Google is still the No. 1

College Graduates' Top Employers

By Francesca Di Meglio 
Having captured the hearts and minds of undergraduate business students, Google is still No. 1 in the latest Universum ranking of the most popular employers rated by young people. But it shouldn't get too cocky: The competition is getting fiercer.

Google (GOOG), along with the Big Four accounting firms—KPMG, Ernst & Young, PricewaterhouseCoopers, and Deloitte—respectively make up the top five on the 2010 ranking compiled by Universum, a research firm in Stockholm. The list is based on the responses of more than 130,000 business and engineering students in 12 major global markets who told Universum where they dream of working.
The accounting firms fared well among business students in the ranking because their training programs are highly regarded and they have been on a hiring tear when jobs for college grads have otherwise been difficult to come by. Google, which took the top spot among both business and engineering students, benefited from a unique corporate culture that includes free food and haircuts and lets employees bring their dogs to work. Kyle Ewing, talent and outreach programs manager for Google in Mountain View, Calif., said in an interview that many are attracted to the company because of its sense of mission.
"Google is a place where you can tackle big problems," she said. "For all employees, there's a real sense that people are working on things that could change the world."
Procter & Gamble (PG), Microsoft (MSFT), Coca-Cola (KO), J.P. Morgan (JPM), and Goldman Sachs (GS) respectively round out the top 10. Finance firms in the banking and investing sectors, management consulting, and oil and gas companies have become less appealing to students, according to the list.

Standouts during the economic crisis

HSBC (HBC), which ranked 22 in 2009, dropped out of the top 50 in 2010. And Intel (INTC), Nokia (NOK), and ExxonMobil (XOM) fell out of the upper 30 to the bottom of the list. Among companies new to the list, Apple (AAPL), Bank of America (BAC), IKEA, and Adidas (ADS:GR) broke into the top 30.
Universum asked students to select the five employers for which they would most like to work from a list of more than 120 that was based on Universum's 2009 top employers ranking. Respondents could write in employers that were not on the list. A company's ranking is based on the percentage of business students who designated it among their top five. Of the top 50, eight are Universum consulting clients.

College Graduates' Top Employers

  The economic crisis that left fewer undergraduates able to find jobs fresh out of college changed the recruiting game, says Universum Chief Executive Officer Michal Kalinowski. Employers that continued to communicate with potential hires and promoted both their consumer brand and the benefits of working at their organization scored with students, he says.

Keeping up a dialogue with talent, regardless of hiring needs, proved beneficial to KPMG, which moved from eighth to second on the list, says Blane Ruschak, executive director of campus recruiting for KPMG in Montvale, N.J.
"You have to keep yourself in the front of the pipeline of students so when things do turn around, they remember you," says Ruschak. One way KPMG did that was to enhance its website, which features tips on the interview process and videos about real employees and what their jobs are like, he says.
"We have a great campaign of helping students better understand our culture," says Ruschak, who added that KPMG will hire more people in 2011 than in 2010.

"fantastic career-launch vehicles"

Today's undergraduates, says Kalinowski, are looking for employers who will cultivate their talent and help them grow. This, he added, is a strength of the Big Four accounting firms and might have helped them reach the top of the list. Among business students, nearly 80 percent said professional training and development was a priority—one they particularly associated with the Big Four.
"They are perceived as fantastic career-launch vehicles," says Kalinowski. "Undergraduates are looking for employers who will keep them attractive in the job market."
Deloitte, which moved up five places to No. 5 on the list, sees itself as a "career accelerator," says Kent Kirch, the firm's global director of talent acquisition and mobility. Deloitte, he adds, provides hard-working, deserving employees with rapid advancement, training and educational opportunities, and the chance to work with high-caliber clients. Although hiring volume dropped slightly during the economic crisis, things have already begun to pick up, says Kirch, and Deloitte plans to hire about 250,000 new employees globally over the next five years.
Corporate social responsibility is another top priority of the Millennial Generation, says Ruschak. The first of the millennials, born in 1980, entered college in the mid-1990s and have been joining the workforce since the early 2000s. Ruschak says KPMG had interns come up with ideas to develop a literacy project that would get books into the hands of underprivileged children as part of a contest. The winners built a Habitat for Humanity house in New Orleans.
The Universum survey found that employers perceived as having a friendly or creative work environment, such as Google, won points with undergrads, while a positive work-life balance, another millennial priority, helped propel companies such as Ernst & Young up the ranking. Dan Black, Americas director of campus recruiting for No. 3 Ernst & Young, says the company offers formal, flexible work arrangements, such as reduced hours at a pro-rated salary or working from home certain days of the week.
"We want employees to be as successful at home as they are at work," says Black.
Di Meglio is a reporter for Businessweek  in Fort Lee, N.J. 

