DealBook: On Wall St., Renewed Optimism for Deals

AppId is over the quota
AppId is over the quota

Before Europe’s debt crisis flared anew last summer, rattling markets and choking off a revival in mergers and acquisitions, huge corporate cash piles and cheap debt had fostered hopes that deal-making would recover strongly last year.

In the first half of 2011, the dollar volume of announced mergers worldwide neared its highest levels since the financial crisis. But that momentum proved fragile as deal volume tumbled 19 percent, to about $1.1 trillion, in the second half of 2011, compared with the same period the year before, according to Thomson Reuters data.

Now, with stock and credit markets steadier, deal makers are growing confident that 2012 will be better for business. Not only do they point to cheap financing and the large amounts of cash on corporate balance sheets, but they say that companies that have already cut costs may decide that they need to make acquisitions to drive growth in the face of a tepid economy.

“The dialogue has gotten back on track,” said Steven Baronoff, chairman of global mergers and acquisitions at Bank of America Merrill Lynch. “If Europe doesn’t go off the rails, you’ll see a return to long-term positive factors.”

According to a recent study by Ernst & Young, 36 percent of companies plan to pursue an acquisition this year.

“We’re optimistic that the need and desire for growth will overcome the volatility headwinds, but that’s where the battle will be waged,” said Jim Woolery, J. P. Morgan’s co-head of North America mergers and acquisitions.

And there is pent-up demand among buyout shops. After a long stretch of tempered activity, many private equity firms are still feeling the pressure to deploy capital or engineer exits.

Still, companies that explore potential deals will most likely tread cautiously. For one, it remains unclear whether European leaders have done enough to ensure that the financial system remains stable on the Continent. And in the United States, 2012 is a presidential election year. With the White House at stake, companies in businesses like finance and health care may not pursue transactions until the outlook for regulation in those industries is clearer.

Many bankers expect to see notable deal activity in energy, industrials, retail, health care and technology. The energy and health care industries produced some of the largest transactions of 2011, like Express Scripts’ $34.3 billion purchase of Medco Health Solutions, Duke Energy’s $25.9 billion takeover of Progress Energy and Kinder Morgan’s $36.2 billion deal for the El Paso Corporation.

The outlook for mergers and acquisitions worldwide varies sharply by region, bankers say. The Americas, where deal volume rose 14.7 percent in 2011, will remain a bright spot, according to Mr. Baronoff of Bank of America Merrill Lynch.

Opinion is more divided over Europe, however. While economic and market woes will lead to some bargains and opportunities, deal-making may still be largely stifled by the persistent sovereign debt crisis.

“Europe is still a mess,” said David A. DeNunzio, vice chairman of Credit Suisse’s mergers and acquisitions group. “People thought there would be more divestiture activity as companies try to get more liquid, but that hasn’t happened yet.”

The disparities among regional economies is expected to fuel more cross-border transactions in 2012. While it is not a new trend for United States businesses to seek growth in emerging markets, bankers are starting to see a reverse in deal flow. After a string of strong quarters, cash-rich corporations in markets like Brazil and China are now bargain-hunting for established brands in developed markets.

“We weren’t having these conversations even three years ago,” said Mr. DeNunzio, who expects an increase of 10 to 15 percent in cross-border transactions.

“Many companies in China and Brazil see this as a once-in-a-lifetime opportunity to acquire world-scale brands at pretty attractive prices,” he said.

At the same time, companies are paying more attention to potential regulatory hurdles, whether their transaction plans are cross-border or domestic. The biggest setback in mergers and acquisitions of 2011 was AT&T’s aborted $39 billion purchase of T-Mobile USA from Deutsche Telekom, which met opposition from the Obama administration.

A deal announced early in 2011, the merger of NYSE Euronext and Deutsche B?rse, remains in regulatory limbo as European authorities seek additional concessions.

Though signs point to a stronger mergers and acquisitions market, there is at least one class of deals not ready for a comeback: the highly leveraged buyout.

In 2011, the private equity titans pursued more modest-size transactions, compared with the go-go years of 2005 to 2007.

Blackstone’s largest acquisition last year was the software maker Emdeon for $3 billion. Kohlberg Kravis Roberts’s biggest deal was even smaller, a $2.4 billion buyout of Capsugel. According to deal makers, buyout shops are still shopping, but banks are less willing to finance huge leveraged buyouts and boardrooms are hesitant to take on the risk. In the aftermath of the financial crisis, boardrooms are still worried that their companies will be left in the lurch if another Lehmanesque event happens.

“Boards used to say, ‘Yeah, go to lunch with L.B.O. firms when they call.’ Now they say, ‘No, you don’t have to do that,’ ” Mr. DeNunzio of Credit Suisse said. “Corporate directors have long memories.”

In 2011, the number of private equity deals announced was roughly flat, but the dollar volume fell 19 percent to $138.1 billion, according to a December report by Ernst & Young.

“And as much as we and our brethren walk with a lot of swagger, the reality is, these institutions and their risk managers need to shed risk-weighted assets, and that makes these types of transactions more difficult,” Mr. DeNunzio said.

Nevertheless, deal makers have been encouraged by the evidence that investors look favorably on mergers and acquisitions as a growth strategy.

In the first six months of 2011, several acquirers recorded healthy gains in their stock prices on the day that deals were announced.

Notably, even Valeant Pharmaceuticals — which began a $5.7 billion hostile bid for the drug maker Cephalon in March — soared 10 percent on its announcement, a rare feat for a hostile buyer.

Over all, the global volume of mergers and acquisitions rose 7.6 percent last year, to $2.54 trillion, from 2010, according to Thomson Reuters.

“We have fragile momentum,” J. P. Morgan’s Mr. Woolery said. “We believe the market will reward prudent acquisitions; the market wants this capital deployed to achieve growth.”

View the original article here

Inside Asia: Currencies in Asia Won't Settle Down Soon

AppId is over the quota
AppId is over the quota

SINGAPORE — The roller coaster ride for Asian currencies, which saw only the yen and the renminbi post significant gains for the year against the dollar, is set to continue in 2012.

While Japan actively sought to stem the yen’s rise — drawing U.S. criticism last week — China intervened to ensure that the renminbi ended the year at a new high. Each currency appreciated about 5 percent in 2011 against the dollar.

The opposite approaches illustrate a dilemma facing Asian policy makers as they try to smooth out foreign exchange rate volatility, which shows no sign of abating in the new year. If the currency is too strong, exports get more expensive. Too weak, and imported inflation spikes and domestic buying power fades.

Singapore and South Korea provide two examples of how inflation can stay surprisingly high, even as declining global demand curbs exports and saps growth. Both the Singapore dollar and the won slipped against the greenback in 2011.

For Japan, which has been battling deflationary forces for two decades, rising prices would be a welcome change. Three times in 2011, Tokyo intervened in the currency market to try to weaken the yen, once with the help of Group of 7 nations after the March earthquake and tsunami, and twice unilaterally.

It was the solo moves that drew Washington’s ire. The Treasury Department pointed out in its Dec. 27 report to Congress on world currencies that the United States “did not support these interventions” and said Japan would be better served by taking steps to increase the dynamism of its domestic economy.

“The United States is saying, ‘Our recovery is dependent on the dollar not becoming too strong,”’ said Yukon Huang, an economist at the Carnegie Endowment for International Peace in Washington. “It’s worried that there will be a global move for people to depreciate” their currencies, he added.

The twice-a-year currency report was mandated by Congress in 1988, when the trade imbalance with Japan was the main concern. More recently, such imbalances have become a source of friction with China.

Even the critique of Japan in the latest report may have been intended as a message for Beijing.

“The criticism is accurate, but it’s 20 years old and resuscitated as cover,” said Derek Scissors, a research fellow at the Heritage Foundation, a conservative research institute in Washington. “It’s so they don’t appear to be picking on China.”

If the U.S. Treasury determines that a country is manipulating its currency to gain a trade advantage, it can call in the International Monetary Fund to press for a realignment.

Some U.S. lawmakers, businesses and unions want Washington to label China a manipulator, but the Treasury declined to do so yet again in its latest report. It did, however, mention China twice as many times as it referred to Japan.

While there may be politics at play in the currency report, a closer look at trading in the renminbi suggests Beijing may have earned its reprieve this time.

The United States has long argued that a stronger renminbi is in China’s best interest because it can help ease inflationary pressures and lift domestic spending power.

The Chinese central bank keeps the currency on a tight leash by setting a daily trading midpoint and then allowing a move of only half a percent on either side.

In the first half of December, the renminbi traded at the bottom of the set range nearly every day, partly because of demand for dollars but also because of increasing fears that the Chinese economy would falter as export demand slowed and the housing market declined.

The People’s Bank of China intervened Dec. 16 and again last Friday to prop up the renminbi, traders said. That left the renminbi up 4.7 percent against the dollar in 2011, even though China’s exports had cooled over the previous six months and will probably slow even more in 2012.

The renminbi’s performance makes it more difficult for the United States to claim China is intentionally weakening its currency to gain a trade advantage.

“The argument gets weaker when China is moving toward a smaller trade surplus,” said Mr. Huang of the Carnegie Institute, who is a former World Bank country director for China.

Why would China favor a stronger currency now? It helps defuse political tension with the United States and discourage traders from assuming that the renminbi is a safe one-way bet, and it can also neutralize imported inflation.

China’s annual inflation rate has dropped dramatically since it hit a three-year peak of 6.5 percent in July, but it is still above the government’s goal of 4 percent.

With oil trading around $100 per barrel even though the world economy looks shaky, it would not take much of a shock to push the oil price back up to the $115 it reached in May, which threatened to choke off the global recovery.

