Lucky Charms. Froot Loops. Cocoa Pebbles. A ConAgra frozen dinner with corn dog and fries. McDonald’s Happy Meals.
These foods might make a nutritionist cringe, but all of them have been identified by food companies as healthy choices they can advertise to children under a three-year-old initiative by the food industry to fight childhood obesity.
Now a hard-nosed effort by the federal government to forge tougher advertising standards that favor more healthful products has become stalled amid industry opposition and deep divisions among regulators.
A report to Congress from several federal agencies — expected to include strict nutritional definitions for the sorts of foods that could be advertised to children — is overdue, and officials say it could be months before it is ready. Some advocates fear the delay could result in the measure being stripped of its toughest provisions.
“All of a sudden everything is dead in the water,” said Dale Kunkel, a communications professor at the University of Arizona who is an expert on children’s advertising. “I have heard no arguments to slow this down other than that the industry doesn’t like it.”
Among the requirements under consideration and included in a preliminary proposal by the agencies: Cereals could have only eight grams of sugar per serving, far less than many cereals that are heavily advertised to children (Lucky Charms and Cocoa Pebbles have 11 grams and Froot Loops has 12). The level for saturated fats would be set so low it would exclude peanut butter. And to qualify for advertising, all foods would have to contain significant amounts of wholesome ingredients like whole grains, low-fat milk, fruits or vegetables.
Critics have long complained that standards used by food manufacturers to designate healthy foods suitable for advertising to children are flawed, with ads for foods high in calories, fat, sugar and salt remaining a prominent part of the Saturday morning ritual on television. The Obama administration, as part of its campaign against childhood obesity, has also called on food companies to do more to ensure that advertising aimed at children is for healthier products.
The federal involvement took a step forward last year when Congress ordered the Federal Trade Commission, the Food and Drug Administration, the Agriculture Department and the Centers for Disease Control and Prevention to recommend standards for children’s food advertising.
The agencies released the preliminary proposal in December. It was far tougher than many had anticipated; advocates applauded but the food and advertising industries gave it a swift thumbs-down.
“The proposal was extraordinarily restrictive and would virtually end all food advertising as it’s currently carried out to kids under 18 years of age,” said Dan Jaffe, executive vice president for government regulations of the Association of National Advertisers, which represents companies that advertise their products.
Mr. Jaffe said he saw the delay in submitting the final report to Congress as a good sign, suggesting that changes were in the works.
The report was expected last week. Betsy Lordan, a spokeswoman for the Federal Trade Commission, said she could not predict when it would be finished. She said the agencies would first release their plan for public comment before submitting it to Congress.
The far-reaching preliminary proposal — and the resistance it encountered — appear to have put the agencies in a bind and created divisions among them, with some federal officials wanting to step back and take a more measured approach.
Restrictions on advertising are problematic in any event, in large part because of free speech issues.
To avoid a showdown, the Federal Trade Commission has said it wants the food and advertising industries to voluntarily accept changes. But the preliminary proposal would have to be substantially modified to gain industry support — and such changes would undoubtedly lead to charges that the government had backed down under pressure.
“With obesity rates the way they are, it’s no longer acceptable for companies to be marketing foods to kids that contribute to obesity and heart disease and other health problems,” said Margo G. Wootan, director of nutrition policy of the Center for Science in the Public Interest, an advocacy group.
At the middle of the debate are questions about the industry’s effort to take steps on its own to improve the way it advertises food to children.
The effort, called the Children’s Food and Beverage Advertising Initiative, began in mid-2007 and now involves 16 large companies that account for about three-quarters of the food and beverage ads on children’s television.
Under the initiative, which is run by the Better Business Bureau, each company sets nutritional criteria for foods it considers suitable to advertise.
The companies agree to feature only foods that meet those criteria in ads that appear during programming predominantly aimed at children under 12, like Saturday morning cartoons or certain time slots on the Nickelodeon network. The pledge also applies to some print advertising and Web sites intended for use by young children.
But critics say the nutritional standards the companies chose are too loose.
Kellogg’s standards allow it to advertise cereals that are high in sugar, like Froot Loops and Frosted Flakes, to young children. They also allow marketing for a candy called Yogos, which has sugar as its main ingredient.
Celeste A. Clark, the senior vice president for global nutrition at Kellogg, said in an e-mail message that the company’s cereals provided nutrients children need. Asked why candy qualified as a healthy choice for children, Dr. Clark said, “We believe that with balance and moderation all foods can have a place in the diet.”
McDonald’s and Burger King justify ads for their Happy Meals and Kids Meals by pledging to show lower-calorie versions of the meals in the ads. Those include apple slices instead of French fries and low-fat milk or fruit juice instead of soda. But critics point out that images of those products often appear fleetingly in ads that emphasize movie tie-ins and toy giveaways, and that children might not realize they are being encouraged to choose them because they are healthier.