 

 

IMF backs coalition spending cuts

The IMF said the health of the banking sector had improved in the past 12 months

27 September 2010 Last updated at 15:01 GMT
 

   The International Monetary Fund (IMF) has said the UK economy is "on the mend" and has backed the coalition government's plans to cut spending.
The IMF described the deficit reduction plan as "essential" in supporting the UK's debt position, and said it "supported a balanced recovery".
The body also said that the UK economy would continue to recover at a moderate pace while the cuts were implemented.
The IMF predicted growth of 2% in 2011, rising to 2.5% in the medium term.
"Economic recovery is underway, unemployment has stabilised and financial sector health has improved," the IMF said.
    It acknowledged that the spending cuts designed to reduce the government's budget deficit would hit growth, but it said that the economy would continue to recover.
"Fiscal tightening will dampen short-term growth but not stop it as other sectors of the economy emerge as drivers of recovery, supported by continued monetary stimulus."
It also said companies were starting to increase investment as "the demand outlook strengthens".
Consumers, it added, would remain "thriftier" than they were before the financial crisis, but would be in a position to "gradually raise their consumption as labour markets recover".
'Downside risks' The body also forecast that inflation would fall back below the target rate of 2% by early 2012.
The rise in VAT to 20% in January would ensure that inflation remains above target next year, it said.
Despite the upbeat assessment of the UK economy and the government's plans to cut the deficit, the IMF warned that "downside risks are also sizeable".
These risks, it said, included continued fragile confidence, weakness in the housing market and a greater impact than expected from spending cuts.

bbc.co

HP's New Tablet Could Be an iPad Spoiler

Hewlett-Packard is bundling a tablet with a $399 printer 

 By Cliff Edwards and Aaron Ricadela

Five months after Apple (AAPL) kicked off the tablet era with the iPad, Hewlett-Packard (HPQ) is trying to shake up the market by giving its tablet away free. Well, not completely free. The 7-inch tablet, measured diagonally, comes packaged with HP's $399 Photosmart eStation and serves as the printer's control screen. Equipped with Wi-Fi, it can be detached and used to download e-books from Barnes & Noble (BKS), play digital music, and connect to social media sites such as Facebook.
HP's tablet may look like a bargain next to rival products due out soon from Samsung and HTC. Those tablets are expected to be priced at around $400 with wireless carrier subsidies and don't come with a printer that can fax and scan documents, too. Some analysts think HP's move could cool other manufacturers' ardor for tablets. "It's a little like someone showing up to the first date with an engagement ring," says Roger Kay, president of technology consulting firm Endpoint Technologies Associates.
HP can afford to undercut rivals on price. Last year's version of the same printer had a built-in display and also went for $399. The company's Imaging and Printing Group makes money not on equipment but on cartridges of toner and ink. (Research firm Gartner (IT) crunched the numbers six years ago and figured HP was charging the equivalent of $7,500 per gallon for ink.) The operating margin in HP's printing business was 17 percent in the last quarter, compared with 5 percent in the PC group. Vyomesh Joshi, who runs HP's printing unit, says the goal isn't so much to trounce the competition as to get people to print content off the Web. "There's a content explosion going on," he says, "and we absolutely want to get that content and print anywhere, any time."
The market for tablets is expected to grow from virtually nothing last year to 11 million units in 2010, according to forecasts from ABI Research. One potential concern for HP and other PC makers, though, is that consumers may come to see the tablets as replacements for laptops and desktops rather than as second or third computers. In a recent statement posted on the company's website, Best Buy (BBY) CEO Brian Dunn noted consumers are shifting toward iPad-like devices. Says Richard Shim, research director for IDC's personal computing program: "Everyone is trying to figure out the opportunity for these types of devices, how to position media tablets in a way that they don't cannibalize other businesses."
The eStation's tablet has limitations, which may convince consumers that this tablet is no PC substitute. For example, it does not offer full access to Android Market, the Google (GOOG) online store that carries more than 70,000 applications. Unlike the iPad's 10-hour battery, HP's tablet runs for only four hours before needing a recharge. That may be good enough for people looking to step up from Amazon.com's (AMZN) Kindle, the electronic book reader that uses E Ink's black-and-white technology, to a relatively stylish color screen and entertainment device. "It ain't no iPad, and it's not necessarily obvious that a tablet belongs with a printer," says Endpoint's Kay. "But for that price, I'd certainly be willing to take a look."
The bottom line: HP's decision to bundle a tablet computer with its new $399 printer could make trouble for competitors.

News & Analysis. {Lincoln Dealers May Bail Rather}

September 24, 2010, 11:45 AM EDT

Lincoln Dealers May Bail Rather Than Reinvest for 2 Sales a Week

 By Keith Naughton
 Sept. 24 (Bloomberg) -- Ford Motor Co.’s Lincoln dealers may be facing the bleakest days in the brand’s 93-year history. Soon they will have to decide whether to double down on the luxury line or walk away.

Sales have plunged almost two thirds from their peak and now average fewer than two vehicles a week for each dealer, one- thirteenth the volume of Toyota Motor Corp.’s Lexus.

Most of Ford’s 1,187 Lincoln dealers also sell Mercury vehicles, and will lose more than half their sales when the automaker discontinues the mid-priced line at the end of the year. Now the company may ask them to spend as much as $2 million each to upgrade showrooms and improve customer service at a meeting in Dearborn, Michigan, on Oct. 3.

Lincoln lags behind other luxury lines as its buyer base ages and it fights an image driven by the Town Car, the typical airport shuttle of corporate executives. Lincoln sold an average of 5.8 cars per showroom a month in 2009, compared with Lexus’s more than 78, according to company data and research firm Grant Thornton.

“You can’t make it on that; it’s just impossible,” said Jack Kain, a Ford and Lincoln dealer in London, Kentucky. “Ford has got to do something.”

The second-largest U.S. automaker says it is. Chief Executive Officer Alan Mulally has sold off the Volvo, Aston Martin, Jaguar and Land Rover brands and is focusing on Lincoln, now Ford’s only luxury line, to get a bigger slice of the more- profitable premium-car market. The company is attempting to attract younger buyers to Lincoln with redesigned models like the MKX sport-utility vehicle and touch-screen technology to operate phone, stereo and climate controls.

