The Agonist - Business

A Retail Disastor

Fri, 20 Nov 2009 01:02:43 -0800

It is midnight. The IT processes I stayed up to babysit at this critical time for retail companies have completed. I am anticipating the likely bankruptcy of the business I've worked for these past years. To say sales are "soft" does not really do justice to what is happening. I will most likely join the ranks of the unemployed sometime before Spring; perhaps sooner if the Bank pulls the line of credit out from under us.

We sell across the US and we know that one of our competitors is in the same trouble; this competitor is much much larger than us and you, dear reader, dear consumer, most likely know their name. They were suckered in by those first few weeks of October when it seemed like it might, just might, be a decent holiday season for retailers. Its not going to be a good retail season; imagine that in a period of just four weeks sales have plummeted 70% even as we begin the holiday shopping season. Its not just our main store but all of our sales channels; even the Amazon channel is down.

Something happened back in mid-October to knock the wind out of retail's sales. I cannot vouch for other sectors of the retail industry but our sales are virtually stopped. It is a Tsunami of consumer despair washing away these few good jobs in an already devastated community.

The books cashing in on the crash

Thu, 19 Nov 2009 18:51:10 -0800

Sean O'Grady | Nov 20

The Independent - When the masters of the universe came crashing down to earth last year, the reverberations were felt far beyond Wall Street and the City. Sean O'Grady surveys the best of the books that explode the myth that greed is good

One of the few welcome consequences of the global recession has been a modest upsurge in economic literacy, or at least interest. That's not to be exaggerated; most people still don't know their asset-backed securities from the elbows, but at least we're making some attempt to redress that deficit of understanding.

No previous economic crisis has brought forth such a crop of words – over 3,000 new books, a few more reprints, trillions of column inches of newspaper, magazine and web pieces, official reports, not to mention a Facebook page devoted to "Recession Survivors" and those Twittering and blogging their way to an understanding of seismic changes. OK, it isn't much to throw into the balance when you have mass unemployment, the derangement of national finances and the destruction of the world's banking system on the other side, but at least we are creeping towards some acknowledgement of what went wrong, and why. That's something.

So, what to read? A bit like the bewildering complexity of "exotic derivatives" that helped to get us into this mess (and which the bankers themselves never understood), the choice seems endless. It really boils down to which of the three prevalent treatments of the crisis you prefer: the anecdotal, the analytical or the apoplectic.

Two Madoff programmers arrested for role in fraud

Fri, 13 Nov 2009 10:57:37 -0800

Grant McCool | New York | November 13

Reuters - Two computer programmers provided technical support to falsify documents and trading records for swindler Bernard Madoff and took hush money to help keep the massive fraud going, U.S. authorities said.

The FBI arrested Jerome O'Hara, 46, and George Perez, 43, at their homes on Friday morning on criminal charges of conspiracy for falsifying books and records at both the broker-dealer and investment arms of Bernard L. Madoff Investment Securities LLC in New York.

"The computer codes and random algorithms they allegedly designed served to deceive investors and regulators and concealed Madoff's crimes," said federal prosecutor Preet Bharara. "They have been charged for their roles in Madoff's epic fraud, and the investigation remains ongoing."

[...]

In August or September 2006, they met with Madoff and told him they would no longer lie for him, a statement by the FBI and the prosecutor said.

The FBI found handwritten notes in O'Hara's desk. "I won't lie any longer. Next time, I say 'ask Frank'" said one note, according to the FBI, a reference to Madoff's long-time deputy, Frank DiPascali.

Madoff told DiPascali to pay the programmers "whatever they wanted in order to keep them happy," the investigators said, and the programmers received pay increases of about 25 percent and net bonuses of about $60,000.

Obama urged to turn successful state job program national

Thu, 12 Nov 2009 20:00:35 -0800

Tony Pugh | Washington | Nov 11

McClatchy - As job losses continue to slow the nation's economic recovery, labor experts and economists are urging Congress and the Obama administration to boost funding for a little-known program that 17 states are using to avert layoffs and keep workers in their jobs.