McDonald’s said in a statement: “Any fair and objective review of our menu and the actions we’ve taken will demonstrate we’ve been responsible, we’re committed to children’s well-being, and we’ll continue to do more.”
Elaine D. Kolish, the industry initiative’s director, said that the program had improved the types of foods featured in children’s advertising and that companies had reformulated dozens of products to reduce sugar, salt and calories.
Four participants in the program, Cadbury, Coca-Cola, Hershey and Mars, have agreed not to aim any advertising to children under 12.
Ms. Kolish said the initiative had been getting more rigorous, with companies increasing the types of marketing covered to include things like computer games and cellphone ads.
“It’s moving the needle,” she said. “We’re not saying things are perfect yet. There’s still room for further growth, but it’s making a difference.”
Friday, July 23, 2010
Indian groups offer best rates
Indian banks now offer the highest savings rates in the UK, following the failure of previous top-payers from Iceland and Ireland in the credit crisis.
Indian deposit-takers head the “best-buy” tables for fixed-rate savings bonds, which give higher returns to savers prepared to tie up their money for one to five years.
The top rate of 4.9 per cent, fixed for five years, is from Bank of Baroda, India’s fourth biggest deposit-taker, beating the highest rate from a UK banking brand of 4.56 per cent. By contrast, with the base rate just 0.5 per cent, the best instant access rates from any bank are below 3 per cent.
Bank of Baroda, which has nine branches in the UK, predominantly serving British Asians, this week started online sales of savings bonds through Moneysupermarket.com, the comparison service.
Other large Indian banks – including State Bank of India, ICICI and Punjab National Bank – have successfully attracted UK deposits in recent years.
Sukhdev Sharma, managing director of Punjab National Bank (International), which offers the highest fixed savings rates for one - and two-year terms (up to 4 per cent), said: “The credibility of Indian banks has gone up in the year or two since the crisis.”
Deposits of up to £50,000 with these banks’ UK arms are covered by the UK’s Financial Services Compensation Scheme, giving savers the same protection as they have with a traditional high street name.
Subhash Mundra, chief executive of Bank of Baroda UK, added that savers had the reassurance that State Bank, Punjab and Baroda are all majority-owned by the Indian state.
“So the logic of a bank going down would be a government default,” he said.
He estimated that Indian banks held more than £5bn of UK deposits – equivalent to the savings book of one of the bigger building societies.
“We’re certainly ahead of the Chinese banks in the UK,” he said.
Indian deposit-takers head the “best-buy” tables for fixed-rate savings bonds, which give higher returns to savers prepared to tie up their money for one to five years.
The top rate of 4.9 per cent, fixed for five years, is from Bank of Baroda, India’s fourth biggest deposit-taker, beating the highest rate from a UK banking brand of 4.56 per cent. By contrast, with the base rate just 0.5 per cent, the best instant access rates from any bank are below 3 per cent.
Bank of Baroda, which has nine branches in the UK, predominantly serving British Asians, this week started online sales of savings bonds through Moneysupermarket.com, the comparison service.
Other large Indian banks – including State Bank of India, ICICI and Punjab National Bank – have successfully attracted UK deposits in recent years.
Sukhdev Sharma, managing director of Punjab National Bank (International), which offers the highest fixed savings rates for one - and two-year terms (up to 4 per cent), said: “The credibility of Indian banks has gone up in the year or two since the crisis.”
Deposits of up to £50,000 with these banks’ UK arms are covered by the UK’s Financial Services Compensation Scheme, giving savers the same protection as they have with a traditional high street name.
Subhash Mundra, chief executive of Bank of Baroda UK, added that savers had the reassurance that State Bank, Punjab and Baroda are all majority-owned by the Indian state.
“So the logic of a bank going down would be a government default,” he said.
He estimated that Indian banks held more than £5bn of UK deposits – equivalent to the savings book of one of the bigger building societies.
“We’re certainly ahead of the Chinese banks in the UK,” he said.
Asian Stocks Rise for Third Week on Commodities, Profit Outlook
July 24 (Bloomberg) -- Asian stocks rose for a third week as commodity prices gained and as U.S. companies reported or raised profit forecasts, boosting confidence in the strength of global economic growth.
BHP Billiton Ltd., the world’s largest mining company, climbed 4 percent this week in Sydney. Hon Hai Precision Industry Co., the world’s largest electronics contract manufacturer, gained 3.7 percent in Taipei after Microsoft Corp. reported positive earnings in the U.S. China Resources Land Ltd., a state-controlled developer, soared 6.4 percent in Hong Kong on speculation China may ease tightening measures.