‘Major Investment’

After peaking at 231,660 vehicles in 1990, Lincoln’s U.S. sales fell to 82,847 last year. While sales have edged up 4.7 percent this year, those of General Motors Co.’s Cadillac have surged 50 percent. Total U.S. sales of luxury models are up 15 percent, according to J.D. Power & Associates.

“We’re going to make a major investment in Lincoln over the next four years with seven new or significantly refreshed products,” Mark Fields, Ford’s president of the Americas, told auto analysts in Southfield, Michigan, yesterday. “Our approach is to enhance and expand Lincoln here in the U.S. and then we can think about maybe looking at global opportunities.”

Shedding Dealers

Ford also is slashing dealerships, attempting to cut its U.S. dealer base in half to about 3,000 to reflect a market share that has dropped to 17 percent from 25 percent in the late 1990s, said Jim Farley, the automaker’s marketing chief.

The retrenching means the company will buy out many Lincoln outlets or pair them with Ford dealers, whose sales have risen 20 percent this year, said Stephen Amabile, a Ford and Lincoln dealer in Springfield, Pennsylvania. That would buttress dealers’ finances in the short run.

“I don’t see how a stand-alone dealer can sell six cars a month and stay in business,” Amabile said. “We’d be disappointed if we didn’t sell that many in a day.”

The Oct. 3 meeting with Ford may be bad news for some Lincoln dealers as the automaker lays out its higher expectations for the brand after the Mercury line disappears from their showrooms, said Bob Tasca Jr., head of the Lincoln- Mercury dealer council.

“After that meeting, dealers are going to have to decide if they can make it without Mercury,” said Tasca, who owns Lincoln-Mercury and Ford showrooms in Rhode Island and Massachusetts. “Dealers will have to decide if it’s a good business case making the extra investment” in Lincoln.

Similar Models

Selling the two surviving brands together may end up hurting Lincoln as consumers compare the models and find the Ford a thrifty alternative, said Paul Melville, a Grant Thornton auto-retailing analyst in Southfield, Michigan. The Lincoln MKS and Ford Taurus, built in the same Chicago factory, share a mechanical foundation and many amenities.

“Ford needs to be careful about getting Lincoln too tied to Ford dealerships,” Melville said. “Lincoln is starting to do a better job of distinguishing itself, but it’s going to take a lot of money and hard effort to get it to be a true luxury brand.”

A new Lincoln small car is among the seven new or improved models Ford has said are coming from Lincoln by 2014. The Dearborn, Michigan-based automaker has overhauled Lincoln’s design theme to outfit models with prominent, split-bow grilles. It also is dedicating engineering and marketing staff to Lincoln, rather than having the brand share personnel with Ford.

“I don’t see a whole lot of new customers coming to the Lincoln brand in the next 12 months or so,” said Amabile, the Pennsylvania dealer. “Until we have an entry-level SUV and the small car, I don’t see any large increases.”

Luxury Experience

Ford wants to upgrade the buying experience to emulate Bayerische Motoren Werke AG, Lexus and Daimler AG’s Mercedes- Benz. At the dealer meeting, Ford will ask the Lincoln dealers to renovate showrooms and improve customer service, said Christian Bokich, a company spokesman.

“Our goal is to set up our dealers so they can succeed wildly and also can treat our customers well,” he said. “Dealers will decide if they’re interested in providing the next level of experience. It will be a question of the market as to whether certain dealers will decide to stay with us.”

Amabile said it cost more than $1 million to upgrade his combined Ford and Lincoln showroom in 2008. He estimates the renovations Ford is seeking will cost dealers $500,000 to $2 million.

Lincoln’s 264 stand-alone dealers -- those who don’t also have a Ford showroom -- will find it hardest to afford additional investments in renovations and training, said Jeff Schuster, an auto analyst with J.D. Power & Associates in Troy, Michigan.

‘Some Push-Back’

“Dealers will feel like, ‘At the same time you’ve cut my volume in half, you’re asking me to invest’,” Schuster said. “I can see some push-back happening.”

At 1,187 dealers, Lincoln has more than five times more showrooms than Lexus, which has 230, Grant Thornton’s Melville said. Lexus sold 145,490 cars and trucks this year through August, almost tripling Lincoln’s 55,776 vehicles sold.

“That’s probably not a sustainable level of sales per dealer with the loss of Mercury,” Schuster said. “Ford does have plans to expand and grow the Lincoln brand. But that’s not something that happens overnight, and dealers have bills to pay.”

--Editors: Kevin Orland, Jamie Butters.
businessweek

23 September 2010 Last updated at 14:56 GM

US existing home sales rise 7.6% in August

Sales are still at their second lowest level in more than ten years

Sales of previously-owned homes in the US rose 7.6% in August, figures have shown, but activity in the housing market remains at low levels.