Mass layoffs of 50 or more employees claimed 278,000 jobs in the third quarter alone, according to new government data. All the laid-off workers were idled for at least a month and only one-third of their employers expected any of them to be recalled.

In the face of continuing business slowdowns, however, thousands of employers are forgoing layoffs and taking advantage of state "work-sharing" programs in which they cut the hours of full-time workers, who then recoup a portion of their lost wages — usually 50 to 60 percent — from unemployment insurance benefits.

The rules vary by state, but work sharing typically helps reimburse employees for wage reductions ranging from 10 to 60 percent.

For example, an employer that needs to cut 20 percent of its full-time work force could do so through layoffs. If those laid-off workers earned an average of $500 a week, they probably could expect roughly $250 a week in unemployment benefits.

However, if instead of layoffs those workers' hours were cut by 20 percent through the work-sharing program, they'd each earn $400 a week. They'd also be eligible for the program's jobless benefits, which would make up about half of that $100 wage cut, or $50. With this approach, the worker's earnings would be roughly $450 a week, a 10 percent cut instead of a 50 percent cut.

good program, we started this a few weeks ago AND you get to keep your insurance!

North America The 'Saudi Arabia Of Natural Gas,' Says Pickens

Wed, 11 Nov 2009 11:09:54 -0800

Shaun Polczer | Calgary | Nov 11

Calgary Herald - He proposes switching semis' fuel as first step

North Americans need to embrace natural gas as the clean-burning solution to North America's energy and environmental security, one of the world's leading oilmen told the Calgary Herald's editorial board Tuesday.

T. Boone Pickens, one of the world's foremost oil barons, is hoping to convert more than seven million heavy trucks and vehicles over to the cleaner-burning fuel in an attempt to reduce U.S. reliance on imported oil.

In a meeting with the Herald, Pickens described North America as the "Saudi Arabia" of natural gas, with more than 100 years of potential supplies.

"We have more gas than anyone else in the world," he said. "America is the Saudi Arabia of natural gas. It's time for us to use this abundant resource to end the cycle of foreign oil dependency and addiction that is making us less safe and more economically insecure."

Pickens was in Calgary to promote his latest venture, the BP Energy Fund, which is to begin trading on the Toronto Stock Exchange.

Power for U.S. From Russia’s Old Nuclear Weapons

Tue, 10 Nov 2009 10:50:54 -0800

Andrew E. Kramer | Moscow | Nov 10

NYT - What’s powering your home appliances?

For about 10 percent of electricity in the United States, it’s fuel from dismantled nuclear bombs, including Russian ones.

“It’s a great, easy source” of fuel, said Marina V. Alekseyenkova, an analyst at Renaissance Capital and an expert in the Russian nuclear industry that has profited from the arrangement since the end of the cold war.

But if more diluted weapons-grade uranium isn’t secured soon, the pipeline could run dry, with ramifications for consumers, as well as some American utilities and their Russian suppliers.

Already nervous about a supply gap, utilities operating America’s 104 nuclear reactors are paying as much attention to President Obama’s efforts to conclude a new arms treaty as the Nobel Peace Prize committee did.

In the last two decades, nuclear disarmament has become an integral part of the electricity industry, little known to most Americans.

Salvaged bomb material now generates about 10 percent of electricity in the United States — by comparison, hydropower generates about 6 percent and solar, biomass, wind and geothermal together account for 3 percent.

Utilities have been loath to publicize the Russian bomb supply line for fear of spooking consumers: the fuel from missiles that may have once been aimed at your home may now be lighting it.

Meanwhile, back at the ranch...

