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There he goes again. Gregory Mankiw earlier this week chastised a few House Republicans for voting for an increase in the minimum wage.
Some Republicans in Congress are apparently worried about the midterm elections. They are so worried, they are starting to vote like Democrats.
And in Mankiw's view, voting like a Democrat on fiscal and entitlement issues is very, very bad--unwise economically and unwise politically. (I guess he slept through the 1993 budget debate.) Now, lets say Congress approved a new open-ended and very expensive entitlement program with no concurrent budget cuts to offset the higher spending. And lets say the President enthusiastically signed it. I think it's a safe assumption that Mankiw would characterize that as "voting like Democrats," and hence economically unwise.
Hmm. I seem to remember an episode a few years ago when a whole lot of Republicans--and not many Democrats--voted to create an open-ended entitlement program without enacting concurrent cost savings, and when a Republican president enthusiastically signed it. It's called the Medicare prescription drug benefit.
At the time, did Mankiw publicly accuse Republicans of voting like Democrats? Of course not. He was working at the White House.
Posted by dan at 09:36 AM
Tom Friedman thinks the time is ripe for a third political party.
I'd like to toss out an idea in the hopes that some enterprising politician or group of citizens — or Unity '08 — will develop it. It's the concept I call "Geo-Green."What might a Geo-Green third party platform look like?
Its centerpiece would be a $1 a gallon gasoline tax, called "The Patriot Tax," which would be phased in over a year. . . .
The billions of dollars raised by the Patriot Tax would go first to shore up Social Security, second to subsidize clean mass transit in and between every major American city, third to reduce the deficit, and fourth to massively increase energy research by the National Science Foundation and the Energy and Defense Departments' research arms.
Gee, if only there was a political party that was interested in conversation and higher fuel efficiency, shoring up Social Security and investing more in mass transit. I guess Friedman never bothered to read the Democrats' 2004 platform.
Posted by dan at 09:28 AM
Charles Forelle and James Bandler continue their impressive series in the Wall Street Journal on options backdating. Now it turns out Microsoft was playing a variation on the theme.
Until 2003, Microsoft Corp. was among corporate America's most generous issuers of stock options to employees. It also, it turns out, routinely maximized gains for recipients by setting prices for the options at the stock's monthly lows.Among other favorably dated grants, Microsoft awarded options at monthly lows each July from 1992 to 1999, with varying dates. The software giant also routinely issued options to new employees at the stock's lowest closing price in the 30 days after they joined.
Those practices, which Microsoft ended in 1999 after seven years, amounted to a variation of backdating of the options, since they couldn't be priced at the low for a month until the month was over. That approach to compensation -- retroactively locking in a low price at which an options holder can buy stock -- has become the subject of a widening series of inquiries at other companies by federal authorities.
Unlike many of those companies, Microsoft voluntarily stopped the practice and disclosed it. In a news release issued on July 19, 1999, the company said it was ending the monthly-low policy and taking a $217 million charge.
But many details of its options dating haven't been widely known, even though the company disclosed the charge. At the time it disclosed the monthly-low practice, Microsoft was getting more attention for its mounting profits and a looming federal antitrust trial.
Moreover, filings show Microsoft granted an option to at least one executive that same month, dated July 30, 1999 -- the lowest price of the month. A later grant to directors was dated Jan. 31, 2000, the lowest price of that month. Additional grants to several executives were dated March 6 and April 24 of that year, again both monthly lows. Several other grants around that time weren't dated at monthly lows.
The details raise questions about how Microsoft began the practice, what prompted it to end it -- and whether the way the world's most prominent technology company dated options grants influenced other firms.
Posted by dan at 09:19 AM
Sally Beatty reports in the Wall Street Journal that some hedge funds are apparently having a good year.
It's known as the Hedge Fund Prom. Beyoncé sang, Jay-Z rapped, and Jon Stewart cracked jokes.The annual Robin Hood Foundation gala, held Wednesday night, is widely considered the most extravagant event of the New York City charity season, pairing Wall Street money and Hollywood glitz. The gathering of hedge-fund founders, media executives and other A-list players raised $48 million to fight poverty in New York City.
Some board members worried two months of stock losses would derail the evening's fund-raising drive. But Wall Street's hedge-fund community, the core of the Robin Hood Foundation, shrugged off the recent market slump (Wednesday's stock rally may have eased the pain) and easily topped the $31.9 million the group raised last year.