Sales climbed to an annual rate of 4.13 million, the National Association of Realtors (NAR) said.
But that was from a low base - July's revised annualised rate of 3.84 million was the lowest since 1997.
July had seen a record one-month drop after the end of a tax credit, designed to boost sales.
"The housing market is trying to recover on its own power without the home buyer tax credit," said Lawrence Yun, NAR chief economist.
"Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty."
Dean Maki from Barclays Capital in New York said the data was "a touch better than expected".
"The tax credits pulled sales forward and now we are in an environment where the underlying trends will be income and employment, which we expect to improve and push existing home sales higher in the coming months."
bbc.co.uk

News & Analysis

News & Analysis

McConnell Takes Broad View of 'Small Business' to Fight Tax

The Senate Republican includes movie stars and investors in his definition to claim half of small-business income would be hit with a tax increase 

By Ryan J. Donmoyer

(Bloomberg) — Senate Republican leader Mitch McConnell says President Barack Obama wants to subject half of all small-business income to a tax increase, a move that he says would strike a blow at the U.S. job-creation engine. McConnell's numbers only add up if you consider people like billionaire investor George Soros, most movie stars and Obama himself small-business owners, tax experts say.
That's because the lawmaker is basing his figure on a broad definition of the term that experts say includes authors, actors and athletes who employ few if any workers. It also encompasses businesses that many people wouldn't consider small, such as Soros's hedge-fund firm and major law partnerships.
"Every student who is a part-time Web designer, partner in a law firm with a billion dollars of revenue and investor in a hedge fund gets lumped together in the data, along with real small businesses," said Ed Kleinbard, a former staff director of the congressional Joint Committee on Taxation and now a law professor at the University of Southern California. "We are being over-inclusive in our use of small-business income."
McConnell and other Republicans have thrust small business to the center of the fight over whether to extend Bush-era tax cuts or limit the break to couples earning less than $250,000 as Obama wants. The tax cuts for all income levels will expire Dec. 31 unless Congress acts.

'Most Productive' Firms

Obama and congressional Democrats contend that 97 percent of small businesses will be unaffected by increasing the top two marginal rates, which would go to 39.6 percent from 35 percent, and to 36 percent from 33 percent. The 97 percent figure itself is too broad, since it includes unprofitable firms, consulting income and investment conduits, says Roberton Williams, a senior fellow at the Tax Policy Center in Washington.
McConnell, House Minority Leader John Boehner and other Republicans say even if only 3 percent of small businesses will be hit with the tax increase, they are the "most successful" and generate most of the real business activity. "The last thing you would want to do is raise taxes in the middle of a recession on our most productive small businesses," McConnell, of Kentucky, said in a Sept. 15 Fox News interview.

No Employees?

While tax experts such as Kleinbard, Williams and the Obama administration itself say McConnell's 50 percent figure exaggerates the share of income earned by traditional small businesses, they say they're unable to rebut the percentage with an accurate one of their own.
The reason is the debate revolves around three types of businesses: partnerships, sole proprietorships and so-called S corporations, which often have one or two shareholders. These structures are popular because they allow profits and losses to be reported on business owners' personal tax returns without first going through a layer of corporate tax. Yet the Internal Revenue Service can't tell if the income comes from a small or large business or whether the entity had any employees at all. Obama, who last year earned more than 10 times as much from his work as an author as he did from his $400,000 presidential salary, reports that business income on his personal tax return the same way as does a shareholder in a machine shop with 50 employees.

Freezing the Rates

McConnell introduced legislation on Sept. 13 that would freeze the current tax rates across-the-board for the next year. He bases his argument on a July 12 finding by the joint tax committee that 50 percent of about $1 trillion of "business income" in 2011 will be reported on about 750,000 tax returns that pay the top marginal rates. He says those are small businesses.
"We believe the nonpartisan joint tax committee is the final authority on the matter," said McConnell's spokesman, Don Stewart. Yet the committee staff report said the data "do not imply that all of the income is from entities that might be considered 'small.'" Almost 20,000 of those businesses had receipts of more than $50 million, it said.
A Sept. 3 report by the Congressional Research Service, a nonpartisan agency that analyzes issues for lawmakers, said the tax committee also counted many businesses that have no employees other than the owner. More than 21 million of the country's 27 million businesses have no workers, according to the U.S. Census Bureau; 1.9 million pay taxes as corporations and wouldn't be affected by increases in individual tax rates.

Poor Targeting

Jane Gravelle, who wrote the research service report, says small businesses with employees will pay 12 percent of the taxes generated by increasing the top marginal rates. "Across-the-board tax cuts for high-income individuals are not efficiently targeted to small businesses," Gravelle wrote.
The Tax Foundation, a Washington research group that favors lower taxes, calculated differently, on an assumption that income is always taxed at the owners' top rate, and concluded the small businesses will pay 39 percent of the share. &quote;Small business is whatever you want it to be," said Mitchell Kopelman, chairman of the tax group at Habif, Arogeti & Wynne LLP, an Atlanta-based accounting firm. His firm, which he called "middle-market," would be counted under McConnell's definition, he said.
Kopelman said his firm represents many bona fide small businesses whose owners earn enough to face higher taxes under Obama's proposals. "They're concerned," he said. "Some are going to spend less, they're going to save less, they're going to invest less."

Donmoyer is a reporter for Bloomberg News.

 

 

15 September 2010 Last updated at 17:09 GMT  

HTC launches Desire HD and Z Android mobile phones

 Mobile phone maker HTC has launched two Android mobile phones designed to secure its place as one of Apple's top competitors.

                                                                                                                                                                                                                               

By Tim Weber Business editor, BBC News website  

The Taiwanese firm hopes to challenge the iPhone 4 with the large-screen Desire HD and the Desire Z with its fold-out keyboard.

Both HTC phones are based on Google's Android operating system.

They come a day after Finnish rival Nokia presented three phones to revive its flagging smartphone division.
Mobile phone makers and network operators are betting heavily that consumers are keen on a connected and multimedia experience on the move.
Smartphone sales soar Speaking at the HTC launch, Patrick Choumet, global director of terminals at network operator Vodafone, said smartphone sales were soaring, already taking more than 30% of the market; in three years Vodafone expects that smartphones will make up 70% ot total mobile phone sales.
With most smartphones now easy to use, customers are making heavy use of new services. During the past year, Mr Choumet said, Vodafone had experienced a doubling of data traffic for both location services like maps, and access to social networks like Twitter and Facebook.