Sun, 08 Nov 2009 06:58:27 -0800

Nov 8

NYT - Frank Rich:

On Tuesday, Congressional Democrats, with the White House’s consent, voted to gut the Sarbanes-Oxley Act, the post Enron-WorldCom law passed in 2002 to prevent corporate accounting tricks and fraud. Arthur Levitt, the former Securities and Exchange Commission chairman, told me on Friday it was “surreal” that Democrats were now achieving the long-held Republican goal of smashing “the golden chalice” of reform. If investors cannot have transparency, Levitt said, “the whole system is worthless.”

Floyd Norris:

The Sarbanes-Oxley law also took steps to reinforce the independence of the Financial Accounting Standards Board, which writes accounting rules in the United States. By giving the board a secure source of financing, legislators said they were protecting it from the threats of the companies that had previously made donations to keep the board functioning.

But this Congress has made clear that independence for the accounting rule writers can go too far — particularly if the rules force banks to reveal the horrid mistakes they previously made.

This year, a subcommittee of the House Financial Services Committee held a hearing at which legislators sought no facts but instead threatened dire action if the chairman of the financial accounting board did not promptly make it easier for banks to ignore market values of the toxic securities they owned. The board caved in, which may be one reason why banks are reporting fewer losses these days.

But the board’s retreat was not enough to satisfy the banks. The American Bankers Association is now pushing Congress to give a new systemic risk regulator — either the Federal Reserve or some panel of regulators — the power to override accounting standards. The view of the bankers is that the financial crisis did not stem from the fact that the banks made lots of bad loans and invested in dubious securities; it was caused by accounting rules that required disclosure when the losses began to mount.

** Committee Allows a Break on Certain Auditing Rules

Comcast Said to Be Close to Gaining NBC Universal

Tue, 03 Nov 2009 19:16:55 -0800

Michael J. de la Merced & Andrew Ross Sorkin | November 1

NYT - General Electric and the cable giant Comcast have moved closer to a deal giving control of NBC Universal to Comcast, and a formal announcement could be made sometime next week, people briefed on the talks said Sunday.

After a series of meetings last week, the two companies reached a tentative agreement on Friday over the main points of a deal, these people said. Comcast would own about 51 percent of NBC Universal, contributing several billions of dollars in cash and its own stable of cable networks to the new venture.

G.E., which currently owns 80 percent of the entertainment company, would retain the other 49 percent and would contribute about $12 billion in debt to the new entity, though it is expected eventually to sell its ownership interest over several years.

Much work remains before the deal can be completed. The main issue is the negotiations with Vivendi, the French conglomerate that owns 20 percent of NBC Universal. Talks with Vivendi are continuing, focused largely on how to reach an acceptable valuation of NBC Universal, these people said. The French media company gained its stake in NBC Universal in 2004 through a deal with G.E., which combined NBC with Vivendi’s Universal Entertainment.

Buying Into Big Media's Recovery

Broadcasting & Cable, By Claire Atkinson, November 2

The dealing, however, may not be done. One Wall Street player confirmed market rumors that bankers have already descended on the MSO's Philadelphia headquarters to work with management on selling the NBC Network and stations to a third party. Comcast had no immediate comment on that still-hypothetical possibility.

CIT’s Bankruptcy May Help Bondholders and Erase Taxpayer Stake

Mon, 02 Nov 2009 06:21:54 -0800

Linda Shen | Nov 2

Bloomberg - CIT Group Inc.’s decision to seek court protection probably will keep money flowing to bondholders and 1 million customers of the 101-year-old commercial lender. Shareholders and taxpayers won’t be as fortunate.

CIT’s Chapter 11 bankruptcy may give bondholders new notes at 70 cents on the dollar plus new common stock, and Chief Executive Officer Jeffrey Peek said clients will be able to get funds. Common stock owners could be mostly wiped out, and the U.S. Treasury Department said it won’t recoup much, if any, of the $2.33 billion of taxpayer money that went into CIT, the largest firm to go bankrupt after getting a federal bailout.