Among the prizes: $650,000 for 10 power lunches for two with a series of celebrity executives, including buyout king Henry Kravis; Jamie Dimon, chief executive of J.P. Morgan Chase; Viacom Chief Executive Tom Freston; Richard Parsons, chief executive of Time Warner; and Robert Rubin, former Treasury secretary and now chairman of Citigroup's executive committee. Also on the auction block: lessons with surfer Kelly Slater, a flight to the Hamptons or Martha's Vineyard with Jimmy Buffett on his sea plane, and an evening at Six Flags Great Adventure in Jackson, N.J. for 500. . . .
The Robin Hood gala has its critics: Some attendees said they're put off by the juxtaposition of big money and disadvantaged students. One person complained that the event is more about showing off than it is about solving poverty. "The best thing about the benefit is what it makes possible for people living in poverty in New York City," said a Robin Hood spokeswoman.
If people want to show off by putting their name on a classroom in an inner-city school, I don't really see the problem.
Posted by dan at 09:15 AM
It wouldn't be a complete week without at least a few lines of shockingly stupid analysis from the Wall Street Journal editorial page, the kind of sentence (or sentences) that make you spit your coffee onto the desk and then launch into a paroxysm of sustained laughter. Thank you, Michael Barone, for making my week complete. He writes, in a piece about Vietnam, Watergate and Karl Rove.
Vietnam and Watergate were arguably triumphs for honest reporting. But they were also defeats for America -- and for millions of freedom-loving people in the world. They ushered in an era when the political opposition and much of the press have sought not just to defeat administrations but to delegitimize them. The pursuit of Karl Rove by the left and the press has been just the latest episode in the attempted criminalization of political differences. Is there any hope that it might turn out to be the last?
Read it again. Barone apparently believes Watergate was a defeat for America -- and for millions of freedom-loving people in the world.
Posted by dan at 08:59 AM
Geraldine Fabrikant reports in the New York Times on one surprisingly successful U.S. export: monster CEO compensation packages.
Posted by dan at 08:33 AM
From John Harwood's story in the Wall Street Journal on the latest WSJ/NBC poll.
"The economy--an issue Republicans, as the governing party, hoped to capitalize on--is providing little traction. Reminded of a host of posisitve statistics on job growth, overall growth and tax cuts, just one in four Americans say those reflect their personal view of the economy.Even among Americans earning more than $75,000 a year, just one-third embrace the positive view. The top economic concerns cited by respondents: health-care and education costs, gas prices, the federal budget deficit and inflation."
Once again, beware the misleading aggregates.
Posted by dan at 09:35 AM
From an article in the Wall Street Journal by Steven Gray about Conagra's efforts to broaden the appeal of its Hebrew National hot dogs.
This week, ConAgra Foods is launching a national TV ad campaign proclaiming its Hebrew National beef hot dogs to be more nutritious than frankfurters sold by its competitors. One 30-second spot shows a cow beneath the slogan, "No Ifs, Ands or Butts," a reference to its assurance that its kosher dogs, prepared in accordance with Jewish dietary law, contain nothing from the rear portion of the bovine anatomy. . .ConAgra, based in Omaha, Neb., is betting that Hebrew National's customers -- many of whom aren't Jewish -- view its kosher designation as an affirmation of the product's purity relative to other hot dogs, which are often pieced together from low-quality pork, beef, chicken or turkey. . . .
ConAgra expects to spend more than $10 million over the next two years on its Hebrew National campaign. The 15- and 30-second spots feature an illustration of a cow on which the animal's front is designated "kosher" and its back, "nonkosher." . .
ConAgra also is heavily promoting its kosher dogs at major-league ballparks. At Detroit's Comerica Park, for instance, it will run a contest to find the best "Higher Authority Hawker." One person per game, caught by a stadium camera eating a Hebrew National hot dog, will be led to a private suite to watch the rest of the game.
In Boston, ConAgra has signed up retired Red Sox great Fred Lynn to pitch Hebrew National franks.
What, Shawn Green wasn't available?
Posted by dan at 09:28 AM
That which gets measured, gets controlled. Pui-Wing Tam reports in the Wall Street Journal on how forcing companies to expense options has helped moderate executive compensation at some companies.
