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Wednesday, May 23, 2012
Pension corp sues Dewey & LeBoeuf law firm
Global shares fall as Greek turmoil saps risk appetiteReuters
Asian shares fell and the dollar rose broadly on Wednesday after efforts to form a new government in Greece collapsed, …
Tuesday, May 22, 2012
Repsol sues Argentina over giant YPF seizure
By Carlos Ruano and Jonathan Stempel
MADRID/NEW YORK (Reuters) - Repsol YPF SA (REP.MC), the large Spanish oil and gas company, on Tuesday sued Argentina for seizing control of formerly state-owned energy company YPF SA (YPFD.BA), in which Repsol held a majority stake.
The lawsuit, filed in the U.S. District Court in Manhattan, is part of Repsol's effort to recover more than $10 billion from Argentina over the seizure in a case that could drag on in arbitration and the courts for years.
Argentina also faces tens of billions of dollars of other U.S. litigation, largely tied to its sovereign debt default one decade ago.
Representatives for the government were not immediately available late Tuesday for comment.
In the complaint, Repsol and the money manager Texas Yale Capital Corp, which holds YPF American depositary receipts, claimed that Argentina reneged on its promise to tender for Class D shares of YPF if it ever took back control of the company.
Argentine president Cristina Fernandez announced the planned seizure of a 51 percent stake in YPF from Repsol on April 16, contending that the Spanish company did not invest enough and allowed oil production and exploration to decline.
Argentine lawmakers approved the seizure earlier this month.
Repsol's total stake prior to the seizure was 57 percent. YPF shares have fallen 50 percent this year, and 31 percent since the seizure was announced, causing losses for other investors.
"Argentina's failure to launch a tender offer despite having retaken control over YPF constitutes a breach of its contractual obligations to other shareholders," the complaint said.
Repsol and Texas Yale seek compensatory damages, a requirement that Argentina launch a tender offer, and other remedies.
Texas Yale is based in Spicewood, Texas.
Earlier Tuesday, Repsol said it had told Fernandez of a dispute under the Treaty for Investment Promotion and Protection agreed between Spain and Argentina -- a necessary step for arbitration at the World Bank's International Center for Settlement of Investment Disputes.
Six months must pass before ICSID will consider arbitration in any dispute, to allow negotiations between the two parties.
Repsol Chairman Antonio Brufau has said his company's claim would be based on an estimated $18 billion total value for YPF.
Spanish government and European Union officials have said they will act against Argentina over the expropriation.
Analysts, however, have said the options are limited. They have noted that Argentina has ignored past ICSID fines and that the country's capacity to settle is unclear because it remains shut out of world capital markets. Argentina may also argue that the YPF seizure was in the public interest.
Even if Repsol were to prevail at the ICSID, lawyers familiar with similar cases said it was unlikely it could recover a payout. About one-fourth of global cases handled by the ICSID have been against Argentina.
"The ICSID takes years in its rulings, but we are talking about the most important case in its history," said one lawyer, who asked not to be named. "I wouldn't be surprised if there was interest in speeding up the process although it is going to be long and involved."
In March, U.S. President Barack Obama said he would suspend trade benefits for Argentina because it had failed to pay more than $300 million in compensation awards in two disputes.
Repsol shares closed down 1.34 percent at 13.62 euros.
The case is Repsol YPF SA et al v. Argentina, U.S. District Court, Southern District of New York, No. 12-03877.
($1 = 0.785 euro)
(Reporting By Carlos Ruano in Madrid and Jonathan Stempel in New York; Additional reporting by Hilary Burke in Buenos Aires; Writing by Sarah Morris and Jonathan Stempel; Editing by Dan Lalor, Jane Merriman and Jim Marshall)
France's Hollande's plane struck by lightning en route to Germany
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Senate leaders move toward vote on Fed nominees
By Thomas Ferraro and Donna Smith
WASHINGTON (Reuters) - President Barack Obama's two stalled nominees for the Federal Reserve are likely to clear a Senate procedural hurdle on Thursday, paving the way for anticipated confirmation, the chamber's leaders said on Tuesday.
Democratic and Republican aides said they expect Senate approval of the pair as early as Thursday, shortly after the procedural vote, which would take the Fed's Washington-based board up to its full seven-person strength for the first time since April 2006.
"We've been waiting months and months. It's important we have a fully functioning Fed," Senate Democratic leader Harry Reid told reporters.
Since officials on the central bank's board are usually aligned with the chairman on matters of policy, Senate approval of the nominees - Harvard economist Jeremy Stein and investment banker Jerome Powell - could strengthen Ben Bernanke's hand if he decides the economy needs more support.
Last month, Bernanke left the door open to further steps to buttress growth but said Fed policy appeared "more or less in the right place." The Fed has held overnight interest rates near zero since late 2008 and has bought $2.3 trillion in government and mortgage-related bonds to push other borrowing costs down.