“It doesn’t look too good for the government preferred or any preferred holders,” Brian Charles, a debt analyst at New York-based brokerage RW Pressprich & Co., said yesterday. “It’s unlikely common shareholders realize any value.”

Hey Obama

Sun, 01 Nov 2009 01:16:54 -0800

Nov 1

BBC - UK: Government to create bank chains

The government is to create three new High Street banking chains by 2015 as part of a major overhaul of the sector.

They will be set up by selling off parts of Royal Bank of Scotland, Lloyds and Northern Rock - the banks which had to be bailed out by the taxpayer.

Ministers and the European Competition Commissioner are in talks over the move, which would go some way to recoup the public money invested in the banks.

There is speculation that buyers might include Tesco and Virgin.

The new chains will be standard retail banks concentrating on deposits and mortgages.

In order to boost competition, they will only be sold to new entrants to the UK banking market and not to existing financial institutions.

Ministers say that creating more competitors on the High Street in this way will invigorate the mortgage market and ultimately lead to a better deal for customers.

How Goldman secretly bet on the U.S. housing crash

Sun, 01 Nov 2009 00:04:29 -0700

Greg Gordon | Nov 1

McClatchy - In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers that it also was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting. Now, a five-month McClatchy investigation has found that Goldman's failure to disclose those secret bets may have violated securities laws.

Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.

Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.

"The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said Laurence Kotlikoff, a Boston University economics professor who's proposed a massive overhaul of the nation's banks. "This is fraud and should be prosecuted."

Bill would force financial firms worth $10 billion or more to pay for rivals’ failures

Wed, 28 Oct 2009 00:55:50 -0700

Washington | Oct 28

AFP - Financial companies with more than 10 billion dollars in assets will have to pay for rivals' failures or rescues, under draft legislation which has been released by the US Treasury and lawmakers.

The plan to address systemic risk in the financial sector will wind down failing institutions and end "too big to fail" bailouts that have been borne by taxpayers, the Treasury and the House Financial Services Committee said Tuesday.

The proposed Financial Stability Improvement Act "provides for the orderly wind-down of failing firms and ends 'too big to fail' to ensure that industry and shareholders absorb the risks and costs of failure, not taxpayers," they said in a statement.

The measure would be a cornerstone of President Barack Obama's commitment to reform financial regulation and avert costly taxpayer bailouts of banks and other financial firms.

"The Financial Services Committee and the Obama administration are committed to ensuring that the taxpayers are never again called upon to take responsibility for Wall Street's business decisions," the bill's sponsors said.

In a letter to committee chairman Barney Frank, Obama congratulated the panel for the progress made "in designing a strong package of financial reforms."

The 253-page draft legislation would create a federal resource fund to deal with failures or rescues that would recover expended funds that had not been recouped, by imposing assessments on firms with more than 100 billion dollars in assets.

The bill would set up an interagency council to monitor and oversee the stability of the financial system and address any related threats.

It would also provide the Federal Reserve and other federal financial agencies greater authority to "regulate for financial stability purposes" and quickly address potential problems.

Among its other provisions, the bill would subject thrift holding companies to Fed supervision and give the Federal Deposit Insurance Corporation, which insures bank deposits, the ability to unwind a failing firm.

"Costs to resolve a failing firm will be repaid first from the assets of the failed firm at the expense of shareholders and creditors, and to the extent of any shortfall, from assessments on all large financial firms," the statement said.

"In this instance, we follow the 'polluter pays' model where the financial industry has to pay for their mistakes -- not taxpayers."

Obama praised the panel for acting "quickly and in the face of substantial opposition to bring strong protections to consumers from unfair and fraudulent lending practices, to regulate derivative markets and to require banks to change compensation practices."

But he admitted that more work was needed "to build a more stable financial system and safeguard our economy from future crises."

So who's in charge?