The MSCI Asia Pacific Index climbed 1.0 percent, advancing for a third-straight week and posting the longest winning streak since the week ended April 16. The gauge has slumped 8.5 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will slow global growth.
“Sentiment has been improving after the better-than- expected U.S. earnings eased investors’ concerns about a poor economic outlook,” said Michiya Tomita, a Hong Kong-based fund manager for Mitsubishi UFJ Asset Management Co., which oversees $64 billion.
Hong Kong’s Hang Seng Index rose 2.8 percent this week as the city’s developers gained on prospects of higher property prices. China’s Shanghai Composite Index climbed 6.1 percent. South Korea’s Kospi Index increased 1.1 percent. Australia’s S&P/ASX 200 Index rose 0.8 percent, led by materials companies. Japan’s Nikkei 225 Stock Average advanced 0.2 percent in a four- day, holiday-shortened week.
Materials Stocks Advance
A gauge of material companies gained the most this week among the 10 industry groups in the MSCI Asia Pacific Index, followed by energy companies.
BHP Billiton climbed 4 percent to A$39.68 this week in Sydney, while Rio Tinto Group, the world’s third-biggest mining company, jumped 6.2 percent to A$69.86. Sumitomo Metal Mining Co., Japan’s largest nickel producer, climbed 4.8 percent to 1,130 yen in Tokyo. Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, surged 7 percent to HK$6.59 in Hong Kong.
The London Metals Exchange Index, a measure of six metals, rose 7.0 percent this week, while copper futures for September delivery jumped 8.7 percent in New York after a report showed sales of previously owned U.S. homes fell less than forecast in June, bolstering the demand outlook for the metal. Crude oil for September delivery climbed 3.2 percent.
Hon Hai Increases
Microsoft, the world’s largest software maker, reported on July 22 a 48 percent climb in fourth-quarter net income, exceeding the average analyst estimate in a Bloomberg survey. Separately, California-based company Apple Inc. forecast fourth- quarter sales that topped analysts’ estimates.
“Microsoft’s earnings reiterated that demand for electronics in the second half is still positive,” said Monika Yang, who helps oversee $2 billion at Hamon Asset Management Ltd. in Hong Kong. “This is a boost to Asian stock sentiment as it stops the earlier noises about possible weak demand.”
Hon Hai Precision Industry gained 3.7 percent to NT$125 this week in Taipei. Samsung Electronics Co., Asia’s biggest maker of computer chips, flat screens and mobile phones, increased 1.1 percent to 811,000 won in Seoul. James Hardie Industries SE, the biggest seller of home siding in the U.S., gained 2.6 percent to A$6.37 in Sydney.
China Policy Speculation
Property developers rose this week on speculation China’s government will soon end policies to cool the housing market. Donald Straszheim, a senior managing director for China research at International Strategy & Investment Group, said China will “back away” from its tightening policies in the housing market within three months as the economy faces a bigger risk from a slowdown than inflation.
China Resources Land jumped 6.4 percent to HK$16.62 in Hong Kong. Guangzhou R&F Properties Co., the biggest real-estate company in the southern Chinese city, surged 13 percent to HK$12.34. China Vanke Co., the country’s largest listed developer, climbed 11 percent to 9.86 yuan in the southern city of Shenzhen.
“What the market is betting now is that the government will allow the current tightening measures to be relaxed going forward,” said Sun Chao, an analyst at Citic Securities Co. in Shanghai.
BHP Billiton Ltd., the world’s largest mining company, climbed 4 percent this week in Sydney. Hon Hai Precision Industry Co., the world’s largest electronics contract manufacturer, gained 3.7 percent in Taipei after Microsoft Corp. reported positive earnings in the U.S. China Resources Land Ltd., a state-controlled developer, soared 6.4 percent in Hong Kong on speculation China may ease tightening measures.
The MSCI Asia Pacific Index climbed 1.0 percent, advancing for a third-straight week and posting the longest winning streak since the week ended April 16. The gauge has slumped 8.5 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will slow global growth.
“Sentiment has been improving after the better-than- expected U.S. earnings eased investors’ concerns about a poor economic outlook,” said Michiya Tomita, a Hong Kong-based fund manager for Mitsubishi UFJ Asset Management Co., which oversees $64 billion.
Hong Kong’s Hang Seng Index rose 2.8 percent this week as the city’s developers gained on prospects of higher property prices. China’s Shanghai Composite Index climbed 6.1 percent. South Korea’s Kospi Index increased 1.1 percent. Australia’s S&P/ASX 200 Index rose 0.8 percent, led by materials companies. Japan’s Nikkei 225 Stock Average advanced 0.2 percent in a four- day, holiday-shortened week.