Not everything in Silicon Valley is recovering. Just look at Rick Belluzzo's pay package.Mr. Belluzzo is chief executive of Quantum Corp., a storage-technology company in San Jose, Calif. While Quantum's stock rose last year, Mr. Belluzzo's pay didn't. In fiscal 2005, his compensation totaled $935,919, down 86% from $6.6 million a year earlier, according to company filings and an analysis of the value of CEO stock options prepared for The Wall Street Journal by compensation-research firm Equilar Inc.
The plunge was driven by a shift in equity compensation. In fiscal 2004, Mr. Belluzzo was awarded stock options valued at $5.9 million. Last year, however, Quantum gave no stock options to the CEO and dished out restricted stock valued at $82,250 instead -- not enough to make up for the move away from stock options. A Quantum spokesman says the stock options the CEO received in 2004 were intended to cover him through fiscal 2007. . .
According to a study by Equilar being released today, CEO pay at Silicon Valley's 150 biggest companies is headed south. In fiscal 2005, the median total compensation of Silicon Valley CEOs dropped to $2.6 million, down 13% from a year ago. Their pay packages are getting hit even as CEO compensation elsewhere rises. Indeed, median total pay for CEOs of companies in the Standard & Poor's 500-stock index increased 2.2% to $8.4 million in 2005, Equilar says.
The slide in Silicon Valley CEO compensation is largely a result of the shrinking value of stock-option grants. While the average number of options awarded to tech CEOs has stayed at around 150,000 for the past two years, the value of the grants fell 34.9% in 2005 to $1.3 million, Equilar says.
Corporate boards have moved to make up for this falloff by handing out more restricted stock -- the median value of restricted stock awarded to Silicon Valley CEOs rose 33.5% last year to $1.1 million. Cash compensation for Silicon Valley CEOs is also going up. Last year the median salary for tech CEOs rose 5.6% to $465,876 and cash bonuses rose 8.7% to $295,875, Equilar says.
But those moves haven't been enough to compensate for the declining value of stock options. "We're at the front end of a major shift away from stock options to more balanced pay packages of restricted stock and cash bonuses in Silicon Valley," says Steve Fackler, a compensation and benefits attorney at Gibson, Dunn & Crutcher LLP in Palo Alto, Calif.
Posted by dan at 09:25 AM
My latest in Slate, on a new play set at a hedge fund.
Posted by dan at 09:09 AM
Glenn Collins reports in the New York Times on the sale of a Revolutionary War battle flags:
Two and a quarter centuries after they were captured from Continental troops and spirited away to England by a British officer, four rare Revolutionary War battle flags were sold on American soil in a Flag Day auction yesterday for $17.3 million.The price set a record for flags as well as for any sale of a Revolutionary War artifact, independent experts said. . . .
The fiercely contested 14-minute auction between at least six bidders was followed with silent intensity by an audience of 150 collectors and history buffs and a contingent of six Revolutionary War re-enacters in full uniform, five of them with cavalry swords. The winner, who bid by telephone, could not be seen or identified by those in the auction room.
The best part of the story:
The $17.3 million purchase price for the flags, which included Sotheby's commission, wildly exceeded the pre-auction estimate of $10 million, and "was more than the cost of the entire Revolutionary War," said Evelyne H. Ryan, executive director of the Bedford Historical Society in Bedford, N.Y.
Posted by dan at 09:05 AM
Consumers of oil and gas seem to be reacting to higher prices by moderating consumption. Peter McKay reports in the Wall Street Journal:
"U.S. gasoline demand has slipped 0.9% to an average of 9.4 million barrels a day over the past year, according to the Energy Information Administration. Imports of foreign petroleum hit an average of 294 million barrles in April. That is down 7% from a year ago and is the lowest total for that month since April 2000, according to the Commerce Department."
And Kevin Morrison reports in the Financial Times that crude inventories are on the rise.
Crude oil inventories in the developed world rose to more than 1bn barrels at the end of April, their highest level in more than 20 years, as high prices have bitten into consumption, the International Energy Agency, the energy watchdog for the developed world, said on Tuesday.
The Paris-based agency consequently trimmed its forecast of global oil demand growth for this year by 10,000 barrels a day to 1.24m b/d.“High oil product retail prices and comparatively low natural gas prices will act as a drag on demand through the end of the year,” it said in its latest monthly report.