This complicates currency policy across Asia. Aside from the renminbi and yen, most Asian currencies weakened in 2011. South Korea, Indonesia and India stepped in to try to cap currency volatility, but countries across the region seemed content to allow a gradual decline.

That may change in 2012. In Singapore, considered a regional bellwether because the city-state is so closely tied to the global economy, annual inflation spiked unexpectedly to 5.7 percent in November. Trade-dependent Singapore uses the exchange rate as its primary monetary policy tool, and has slowed the pace of appreciation to try to support growth. But that leaves it vulnerable to imported inflation.

In South Korea, a measure of factory activity fell to its lowest level in nearly three years in December, figures released Monday showed, yet the country’s inflation rate came in above the central bank’s goal. The Bank of Korea said last week that fighting inflation would remain the top policy priority in 2012. That suggests Seoul may rethink the wisdom of letting the won weaken.

“We believe the government’s tolerance for a weak won is waning,” Wai Ho Leong, an economist at Barclays, wrote in a note to clients Friday.

View the original article here

Gotham: At Wall Street Protests, Clash of Reporting and Policing

AppId is over the quota
AppId is over the quota

Any officer who “unreasonably interferes” with reporters or blocks photographers will be subject to disciplinary actions.

These are fine words. Of course, his words followed on the heels of a few days in mid-November when the police arrested, punched, kicked and used metal barriers to ram reporters and photographers covering the Occupy Wall Street protests.

And recent events suggest that the commissioner should speak more loudly. Ryan Devereaux, a reporter, serves as Exhibit 1A that all is not well.

On Dec. 17, Mr. Devereaux covered a demonstration at Duarte Square on Canal Street for “Democracy Now!,” a news program carried on 1,000 stations. Ragamuffin demonstrators surged and the police pushed back. A linebacker-size officer grabbed the collar of Mr. Devereaux, who wore an ID identifying him as a reporter. The cop jammed a fist into his throat, turning Mr. Devereaux into a de facto battering ram to push back protesters.

“I yelled, ‘I’m a journalist!’ and he kept shoving his fist and yelling to his men, ‘Push, boys!’?”

Eventually, with curses and threats to arrest Mr. Devereaux, the officer relaxed his grip.

You don’t have to take his word. An Associated Press photograph shows this uniformed fellow grinding a meat-hook fist into the larynx of Mr. Devereaux, who is about 5 feet 5 inches. A video, easily found online, shows an officer blocking a photographer for The New York Times at the World Financial Center, jumping to put his face in front of the camera as demonstrators are arrested in the background.

And three nights ago, at a New Year’s Eve demonstration at Zuccotti Park, a captain began pushing Colin Moynihan, a reporter covering the protest for The Times. After the reporter asked the captain to stop, another officer threatened to yank away his police press pass. “That’s a boss; you do what a boss tells you,” the officer said, adding a little later, “You got that credential you’re wearing from us, and we can take it away from you.”

Reporting and policing can be high-adrenaline jobs. . But the decade-long trajectory in New York is toward expanded police power. Officers routinely infiltrate groups engaged in lawful dissent, spy on churches and mosques, and often toss demonstrators and reporters around with impunity.

When this is challenged, the police commissioner and the mayor often shrug it off and fight court orders. The mayor even argued that to let the press watch the police retake Zuccotti Park would be to violate the privacy of protesters. “It wouldn’t be fair,” he said.

As arguments go, this is perversely counterintuitive. But the mayor’s words reflect, as State Senator Eric Adams, the civil liberties lawyer Norman Siegel and two others wrote in a recent letter to the commissioner, a misunderstanding of long-established patrol guide procedures. The regulations are clear:

“The media will be given access as close to the activity as possible, with a clear line of sight and within hearing range of the incident.”

Precisely the opposite occurred on Nov. 15, when police officers herded reporters into a pen out of sight and sound of Zuccotti Park.

The next day, the protesters moved north and briefly occupied a lot owned by Trinity Church. As the police closed in on demonstrators, they also handcuffed and arrested Associated Press and Daily News reporters. Mayoral press representatives stoutly insisted that the police acted properly. “It is impossible to say the reporters were not breaking the law,” a spokesman wrote to me.

Let me venture into the world of the impossible then. The police patrolmen’s guide is explicit. “Members of the media,” it states, “will not be arrested for criminal trespass unless an owner expressly indicates ... that the press is not to be permitted.”

I checked with the landlord, Trinity Church. They’d made no such call. Paul J. Browne, a deputy police commissioner, agreed. That is why, he noted in an e-mail, “The reporter arrests at Duarte were voided.”

Senator Adams retired as a police captain. He loved the blue and all it implied, and acknowledges he was not above cursing the laws that restrained him.

“Who wouldn’t like unlimited power?” he said.

That is precisely why the past decade worries him so. “If the police and the mayor won’t follow their own rules, whose rules will they follow?” he says. “And very few people ask any questions.”

New York, Mr. Adams says, “is leading the way in not wanting to know where it’s going.”

E-mail: powellm@nytimes.com

Twitter: @powellnyt

View the original article here

Advertising: To Promote Brisk Tea, Pepsi Enlists the Aid of Yoda

AppId is over the quota
AppId is over the quota

This week, the company is introducing new product packaging and a new mobile game app — featuring Yoda and Darth Maul, characters from the film, originally released in 1999 — created for Brisk’s target market, young adults, particularly males, ages 18 to 29. The initiatives will be the focus of the largest multimedia advertising and marketing campaign that PepsiCo has ever waged for Brisk.

PepsiCo has bottled and marketed Brisk, a Lipton ready-to-drink tea brand, through a joint venture with Unilever, owner of Lipton, since 1991. It has also worked with Lucasfilm to promote the “Star Wars” franchise since 1997.

The new campaign is the brainchild of Mekanism, the San Francisco-based agency PepsiCo hired in 2010 that revived Brisk’s clay-animated commercials from the mid-1990s. The original spots parodied figures like Frank Sinatra and Babe Ruth, while the new Mekanism Brisk ads have featured Eminem — in a Super Bowl XLV commercial — as well as Danny Trejo and Ozzy Osbourne.

Industry observers and executives involved with the campaign say Mekanism’s efforts to increase Brisk’s social media presence and sales have been successful. According to Ian Kovalik, a creative director of Mekanism, the number of Brisk’s Facebook fans has jumped to 950,000 from 10,000 in late 2010.

?

Eric Fuller, brand director for Brisk, said the brand’s sales had more than doubled in the last two years, to a projected 104 million cases this year from 48 million cases in 2009. Similarly, according to data provided by Larry Finkel, director of food and beverage research for MarketResearch.com, Brisk’s dollar sales in supermarkets, drugstores and mass merchants excluding Walmart rose 12 percent, to $94.3 million, in the year ending April 17, 2011.

That rate of growth far exceeded the rate of dollar sales growth of PepsiCo’s other Lipton ready-to-drink tea brands, Lipton, Lipton Diet, Lipton PureLeaf and Tazo.

Brisk’s rate of dollar sales growth also exceeded that of rival brands Arizona, up 3.5 percent, and Snapple, up 6.2 percent. During this period, Arizona Beverage Company brands generated 30.8 percent of all ready-to-drink tea dollar sales, PepsiCo 29.9 percent and the Dr Pepper Snapple Group 17.2 percent, Mr. Finkel said.

The 3-D release of “Phantom Menace” is slated for Feb. 10, and the “Star Wars” campaign is aimed at continuing Mekanism’s success in increasing Brisk’s social media presence and sales. PepsiCo’s initiatives will include the introduction, starting Tuesday, of special “Star Wars” packaging and promotions at retailers.

Among these are a one-liter, limited-edition bottle of raspberry iced tea with a Darth Maul label; codes under caps of one-liter bottles of Brisk’s 12 teas and juice drinks, which will help buyers play the “Star Wars” mobile game; and a new one-gallon jug, in four flavors, for home consumption.

On Wednesday, a new Brisksaber mobile game app — developed by Flying Wisdom Studios of San Francisco — will be introduced in the Android and Apple marketplace; players will be able to unlock new game characters, vehicles and weapons by redeeming bottle cap codes. The app will be promoted on Facebook and Hulu, and through Tapjoy, an app ad network, beginning Jan. 9.

On Jan. 15, 15- and 30-second TV spots will start running, initially on Fox Broadcasting’s Sunday night “Animation Domination” programming, and subsequently on network and cable stations like Adult Swim, Comedy Central, MTV, Spike and Syfy.

The 30-second spot shows Yoda and Darth Maul beginning to fight. Darth Maul’s light saber malfunctions many times before he falls into a Brisk vending machine. Although he is reinvigorated when he drinks the iced tea, just as he again tries to attack Yoda, the vending machine squashes him. Yoda says, “Too old for this I’m getting,” while the voice-over proclaims, “That’s Brisk, baby,” a tagline introduced in Brisk’s original animation spots.

?

More than 500 movie theaters in 15 states will run the TV spots for two months starting Friday; similar radio ads will run starting Jan. 23 on stations in New York and Southern California. Brisk also will hold sampling events across the country from late January through mid-March.

Mr. Fuller said Brisk’s 2012 advertising and marketing budget would be in the “low double digits” of millions of dollars, the most PepsiCo had ever spent to promote the brand. He also said 75 percent of this spending would occur in the first quarter of the year.

According to the research firm Kantar Media, PepsiCo’s annual advertising expenditures for Brisk never exceeded $670,000 in 2007, 2008 and 2010, and totaled $4.7 million in the first nine months of last year. It said PepsiCo did no advertising for Brisk in 2009.

Industry observers and experts differed about the prospects of the PepsiCo campaign.

Noting that recently rising commodity prices had led to higher prices for ready-to-drink teas and subsequent softening of sales growth, Michael Bellas, chairman and chief executive of Beverage Marketing, a consulting company, called Brisk the “dominant value brand” in the ready-to-drink tea category.