Materials Stocks Advance
A gauge of material companies gained the most this week among the 10 industry groups in the MSCI Asia Pacific Index, followed by energy companies.
BHP Billiton climbed 4 percent to A$39.68 this week in Sydney, while Rio Tinto Group, the world’s third-biggest mining company, jumped 6.2 percent to A$69.86. Sumitomo Metal Mining Co., Japan’s largest nickel producer, climbed 4.8 percent to 1,130 yen in Tokyo. Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, surged 7 percent to HK$6.59 in Hong Kong.
The London Metals Exchange Index, a measure of six metals, rose 7.0 percent this week, while copper futures for September delivery jumped 8.7 percent in New York after a report showed sales of previously owned U.S. homes fell less than forecast in June, bolstering the demand outlook for the metal. Crude oil for September delivery climbed 3.2 percent.
Hon Hai Increases
Microsoft, the world’s largest software maker, reported on July 22 a 48 percent climb in fourth-quarter net income, exceeding the average analyst estimate in a Bloomberg survey. Separately, California-based company Apple Inc. forecast fourth- quarter sales that topped analysts’ estimates.
“Microsoft’s earnings reiterated that demand for electronics in the second half is still positive,” said Monika Yang, who helps oversee $2 billion at Hamon Asset Management Ltd. in Hong Kong. “This is a boost to Asian stock sentiment as it stops the earlier noises about possible weak demand.”
Hon Hai Precision Industry gained 3.7 percent to NT$125 this week in Taipei. Samsung Electronics Co., Asia’s biggest maker of computer chips, flat screens and mobile phones, increased 1.1 percent to 811,000 won in Seoul. James Hardie Industries SE, the biggest seller of home siding in the U.S., gained 2.6 percent to A$6.37 in Sydney.
China Policy Speculation
Property developers rose this week on speculation China’s government will soon end policies to cool the housing market. Donald Straszheim, a senior managing director for China research at International Strategy & Investment Group, said China will “back away” from its tightening policies in the housing market within three months as the economy faces a bigger risk from a slowdown than inflation.
China Resources Land jumped 6.4 percent to HK$16.62 in Hong Kong. Guangzhou R&F Properties Co., the biggest real-estate company in the southern Chinese city, surged 13 percent to HK$12.34. China Vanke Co., the country’s largest listed developer, climbed 11 percent to 9.86 yuan in the southern city of Shenzhen.
“What the market is betting now is that the government will allow the current tightening measures to be relaxed going forward,” said Sun Chao, an analyst at Citic Securities Co. in Shanghai.
Cameron seeks Indian military contracts
David Cameron will seek next week to sell Hawk jets and design plans for aircraft carriers to India, as he leads a clutch of cabinet ministers on a trade mission to the subcontinent.
Defence exports will be one of the most concrete and contentious manifestations of the “special partnership” Mr Cameron wants to forge with a rising power that he feels Britain has neglected for too long.
The prime minister is to travel with seven cabinet ministers – including the foreign secretary, chancellor and business secretary – in an effort to revitalise ties with New Delhi and to generate business in the insurance, financial services and technology sectors.
But the most immediate big deals may come in defence. BAE hopes to sign a deal worth up to £500m to supply about 60 more Hawk trainer jets, building on an established partnership with Hindustan Aeronautics Ltd (HAL), the state-run defence company.
India ordered 66 Hawk jets from BAE in 2004 at a £1bn cost. All the aircraft in the follow-up deal are likely to be built by HAL.
The model for technology transfer and joint manufacturing could also be extended to UK aircraft carriers. Senior defence figures believe the Indians may be interested in buying designs or specific technologies, in a deal that would advance the country’s shipbuilding capacity.
Other potential defence equipment offers on the British stall include the Type-26 frigate, the “future surface combatant”, which BAE Systems would seek to sell in “modular form” once its design is complete.
The UK company has been seeking shipbuilding opportunities as India’s navy has sought to expand its fleet from its own dockyards rather than buying warships from other navies.
BAE already has an armoured vehicle and artillery joint venture with Mahindra & Mahindra, the truck maker.
Mr Cameron’s team will also seek to press British interests in India’s $11bn (£7.1bn), 126-aircraft fighter procurement contest. Six manufacturers are in the running, with EADS, the consortium that includes BAE Systems, offering the Eurofighter Typhoon jet.
While the Indian government is keen to develop its defence industrial base, it continues to source about 70 per cent of its equipment from foreign suppliers.
Defence exports will be one of the most concrete and contentious manifestations of the “special partnership” Mr Cameron wants to forge with a rising power that he feels Britain has neglected for too long.
The prime minister is to travel with seven cabinet ministers – including the foreign secretary, chancellor and business secretary – in an effort to revitalise ties with New Delhi and to generate business in the insurance, financial services and technology sectors.
