government would need to rescue them in times of trouble. Dodd-Frank, critics say, did little to break up the nation’s biggest banks but left small community banks without implicit government backing and fighting for survival.

But that is not the full story.

For one, Democrats note that the “systemically important” brand is actually meant to strike down the perception that some banks are too big to fail. As Mr. Obama said on Wednesday, these firms must produce so-called living wills and face other measures that empower regulators to wind down big banks in an orderly fashion.

Mr. Romney’s decision to single out five New York banks is also suspect. The designation applies not only to Wall Street banks but to dozens of insurance companies, conglomerates and other major banks scattered across the country. Politico’s Morning Money newsletter on Thursday quoted an anonymous executive as saying, “If he’d named names, it would have been his top five contributors.”

Dodd-Frank supporters also argue that the designation of SIFI – systemically important financial institutions – is hardly a wet kiss. It comes with heightened capital requirements and regulatory scrutiny.

Of course, it is not like Wall Street has never been kissed before. The Clinton administration, at the behest of big banks, tossed out Depression era measures like the Glass Steagall Act, which prevented banks from buying insurance companies. And when the banks grew so bloated that they nearly burst in 2008, Congress came to their rescue with hundreds of billions of taxpayer dollars.

But is Dodd-Frank the giveaway that Mr. Romney claims? If so, the Obama administration is kissing but not telling.

Source & Image : New York Times

Central Bank Actions Have ‘Alleviated Tensions’ in Euro Zone, President Says

The president of the European Central Bank gave a guardedly upbeat assessment of the situation in the euro zone Thursday, saying that troubled countries had made “significant progress” remaking their economies and that the banking system was healthier.

“So, not bad,” Mario Draghi said, with an air of distinct satisfaction, at a press conference in the Slovenian capital of Ljubljana following a meeting of the bank’s governing council.

But, perhaps wary of seeming too optimistic and encouraging complacency by elected officials, he added that the state of the euro zone remained tenuous. Early this year, Mr. Draghi also called a turning point in the crisis, only to see tensions return with a vengeance later on.

After a period of intense activity to calm the euro zone crisis, the E.C.B. had not been expected to announce major new policy actions Thursday. And, as expected, the bank left its benchmark interest rate at a record-low 0.75 percent.

Instead, the focus has been on elected leaders, and particularly whether Spain will meet conditions for the E.C.B. to start buying its bonds as a way of restarting bank lending in the country.

Mr. Draghi asserted that the E.C.B.’s promise to buy bonds in so-called Outright Monetary Transactions had “helped to alleviate tensions” in the markets.

He added that the bond purchases, once they begin, “will enable us to provide, under appropriate conditions, a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability in the euro area.”

But he also called on governments to do their part to continue to make progress on overhauls of national economies and the structure of the euro zone.

And he warned that, if the E.C.B. began buying bonds to help a euro zone country hold down borrowing costs, the bank would cut off aid if countries failed to meet agreed conditions.

Last month, Mr. Draghi set out the terms for the central bank to begin buying euro zone government bonds. One of the conditions was that countries must request help from the euro zone bailout fund. Until Spain takes that step, the E.C.B. is not likely to take action.

The E.C.B. promise last month to intervene in bond markets, as well as Mr. Draghi’s vow to do “whatever it takes” to preserve the euro, has calmed tensions considerably. But market interest rates for Spanish bonds have been creeping higher in recent weeks as Prime Minister Mariano Rajoy delays asking for relief, a move which would require him to accept restrictions on how he manages the economy.

On Thursday, the Spanish Treasury successfully auctioned €4 billion of debt, the maximum amount that it had aimed to sell, amid strong demand and paying lower interest rates than when it last sold such bonds.

Analysts cautioned, however, into reading too much into the positive result.

Nicholas Spiro, managing director of Spiro Sovereign Strategy, a research concern, wrote Thursday in a note that investors were “taking an overly optimistic view” of the eventual effectiveness of the E.C.B. bond-buying program.

“Spain’s debt market is currently in a state of limbo,” he wrote. “It is being propped up by an E.C.B.-backed bond-buying scheme that has yet to be put into practice.”

In his remarks Thursday, Mr. Draghi presented a somewhat rosier picture of the situation in the euro zone, saying that “significant progress” has been made in countries like Spain and Portugal. He also noted that weaker banks in the euro zone had bolstered their capital cushions.

“When I said there has been significant progress, I included the repairing of the banking system,” Mr. Draghi said. “The capitalization gap that was pretty wide a couple of years ago has been significantly reduced.”

Mr. Draghi ticked off a number of signs that the crisis has eased, including inflows of bank deposits to Italy and a rise in bond sales by banks and corporations, which should help investment and lending. He also said that Spanish banks had become less dependent on lending from the E.C.B., a possible sign they are able to raise funds on markets.

But he added, “We also have to express a note of caution. Volatility is still relatively high. And governments will have to persevere on their reform action.”

Mr. Draghi also reiterated his view, which some euro countries have questioned, that the central bank’s actions to shore up the euro fall squarely within its purview.

“Let me repeat again what I have said in past months,” he said. “We are strictly within our mandate to provide price stability over the medium term, we act independently in determining monetary policy, and the euro is irreversible.”

From the E.C.B.’s point of view, there would have been little point in further cutting the main interest rate from 0.75 percent. Rates are already probably too low for stronger countries like Germany, while the official rate is no longer having much effect on borrowing costs for business and consumers in the troubled countries.

In addition, a rate cut now would have left the E.C.B. with few policy options if the situation in the euro zone deteriorates further.

“While a rate cut could easily be justified by the economic outlook,” analysts at ING wrote in a note Wednesday, “we think that the E.C.B. is not yet willing to fire this very last shot.”

Raphael Minder contributed reporting from Madrid.

Source & Image : New York Times