“Consumers are more worried about spending and looking for value. My gut feeling is the new 128-ounce packaging and gaming should put Brisk right where it wants to be,” he said.

However, Irma Zandl, a New York-based market researcher who specializes in Generation X and Y consumers and has advised PepsiCo in the past, said the new ads “executionally felt very formulaic.”

“They felt like every other 30-second spot with a superhero,” Ms. Zandl added. “I didn’t feel, ‘Wow, I’ve got to post them on Facebook because they’re so fresh.’ The question is, will young guys think this is so amazing and fabulous? Young consumers are so much savvier and have set the bar so much higher because they see so much.”

View the original article here

Workers Locked Out at Caterpillar Locomotive Plant in Canada

AppId is over the quota
AppId is over the quota

The action came after the employees in London, Ontario, rejected a contract proposed by Electro-Motive Canada. The Canadian Auto Workers union said the proposal would cut wages in half, substantially reduce benefits and end the current pension plan.

“It’s not really a proposal, it’s an ultimatum,” said Tim Carrie, president of the union local that represents the factory’s workers. “This is an attack on middle-class jobs.”

On a Web site with updates about the dispute, Electro-Motive, which Caterpillar acquired in 2010, said the lockout would remain in effect “until a ratified contract is in place.”

The company said the union’s decision not to strike constituted “acceptance of the new wages and benefits as represented in EMC’s final offer.” The company said it was “hopeful of a speedy ratification allowing union members to return to work.”

But some of the union’s executive members have suggested that Caterpillar’s contract demands were intended to provoke a shutdown of the Canadian factory as a prelude to moving all production to the United States.

Caterpillar has a long history of tough labor negotiations and bitter labor disputes. In 1995, workers at the company’s unionized operations in the United States returned to work after declaring a 17-month strike a failure. In 2009, workers took executives at Caterpillar France hostage during a dispute over the restructuring of operations in Grenoble.

Electro-Motive is the second-largest maker of locomotives in North America, after General Electric, and for most of its history was a unit of General Motors. While the parent company, Electro-Motive Diesel, is based in LaGrange, Ill., its only assembly plant in recent years has been the Canadian operation.

But last October, Progress Rail, Caterpillar’s rail operations holding company, opened a new locomotive assembly plant in Muncie, Ind.

The Canadian Auto Workers say that wages and benefits are substantially lower at the new American factory.

The union has suggested that, in addition to reducing labor costs, the company may also want to end Canadian production to avoid potential problems with “Buy American” provisions of United States government procurement rules. While the United States government has said that Canada is exempt from any such measures, labor leaders say that has not always been the case in practice.

The purchase of Electro-Motive Canada was reviewed by the Canadian government under the nation’s foreign investment laws. The union has asked the government to release what conditions, if any, were attached to the subsequent approval. The Canadian government recently settled a dispute with United States Steel under those laws after the company shut down a Canadian steel maker shortly after acquiring it.

“When a foreign company comes in and purchases an existing facility, there has to be a benefit to Canadians,” said Mr. Carrie, the union executive. “Americans coming in and trying to slash wages in half is not a benefit to Canadians.”

Industry Canada, the government department that handles investment reviews, was closed for the New Year holiday on Monday and did not respond to requests for comment.

Anne Marie Quinn, a spokeswoman for Electro-Motive Canada, declined to answer questions about the company’s contract demands, its long-term production plans or any commitments made to the Canadian government.

The company’s Web site about the labor dispute, though, said that the cost of wages and benefits for its workers in Illinois, who are represented by the United Automobile Workers, is about half that for the London plant.

The site says that the now-expired contract at the Canadian factory “also has?antiquated work rules that make the London operation inefficient.”

View the original article here

Fair Game: 2011, a Year of Me-Firsts in Business — Fair Game

AppId is over the quota
AppId is over the quota

Some of this stuff we already knew. Like the fact that banks love the perks that come with being too big to fail. They will lobby shamelessly to hang on to their riskiest businesses and stay perilously large. No surprise, really. A heads-we-win, tails-the-taxpayers-lose model has a lot going for it, at least for executives atop these institutions.

Here’s another lesson we didn’t need to relearn: Penalties levied on corporate miscreants, and the legal bills they rack up defending themselves, never come out of their own pockets. Insurance policies and shareholders wind up paying. Another win for the me-firsters.

And what if you run a company so far into the ground that the federal government has to take it over? Not to worry: the taxpayers may even pay your legal bills. Consider Fannie Mae and Freddie Mac. Since the two companies collapsed into conservatorship in 2008, taxpayers have advanced about $73 million to pay the legal bills of former executives who are fighting fraud suits and investigations dating back to 2005.

Isn’t America great?

Another unfortunate lesson we keep learning over and over is that policy makers always put off tough decisions for another day. Kicking the can down the road is so much more fun and profitable, especially for politicians worried about re-election.

But last year also provided some truly illuminating moments. A favorite was the pronouncement that if Greece were to default on its debts, it wouldn’t really count as a default at all. That determination meant that investors who had bought insurance against a possible default would be out of luck. Their policies wouldn’t pay off as expected.

Who ginned up this nondefault default? A secret committee of bankers who call the shots in the world of credit default swaps. These people happen to work for big banks that probably sold the insurance and, as a result, would be on the losing end if a Greek default were actually called a default.

It sure is good to run the Wall Street branch of the Ministry of Truth.

Another eye-opener came courtesy of the folks at MF Global, the trading house and derivatives dealer overseen by Jon S. Corzine, the former New Jersey senator and governor and former chief executive of Goldman Sachs. Investors were shocked to learn that MF Global, a supposedly legitimate brokerage firm, was so lax about its affairs that hundreds of millions of customer dollars simply vanished. Months after MF Global failed, an army of investigators is still searching for the missing money.

Washington politicians can usually be relied upon to educate the citizenry — again and again. Last year was no exception. One telling moment came late in the year, when Democrats and Republicans agreed to extend an existing payroll tax cut for two months. Helping to defray the cost was $36 billion generated through an increase in mortgage guarantee fees charged by Fannie Mae and Freddie Mac.

That $36 billion will come out of borrowers’ hides, of course. But using Fannie and Freddie as a money spigot sent a powerful message: Never mind that losses at these mortgage giants have cost taxpayers $150 billion so far. Or that many Americans would prefer these toxic twins to go out of business sooner rather than later. As long as Fannie and Freddie are viewed as piggy banks, there is little chance that Congress will dissolve them. It looks as if these taxpayer-owned zombies, which did so much damage to our economy, are poised to live on and on.

Finally, it was in 2011 that the ugliest paradox of the financial crisis became clearer. That is, some of the very people our government had pushed to embrace the American dream of homeownership — minority groups, lower-income borrowers, immigrants and others previously shut out of the market — were the very people hurt the most by the foreclosure mess. Washington’s push to increase homeownership opened the door for companies to sell poisonous and tricky loans that have now imperiled many of the most vulnerable.

This became painfully evident in a discrimination suit filed by the Justice Department against Countrywide, once the country’s largest mortgage lender. The suit, filed in December, was based on investigators’ findings that more than 200,000 minority borrowers had been charged higher fees and rates by Countrywide than white borrowers of similar financial standing.

The Justice Department also said that Countrywide steered more than 10,000 minority borrowers into high-cost subprime mortgages even as white borrowers received standard, lower-cost loans. The company’s systems, investigators said, allowed loan officers and mortgage brokers to change the terms of mortgages without complying with fair-lending rules.

Bank of America, which bought Countrywide in 2008, agreed to pay $335 million to settle the suit. The events cited in the lawsuit occurred before its purchase of Countrywide.

But the facts assembled by the Justice Department certainly shed new light on Countrywide’s boasts of eliminating barriers to minority homeownership. Its House America program, which committed $600 billion in loans for low-income borrowers in 2003, won plaudits for Angelo R. Mozilo, Countrywide’s co-founder.

The next year, Mr. Mozilo was named Housing Person of the Year by the National Housing Council Conference. “We commend his leadership,” said G. Allan Kingston, the group’s chairman at the time, adding that it “led to the company becoming one of the top lenders to African-Americans and Hispanics, a direct result of his clear understanding that we must do more to ensure affordable homeownership opportunities throughout the nation.”

As I said: live and learn.

View the original article here

On the Road: Owners Argue Merits of Firearms on Airplanes - On the Road

AppId is over the quota
AppId is over the quota

AT a big gun show here a couple of weeks ago, J. D. Schechter was busy signing up new members for the Arizona Citizens Defense League.

“We apply pressure on our hired hands in the state legislature in Phoenix to expand the rights of Arizonans to carry guns,” explained the elaborately mustachioed Mr. Schechter, who was wearing a park ranger-style hat and a khaki uniform. Next to his table in the sprawling exhibition hall, hundreds of people browsed through booths that offered a vast array of handguns, rifles and shotguns, hunting knives and survival gear, military memorabilia — and handmade jewelry.

Lately, I’ve been thinking more about firearms after strong reaction I had to a recent column about travelers who were stopped at airport security checkpoints for trying to carry guns onboard planes. I even heard from a few readers who believe that the relaxation of so-called right-to-carry gun laws in many states ought to expand federally to allow responsible, legal permit-holders to carry firearms on airplanes.

No one I know believes this will actually happen. On the other hand, statistics show that more and more people are carrying guns to airports. As I noted in the column, the Transportation Security Administration director, John S. Pistole, said recently that screeners now find on average four or five guns each day in carry-on bags. Eighteen months ago, the T.S.A. was finding only about two guns a day.

Consider the week of Dec. 19 through Dec. 25, a period when the T.S.A. found 31 guns in carry-on bags, many of them loaded, with a round in their chambers.