But the most immediate big deals may come in defence. BAE hopes to sign a deal worth up to £500m to supply about 60 more Hawk trainer jets, building on an established partnership with Hindustan Aeronautics Ltd (HAL), the state-run defence company.
India ordered 66 Hawk jets from BAE in 2004 at a £1bn cost. All the aircraft in the follow-up deal are likely to be built by HAL.
The model for technology transfer and joint manufacturing could also be extended to UK aircraft carriers. Senior defence figures believe the Indians may be interested in buying designs or specific technologies, in a deal that would advance the country’s shipbuilding capacity.
Other potential defence equipment offers on the British stall include the Type-26 frigate, the “future surface combatant”, which BAE Systems would seek to sell in “modular form” once its design is complete.
The UK company has been seeking shipbuilding opportunities as India’s navy has sought to expand its fleet from its own dockyards rather than buying warships from other navies.
BAE already has an armoured vehicle and artillery joint venture with Mahindra & Mahindra, the truck maker.
Mr Cameron’s team will also seek to press British interests in India’s $11bn (£7.1bn), 126-aircraft fighter procurement contest. Six manufacturers are in the running, with EADS, the consortium that includes BAE Systems, offering the Eurofighter Typhoon jet.
While the Indian government is keen to develop its defence industrial base, it continues to source about 70 per cent of its equipment from foreign suppliers.
Thursday, July 22, 2010
Top Banks Paid $1.6 Billion in Excessive Bonuses, U.S. Finds
With the financial system on the verge of collapse in late 2008, a group of troubled banks doled out more than $2 billion in bonuses and other payments to their highest earners. Now, the federal authority on banker pay says that nearly 80 percent of that sum was unmerited.
In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.
The group includes Wall Street giants like Goldman Sachs, JPMorgan Chase and the American International Group as well as small lenders like Boston Private Financial Holdings. Mr. Feinberg’s report points to companies that he says paid eye-popping amounts or used haphazard criteria for awarding bonuses, the people with knowledge of his findings said, and he has singled out Citigroup as the biggest offender.
Even so, Mr. Feinberg has very limited power to reclaim any money. He can use his status as President Obama’s point man on pay to jawbone the companies into reimbursing the government, but he has no legal authority to claw back excessive payouts.
Mr. Feinberg’s political leverage has been weakened by the banks’ speedy repayment of their bailout funds. Eleven of the 17 companies that received criticism in the report have repaid the government with interest, so they have no outstanding obligations to reimburse.
As a result, Mr. Feinberg will merely propose that the banks voluntarily adopt a “brake provision” that would allow their boards to nullify or alter any bonus payouts or employment contracts in the event of a future financial crisis. All 17 companies have told Mr. Feinberg that they will consider adopting the provision, though none has committed to do so.
Mr. Feinberg is expected to call the payouts ill advised but not unlawful or contrary to the public interest, the people with knowledge of his report said.
On Wall Street, meanwhile, profits and pay have already rebounded. Goldman Sachs is on pace to hand out an average of $544,000 per worker in salary and bonuses, though many could earn several times that amount. JPMorgan Chase’s investment bank is on track to pay its workers, on average, about $425,000, while the average Morgan Stanley employee could collect about $260,000.
If the second half of 2010 plays out like the first half, Wall Street bonuses will be paid out at about the same level as last year and similar to 2007 levels, when the crisis had just started to unfold.
“It’s healthier than I would have ever expected a year ago,” said Alan Johnson, a longtime compensation consultant who specializes in financial services.
Mr. Feinberg was named last month as the independent administrator for claims tied to the BP oil spill, making it likely that the release of his findings on the financial firms will be his final act as the overseer of banker pay.
The review, mandated by the 2009 economic stimulus bill, broadened the scope of Mr. Feinberg’s duties to include examining the pay packages of top earners at 419 companies that accepted bailout funds. However, it did not give him the power to demand changes to the compensation arrangements, as he did in each of the last two years at seven companies that received multiple bailouts.
Mr. Feinberg spent five months reviewing compensation paid to each company’s 25 highest earners between October 2008, when the first bailouts were dispensed, and February 2009, when the stimulus bill took effect. He narrowed his scrutiny to about 600 executives at 17 banks, with payouts totaling $2.03 billion.
Mr. Feinberg’s criteria for identifying the worst offenders were large payouts, in aggregate or to specific individuals; overly generous exit packages; or a failure to provide clear performance criteria or other rationale for extra pay.
Mr. Feinberg then approached each of the 17 companies with his proposed remedy during conference calls over the last two weeks. The 11 companies that have fully repaid their bailout money are American Express, Bank of America, Bank of New York Mellon, Boston Private, Capital One Financial, Goldman Sachs, JPMorgan, Morgan Stanley, PNC Financial, US Bancorp and Wells Fargo.