Posted by dan at 09:36 AM
Consumers of oil and gas seem to be reacting to higher prices by moderating consumption. Peter McKay reports in the Wall Street Journal:
"U.S. gasoline demand has slipped 0.9% to an average of 9.4 million barrels a day over the past year, according to the Energy Information Administration. Imports of foreign petroleum hit an average of 294 million barrles in April. That is down 7% from a year ago and is the lowest total for that month since April 2000, according to the Commerce Department."
And Kevin Morrison reports in the Financial Times that crude inventories are on the rise.
Crude oil inventories in the developed world rose to more than 1bn barrels at the end of April, their highest level in more than 20 years, as high prices have bitten into consumption, the International Energy Agency, the energy watchdog for the developed world, said on Tuesday.
The Paris-based agency consequently trimmed its forecast of global oil demand growth for this year by 10,000 barrels a day to 1.24m b/d.“High oil product retail prices and comparatively low natural gas prices will act as a drag on demand through the end of the year,” it said in its latest monthly report.
Posted by dan at 09:36 AM
Must see TV? More like must discount TV. Brian Steinberg and Suzanne Vranica report in the Wall Street Journal on television network upfront sales. The big loser? General Electric's NBC, once again.
As of yesterday afternoon, Fox had completed 70% of its upfront ad deals for the fall season with price increases of 2% and 3%, News Corp. President Peter Chernin told an investor conference. Media buyers confirmed Fox's pricing, measured in the cost of reaching a thousand people, a standard metric in TV ad sales.In contrast, other networks have finalized much less business -- and in at least some cases, worse prices. General Electric's NBC, the weakest network in ratings, is accepting price reductions of 4% to 5%. Both CBS Corp.'s CBS and Walt Disney's ABC are facing resistance as they push for price increases, media buyers say, despite strong performance of both networks in ratings. . . .
The direction of pricing suggests this year's upfront is even tougher than last year, when Fox, ABC and CBS each won price increases of between 4% and 6%. Only NBC, in the ratings doldrums, took a price reduction last year, with prices flat to down 3%. . . .
NBC, which has lagged behind other networks in ratings in the past couple of years, has completed about 40% of its upfront sales, according to a person familiar with the situation. Buyers have been interested in working with NBC because of its willingness to accept lower prices. The network expects to secure between $1.8 billion and $1.9 billion in total ad commitments in the upfront, compared with about $1.9 billion last year, making up for lower prices by selling more inventory.
Posted by dan at 09:33 AM
Back in March, we flagged the poor financial performance of American Media, the magazine conglomerate built around tabloids and muscle magazines. Today, Dennis K. Berman and Sarah Ellison report in the Wall Street Journal that American Media is trying to slim down by selling a bunch of its magazines.
American Media Inc. is putting five of its 16 magazine titles on the auction block, as the publisher tries to find the right mix of businesses during months of tumultuous reorganization, people familiar with the matter said.The titles for sale include Muscle & Fitness, Flex, Muscle & Fitness Hers, country-music magazine Country Weekly and Spanish-language celebrity title Mira! The five titles produced revenue of about $84 million in the 12 months ended in March, and operating income plus amortization of around $30 million.
New York-based American Media is hoping to fetch anywhere from 10 to 13 times the operating income, the people familiar with the matter said, giving the titles a target price of at least $300 million. J.P. Morgan Chase & Co. and Bear, Stearns & Co. are handling the sale, according to the people familiar with the matter. . .
In the six months ending in September 2005 -- the last for which public financial statements are available -- American Media reported a net loss of $13.2 million on revenue of $266 million. Long-term debt stands at around $862 million.
Ad revenue for the National Enquirer fell 15% in May versus a year ago. At Shape, ad revenue dropped 3.4%. Ad revenue was up 14% at Men's Fitness and up 4.4% at Country Weekly, according to data from Publisher's Information Bureau.
Posted by dan at 09:28 AM
Look who is railing against the administration's failure to develop anything resembling a plan to deal with the nation's energy challenges. Why it's that well-known leftist Rudolph Giuliani. Patrick Healy reports in the New York Times
Challenging fellow Republicans in Washington, former Mayor Rudolph W. Giuliani said yesterday that the Bush administration lacked an energy policy and that greater reliance on nuclear power, ethanol-based fuels and hybrid vehicles was more realistic than President Bush's goal of independence from foreign energy sources.Mr. Giuliani, who is considering a presidential bid in 2008, did not criticize Mr. Bush by name, and some of his ideas reflected Republican orthodoxy about increasing energy supply. Yet in a speech to conservative thinkers from the Manhattan Institute for Policy Research, Mr. Giuliani implicitly accused the White House of doing little to expand energy sources. Afterward, too, he expressed concern about global warming, saying that "everyone accepts the fact that it's happening and it has an impact."