Meanwhile, gun sales are booming. The F.B.I. says that the number of criminal background-check applications for purchases of guns set a record in December for the second consecutive month.

The subject of guns is complex and emotional. Just this past week, several fatal shootings made the news, including an off-duty federal agent who was killed on Long Island while trying to stop a robbery and a park ranger in Washington killed in Mount Rainier National Park while making a routine traffic stop.

And, I’m well aware of the irony of writing about a gun show in Tucson, where one year ago this Sunday, a gunman opened fire during a political event outside a supermarket, killing six and wounding 13 others, including my own congresswoman, Gabrielle Giffords. The next big gun show scheduled for Tucson, incidentally, is this weekend, at the Pima County Fairgrounds.

But let’s simply address the subject of firearms and air travel. As a tiny percentage of overall travelers, most of the people carrying guns to airports do not have terrorist intentions.

Ron Paul, a Republican presidential candidate, suggested in a statement last year that prohibiting legal gun owners from carrying weapons on airplanes had “set the stage for 9/11.” Others point to reports of federal “red team” security inspectors routinely finding in random tests that firearms readily get through security checkpoints undetected.

“Look at how many guns already get through,” said Kurt Amesbury, a director of a gun owners group called Keep and Bear Arms. Mr. Amesbury was one of the activists who objected to my column about more guns turning up at airport checkpoints. (Guns can be legally transported in checked bags after a passenger declares them.)

Mr. Amesbury and some other gun rights supporters I spoke with say they believe that airline security can be enhanced if more passengers were armed. I don’t agree, but their positions deserve to be understood.

In essence, they say that gun owners with appropriate licenses should be able to carry weapons after making themselves known to security officials and the captain. Federal air marshals on board would also know which passengers are armed. “I present my permit and say that I’m carrying,” Mr. Amesbury said. “Why wouldn’t that work?”

Of course, there are other implications, including dangerous felons circumventing permit procedures and legally carrying weapons.

Still, I’m happy to say that even as I was being denounced on gun rights Web sites as participating in a “jihad” against the Second Amendment, at least some agreement was achieved on the subject of “knuckleheads,” which is how I referred to those who claim they simply forgot they had a gun in their bags. Some supporters of gun rights who objected generally to the column did agree that a right to carry arms probably also includes a responsibility to remember where your gun is.

Asked about this at the gun show, Mr. Schechter handed me a Citizens Defense League refrigerator magnet and pointed to rule No. 5, which stated: “Always maintain control of your defensive tools.”

View the original article here

A Gathering Storm Over ‘Right to Work’ in Indiana

AppId is over the quota
AppId is over the quota

The thunderclouds are gathering first here in Indiana. The leaders of the Republican-controlled Legislature say that when the legislative session opens on Wednesday, their No. 1 priority will be to push through a business-friendly piece of legislation known as a right-to-work law.

If Indiana enacts such a law — and its sponsors say they have the votes — it will give new momentum to those who have previously pushed such legislation in Maine, Michigan, Missouri and other states. New Hampshire’s Republican-controlled Legislature was the last to pass a right-to-work bill in 2011, but it narrowly failed to muster the two-thirds majority needed to override a veto by the Democratic governor; an Indiana law would re-energize that effort.

Right-to-work laws prohibit union contracts at private sector workplaces from requiring employees to pay any dues or other fees to the union. In states without such laws, workers at unionized workplaces generally have to pay such dues or fees.

Many right-to-work supporters say it is morally wrong to force unwilling workers to contribute to unions, while opponents argue that it is wrong to allow “free riders” not to support the unions that represent them in negotiations and arbitrations.

Right-to-work is also a potent political symbol that carries serious financial consequences for unions. Corporations view such laws as an important sign that a state has policies friendly to business. Labor leaders say that allowing workers to opt out of paying any money to the union that represents them weakens unions’ finances, bargaining clout and political power.

Organized labor has vowed to fight the Indiana bill, which it says would turn the state into the “Mississippi of the Midwest.” If the legislation passes, Indiana would become the first state to have such a law within the traditional manufacturing belt, a union stronghold that stretches from the Midwest to New England. Right-to-work laws exist in 22 states, almost all in the South and West, with Oklahoma the most recent to pass one, in 2001.

Right-to-work supporters say they can win quick passage because Indiana’s Republican governor, Mitch Daniels, backs the bill and Republicans have large majorities in the House and Senate.

Democratic and union leaders say they hope to block the legislation, in part by flooding the statehouse with thousands of protesters — exactly as unions did last year in Wisconsin, Ohio and Indiana in an attempt to defeat legislation that limited bargaining rights for public sector workers. Democratic lawmakers in Indiana have also hinted that they might once again flee to Illinois, as they did last year, to block votes on anti-union bills.

Indiana’s Republican leaders are eager to pass the bill — and end any related commotion — before Feb. 5, when the national spotlight turns to Indianapolis for the Super Bowl.

In heading the legislative push, Brian C. Bosma, the Republican speaker of the Indiana House, argues that not being right-to-work is a big handicap when Indiana competes for jobs.

“Local economic development officers testified that 25 to 50 percent of companies looking to create employment, whether through expansion or locating a new facility, just took Indiana and other non-right-to-work states off the table,” he said in an interview. “This is stopping employers from coming to Indiana. We need to deal with that.”

Kevin Brinegar, president of the Indiana Chamber of Commerce, praised the bill as a low-cost way to improve the business climate. “It’s not like we’re going to spend a billion dollars on tax incentives,” he said. “It’s free.”

But opponents say the talk of improving Indiana’s business climate is just a pretext.

“It’s a political attack on what the Republicans see as one of their main opponents — organized labor,” said Jim Robinson, the top United Steelworkers official in Indiana. “They want to weaken unions to help assure continued Republican majorities.”

View the original article here

BP Says Halliburton Must Pay All Gulf Spill Costs

AppId is over the quota
AppId is over the quota
Competing histories across the Strait of Gibraltar contribute to its peculiar exclaves.

Medicare should demand evidence that a costly cancer treatment is more effective than cheaper options.

In Nigeria, designating Boko Haram as a foreign terrorist group will only inflame anti-Americanism among Muslims.

View the original article here

World Markets Turn Higher

AppId is over the quota
AppId is over the quota

European stocks rallied on Monday, after manufacturing in Germany and China beat forecasts. French bonds fell before debt sales this week and the euro weakened.

The Stoxx Europe 600 index closed up 1.1 percent and the DAX index in Germany surged 3 percent. The Bovespa index in Brazil increased 1.9 percent. The markets in the United States, Britain and several other countries were closed Monday in observance of the New Year’s holiday.

The price of French 10-year bonds fell for a fourth day, pushing yields higher to 3.24 percent. France plans to sell 16.9 billion euros ($21.9 billion) of debt this week. France’s CAC-40 index climbed 2 percent and benchmark indexes in Portugal and Italy increased at least 1.8 percent. The euro weakened against 13 of 16 major peers.

Gold touched the highest level in a week on reports that Iran had produced its first nuclear fuel rod, spurring investors to buy the precious metal as a haven. Spot prices gained as much as 3.2 percent to $1,613.40 an ounce in London, before trimming its gain to 0.2 percent and trading at $1,566.27.

Germany’s purchasing managers index climbed to 48.4 last month, according to Markit Economics. A manufacturing gauge for China increased to 50.3, the Beijing-based logistics federation said Sunday.

“On the first day of the year, a lot of investors, having cleaned their portfolios, have liquidity to invest,” said Arnaud Scarpaci, a fund manager at Agilis Gestion in Paris. “Germany can be seen as a safe haven because it has stronger growth than other countries. People are investing in industries with a lot of visibility, such as utilities.”

Equities and commodities last week capped their worst annual returns since the financial crisis in 2008 amid concern that Europe’s government debt crisis would weigh on global growth. The Stoxx 600 lost 11 percent in 2011, while the MSCI Asia-Pacific index slid 17 percent.

The Standard & Poor’s 500-stock index closed virtually unchanged, ending 2011 at 1,257.60, compared with its 2010 close of 1,257.64.

The direction of the S.& P. 500 in January has correctly foreshadowed whether stocks end the year higher or lower in 60 of the last 83 years, or about 72 percent of the time, according to an e-mail on Sunday from Howard Silverblatt, senior index analyst at S.& P.

German bonds declined for the first time in five days, pushing 10-year yields up to 1.91 percent. The country will auction 5 billion euros of bonds due in 2022 on Wednesday.

Mexican stocks advanced, sending the benchmark Bolsa index up 0.7 percent.

View the original article here

Business Briefing | Company News: Teva Names a New Chief Executive

AppId is over the quota
AppId is over the quota
Competing histories across the Strait of Gibraltar contribute to its peculiar exclaves.

Medicare should demand evidence that a costly cancer treatment is more effective than cheaper options.

In Nigeria, designating Boko Haram as a foreign terrorist group will only inflame anti-Americanism among Muslims.

View the original article here

Business Briefing | Legal News: U.S. Shareholders Sue Lloyds

AppId is over the quota
AppId is over the quota
Competing histories across the Strait of Gibraltar contribute to its peculiar exclaves.

Medicare should demand evidence that a costly cancer treatment is more effective than cheaper options.

In Nigeria, designating Boko Haram as a foreign terrorist group will only inflame anti-Americanism among Muslims.

View the original article here

Exxon Could Receive $555 Million in Cash from Venezuela

AppId is over the quota
AppId is over the quota

The arbitration award decided by the International Court of Arbitration, which is based in Paris, was valued at $907.6 million. In addition to the cash Exxon stands to receive, the oil giant will be released from the payment of debts totaling about $352 million. The ruling was dated Dec. 23, but Exxon said it did not receive the decision until Friday.