The six companies that have not fully repaid their bailout funds are A.I.G, Citigroup, the CIT Group, M&T Bank, Regions Financial and SunTrust Banks.
Among the banks that have not fully repaid the government, Citigroup was identified by Mr. Feinberg as having the most egregious compensation packages during the bailout period, according to officials with knowledge of his report. The bank handed out several hundred million dollars in pay in 2008 as it struggled to stay afloat.
Roughly two-thirds of the outsize payouts were from bonuses awarded to Andrew Hall and another trader who were part of the bank’s Phibro energy trading unit. Citigroup sold that business to Occidental Petroleum last fall, under pressure from Mr. Feinberg, after the disclosure that Mr. Hall had received a $100 million payout.
Mr. Feinberg is not expected to name individual executives who received the highest awards.
His review is among several compensation initiatives scrutinizing banker pay. In June, the Federal Reserve ordered about two dozen of the biggest banks to address several pay practices that, even after the crisis, it said encouraged excessive risk-taking.
European banking regulators introduced tough new standards for bonus payments earlier this month. And the Federal Deposit Insurance Corporation is developing a plan that would partly tie bank insurance premiums to the perceived risk of their executive pay packages. That proposal could be reviewed by the agency’s board as early as next month.
In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.
The group includes Wall Street giants like Goldman Sachs, JPMorgan Chase and the American International Group as well as small lenders like Boston Private Financial Holdings. Mr. Feinberg’s report points to companies that he says paid eye-popping amounts or used haphazard criteria for awarding bonuses, the people with knowledge of his findings said, and he has singled out Citigroup as the biggest offender.
Even so, Mr. Feinberg has very limited power to reclaim any money. He can use his status as President Obama’s point man on pay to jawbone the companies into reimbursing the government, but he has no legal authority to claw back excessive payouts.
Mr. Feinberg’s political leverage has been weakened by the banks’ speedy repayment of their bailout funds. Eleven of the 17 companies that received criticism in the report have repaid the government with interest, so they have no outstanding obligations to reimburse.
As a result, Mr. Feinberg will merely propose that the banks voluntarily adopt a “brake provision” that would allow their boards to nullify or alter any bonus payouts or employment contracts in the event of a future financial crisis. All 17 companies have told Mr. Feinberg that they will consider adopting the provision, though none has committed to do so.
Mr. Feinberg is expected to call the payouts ill advised but not unlawful or contrary to the public interest, the people with knowledge of his report said.
On Wall Street, meanwhile, profits and pay have already rebounded. Goldman Sachs is on pace to hand out an average of $544,000 per worker in salary and bonuses, though many could earn several times that amount. JPMorgan Chase’s investment bank is on track to pay its workers, on average, about $425,000, while the average Morgan Stanley employee could collect about $260,000.
If the second half of 2010 plays out like the first half, Wall Street bonuses will be paid out at about the same level as last year and similar to 2007 levels, when the crisis had just started to unfold.
“It’s healthier than I would have ever expected a year ago,” said Alan Johnson, a longtime compensation consultant who specializes in financial services.
Mr. Feinberg was named last month as the independent administrator for claims tied to the BP oil spill, making it likely that the release of his findings on the financial firms will be his final act as the overseer of banker pay.
The review, mandated by the 2009 economic stimulus bill, broadened the scope of Mr. Feinberg’s duties to include examining the pay packages of top earners at 419 companies that accepted bailout funds. However, it did not give him the power to demand changes to the compensation arrangements, as he did in each of the last two years at seven companies that received multiple bailouts.
Mr. Feinberg spent five months reviewing compensation paid to each company’s 25 highest earners between October 2008, when the first bailouts were dispensed, and February 2009, when the stimulus bill took effect. He narrowed his scrutiny to about 600 executives at 17 banks, with payouts totaling $2.03 billion.
Mr. Feinberg’s criteria for identifying the worst offenders were large payouts, in aggregate or to specific individuals; overly generous exit packages; or a failure to provide clear performance criteria or other rationale for extra pay.
Mr. Feinberg then approached each of the 17 companies with his proposed remedy during conference calls over the last two weeks. The 11 companies that have fully repaid their bailout money are American Express, Bank of America, Bank of New York Mellon, Boston Private, Capital One Financial, Goldman Sachs, JPMorgan, Morgan Stanley, PNC Financial, US Bancorp and Wells Fargo.
The six companies that have not fully repaid their bailout funds are A.I.G, Citigroup, the CIT Group, M&T Bank, Regions Financial and SunTrust Banks.