"I can't imagine how you can achieve anything in government without a plan," he said in his remarks at the Princeton Club, referring to the nation's long-range energy needs. "This is an area where we haven't had a plan in a very, very long time."
It's actually a brilliant move: he burnishes his image as an independent while indirectly shilling for clients. Giuliani's lobbying firm, Healy notes, "advises energy companeis and a liquefied natural gas project on Long Island."
Posted by dan at 09:23 AM
George Fairclough and Shai Oster report in the Wall Street Journal on the conflicts created by China's growing automobile market.
Nearly 1,000 new cars hit the streets here every day, crowding a city already choked with pollution. Levels of nitrogen dioxide currently exceed the World Health Organization's clean-air guidelines by 78%.The mayor, Wang Qishan, complains that the number of cars flooding the roads makes it "more difficult to run the city." Local officials are so worried about air quality for the 2008 summer Olympic Games that they are considering a temporary ban on private cars.
At the same time, the city owns Beijing Automotive Industry Corp., a car maker that has joint ventures with DaimlerChrysler AG and South Korea's Hyundai Motor Co. Last year, the company and its affiliates made more than 500,000 cars, trucks and buses, employed 48,000 workers and paid more than $500 million in local taxes. By 2008, they expect to produce one million vehicles a year.
After various on-and-off restrictions, Beijing, which has more vehicles than any other Chinese city, has almost no limitations on car usage.
"This is something of great difficulty for us. The contradiction of population and the environment -- for us and the whole of China," said Mr. Wang at a March meeting.
And the car craze here has just begun. China now has about 25 vehicles -- and fewer than seven cars -- for every thousand people, roughly the same level as the U.S. had in 1915. If auto sales continue apace, there will be more than 130 million vehicles on China's roads by 2020 -- up from about 33 million today. That could help double China's demand for crude oil and lead to a sharp increase in greenhouse-gas emissions, according to estimates by the government and environmental groups.
"If we follow the current track of consumption patterns to develop the automobile in China," says Pan Yue, vice minister of the State Environmental Protection Administration, "the world will not be able to support" it.
Complicating matters, Chinese gasoline contains high levels of sulfur and other contaminants. It will take years and billions of dollars to improve China's refineries to make higher-quality, cleaner-burning gas.
Posted by dan at 10:35 AM
China is slowly--slowly--losing its edge in labor costs. Doug Cameron reports ($ required) in the Financial Times
Wage inflation in China’s financial and professional services sector has climbed to 17 per cent and pushed local employers to cut their hiring plans, according to Manpower, the temporary employment group.Jeff Joerres, Manpower’s chairman and chief executive, said sought-after staff in the affected sectors were staying as little as 60 days before finding new employers with better wages and conditions.
Higher wage rates and a shortage of middle management have pushed companies to trim their hiring plans for the third quarter, said Manpower, whose closely watched global staffing survey was expanded last year to include China.
Here's Manpower's release on the global outlook.
Posted by dan at 10:28 AM
Harvard's Joint Center for Housing Studies has a big new report out that's getting a lot of media play, in part because it tells everybody what they want to hear: yes, housing is expensive, but there's no crash coming. Why? Lots of household formation, less over-development than in previous periods, etc.
That said, there's plenty of troubling data in the study. In 20004, 15.6 million Americans spent more than half their incomes on housing, up from 13.7 million in 2001.
More broadly, if when the housing bubble pops, it's unlikely to be a national phenomenon, because the rapid growth in housing prices hasn't been a national phenomenon. In markets like Utica or Fort Wayne, housing prices haven't risen all that much, and there hasn't been any huge shift in supply and demand. Not so in the Miami condo market. And something tells me this report isn't going to be much comfort to the guy down the road who is asking $5 million for a 9,300 square-foot spec house that sits on a single acre.
Posted by dan at 10:19 AM
This is interesting. A huge Spanish bank is buying up some smaller Texas banks--in part because it views the banking market there as partially integrated to Mexico's banking market. Ben White and John Authers report in the Financial Times.