Republican Senator David Vitter objected to both nominees, saying he worried they would provide "rubber stamps" for Bernanke's policies, and he called for a full debate.
Vitter's move had raised the specter the Senate might abandon the nominees, leaving a decision on filling out the Fed board to whoever wins the presidential election in November.
But Reid, with Republican support, moved to confirm and seat them. He scheduled a procedural vote for Thursday and expressed hope the nominees that Obama put forward in December would secure the 60 votes needed to move toward final approval.
Democrats hold the Senate, 53-47, meaning they need at least a few Republicans votes to reach the needed 60.
"My impression is that there is bipartisan support," Senate Republican Leader Mitch McConnell told reporters.
A senior Democratic aide described the two as a "balanced pair," saying that while Obama formally nominated both of them, Powell had been "hand-picked by Senator McConnell."
A Democratic aide said a final confirmation vote would likely come on Thursday, with both Democrats and Republicans agreeing to only a brief debate.
However, Republicans could push a vote into Friday or early next week if they want more time to discuss the nominees.
Stein, who holds a doctorate in economics from the Massachusetts Institute of Technology, is a Harvard economist who served briefly as a senior adviser to Treasury Secretary Timothy Geithner and as a staff member for Obama's National Economic Council. He specializes in stock price behavior, corporate investment and financing decisions, risk management and business capital allocation.
Powell is a lawyer who brings Wall Street experience, having worked at Bankers Trust, the Carlyle Group and Dillon Read after serving as a Treasury undersecretary in the administration of former President George H. W. Bush. His knowledge of financial markets could help fill the gap left by Kevin Warsh, a former Morgan Stanley executive who left the Fed a year ago.
By choosing a pair of nominees with Democratic and Republican credentials, Obama had hoped to win quick approval.
Fed board terms run for 14 years but Stein and Powell have been nominated to fill out unexpired terms. Powell's term would end on January 31, 2014, and Stein's would end on January 31, 2018.
(Reporting by Tom Ferraro and Donna Smith; Editing by Anthony Boadle, James Dalgleish and Dan Grebler)
Lawsuit against Le-Nature's law firm reinstated
PITTSBURGH (AP) -- A Pennsylvania appeals court has reinstated a malpractice claim against one of Pittsburgh's leading law firms.
The Superior Court ruling Monday involves law firm K & L Gates and Le-Nature's, a bankrupt soft drink maker that was based in Latrobe.
In the lawsuit a bankruptcy court trustee had accused K & L Gates of professional negligence for its role in an investigation that failed to uncover massive fraud at Le-Nature's.
Last year the founder of Le-Nature's was sentenced to 20 years in federal prison for an accounting fraud scheme that cost investors $684 million. Other company executives and associates also received stiff sentences.
A K & L Gates spokesman didn't immediately respond to messages seeking comment.
Jamie Dimon passes shareholder vote on JP Morgan role
The FBI and the US Department of Justice are examining whether there was any criminal wrongdoing in losses that have damaged the reputation that JP Morgan and Mr Dimon have built for risk management.
America's largest bank by assets has been battling to contain the fallout from the losses, which Mr Dimon described as "self-inflicted".
Yesterday, at the bank's annual shareholder meeting in Tampa, Florida, the banker admitted: "It should never have happened. I can't justify it."
The 56 year-old, one of the most powerful bankers on Wall Street, said he would consider clawing back the bonuses of any executives found to be responsible.
The losses have already cost Ina Drew, the head of the bank's chief investment office, her job and more are expected to leave the bank.
Mr Dimon yesterday refused to say how long its own internal investigation will take, but said the bank would "do the right thing".
In a further blow to Mr Dimon, whom President Barack Obama once described as his "favourite banker", 40pc of JP Morgan's shareholders voted to split his dual role as chairman and chief executive.
The crisis is the biggest that Mr Dimon has faced since shepherding JP Morgan through the financial crisis. Just a month ago, he dismissed reports about large trades the bank was making in an obscure corner of the derivatives market as nothing more than a "tempest in a teapot". Yesterday, he promised shareholders that "we will do the right thing" in investigating the losses.
But there was little sign of the controversy abating yesterday. John Liu, who runs New York City's pension fund, yesterday joined the call for bonuses of those executives responsible for the losses to be taken back.
The disclosure of the losses in the credit derivatives market has reignited the debate in the US over whether more regulation is needed to ensure the safety and soundness of the financial system.
Mr Dimon has been one of the most outspoken critics of the wave of regulation since the financial crisis, but insisted to shareholders that he was in favour of "sound and strong" regulation.
JP Morgan, which employs thousands of people in the City of London, has warned that the $2bn losses could deepen over the course of the year.
While some shareholders at the Florida AGM offered support to Mr Dimon, others were alarmed and baffled at the scale of the losses that the bank said it ran up in six weeks. "I'd like to have a clearer sense of the risk that I'm taking when I invest in JP Morgan," said Eric Vlahov, a shareholder. "Right now you don't."