Among the banks that have not fully repaid the government, Citigroup was identified by Mr. Feinberg as having the most egregious compensation packages during the bailout period, according to officials with knowledge of his report. The bank handed out several hundred million dollars in pay in 2008 as it struggled to stay afloat.
Roughly two-thirds of the outsize payouts were from bonuses awarded to Andrew Hall and another trader who were part of the bank’s Phibro energy trading unit. Citigroup sold that business to Occidental Petroleum last fall, under pressure from Mr. Feinberg, after the disclosure that Mr. Hall had received a $100 million payout.
Mr. Feinberg is not expected to name individual executives who received the highest awards.
His review is among several compensation initiatives scrutinizing banker pay. In June, the Federal Reserve ordered about two dozen of the biggest banks to address several pay practices that, even after the crisis, it said encouraged excessive risk-taking.
European banking regulators introduced tough new standards for bonus payments earlier this month. And the Federal Deposit Insurance Corporation is developing a plan that would partly tie bank insurance premiums to the perceived risk of their executive pay packages. That proposal could be reviewed by the agency’s board as early as next month.
Asian Stocks Rise, Corporate Bond Risk Falls on Profit, Economy
July 23 (Bloomberg) -- Asian stocks rose the most in more than a week and a measure of corporate bond risk fell to the lowest in a month after companies boosted profit forecasts and growth accelerated in European manufacturing and services.
The MSCI Asia Pacific Index gained 1.4 percent to 117.17 at 11:45 a.m. in Tokyo. Oil traded at $79.14 a barrel, near an 11- week high. Futures on the Standard & Poor’s 500 Index increased 0.1 percent after the index soared 2.3 percent yesterday.
U.S. equities jumped the most in more than two weeks yesterday after companies from United Parcel Service Inc. to AT&T Inc. and Qualcomm Inc. increased forecasts. Microsoft Corp. reported its biggest sales gain in 2 1/2 years, and Japan’s Komatsu Inc. said it may raise its earnings estimates. Financial companies contributed to the gain in Asian stocks today ahead of the publication of tests on the strength of European banks.
“Microsoft’s earnings reiterated that demand for electronics in the second half is still positive,” said Monika Yang, who helps oversee $2 billion in Hong Kong at Hamon Asset Management Ltd. “This is a boost to Asian stock sentiment as it stops the earlier noises about possible weak demand in the second half.”
Japan’s Nikkei 225 Stock Average gained 1.8 percent, the biggest advance among benchmark equity indexes in the Asia- Pacific region, followed by Australia’s S&P/ASX 200 Index’s 1.6 percent increase. Taiwan’s Taiex index climbed 1.3 percent, the most in more than a week, on a rally in technology shares.
Canon, Asustek Climb
Canon Inc., a camera maker that counts Europe and the Americas as its biggest markets, jumped 2.9 percent in Tokyo. Laptop computer supplier Acer Inc. advanced 1.3 percent and Asustek Computer Inc., a maker of low-cost personal computers, climbed 2.3 percent after Microsoft reported sales.
BHP Billiton Ltd. and Rio Tinto Group, the world’s No. 1 and No. 3 mining companies, jumped at least 1.7 percent in Sydney after oil and metals prices rose yesterday.
Asian bond risk fell. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 2 basis points to 121 basis points, the lowest since June 21, ICAP Plc and CMA prices show. The indexes track credit-default swaps, which are used to insure against missed debt payments.
The Markit iTraxx Australia index fell 4 basis points to 120 basis points, the lowest since June 22, according to Nomura Holdings Inc. and CMA.
Crude oil traded near an 11-week high after rising on optimism fuel demand will increase amid improved prospects for an economic recovery. Crude for September delivery was at $79.13 a barrel, down 21 cents, in electronic trading on the New York Mercantile Exchange. The contract rose $2.74 to $79.30 yesterday, the highest settlement since May 5 and biggest increase since May 27.
The MSCI Asia Pacific Index gained 1.4 percent to 117.17 at 11:45 a.m. in Tokyo. Oil traded at $79.14 a barrel, near an 11- week high. Futures on the Standard & Poor’s 500 Index increased 0.1 percent after the index soared 2.3 percent yesterday.
U.S. equities jumped the most in more than two weeks yesterday after companies from United Parcel Service Inc. to AT&T Inc. and Qualcomm Inc. increased forecasts. Microsoft Corp. reported its biggest sales gain in 2 1/2 years, and Japan’s Komatsu Inc. said it may raise its earnings estimates. Financial companies contributed to the gain in Asian stocks today ahead of the publication of tests on the strength of European banks.
“Microsoft’s earnings reiterated that demand for electronics in the second half is still positive,” said Monika Yang, who helps oversee $2 billion in Hong Kong at Hamon Asset Management Ltd. “This is a boost to Asian stock sentiment as it stops the earlier noises about possible weak demand in the second half.”