The Venezuelan government and Exxon both sought to portray themselves as victors in the arbitration, which stemmed from the 2007 nationalization of a heavy crude oil production project in the Orinoco Belt, considered one of the world’s richest potential petroleum reserves.

Petróleos de Venezuela, the state-run oil company, released a statement on Monday saying that Exxon had sought a much larger compensation and that the arbitrator’s conclusion showed that the company’s claims were “exorbitant” and “completely exaggerated and beyond all logic.”

The state oil company said that its “successful defense” in the case meant that it was required to make only a $255 million payment to Exxon.

But the state oil company’s statement acknowledged that Exxon would also receive about $300 million in cash from bank accounts in the United States belonging to the state oil company; those accounts were frozen by a court ruling after the nationalization. Exxon said the frozen accounts contained $305 million.

The government statement said that Venezuela has always been willing to compensate private interests for the nationalization of assets as long as the compensation was “fair and reasonable.”

In a statement Monday, Exxon said that the arbitration affirmed the state oil company’s contractual liability in its agreements with Exxon over what was known as the Cerro Negro project.

“Contract sanctity and respect for the rule of law are core principles used to manage our business over the long term,” Exxon said.

The nationalization of the Exxon project and other oil projects involving multinational corporations was a major step in a campaign of expropriations by the government of Venezuela’s president, Hugo Chávez.

Exxon and Venezuela are involved in a second arbitration over the same project before the International Center for Settlement of Investment Disputes, part of the World Bank, which could increase the amount the company receives.

The country faces several other potential settlements with foreign companies over a spate of nationalizations that have taken place in recent years. One of those involves a project of the oil company Conoco Phillips, also in the Orinoco Belt.

The ruling appeared to lend weight to Venezuela’s argument that it should compensate companies for the amount they had invested, the so-called book value, rather than the market value that an asset would receive if it were put up for sale.

View the original article here

Mutual Funds Report: Second Quarter

AppId is over the quota
AppId is over the quota
Fund managers who increase cash positions before a market downturn can later use those reserves to buy beaten-down stocks.

Many investors suffered in the last quarter’s sell-off, but losses in large-cap stock funds weren’t as bad as those for riskier, small-cap portfolios.

In the last economic slowdown, stock markets of countries like China, India and Brazil fared worse than their generally healthy economies. Could that change in the next downturn?

Throughout the summer, mutual funds looked for havens — typical ones like gold, and less common ones like short sales — as they tried to shield their investors from the market’s huge losses.

View the original article here

For 2012, Signs Point to Little Gain in Consumer Spending

AppId is over the quota
AppId is over the quota

As the weak economy has trudged on, they have leaned on credit cards to pay for holiday gifts, many bought at discounts. They are dipping into savings to cover spikes in gas, food and rent. They are substituting domestic vacations for international trips, squeezing more life out of their washing machines and refrigerators and switching to alternatives as meat prices have risen.

That leaves little room for a big increase in spending in 2012, economists say, a shaky foundation for the most important pillar of the American economy.

“The consumer is far from healthy,” said Steve Blitz, senior economist for ITG Investment Research.

Even the seemingly robust holiday shopping season is raising concern. After a strong start on Thanksgiving weekend, a pronounced lull followed, causing retailers to mark down products heavily in the week before Christmas. While final numbers for the season are not in, analysts say they are worried that retailers had to eat into profits to generate high revenues.

Consumer spending makes up 70 percent of the economy, so until it ignites, general growth is likely to be sluggish.

Macroeconomic Advisers, a forecasting company, projects growth of around 2 percent for the first half of this year, down from an estimate of 3.6 percent in the fourth quarter of 2011 and just 1.8 percent in the third quarter.

For consumers, the reasons for the sluggishness are clear: incomes are essentially flat, job growth is modest, and more than 40 percent of the new jobs in the last two years have been in low-paying sectors like retail and hospitality.

While consumer spending is not “going to collapse,” said Joel Prakken, senior managing director at Macroeconomic Advisers, “there are some headwinds there.”

Sarah M. Manley, a marketing consultant with two young sons in Waconia, Minn., has developed coping strategies in the last few years. Laid off in 2008, she started a business. She and her husband can make their mortgage payments and are paying off debts from when a storm damaged their roof.

“It’s not necessarily that I’m saving more money, but I’m paying off some of the debts that were amassed during the last three years, just trying to make headway,” Ms. Manley said.

To do that, she has changed habits. She uses the app GasBuddy to check prices at nearby stations before she buys gas for her car. She buys seasonal food on sale and freezes it — for Valentine’s Day, she plans to prepare crab legs she bought and froze last summer — and she is stocking up on holiday hams. She has switched from buying milk in gallon containers to buying it for less in plastic bags from the local gas station.

For big purchases, like the laptop she bought last summer, Ms. Manley still relies on credit, but is careful. She opens credit card accounts offering an introductory rate of no interest, then closes them just before the annual percentage rate kicks in.

“Everybody’s learned how to be frugal in the last two or three years,” she said.

Economic indicators suggest that, while things may not get worse for consumers this year, they will not get much better. In the third quarter of 2011, the most recent period for which figures are available, consumer spending rose slightly more than 1 percent, according to the Commerce Department.

Although housing sales have recently shown signs of recovery, prices are still falling and mortgage lenders are cautious. In November, contracts represented by 33 percent of members of the National Association of Realtors did not close, up from just 9 percent a year ago.

And with more than one in every five borrowers still owing more than their homes are worth, many homeowners feel too pressed to spend on much more than the essentials.

The stock market did not help consumers, either. Because of turmoil in the markets in the late summer and early fall, household wealth declined by $2.4 trillion in that period, a contraction likely to make people think twice about big purchases.

Adding to the uncertainty, financial weakness in Europe, and the potential expiration of the payroll tax cut and unemployment insurance benefits in two months, could further soften spending.

View the original article here

One on One: Scott Harrison, Chief Executive of Charity Water

AppId is over the quota
AppId is over the quota
Photographs by charitywater.orgA clean drinking well in Rwanda, financed by donations to Charity Water.

Scott Harrison used to be a New York City club promoter, making a living from selling people $16 drinks and $300 bottles of vodka. Now he is the founder and chief executive of Charity Water, a nonprofit that focuses on the need for clean drinking water around the world.

Mr.Harrison, 36, says the group received early support from people in technology, and for its growth, has relied on methods borrowed from social media, and from the way start-ups operate. Here is an edited version of our conversation.

What is Charity Water?
It’s a nonprofit that brings clean and safe drinking water to people in need around the world.

Scott Harrison, founder and chief executive of Charity Water.

How did you end up starting a nonprofit?
I was dismayed that people my age weren’t donating to charity.?Younger people had a long list of reasons why they didn’t want to donate, including that they didn’t trust charities. They didn’t know where their donations were going.

You run the nonprofit?like a start-up and not like a charity. How did this happen?
Our early spurt of donations came from people in technology. For example,?Michael Birch, who?successfully?exited Bebo, was our initial bridge to?Silicon?Valley.?Through Michael we started spending more time in Silicon Valley and got to meet people like?Dennis Crowley?and?Jack Dorsey.

Why did people in Silicon Valley want to work with Charity Water, and not, say, The Red Cross?
I think Charity Water felt different to them. We were young, we were tackling an improbably important problem: trying to bring clean water to one billion people. Because we acted like a start-up, people who run start-ups could associate with us.

Do you attribute a lot of?Charity?Water’s success to the Web?
Yes. Absolutely. Because I came from a nontraditional background, I didn’t really know how fund-raising worked. To me, the most efficient way to raise money was online, so we adopted that as the main vehicle to reach people. Today over 75 percent of our donations for water projects come from the Web.

Has your focus on technology helped you grow?
Over the last four years we’ve grown by 400 percent while charitable giving in American has been going down, on an?aggregate, by as much as 10 percent over the past three years.

What else do you differently with the Web?
We are able to tie donation dollars with integrity to the water project they funded. We show people the impact their donations have had. For us that means photographing all the water wells and showing people online where their money went.

Have sites like Twitter and Facebook helped you expand and reach a larger audience?
Absolutely! Social media has played an integral role in our rapid growth and success. We use a very visual language in the way we talk to people about our goals. I like to say that “we show and we don’t tell.” Rather than tell you about a child walking for five hours a day to get drinking water, we’ll show you online.

How else do you use the Web?
With YouTube we created thank you videos for our donors. For example, if a donor baked for us to make money for Charity Water, our staff dressed up as bakers and made a video thanking them. If a donor, like Chris Sacca, biked across America, then our staff dressed up this way.

How did you end up starting Charity Water?
I was a club promoter for almost 10 years in New York. I got people wasted for a living. I sold them expensive drinks in expensive bottles at nightclubs. At 28 years old, after a decade of selfish and decadent living, I realized how miserable I was. I went to live in Liberia in West Africa with a group of humanitarians and surgeons, and I saw extreme poverty for the first time in my life. It ruined me. I spent almost two years as a volunteer there. Then, I came home and started Charity Water.

What have you learned that can help other nonprofits?
Simplicity is key. Be able to tell your story simply. I can’t tell you how many nonprofits I meet and after three minutes talking to them, I still have no idea what they do. Show. Don’t tell. And do it visually. Use the Web to tell people where their money has gone and let them see what it has done.

Has mobile helped you with donations?
No one has figured out mobile giving, yet. We’ve experimented with text campaigns with some degree of success, but we’re really looking for that big idea in mobile and giving.