The new HTC phones play to both trends. They are based on the latest version of Google's Android operating system - version 2.2, nicknamed FroYo - although HTC makes great play of its user interface Sense, which sits on top of the standard Android platform.

The new HTC Sense is not a revolution; current HTC phone owners will discover a raft of small tweaks to the software, all designed to ensure a smoother user experience.
Nokia's new top smartphone, the N8, sports a 12 megapixel camera. HTC's HD phone is countering with an 8 megapixel camera that is boosted by fairly sophisticated onboard picture editing software.
Big screen experience It's here that the HD's large 4.3 inch (10.9 cm) screen - framed by a solid aluminium body - comes into its own.
While large, the HD does not feel unwieldy - unlike Dell's mini-tablet Streak with its 5-inch screen.
The Desire HD is larger than the Apple iPhone 4 - 8mm taller, 10mm wider and 2.5mm thicker - but then the iPhone has a comparatively small screen of just 3.5 inches.

The Desire HD has a huge screen, but at the cost of size and weight

Weight may be an issue for some buyers, with the HTC HD's quite heavy at 164 grams, compared to Apple's 137.
The Desire Z is even heavier at 180g, even though it is not much larger than the original HTC Desire. The weight is the price users have to pay for the phone's solidly-built flip-out keyboard. Like the Nokia N97, the phone suffers from keyboard stretch - as the keyboard is both slim and wide.
HTC's real challenge to Apple, however, is its "cloud service" for mobile phones, dubbed HTCSense.com.
Similar to Apple's MobileMe offering, the service allows users to control their phone from their computer, not just by backing up everything on the phone to the "internet cloud" where it can be accessed from any location with any web device.
Desire owners that have forgotten their phone at home, or even lost it, now can locate it, lock it remotely, tell the phone to forward all calls to another number, leave a text message for the finder of the phone, or erase all data on the phone if it is well and truly lost.
While Apple's MobileMe comes with a price tag, HTC promises to offer its service free to owners of Desire HD and Z phones - although some applications like turn-by-turn navigation for cars will come at a premium.
Technically, however, HTC's new product lineup is probably not about rivalling the iPhone.
Rather, it is a challenge to the makers of other mobile phones based on the Android operating system.


 

 

Ahead of all.

Best And Worst Performing Companies by Region

Wall Street Banking on Republicans to Push Legislative Goals

John Boehner

                                                                              
                                                                              
                                                                              
September 14, 2010, 12:22 AM EDT

By Robert Schmidt

Sept. 14 (Bloomberg) -- Wall Street is preparing for a Republican surge in Congress that could help it block proposed taxes on banks and investments, blunt new financial regulations and regain some of the lobbying firepower it lost during the financial crisis.
What bankers won’t be looking for, lobbyists said, is a repeal -- or any major changes -- to the Dodd-Frank bill, the most sweeping rewrite of financial regulation since the 1930s. While the law is widely criticized by the industry, Republican gains in the November election won’t be large enough to override a veto by President Barack Obama.     
Financial firms, which for most of this year have been shifting political contributions to Republicans, say they’ll push Congress to restrain federal agencies that are filling in the details of the law, writing rules in areas including capital standards and a ban on proprietary trading. Banks would prefer to have Republicans overseeing the regulators, lobbyists said.
A Republican takeover would mean the banking industry “will have an active voice on the Hill, trying to influence the direction of regulatory agencies,” said Travis Plunkett, legislative director at the Consumer Federation of America, noting that only three House Republicans voted for Dodd-Frank. “The oversight process, grilling agency officials, that’s a big deal that shouldn’t be underestimated.”

More than a dozen lobbyists, lawyers and officials at large banks, hedge funds and Wall Street trade associations discussed in interviews the shape of the banking industry’s legislative agenda. They spoke on condition of anonymity because their firms haven’t authorized them to speak publicly before the election.

High-Frequency Trading

Other issues high on financial firms’ legislative agenda include heading off attempts to regulate high-frequency stock trading and pushing for trade agreements, deficit reduction and revamping Fannie Mae and Freddie Mac -- all areas where financial companies say their interests are more aligned with Republicans.

Most executives said the industry would welcome a divided government, because that would make it difficult to pass any new financial laws. Polls show that Republicans are within striking distance of taking over the House, where they need a gain of 39 seats, and are drawing closer in the Senate, where they need 10 more seats.

While House Minority Leader John Boehner of Ohio said in July that he favored a repeal of Dodd-Frank, bank executives don’t see that as a realistic option.

If Republicans take over the House, banks will try to stop the push for a tax or fee on the biggest financial companies -- which has been threatened by Democrats to help pay for the $700 billion bailout, implementing the regulatory law and other initiatives.

Carried Interest

Hedge and private equity funds also hope to derail the Democrats’ plan to raise taxes on investment profits known as carried interest. General partners at the funds can now qualify for capital gains tax treatment on their pay derived from investment profits, which is lower than the income tax rate.

The Obama administration includes the carried-interest tax in its 2011 budget proposal, and economists at the congressional Joint Committee on Taxation estimate it will bring in $13.5 billion over the next decade.

Should Congress be unable to decide the future of former president George W. Bush’s tax cuts this year, a Republican- controlled Ways and Means Committee may be more receptive to arguments from the financial industry to preserve lower tax rates, including those on dividends and capital gains, for the highest earners.