Banco Bilbao Vizcaya Argentaria SA, Spain's second-largest bank, yesterday extended its retail banking reach in the US by agreeing to buy Texas Regional Bancshares for $2.16bn. . . .The purchase significantly increases BBVA's retail banking presence in the US. Previously, the Spanish bank had focused mainly on remittances to home countries by immigrants in the US.
BBVA owns Bancomer, one of Mexico's two largest banks, and claims to account for 40 per cent of the $20bn Mexican immigrants send home each year.
Texas Regional, based in McAllen, has 73 branches in Texas and about $6.6bn in assets.
In a recent interview, Francisco González, BBVA's chief executive, said, "We are in this country today because we are very successful in Mexico. We realised a couple of years ago that having in Bancomer such a large franchise in Mexico, we had an opportunity to reach out to this country."
Posted by dan at 10:15 AM
Writing in the Wall Street Journal, Shefali Anand flags a new report from the Investment Company Institute that shows investors have gotten wiser about mutual fund fees.
"Stock funds with below-average expense ratios held nearly 90% of all stock-fund assets as of Dec. 31, according to the report scheduled to be released today.The ICI studied average expenses of U.S. mutual funds on an asset-weighted basis -- expenses paid proportionate to the assets in a fund -- and found that, on average, investors paid 1.13% in expenses on stock funds in 2005, down .04 percentage point from a year earlier, and about 0.9% on the average bond fund. The average money-market fund cost 0.41% in expenses. . .
There is "a conscious choice of fund investors to move toward lower-cost fund complexes," said Sean Collins, senior economist at the ICI who worked on the study. The other major reason for declining expenses, he said, is the growth in assets under management for mutual funds. . . .
According to the study, money has flowed into funds with low costs in the past two years -- nearly 70% of new cash flow to stock funds has gone to funds with expenses of less than 1%. In 2005, of the $136 billion in net new cash flow to stock funds, 30% went to those funds with expense ratios of less than 0.5%, up from 22% in 2003.
Nearly half of this new money came from institutional funds -- such as 401(k) plans -- which usually bargain for low expenses from fund firms.
Over the past three years, more than 90 fund firms have cut their fees, some of which followed settlements with regulatory authorities on issues like market timing, which rocked the fund industry in 2003. Mr. Collins said these cost cuts were a contributing factor to the reduction in average fees but not a key factor. He said competition among fund firms is another reason some firms cut fees.
Posted by dan at 09:03 AM
Somehow I don't think this is what Wal-Mart had in mind when it decided to pursue upscale consumers. The Wall Street Journal reports:
NEW YORK -- LVMH Moet Hennessy Louis Vuitton's Fendi brand sued Wal-Mart Stores Inc. in federal court in Manhattan on Friday, alleging counterfeit Fendi bags and wallets are being sold in Sam's Club stores for hundreds of dollars less than the actual items.The lawsuit alleges Sam's Club stores, including stores in the New York area, are selling handbags, shoulder bags, purses, wallets and key chains that "imitate the designs of the Fendi products and that bear reproductions, counterfeits, copies or colorable imitations of the Fendi trademarks."
The alleged counterfeit items are selling for as much as 68% less than the actual Fendi products, the lawsuit says.
For example, a Sam's Club in Las Vegas was selling a handbag for $295.03, compared with $925 for the actual Fendi product, according to the complaint.
Posted by dan at 09:01 AM
Nikki Taft reports in the Financial Times that London bankers have discovered a new market: divorcees. ($ required)
Private banks are lining up to provide divorcees with litigation funding in the hope that they will get to manage the assets from the settlement.Two landmark rulings last month by the House of Lords, which improved significantly the payout prospects for "home-based" spouses - typically wives - in big-money divorce cases, have spurred new interest in divorce as a business opportunity.
In one case, Melissa Miller, former wife of star fund manager Alan Miller, walked away with £5m after a marriage lasting less than three years. In the other, Julia McFarlane, ex-wife of Deloitte tax partner Ken McFarlane, secured £250,000 a year with no time limit. The couple had already agreed to split their £3m-worth of assets equally.
"We've been approached by three banks in the past two months," said Susie Barter, a family law specialist at Speechly Bircham, a City law firm with a private client and family practice. She added that a few private banks started to provide litigation loans for divorcees when Britain's legal regime began to shift in a "wife-friendly" direction after another law lords' decision, White v White, five years ago. But she described those firms as "pioneers". Now, she said, "it's becoming much more commonplace".