Start-ups can sometimes be ostentatious with their money. Does it bother you when working with these companies?
I remember when I first came to New York from?Africa, my first day back someone bought me a sixteen-dollar cocktail at the Soho House and my paradigm had shifted. Sixteen dollars could have bought a bag of rice, feeding a family for a month in Liberia. I remember feeling angry and self-righteous?and indignant, but I knew that it would do no good. Who was I to judge? I look at the wealth and success in Silicon Valley as an?opportunity to transform lives around the world without judging people and I want to invite them into our story.

What impact has Charity Water had so far?
In just over five years, Charity Water has raised over $58 million from 250,000 generous donors around the world. We have also funded 4,280 water projects that will provide two million people with clean drinking water in 19 countries.

Start-ups see going public or an acquisition as success. What’s your goal?
We envision a day when every person on earth has clean and safe water to drink.

Charity Water plans to bring clean drinking water to one billion people around the world.

View the original article here

DealBook Column: 2011's Best and Worst in the Financial World - DealBook

AppId is over the quota
AppId is over the quota
Victor R. Caivano/Associated PressKaty Perry, an artist with EMI, which was sold last year, performing in Buenos Aires.

Please, please take your seats.

Thank you once again for coming to DealBook’s annual closing dinner, where we toast and roast the world of finance — and look ahead to the new year.

We moved this year’s dinner from its usual spot in Manhattan to Paris so Nicolas Sarkozy and Angela Merkel (or Merkozy, as you know them) could attend, given their newfound influence on the markets and the global economy.

We thought of holding our gathering in Berlin, but then realized this might be the last year we’d be able to do Paris while France still has its AAA credit rating. Christine Lagarde, managing director of the International Monetary Fund, also pointed out that Société Générale could use the extra A.T.M. fees from all of you withdrawing tip money for the coat check.

Not everyone could make it. We mailed Jon Corzine several invitations, but initial reports indicated they were accidentally commingled with his holiday cards. He now says he misplaced the invitations completely and has “no idea” where they could be.

Silvio Berlusconi originally R.S.V.P.’ed “yes” when he saw the menu, but backed out when he learned that “16-year-old Caol Ila” was a single-malt whisky.

But it’s nice to see that so many of you could attend. The seating chart was a bit challenging. Jamie Dimon, chief executive of JPMorgan Chase, is sitting next to Paul Volcker. They’ve agreed to take any discussion of the Volcker Rule outside.

I placed Lloyd Blankfein next to Mark Zuckerberg to ease the underwriting pitch for Facebook’s planned I.P.O. in 2012. I overheard Mr. Zuckerberg ask Mr. Blankfein what holiday gifts he had given his children. Then Mr. Zuckerberg added, “I’m not making small talk, Lloyd — it’s literally the only piece of your personal data I don’t have.”

By the way, Mr. Blankfein, the celebrity chef Mario Batali is graciously catering our dinner and has assured me that blood-sucking squid is not on the menu. I should also note that Mr. Batali has volunteered his services, perhaps to atone for declaring in 2011 that “the ways the bankers have kind of toppled the way money is distributed and taken most of it into their hands is as good as Stalin or Hitler and the evil guys.” Mario is preparing tagliatelle ai funghi e pancetta, which roughly translates to “please don’t put my restaurants out of business.”

I was hoping to invite some leaders of Occupy Wall Street to provide a little balance, but I still don’t know who’s in charge.

Finally, Andrew Mason of Groupon is here. It’s hard to overstate how big a year it was for Mr. Mason. His company went public, he became a billionaire and the daily coupon deals phenomenon he pioneered has seemingly swept the nation. Even his tablemate, Brian Moynihan, chief executive of Bank of America, is getting into the Groupon spirit with an offer of his own: three shares for the former price of one!

And now, on to the toasts and roasts of 2011:

Andrew Harrer/Bloomberg NewsT-Mobile BlackBerry phones. AT&T’s giant deal for T-Mobile fell apart last year.

BIGGEST LOSER AT&T’s attempted $39 billion acquisition of T-Mobile may have been the worst merger idea of 2011. Both sides claim the regulatory winds shifted in Washington after the deal was announced. But anyone who was paying even a whiff of attention knew from Day 1 that regulators would block it.

Many have credited T-Mobile’s parent, Deutsche Telekom, and its legal team for walking away with a breakup fee worth about $6 billion. But T-Mobile winds up the biggest loser. The sour regulatory mood will make it harder for T-Mobile to pursue a deal with Sprint, which had been circling the company before AT&T arrived. T-Mobile and Sprint are both in worse positions than they were a year ago; both companies have lost customers, and Sprint has a lot less money to spend on an acquisition.

As for Randall Stephenson, AT&T’s chief, while the dead deal was clearly a mistake at least it was a relatively cheap one, costing the company only about two months’ worth of cash flow.

BIGGEST WINNER (FOR NOW) Richard Handler, the chief of Jefferies & Company, probably deserves a pat on the back — and a double shot of that Caol Ila. He had a tough 2011.

His firm skirted a run on the bank after the collapse of MF Global put the spotlight on Jefferies as the American investment house most vulnerable to European sovereign debt. A credit rating downgrade only fanned the flames. But Mr. Handler stood firm, issuing lengthy denials of virtually any speculation that emerged. And he reduced the firm’s exposure to European sovereign debt by half just to prove to the market that he could. He had little choice, but so far, it’s been a winning strategy. Stay tuned for 2012.

THE RATINGS AGENCIES I’ve invited Douglas Peterson, the newly installed president of Standard & Poor’s Ratings Services, mainly because the firm — and its industry peers — performed so miserably. You’re new, Mr. Peterson — you just came over from Citigroup, where you were chief operating officer — so we’ll let you eat with us this time.

But do take note: until the week before the collapse of MF Global, your peer agencies were giving that firm an investment-grade credit rating. As usual, the big ratings agencies did not sound the alarms until long after the fire was raging out of control. In S.& P.’s case, it kept an investment-grade rating on MF Global until it filed for bankruptcy protection.

Remember Enron? A.I.G.? S.& P. rated those companies with just as much insight. And Mr. Peterson, your firm’s downgrade of the United States last summer seemed aimed more at generating media attention and headlines than helping investors understand the risks of investing in United States Treasury securities. If anything, the downgrade proved how irrelevant the ratings agencies have become: Treasuries have since rallied.

So that you can gain a fuller appreciation of the anger the American public harbors for your firm and industry, I seated you next to Michael Moore, who recently said on Twitter: “Pres Obama, show some guts & arrest the CEO of Standard & Poors.”

CONSUMER ‘PROTECTION’ I invited both Elizabeth Warren and Richard Cordray to make a point: the bankers in this room waged a successful campaign to keep Ms. Warren from running the Consumer Financial Protection Bureau in 2011. That, in turn, led President Obama to nominate Mr. Cordray, who was rejected by Republicans, again at the behest of Wall Street.

Whether either was the right person for the post is almost irrelevant. What’s clear is that Wall Street is doing everything it can to keep the agency from being able to do its job, and that’s a shame.

Even if you think the financial industry is overregulated or you don’t like the agency’s governance structure, all this political maneuvering sends an awful message to the public: Wall Street banks are actively trying to stymie a start-up agency charged with protecting consumers’ money.

SLEEPER DEAL OF 2011 The sale of EMI Publishing for $2.2 billion to a group led by Sony was hardly the biggest deal of the year, but it might have been the most interesting and undercovered transaction of 2011.

Consider this: EMI’s recorded music unit — the sexy part of the business that produces albums by the likes of Katy Perry and Coldplay — was sold on the same day for $1.9 billion to the Universal Music Group, a division of the French conglomerate Vivendi.

That means the typically boring publishing business, which deals with song copyrights, was sold for more, and it went to a Sony-led group that included boldface-name investors like the media mogul David Geffen; the estate of Michael Jackson; Blackstone’s GSO Capital Partners unit; Mubadala, the investment arm of Abu Dhabi; and Jynwel Capital of Malaysia.

The transaction was orchestrated by Robert Wiesenthal, chief financial officer of the Sony Corporation of America, demonstrating that in this age of digital media uncertainty, the predictable fee stream of a homely business like music publishing has a higher value than an ego-driven trophy asset like music recording.

Watch for more deals of this sort in 2012.

Jamie Mccarthy/Getty Images For The Promotion FactoryTheodore Forstmann, a pioneer in private equity, died in November after a battle with brain cancer.

REMEMBERING TEDDY Finally, let’s have a brief moment of silence for Theodore Forstmann, one of the pioneers of the private equity business, who died in November after a battle with brain cancer.

In an often-scorned industry, he embodied its best parts. Bold, often brash, sometimes difficult, he was ultimately an entrepreneur’s entrepreneur. And he was introspective enough to have serious doubts about the use of leverage and speak out publicly about it. Most important of all, he donated much of his fortune to underprivileged children.

I’d be remiss if I did not also mention another industry legend who died in 2011: F. Warren Hellman, co-founder of Hellman & Friedman, the West Coast buyout firm that once owned Levi Strauss & Company and Nasdaq. He, too, gave away much of the “2 and 20” he made.

At a time when the “1 percent” is being ridiculed as selfish and greedy, it is worth remembering the enormous good Mr. Forstmann and Mr. Hellman accomplished. I attended Mr. Forstmann’s funeral and was struck less by the Masters of the Universe in the pews than by the dozens of schoolchildren in attendance — most of them recipients of scholarships financed by Mr. Forstmann.

View the original article here

Building Storehouses for the Sun’s Energy, for Use After Dark

AppId is over the quota
AppId is over the quota

That challenge seems to be creating an opening for a different form of power, solar thermal, which makes electricity by using the sun’s heat to boil water. The water can be used to heat salt that stores the energy until later, when the sun dips and households power up their appliances and air-conditioning at peak demand hours in the summer.