Milliseconds

Republican lawmakers already have been focused on high- frequency trading, an issue important to hedge-fund managers who make money using computers to buy and sell thousands of shares in milliseconds and brokerage firms that execute the trades.

The practice, which accounts for more than 50 percent of daily stock trading, has drawn criticism from investors and Democratic members of Congress who question whether it contributed to the May 6 market plunge when $862 billion was erased from the value of U.S. equities in less than 20 minutes.

Spencer Bachus of Alabama and Jeb Hensarling of Texas, Republican members of the House Financial Services Committee, wrote on Aug. 24 to Securities and Exchange Commission Chairman Mary Schapiro, advising her to get a better understanding of what caused the crash before “assigning blame to algorithmic or high-frequency trading firms.”

Virginia’s Eric Cantor, the second-ranked House Republican, has urged Schapiro to make sure she has empirical evidence to support new regulations.

Free Trade

The Republican agenda could also give new life to free- trade agreements with Colombia, Panama and South Korea, which have languished amid opposition from unions, said Sage Eastman, spokesman for Representative Dave Camp of Michigan, the top Republican on the Ways and Means committee. Marisol Garibay, spokeswoman for Republicans on the House Financial Services Committee, said Republicans would push to decide the fate of Fannie Mae and Freddie Mac, the mortgage finance companies in government conservatorship.

The new Consumer Financial Protection Bureau, to be housed at the Federal Reserve, may draw great interest from lawmakers, analysts said. While it has the ability to fund itself, and won’t be subject to congressional pressure on its budget, the agency will have to write a slew of new rules in areas ranging from credit cards to mortgages.

Slowing the Rules

Overall, Republican oversight will “certainly complicate the rule-writing process and it could slow it down in particular areas,” said Kevin Petrasic, a former official at the Office of Thrift Supervision who now is an attorney at Paul, Hastings, Janofsky & Walker in Washington.

While strong profits have returned to Wall Street during Obama’s stewardship of the economy, the bankers’ shift toward Republicans was reflected in campaign contributions this year. David Hirschmann, president of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, said that bankers and the business community feel demonized by the administration.

“For two and a half years, it’s been tar and feather,” Hirschmann said. “They are just hoping for an environment where the impact on the broader economy is at least considered” in setting policy.

In June, the month when Congress was putting final touches on the Dodd-Frank regulatory law, employees in the securities and investment industry gave 68 percent of their donations to Republicans, according to research from the nonprofit Center for Responsive Politics.

Obama’s Sources

Contrast that with 2008, when employees of securities and investment firms contributed $14.9 million to Barack Obama’s presidential campaign, more than any other industry and $6.2 million more than they contributed to Republican John McCain. Obama’s five biggest corporate sources of money included employees of Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co., the center said.

Now political action committees at almost all the big banks have rebalanced. Goldman Sachs’s PAC has so far given 51 percent to Democrats for the 2009-2010 election cycle, down from 64 percent in 2007-2008. Morgan Stanley cut contributions to Democrats from 54 to 47 percent, Bank of America Corp. from 53 percent to 44 percent and Citigroup from 53 percent to 50 percent. JPMorgan’s PAC is the only one to increase support for Democrats, from 47 percent in 2007-08 to 49 percent so far in this cycle.

“It’s clear that if Republicans are handed back the keys, it’s going to be big Wall Street banks that are going to be driving the car,” said Hari Sevugan, a spokesman for the Democratic National Committee.

--With assistance from Jonathan Salant, Jesse Westbrook and Brian Faler in Washington. Editors: Lawrence Roberts, David Scheer.
To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net
businessweek
                                                                                                    

UK banks already hold a sufficiently high level of capital

New bank capital ratio 'to be set at 7%

Central bank governors and senior regulators are to impose tighter restrictions on the level of capital banks must hold, the BBC has learnt.

In future, they will need a "tier one capital ratio" of at least 7%. The ratio is a measure of banks' cushion against future losses. The current requirement is just 4% and the new figure is designed to protect the world's banks in future downturns. 

The new rules were drawn up by the Basel Committee on Banking Supervision.

They are expected to be approved by the governors and senior regulators when they meet in Switzerland on Sunday, BBC business editor Robert Peston says.

It will then still need to be ratified by the head of government of the G20 group of nations at their summit in November.
Low levels of capital relative to assets were a major factor in the recent global financial crisis.
Northern Rock and Royal Bank of Scotland in the UK, and Citibank in the US were among many banks that had dangerously small amounts as backup.
The tier one capital ratio is made up of the bank's equity - its shares - and its retained earnings, that is profits not paid out as dividends.
If a bank makes losses on loans, it is the shareholders who take this loss.
However, once all of a bank's equity is eaten up by losses, the bank becomes insolvent - in other words its assets are no longer worth enough to repay all of its debts.
The new requirement should prove little problem for the major UK banks, as it is lower than the ratio currently held by them.

It is also well below the 10% level that was being pushed for by the UK, the US and Switzerland.

But our business editor says there was stiff resistance to the 7% rate from some quarters, led by Germany, many of whose banks typically have much lower stocks of core capital in the form of equity and retained earnings.
He says many will have great difficulty in meeting the new standard.
The updated "Basel" rules - named after the Swiss city where the central bankers meet - will mean some banks will need to raise a lot more money from shareholders.
The rules may have the effect of limiting lending, at least in the short-term, as most banks - particularly those in Europe - have too little capital for the loans they have already made.
9 September 2010 Last updated at 09:40 GMT  bbc.co.uk

 

 

Bankers meet to agree new rules

Any deal will need to be ratified by national governments

12 September 2010 Last updated at 10:21 GMT

Central bank governors and senior regulators meet in Switzerland to agree a deal requiring banks to hold more capital in reserve.