Japan’s Nikkei 225 Stock Average gained 1.8 percent, the biggest advance among benchmark equity indexes in the Asia- Pacific region, followed by Australia’s S&P/ASX 200 Index’s 1.6 percent increase. Taiwan’s Taiex index climbed 1.3 percent, the most in more than a week, on a rally in technology shares.
Canon, Asustek Climb
Canon Inc., a camera maker that counts Europe and the Americas as its biggest markets, jumped 2.9 percent in Tokyo. Laptop computer supplier Acer Inc. advanced 1.3 percent and Asustek Computer Inc., a maker of low-cost personal computers, climbed 2.3 percent after Microsoft reported sales.
BHP Billiton Ltd. and Rio Tinto Group, the world’s No. 1 and No. 3 mining companies, jumped at least 1.7 percent in Sydney after oil and metals prices rose yesterday.
Asian bond risk fell. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 2 basis points to 121 basis points, the lowest since June 21, ICAP Plc and CMA prices show. The indexes track credit-default swaps, which are used to insure against missed debt payments.
The Markit iTraxx Australia index fell 4 basis points to 120 basis points, the lowest since June 22, according to Nomura Holdings Inc. and CMA.
Crude oil traded near an 11-week high after rising on optimism fuel demand will increase amid improved prospects for an economic recovery. Crude for September delivery was at $79.13 a barrel, down 21 cents, in electronic trading on the New York Mercantile Exchange. The contract rose $2.74 to $79.30 yesterday, the highest settlement since May 5 and biggest increase since May 27.
ONGC in BP talks over Vietnam assets
India’s largest oil group is in talks with BP to buy its Vietnamese assets as the UK company works towards the $10bn of sales it has targeted in the wake of the Gulf of Mexico oil spill.
R.S. Sharma, chairman of the state-owned Oil and Natural Gas Corp, told the Financial Times that he would be in Hanoi on Thursday with Murli Deora, India’s oil minister, to discuss the deal with the Vietnamese authorities and PetroVietnam, the state oil company. He said the matter would also be discussed with David Cameron, the UK prime minister, on his official visit to New Delhi next week.
“BP has given its intention that they want to sell their stake in the Vietnam oilfield and we are discussing with them a way to reach a deal,” said Mr Sharma. “We will be talking with Cameron and his team ... the [Indian] government is fully backing this deal.”
BP intends to sell all of its assets in Vietnam and Pakistan, except for its lubricants business, in its drive to raise $10bn to help pay for the Gulf oil spill clean up and compensation.
The Vietnamese assets are valued at about $966m and the Pakistan business at about $690m, according to UBS. ONGC said it was only interested in Vietnam, where it already has interests.
BP has been operating in Vietnam for more than two decades and its flagship asset is the Nam Con Son gas project in the South China Sea, in which it has a 35 per cent interest in two fields, with ONGC holding a 45 per cent stake and PetroVietnam owning a 20 per cent stake.
BP has a minority stake in the 371km Nam Con Son pipeline connecting the field to onshore terminals, and controls a third of the Phu My power plant.
“We would welcome interest from any parties and we’ll work towards a deal hopefully by the end of the year,” said BP, which declined to comment on ONGC’s interest
R.S. Sharma, chairman of the state-owned Oil and Natural Gas Corp, told the Financial Times that he would be in Hanoi on Thursday with Murli Deora, India’s oil minister, to discuss the deal with the Vietnamese authorities and PetroVietnam, the state oil company. He said the matter would also be discussed with David Cameron, the UK prime minister, on his official visit to New Delhi next week.
“BP has given its intention that they want to sell their stake in the Vietnam oilfield and we are discussing with them a way to reach a deal,” said Mr Sharma. “We will be talking with Cameron and his team ... the [Indian] government is fully backing this deal.”
BP intends to sell all of its assets in Vietnam and Pakistan, except for its lubricants business, in its drive to raise $10bn to help pay for the Gulf oil spill clean up and compensation.
The Vietnamese assets are valued at about $966m and the Pakistan business at about $690m, according to UBS. ONGC said it was only interested in Vietnam, where it already has interests.
BP has been operating in Vietnam for more than two decades and its flagship asset is the Nam Con Son gas project in the South China Sea, in which it has a 35 per cent interest in two fields, with ONGC holding a 45 per cent stake and PetroVietnam owning a 20 per cent stake.
BP has a minority stake in the 371km Nam Con Son pipeline connecting the field to onshore terminals, and controls a third of the Phu My power plant.
“We would welcome interest from any parties and we’ll work towards a deal hopefully by the end of the year,” said BP, which declined to comment on ONGC’s interest
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