Two California companies are planning to deploy the storage technology: SolarReserve, which is building a plant in the Nevada desert scheduled to start up next year, and BrightSource, which plans three plants in California that would begin operating in 2016 and 2017. Together, the four projects will be capable of powering tens of thousand of households throughout a summer evening.

Whether the technology will be widely adopted remains to be seen, but companies like Google, Chevron and Good Energies are investing in it, and the utilities NV Energy and Southern California Edison have signed long-term contracts to buy power from these radically different new power plants.

One crucial role of the plants will be complementing solar panels, which produce electricity directly from sunlight. When the panels ramp down at dusk or on cloudy days, the plants will crank up, drawing on the stored thermal energy.

That job will become more important if photovoltaic panels, which have plunged in price lately, become even cheaper and sprout on millions of rooftops. As the grid starts depending more heavily on solar panels or wind turbines, it will need other energy sources that can step in quickly to balance the system — preferably ones classified as renewable.

Most utilities are trying to generate as many kilowatt-hours of renewable energy as they can to meet stiffer state requirements on incorporating more alternative energy, said Kevin B. Smith, the chief executive of SolarReserve.

“As we move forward, we’ll get more and more traction with the fact we can provide more capacity,” Mr. Smith said, referring to his company’s storage technology.

The Energy Department seems to agree: in September it gave SolarReserve a $737 million loan guarantee for its project in Nevada. The plant will generate 110 megawatts at peak and store enough heat to run for eight to 10 hours when the sun is not shining.

The public’s view on loan guarantees for solar projects has soured somewhat since the bankruptcy of Solyndra, a California company that received a $535 million loan guarantee to build a factory to make solar panels — only to see the market for the modules crash.

But the outlook has always been clearer for companies that make electricity, which, unlike solar modules, is generally presold by contract.

Technical details of the SolarReserve and BrightSource plants vary slightly, but both will use thousands of computer-operated poster-size mirrors aiming sunlight at a tower that absorbs it as heat.

SolarReserve absorbs the heat in molten salt, which can be used immediately to boil water, generating steam that turns a conventional turbine and generator. Hot salt can also be used to retain the heat for many hours for later use. BrightSource heats water that can be used immediately as steam or to heat salt for storage.

The plants rely on salt because it can store far more heat than water can. But once molten, it must be kept that way or it will freeze to a solid in part of the plant where it will be difficult to melt again. “You’ve made a commitment to those salt molecules,” said John Woolard, the chief executive of BrightSource.

The technology is not complicated, but the economics are.

The simplest, least expensive path for solar thermal is to turn the heat into electricity immediately. But the companies are a bit like the farmer who harvests the grain and stores it in a silo rather than shipping it straight to market on the expectation that prices will be higher later. They are betting that in revenue terms, the hour at which the energy is delivered will be more important than the amount generated.

The notion is that widespread adoption of solar panels — whether on rooftops or in giant arrays in the desert — will change the hours at which prices are highest.

Today, electricity prices usually peak in the late afternoon and evening on hot summer days. “Photovoltaic panels will do a pretty good job of chopping that peak” in the late afternoon, said Paul Denholm, a solar specialist at the National Renewable Energy Laboratory in Boulder, Colo.

In other words, the new price peak will be pushed to later in the day, to just before and after sunset, when solar photovoltaic production is small or nonexistent, he and other experts say.

This article has been revised to reflect the following correction:

Correction: January 2, 2012

An earlier version of this article gave an incorrect name for the chief executive of BrightSource. He is John Woolard, not Paul.

View the original article here

Pawnbrokers Prosper as Greece Struggles With Hard Times

AppId is over the quota
AppId is over the quota

But the stores — pawnshops and gold dealers — are thriving as Greeks who are short of cash give up jewelry and other valuables to make ends meet and pay new taxes. The authorities reported a veritable explosion in the sector, with 90 percent of the nation’s 224 officially registered pawnshops having opened in the past year.

While these entrepreneurs insist that their services are legitimate, the Greek authorities contend that many of the shops are concealing a rapidly expanding illicit trade in gold, and that much of it is being smuggled out of the debt-racked country, confounding efforts to curb rampant tax evasion.

Similar trends have been reported in other countries that were hit by recession. In the United States and Britain, weakening economies and turmoil in credit markets have helped gold dealers thrive. A decade ago, the same happened in Argentina, after its economic meltdown.

In Greece, new outlets are springing up on streets where bankrupt stores have been boarded up. Competing with old-school pawnbrokers who work out of tiny stores on side streets, the new professionals lease central locations, taking advantage of falling rents. They advertise in newspapers and on television, and slip promotional leaflets under doors and on car windshields. Many also accept cars, yachts and real estate from Greeks no longer able to finance affluent lifestyles.

Many jewelers have joined in, putting placards in their windows reading “I buy gold.” And there are signs of foreign interest. One Italian jewelry wholesaler, which has opened several franchises in Greece, accepts gold teeth as well as jewelry in exchange for cash.

Although most traders are reluctant to talk, those who do say they are just seizing an opportunity created by hard times and the high price of gold, roughly $1,600 an ounce.

“Gold is strong — so there’s a lot of interest in selling,” said Yiannis Spiratos, manager of a pawnshop in central Athens. “We’re just serving that interest.”

He said that 8 in 10 customers sold their goods outright, rather than pawning them. “Some sell their jewelry because they never wear it; many say they need the money to pay the emergency tax,” he said, referring to a new tax on property owners.

Outside his shop, a smartly dressed middle-aged woman said she had just sold some earrings and her husband’s gold watch. “He couldn’t do it; he was too embarrassed,” said the woman, who gave her name only as Anna. She said she had made around $1,500 from the sale, after visiting four other shops for quotes.

With an increasing number of Greeks considering cashing in their jewelry or family heirlooms, the country’s consumer protection agency recently published guidelines to protect people from unscrupulous dealers. It warns against traders promising particularly high prices and advises consumers to weigh their jewelry at home or to have it assayed at a laboratory run by the national association of goldsmiths. The warning followed a government order for stricter inspections of gold dealers to ensure they are licensed and operating legally.

“The crisis is an opportunity for many, and that’s O.K. as long as it’s legal,” said Nikos Lekkas, the head of inspections at the Financial and Economic Crime Unit of the Ministry of Finance.

But although most gold dealers obtain the required operating license from the police, few keep a log of their transactions, as the law dictates. Inspections of pawnshops and gold dealers in Athens indicated that 80 percent were guilty of tax evasion, depriving the government of millions, and possibly billions, of euros in lost revenue, according to the financial crime unit.

Tax evasion remains one of the biggest drains on the Greek state, accounting for about $58 billion annually, or 13 percent of gross domestic product. That remains a sore point with the European Union and the International Monetary Fund, which have lent Greece billions of euros to avert a default that could be catastrophic for the euro zone.

Inspections by the financial crime unit suggest that some shops are fronts for illegitimate businesses shipping large quantities of gold out of the country illegally. In one recent raid, the police stopped a car near the western port of Patra that was carrying a half ton of silver bars, but no official documents.

The authorities traced the cargo to a pawnshop near Syntagma Square, in the heart of Athens. They said the shop had shipped, in a separate delivery, an eighth of a ton of gold bars to Germany, worth an estimated $8.72 million, again without documents. Investigators said they also traced six Cypriot and German offshore companies to pawnshops and gold dealers in Greece.

There are also signs that some pawnshops are receiving stolen goods, particularly jewelry, which is hard to trace because it is quickly sold or melted down in foundries.

Most pawnshops deny working with foundries. The foundries themselves — whose number tripled during the last year, with 10 now operating in the Athens area — were tight-lipped. Several denied that they worked with gold and none were listed as doing so in Greek directories.

Some financial experts say the trade is much like any other, some of it legal and some not, with the only difference being the higher value of gold.

“Since the beginning of time, people have melted down or sold their jewelry when the need arises,” said Babis Papadimitriou, an economics commentator. “This is what Greeks are doing now.”

View the original article here

BUSINESS: House Advantage: The Sure Thing

AppId is over the quota
AppId is over the quota
An animated explanation of how banks use securities lending to make a profit, while their customers cover the losses.

Produced by Zach Wise, Danielle Belopotosky

View the original article here

France’s Treasury Chief Works to Guard Credit Rating

AppId is over the quota
AppId is over the quota

Mr. Fernandez, the head of the Treasury within the Ministry of the Economy, Finance and Industry, has already been through a similar crisis-management exercise. That came in early August, when Standard & Poor’s cut the top credit rating of the United States government while most of the French elite was on vacation.

Within hours on a summer Saturday morning, Mr. Fernandez helped organize a series of emergency calls with his boss, Finance Minister Fran?ois Baroin, and others in Paris’s circle of policy makers, to prevent the American crisis from sending a financial tsunami across the Atlantic.

Later that day, Mr. Baroin appeared on French television to question the validity of the United States downgrade. President Sarkozy interrupted his vacation in a show of engagement. But behind the scenes, Mr. Fernandez did much of the heavy lifting.

It was not the first time in the two-year-long European crisis that Mr. Fernandez has quietly kept things moving. And it probably will not be the last.

As France and Germany take the lead in trying to hold the euro currency union together, Mr. Fernandez has emerged as one of Paris’s top power brokers — whether in promoting the French position on the banking sector’s participation in a Greek bailout, or the creation of a rescue fund for troubled countries, or the recent deal by most European Union governments to shore up the foundations of the euro zone.

So much confidence has been placed in Mr. Fernandez that the French news media have started calling him the “guardian of the triple-A.”

But Mr. Fernandez, at 44 a youthful technocrat whose soft blue eyes belie an inner sang-froid, chuckles about the moniker with an almost embarrassed air.

“I’m a civil servant,” he said demurely. “I do what I have to do.”