• Osborne gives Bank greater powers

 At present the "tier one capital ratio" is 4%. The ratio is a measure of banks' cushion against future losses.

BBC business editor Robert Peston says in future it will be at least 7%.  

The meeting at the Bank for International Settlements is a major part of the global financial reforms after the global economic downturn.

 

Ratification

The new figure is designed to protect the world's banks in future downturns.
 Low levels of capital relative to assets were a major factor in the recent global financial crisis.

Any agreement will still need to be ratified by the heads of government of the G20 group of nations at their summit in November.
The tier one capital ratio is made up of equity - its shares - and retained earnings. If a bank makes losses on loans, it is the shareholders who take this loss.
However, once all of a bank's equity is eaten up by losses, the bank becomes insolvent - in other words its assets are no longer worth enough to repay all of its debts.
The new requirement should prove little problem for UK banks, as it is in fact lower than the 8-9% ratio currently held by them.
It is also well below the 10% level that was being pushed for by the UK, the US and Switzerland.
The updated rules will mean some banks will need to raise a lot more money from shareholders.
The rules may have the effect of limiting lending, at least in the short term, as most banks - particularly those in Europe - have too little capital for the loans they have already made.
bbc.co.uk
 

The Challenges Facing Burger King Buyer 3G Capital

  The investment outfit and its Brazilian backers will need to do more than just cut costs at the    troubled burger chain

By Diane Brady

When it comes to the pitfalls of operating a fast-food chain, Burger King (BKC) has experienced them all: falling profits and sales, angry franchise owners, mediocre innovation, growing competition, and a razorlike focus on the very customers who have been hardest hit during the recession. So when a little-known investment outfit called 3G Capital said it would buy the Miami-based chain for about $4 billion on Sept. 2, an obvious question was: why?
Burger King may be the world's No. 2 hamburger chain, but it's a distant runner-up, with 12,174 restaurants worldwide vs. 32,466 for McDonald's (MCD). McDonald's averages about twice the sales volume per U.S. outlet, and its stock has far outperformed that of its rival on the strength of new products such as coffee drinks and smoothies. Burger King, in contrast, has seemed fixated on hawking a $1 double cheeseburger—now $1.29 following a bitter lawsuit with franchisees who claim it's a money loser. The chain has also narrowed its target audience, chasing young men with cheeky ads, while McDonald's has gone for broad family appeal.
Sources close to 3G say the partners are betting they'll be able to trim costs (though no more than 10 percent) and ramp up international expansion to make the deal work. (3G has also been in the news lately as the employer of Marc Mezvinsky, Chelsea Clinton's new husband.) Most of 3G's money comes from three Brazilian billionaires: Jorge Paulo Lemann, Marcel Herrmann Telles, and Carlos Alberto da Veiga Sicupira. They've offered investors $24 per share, 46 percent more than Burger King's Aug. 31 closing price. If the deal goes through—which is likely, given the support of the board and the private equity firms that hold 31 percent of shares—the chain will go private for the second time in less than a decade. (TPG Capital, Goldman Sachs Capital Partners, and Bain Capital bought Burger King from Britain's Diageo (DEO) for $1.5 billion in 2002 and took it public in 2006.) Investors then expect 3G to expand in faster-growing markets such as Latin America and Asia.
Burger King declined to comment beyond public releases. In a letter to franchisees, 3G Capital Managing Partner Alex Behring, who will be co-chairman of the chain once the deal closes, wrote about 3G's "hands-on management approach" and intention to invest in the brand.

Cost-Cutting Expected

Yet the first priority, given the Brazilian investors' past record, is likely to be a rapid-fire push to cut costs. That's certainly been the case at Anheuser-Busch Inbev (BUD), the world's largest brewer, which Lemann's group helped create when InBev, the Belgian brewer it had a stake in, completed a hostile takeover of the American brewer two years ago. Lemann, Telles, and da Veiga Sicupira all sit on the board of the merged company. After the merger, former Anheuser-Busch employees soon lost perks ranging from business-class flights and BlackBerrys to free cases of beer. About 1,400 quickly lost their jobs. Gone were the lush furnishings and private planes. Even Brazilian-born Chief Executive Officer Carlos Brito flies economy class.
Through a spokesman, 3G issued a statement saying "any potential opportunities for cost efficiencies will be managed with the overall benefit of the company in mind, without compromising the franchisees." A person familiar with 3G's plans for Burger King says the company is ripe for cost-cutting, especially at company-owned restaurants, which are typically less profitable than those operated by franchisees. This person says labor costs are high at these restaurants, as is overhead at the Miami headquarters.
businessweek.com

 

 

 

The bank's loss was the largest in Irish history (Anglo irish bank)

The bank's loss was the largest in Irish history

8 September 2010 Last updated at 14:56 GMT 

Anglo Irish Bank to be broken up by Dublin

The Irish government has said it will break up the nationalised Anglo Irish Bank as part of the bank's resolution.

The failed lender will be split in two - a funding bank and an asset recovery bank, the finance ministry said. The asset recovery bank would retain a banking licence, but would focus on managing the existing loans inherited by Dublin when it took over the bank. The funding bank, meanwhile, will hold all of Anglo's deposits and will not engage in any new lending.