Sun, 25 Oct 2009 19:14:59 -0700

Government is outsourcing a variety of important tasks to private contractors, who operate with little oversight

"In her new book, One Nation Under Contract, Allison Stanger documents in stunning detail the extent to which the United States has turned much of its most important work over to private contractors whose motivation is profit and level of public accountability near zero.

“Lockheed Martin . . . gets more federal money each year than the Departments of Justice or Energy. Lockheed Martin sorts your mail, tallies up your taxes, cuts social security checks, counts people for the US census, runs space flights, and monitors air traffic.’’ In fact, “in this new world,’’ she writes, “the private sector increasingly handles the everyday business of governing.’’

M&S makes palm oil pledge to save forests

Sat, 24 Oct 2009 22:53:09 -0700

Martin Hickman | Oct 24

The Observer - Commitment aimed at halting ecological damage done in South-east Asia

Marks & Spencer will commit to paying more for sustainable palm oil across its entire range of products today in an attempt to limit environmental damage in south-east Asia.

In a rolling programme over the next six years, M&S will buy GreenPalm certificates for sustainably produced palm oil equivalent to the amount it uses in almost 1,000 food, beauty and home products. Like other food manufacturers, M&S pours palm oil, the world's cheapest vegetable fat, into a wide variety of food and household products such as biscuits and convenience foods.

By early next year, the retailer said nine products, including 200g packs of oatcakes, a 500g cookie selection and seven types of cooked potatoes, would be covered by the GreenPalm scheme. By 2015, it promised to buy certificates for all relevant products. M&S, which would not disclose the cost of the commitment, is also funding a 120-acre wildlife corridor between plantations in Borneo.

UK economy in its longest recession on record

Fri, 23 Oct 2009 09:49:14 -0700

Ashley Seager, Julia Kollewe & Kathryn Hopkins | London | October 23

The Guardian - The British economy is mired in its longest recession on record, as government figures out this morning showed a shock 0.4% drop in gross domestic product (GDP) in the third quarter of the year.

The figures confounded widespread hopes that the economy had returned to growth after five consecutive quarters of recession.

City economists had almost unanimously expected a small increase in GDP. Quarterly records go back to 1955 and show there has never until now been six quarters of contraction in a row.

The pound fell sharply against the dollar and euro as dealers digested the bad news. The figure left output 5.2% lower than the same quarter last year and about 6% lower overall in this recession.

Straight after the figures were released, Alistair Darling reiterated his view that growth will return to Britain by the end of the year. "I've always been clear that growth will return at the turn of the year, as my budget forecast confirmed," he said. "We're facing the worst global financial crisis and recession in 60 years. We've always said that we remain cautious as a result of the high degree of economic uncertainty."

Economists were unimpressed. Nick Parsons at National Australia Bank said: "Darling says he stands by his 2009 growth forecast. This is utter nonsense. He forecast -3.5% at budget time and if we are to hit the forecast, we would need to see growth of more than 4% in the fourth quarter.

Economists revolt over surprise recession data

The Times, By GraÍnne Gilmore and Rebecca O'Connor, October 23

Economists today cast doubt on official data showing that British gross domestic product (GDP) contracted by 0.4 per cent between July and September, claiming the surprise fall is far worse than economic reality.

The shock figures from the Office for National Statistics (ONS) revealed that the country remained mired in recession during the third quarter — the sixth consecutive quarter of contraction, signalling the country’s longest downturn since records began in 1955.

Economists had widely expected that the country had emerged from recession between July and September.

Longest recession on record grips UK

Press Association, By Russell Lynch, October 23

The UK is now in the grip of the longest recession since records began, according to gloomy official figures published today.

Hopes for an end to recession were scuppered as the economy shrank by a shock 0.4 per cent between July and September - a record sixth quarter in a row of decline.

Output has now slumped 5.9 per cent since the onset of recession - almost as bad as the 6 per cent slump seen in the early 1980s - the Office for National Statistics said.