What he must do now could prove crucial to how well France weathers the country’s seemingly inevitable debt downgrade. Because the demotion has been widely telegraphed by the three major credit rating agencies, Mr. Fernandez and other officials do not expect the impact to be devastating.

Still, a lower credit rating will probably make it more expensive for France to service its debt, and more difficult for the Europewide rescue fund — of which France is a major backer — to operate. That, in turn, could renew tensions between France and Germany over how to manage the euro crisis.

For every photo op in which Mr. Sarkozy and Chancellor Angela Merkel of Germany trumpet a new step forward, Mr. Fernandez has spent countless hours behind the scenes with an influential man in the presidential cabinet, Xavier Musca, Mr. Sarkozy’s powerful chief of staff, and Berlin’s point man, J?rg Asmussen, to smooth and soothe the sometimes testy French-German relationship.

Mr. Fernandez also exchanges e-mails frequently with officials at the Treasury Department to keep up on developments across the Atlantic. And his ability to parse mind-numbing financial issues better than nearly any other French civil servant helped French leaders look smart during the Group of 20 meetings to which France played host in 2011.

Doing all this largely below the public radar is apparently the way Mr. Fernandez prefers to work. In a country where discretion is a highly prized commodity, his effectiveness comes from operating in the shadows.

“Ramon is the right man in the right place,” said Christine Lagarde, who worked with Mr. Fernandez until last summer, when she resigned as France’s finance minister to become the managing director of the International Monetary Fund.

“He is smart, experienced, a good negotiator, but also a critical part of a close-knit network of advisers to the leading political figures,” Ms. Lagarde said.

For Mr. Fernandez’s efforts, he was made a chevalier of the French Legion of Honor in December, in a ceremony under the gilded ceilings of the élysée Palace. Mr. Sarkozy cited Mr. Fernandez as a pillar in the management of France’s future.

Yet such moments are rare. Mr. Fernandez generally eschews the elitist trappings embraced by most other government dignitaries.

He rides a motor scooter to work, for example. The idea of being chauffeured around “gives me a headache,” he said. On the scooter, “you take some fresh air, and you are forced to focus on just one thing.”

View the original article here

Frequent Flier: To Asia and Back Again, Sleep Not an Option - Frequent Flier

AppId is over the quota
AppId is over the quota

My business partner Jon Greenlee and I would strap ourselves to the wing to save money. When we travel, we rarely sleep because we have to book these bizarre trips. It’s crazy.

Our first international business trip was pretty terrible. We needed to get to Asia and our first thought was that we couldn’t afford it. But then we got online and found a way to get there without going completely broke.

We drove from our headquarters in Pittsburgh to Washington, where we caught a morning flight to South Korea. From there, we went to China, Japan and Indonesia. The entire trip was five days long, and we got maybe five hours of sleep the whole time.

In China, we had translators, but we were still used to conducting business American style, where you can get a deal done in two hours and everybody leaves happy. But in Asia, every meeting was about 10 hours long and everyone wanted to serve us food. We were so stuffed and jet-lagged, it was ridiculous.

When we got to Jakarta, we went through complete culture shock. The traffic was crazy and our hotel was on high alert because of a bomb scare. But we managed to do some business. The plan was to fly out of Jakarta at midnight, land in Korea and then fly home.

By this time, both of us were completely exhausted, but my partner was having the worst of it. When we landed in Washington, he bolted off the plane, so we wound up going through customs separately.

Finally, he showed up and when he realized we still had to spend several hours in a car to get home, he threw his bag against a wall. Security immediately came over to question him. He started mumbling about how tired he was and I think they felt sorry for him so they let him go.

Our chief financial officer picked us up and we motioned for Jon to get in the back of the car. He slept the whole way home.

The trip was actually worth it since we eventually opened two offices in China and one in Indonesia.

But sometimes you don’t get the deal.

We had a meeting in England, and we had to get there and then back to Pittsburgh all within one day. We flew out early in the morning and right after landing, we went to our meeting in this beautiful older building. We had a nice presentation lined up. Since we’re a tech company, everything is supposed to go smoothly.

We had a converter and Jon plugged in the computer. The electricity immediately went out. We stood there looking at each other, with the clients looking at us, with that “who are these losers?” expression on their faces. We didn’t even know if it was our fault.

I tried to salvage the meeting by just talking about our technology, and told them to imagine what it would be like. They looked at me like I was insane. I think a few yawned. Of course, we didn’t get the deal.

Our friend who lined up the meeting for us felt so bad about everything that he bought us two first-class tickets home. I would love to tell you we enjoyed first class, but I can’t. All we did was sleep.

By Ty Morse, as told to Joan Raymond. E-mail: joan.raymond@nytimes.com

By Ty Morse, as told to Joan Raymond. E-mail: joan.raymond@nytimes.com

View the original article here

Itineraries: Sorting Through Hotels’ Rewards Programs

AppId is over the quota
AppId is over the quota

Hotel programs generally do not have blackout dates, do not charge travelers to book a reward stay and do not assess a fee if customers’ plans change and they need to rebook the room.

But hotel chains have more inventory than airlines because their occupancy rate is usually lower than an air carrier’s. Customers who redeem points for a free stay “aren’t usually taking a room away from a paying customer, the way an airline traveler redeeming a free seat might be,” said Brian Kelly, who manages a travel blog called The Points Guy.

Hotel rewards programs are not all alike, however. Some erase points if an account shows no activity in a year, while other programs’ points never expire.

Customers in the Hilton HHonors program, for example, need to fulfill annual qualification requirements or they may be downgraded to a lower rewards tier. The points remain active as long as the program member stays in a Hilton Worldwide hotel, or earns or redeems any HHonors points within a 12-month period. Otherwise, they expire. “We want to focus more on the people who are still engaged with us,” said Jeff Diskin, senior vice president for global customer marketing at Hilton Worldwide. “We are stratifying who we invest in.”

In the Starwood Preferred Guest program, which includes the W, Westin, Sheraton and St. Regis chains, customers at the basic level also have their accounts closed and points forfeited if they have no activity in their account in a year. E-mails to rewards program members suggest ways to keep the account open short of a hotel stay, like dining at a hotel in the chain or spending $12.50 to buy 1,000 Starpoints.

At the elite levels, the program is more forgiving, particularly for the highest tier, Platinum. “Each year a member is inactive, they are placed in a lower level so you can go years at the Platinum status without any activity before an account is closed,” said Chris Holdren, senior vice president for Starwood Preferred Guest.

Hyatt Hotels also closes accounts and erases points after 12 months. The Marriott Rewards policy says the company reserves the right to close accounts after two years of inactivity, but a spokeswoman, Laurie Goldstein, said, “So far, we have never done it.”

Michael McCall, the chairman of the marketing and law department at Ithaca College’s School of Business, pointed out that guests redeeming points for a free stay cost the hotel money, so promises of future free stays can take away from future profits.

Still, demoting customers who stay infrequently or canceling their points can be dicey, Mr. McCall said. “It saves money, but can engender ill will.”

Clay Voorhees, a marketing professor at the Eli Broad College of Business at Michigan State University, says hotels must focus on top customers because they are the most profitable. “Someone who only stays a few nights per year but just explodes money on conference facilities and meals is more valuable to the hotel than a value seeker who stays more often, but always at a discount,” he said.

Hotels are offering more choices to customers in redeeming their points. Frequent travelers who already spend many nights on the road may not value a free night in a hotel. They can choose instead to participate in hotel-sponsored events. The Fairmont offers a visit to a Zulu village in South Africa, where guests are accompanied by a photographer and served a traditional meal. At the W hotel in Hong Kong last October, Starwood Preferred Guest members could redeem points for a private concert with a pop star, Khalil Fong. Hilton and others allow members to buy merchandise, combine with airline miles or donate points to charity.

Those on the lower rungs of hotel rewards systems can inexpensively reset the expiration clock, Mr. Kelly, the blogger, said. He pointed to free mileage management services like Usingmiles.com and Awardwallet.com that will notify the user when points are due to expire. “Letting points expire is like putting money in a trash can,” he said.

Points never expire for members of the Priority Club, which is run by the InterContinental Hotels Group and includes Holiday Inn, InterContinental Hotels and Crowne Plaza. Don Berg, vice president for loyalty programs and partnerships at IHG, said his company’s program was created in 1983, and 50,000 original customers were still in the program, even though “there were periods of time along the way when we didn’t see some of them for a while.”

“Our research tells us the No. 1 feature of a rewards system is no point expiration,” Mr. Berg said. “It would be like looking at your checking account one day and seeing your money is all gone.”

Mr. Berg said there sometimes was a natural ebb and flow in travel habits. Customers cycle in and out of jobs that require heavy travel, he said, or may have circumstances like the birth of a baby or a family illness that dictate the amount of time they can spend away from home. “If you are sick, and we don’t see you for a year, we’re not going to cut you off,” he said.

There are a number of ways to compare hotel rewards programs other than how quickly points expire. Travelers can compare the number of points they receive for each dollar spent, as well as how many points they need to earn a free night at a luxury property. They can also see the point total to qualify for elite status, which offers benefits like free room upgrades and late checkout.

And then there are the hotels that eschew points-based reward systems. At the Kimpton hotel chain, seven stays earn customers a free room night. Staying at 10 different hotels earns two nights. “We wanted to encourage travelers to try different Kimpton hotels, perhaps in the same city,” said Niki Leondakis, president of Kimpton Hotels. “We also wanted our free stays to be uncomplicated, so customers don’t have to worry about acquiring different numbers of points for different stays or redeem different amounts of points to stay at different hotels.”

Mr. Kelly agreed that hotel rewards systems “can be complicated, confusing and annoying.” But, he added, “It’s worth investing time in figuring out how to earn and keep them.”

View the original article here