"It will be a stand-alone, regulated bank, completely separated from Anglo's loan assets and it will be owned directly by the Minister for Finance," said Finance Minister Brian Lenihan.

The deposits are guaranteed by the Irish government.
The news comes a week after Anglo announced the largest corporate loss in the history of the Republic of Ireland.
The bank made a record loss of 8.3bn euros (£6.7bn) in the first half of 2010.
The bank got into severe difficulty in 2008 following the sharp downturn in the Irish housing market which left it with substantial bad debts.
bbc.co.uk

 

 

Workers of the World, Innovate

Courtesy of Getty Images

Special Report September 7, 2010, 11:30PM EST 

Pitney Bowes, AT&T, and Electronic Arts are among the companies using software to tap workers' collective intelligence to solve problems, reduce costs, and find new markets

By Rachael King  Pitney Bowes Inc., the maker of postage scales and mail-sorting equipment, needed to find a way to field customer inquiries without passing callers from one agent to the next.Yet rather than ask managers to come up with a fix, Pitney Bowes (PBI) executives put the challenge to the workforce. Within days, employees proffered a solution that the company then implemented. "It goes far beyond management deciding to change and to innovate, and there are so many good ideas that could be acted on that are with the people who are right there every day, dealing with customers," says Pitney Bowes Chief Executive Officer Murray Martin. A measurable increase in customer satisfaction was "almost immediate."

Under pressure to add growth while keeping research costs in check, companies are striving to get better at tapping in-house expertise. Pitney Bowes, AT&T (T), Cisco Systems (CSCO), Electronic Arts (ERTS), Wal-Mart Stores (WMT), and MetLife (MET) are using software and other tools to mine the collective intelligence of their workforce, organize the resulting suggestions, and then predict which ones are most likely to succeed.
Pitney Bowes, which in the past used a suggestion box to get input from employees, now relies on a program called Idea Central from U.K.-based Imaginatik Plc (IMTK:LN). Since 2008, Pitney Bowes executives have asked workers to tackle 42 different challenges and received about 3,000 ideas. The company has implemented or plans to put in place about 700 of those, Martin says. About 10,000 employees of Stamford (Conn.)-based Pitney Bowes use Idea Central.

$250 Million Market

Companies spend an annual $250 million on collective intelligence tools, says Imaginatik Executive Vice-President Luis Solis, who estimates that the market is growing 15 percent to 30 percent a year.
Video game publisher Electronic Arts (ERTS) wanted to do a better job predicting which games would succeed to more effectively allocate marketing dollars. So it surveyed employees using software from San Francisco-based Crowdcast. Forecasts based on that polling turned out to be more accurate than the company's own projections, according to Crowdcast CEO Mat Fogarty.
AT&T, the largest U.S. telephone company, uses software sold by Spigit Inc. to let employees generate ideas and bet on which ones will succeed. AT&T now has about 40,000 employees that have signed up for its internal network called The Innovation Pipeline. AT&T was among 164 companies that attended an Aug. 19 customer conference sponsored by Spigit in Half Moon Bay, Calif. "We wanted to democratize how we innovate at AT&T and take it out of the labs," AT&T innovation leader Patrick Asher said at the conference.
The company spends several million dollars a year on collective intelligence, Asher said. It has sought feedback in such areas as customer service and how to deploy Long-Term Evolution, a next-generation wireless technology, more rapidly. Each quarter, AT&T senior executives fund a handful of what they consider the best ideas.

Employee Participation

Measuring collective intelligence can be a struggle at companies whose employees won't participate or whose midlevel managers consider the efforts a waste of time. "You will have managers who don't really see it and you have to find a way of overcoming that and forcing it to occur anyway," says Martin at Pitney Bowes, where each business is required to post a challenge.
To keep employees coming back, AT&T senior executives offer financial incentives, including a drawing to win $500, Asher said at the conference. The company also doles out virtual currency that can be used to bet on which ideas are most likely to succeed. Participation in The Innovation Pipeline surged to 17,862 in October 2009 from 4,082 in July of that year.
Another hurdle lies in keeping staffers from betting on the success of ideas—say, giving everyone a raise—that, while appealing to the rank and file, are unlikely to win management backing. At AT&T, employees lose virtual currency when they bet on ideas that don't prevail.
Martin also recommends being up-front and responding to every idea, including telling employees which ideas simply won't work. "They'd sooner hear that than nothing," he says.

Long-Term Innovation

Even ideas that result in incremental changes can make a bigger difference in the long run, says John Hagel III, co-author of The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion. People recognized as problem-solvers in one area can join with colleagues in other businesses or regions to tackle larger issues, he says. "Then, over time, you see teams coming together, people from very different parts of the world," says Hagel, also the co-chairman for the Deloitte Center for the Edge. "There's where you start to see the real innovation."
At Pitney Bowes, managers issued a challenge to employees in the international software business, which prompted a conversation with colleagues in another division and ultimately led to three contracts worth 300,000 euros ($383,940). "It's people connecting and sometimes there are unintended consequences," Martin says.
Pitney Bowes welcomes ideas that can result in changes large or small. To entice employees to aim high, it created a competition called Innovation Idol, modeled on the talent-search TV show American Idol. The effort culminated in an event where backers of the six best promising ideas made onstage presentations to senior management. Martin, clad in a mask of Simon Cowell, the harshest judge on the TV show, was so impressed with the pitches that he chose to fund two of them on the spot.

King is a writer for Bloomberg Businessweek in San Francisco. 

businessweek.com

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