Sandra Davis, head of Mischon de Reya's family practice, agrees: "There absolutely has been an increase [in bank interest] - because it's a very soft way of ensuring that someone who has had a relationship with the bank will become a portfolio client."
Only this week, for instance, Duncan Lawrie, the Belgravia-based private bank, announced that it was introducing a "matrimonial dispute loan", which offers funds at 2 per cent over base rate, with a 1 per cent fee.
If some enterprising bankers set up a boutique firm to specialize in such financing, they should call it Infidelity Investments.
Posted by dan at 06:09 AM
Great article by Ellen Gamerman in the Wall Street Journal on the phenomenon of companies selling internships to the highest bidder.
In the competitive world of summer internships, a new route to plum spots is emerging: buying them at auctions, often at elite private schools. This spring, internships at Morgan Stanley, NBC, Miramax, WebMD, Electronic Arts and a host of other companies have been put out to bid at auctions across the country. Bids often reach into the $2,000 to $5,000 range. Some internships are unpaid; in other cases the winners' kids receive a salary.Schools say internships have strong appeal at charity auctions with parents who see them as résumé builders for college applications. When a stint at investment bank Friedman, Billings, Ramsey went on the block at Georgetown Prep's spring auction, so many parents bid on it, the school immediately added a second position, for a total of $10,000, says spokesman for the North Bethesda, Md., school. Companies say they view these internships as charitable contributions with a unique return: mentoring young talent from top schools.
Brian O'Neill, the chief executive of O'Neill Properties Group, says he was confident he would get strong interns when he donated two slots to the Episcopal Academy in Merion Station, Pa. In addition to running the privately held $4 billion real-estate holding company in King of Prussia, Pa., Mr. O'Neill is a trustee of the school, which his son attended. He says he was relying on the school's high standards to deliver suitable interns -- regardless of who won the auction. "The vetting process to get into Episcopal is so rigorous," he says. The internships pay $400 a week and include time assisting Mr. O'Neill on deals.
Well worth reading the whole thing. While this is clearly yet another blow against meritocracy, it could represent a new business model for glamorous yet chronically money-losing businesses.
Posted by dan at 06:05 AM
Well that didn't take very long. Fulcrum Global Partners, an independent stock research company founded in 2001, has closed up shop. From Saturday's Wall Street Journal:
Fulcrum Global Partners has closed for business. It had quickly become one of Wall Street's larger independent stock-research firms after opening in 2001. Is this a sign that research from non-Wall Street firms has no future?
Firms like Fulcrum, which covered a broad selection of big stocks, seemed to have it made when New York Attorney General Eliot Spitzer's crusade against biased Wall Street research enhanced their appeal. The big brokers were barred from using investment-banking fees to subsidize research. That raised the hope that institutional investors would start paying directly for it.But the large investment banks haven't been dislodged. True, most of them have cut costs-Wall Street employs 35% fewer analysts than in 2001, according to research firm Sanford Bernstein. But after regulatory revamps, which addressed conflicts of interest at securities firms, research quality has improved.
Posted by dan at 06:02 AM
It's not quite fiddling while Rome burns, but the Economist notes ($ required) that decadence among Italy's ruling class isn't entirely a thing of the past.
"Only in Italy could austerity measures be ushereed in over dinner at a luxury hotel. Last weekend the new centre-left prime minister, Romano Prodi, and his cabient repaired to a former noble retreat in Umbria. After hearing from the finance minister, Tommaso Padoa-Schioppa, about the dire state of the public finances, ministers enjoyed a five-course feast featuring truffle and pigeon risotto."
I don't know about "only in Italy." One could well imagine this being done in France, too.
Posted by dan at 05:55 AM
The Economist reports on some strange fiscal priorities in South Carolina.($ required)
"But 12 years after 40 rural school districts filed a lawsuit alleging unequal school funding, a circuit judge ruled late last year that South Carolina had not obligation to repair tumbledown facilities or raise teachers' pay. . .Decrepit buildings are only part of the problem. South Carolina is 49th among the 50 states in overall high-school SAT scores. . . and lowest in its high-school graduation rate. Among more geneeral indicators, teenage pregnancy, infant mortality and child-poverty rates are all considerably higher than the national average. . .
South Carolina is said to be planning to spend nearly $100m, which would more more than cover the cost of most of the state's public projects, to preserve and display a civil war submarine called the Hunley.
Posted by dan at 05:51 AM