Although the proposal to appoint an independent chairman failed to win the support of the majority of shareholders, the size of the vote in favour may have surprised the bank's board.
Most votes are likely to have been submitted before the trading losses were disclosed last Thursday. However, 91.5pc of shareholders backed the pay of Mr Dimon, which totalled $23m last year.
Bondholder fury as Athens pays off debts to hedge funds
Bondholders, who were forced to accept losses of around 75pc on their debt two months ago or lose everything, hired lawyers to claim they were "fraudulently misled" after Athens repaid €435m to debtors who resisted the restructuring.
The owners of the €435m bonds are hedge funds that refused to accept the terms of the bond swap in March, despite being repeatedly warned that Athens would not have any money to pay them later. But when the bonds fell due on Tuesday, Athens decided to pay them in full to avoid more uncertainty amid the political chaos.
An official involved in the negotiation said: "It was considered imprudent to default on a bond issue at a moment of political instability, when the country's membership of the euro is being questioned."
However, in solving the immediate threat, lawyers said Greece now has a far bigger problem. Bondholders with a total of €6.4bn refused to participate in the so-called private-sector involvement (PSI), leading to questions about whether they will also be paid in full.
James Campbell, partner at London-based law firm Pillsbury, said he had been instructed by bondholders who did accept losses to pursue their case. He confirmed: "Bondholders feel they were fraudulently misled when the negotiating authorities said there was no alternative to the restructuring. Clearly there was, and now bondholders want to recover their losses."
Mr Campbell added: "The decision by Athens to repay the €430m in full will have serious repercussions for any future debt restructuring and the sovereign bond market as a whole. The system only works if bondholders can trust sovereigns."
The Greek finance ministry said in a statement: "The decision weighed carefully all relevant factors and implications as well as the current conjuncture. Today's decision does not prejudice future decisions on the treatment of the remaining bonds
not tendered in the PSI exchange."
More than 85pc of Greek bondholders accepted the deal in March, which was the biggest sovereign restructuring ever attempted. The deal, which took nearly eight months to thrash out, was a precondition to international leaders releasing the €130bn second bail-out needed to avert a Greek default.
It was achieved after Greek politicians controversially inserted Collective Action Clauses (CACs), which allowed them to impose the deal with just 66pc of support from bondholders. Experts warned that the legal challenge to Greece would face an uphill battle because bondholders agreed to the swap.
One credit hedge fund said the claim was "emotional" rather than substantial. "Some outriders have got lucky but that doesn't mean that everyone else can get paid, that's still impossible."
Global lenders face 'killer losses' on Greek debt
The euro tumbled to a four-month low and European stock markets dropped as political leaders and economists warned that the next round of elections called in Athens amounted to a vote on Greek membership of the euro
“What’s at stake isn’t just the next Greek government,” said Guido Westerwelle, Germany’s foreign minister. “What’s at stake is the Greek people’s commitment to Europe and the euro.”
“A second vote means Greece is edging closer to the point where it’s inevitable they have to exit the euro,” Fredrik Erixon, head of the European Centre for International
Political Economy in Brussels, said. “No other course of events is now likely.”
As the Greek president, Karolos Papoulias, admitted defeat on coalition talks, Alexis Tsipras, leader of the radical Left-wing Syriza party which is leading the Greek polls, said he couldn’t “guarantee” the country would stay in the euro.
“We ask that our country remain in the euro without the catastrophic policy of austerity and we have the solidarity of Europe,” he said. “I can’t guarantee that the euro area itself and the euro will be united and exist.”
French President François Hollande and German Chancellor Angela Merkel, speaking together for the first time on the day of President Hollande’s inauguration, said they wanted Greece in the euro but stressed that it had to stick to the agreed austerity.
However, they hinted at other compromises. President Hollande confirmed he would seek to “renegotiate” the region’s fiscal pact to boost growth – saying that everything from eurobonds, funding, and competitiveness should be considered.
“We have to allow Greece to find solutions [...] everything has to be examined,” he said. “But at the same time, promises made must be held.”
Chancellor Merkel said their discussion had revealed “differing points of view”, but she also softened her tone, saying: “We want to do whatever we can do to help Greece structurally, with growth, in terms of organisation.”
Global financial institutions have a €422bn (£335.8bn) exposure to Greek debt, including state, household and corporate debt, according to the latest figures from the International Monetary Fund.
Yesterday the IESEG School of Management said the total losses could reach €66.4bn for France and €89.8bn for Germany. “Assuming that the new national currency would depreciate by 50pc against the euro, which is realistic, the losses for French banks would reach €19.8bn. They would reach €4.5bn for German banks,” it said.
The Institute of International Finance has estimated that the global cost of a Greek exit could hit €1trillion. When Argentina defaulted in 2001, foreign debtors lost around 70pc of their investments.
The Eurostoxx 600 fell 0.7pc to a year-low; Germany’s Dax dropped 0.8pc; Italy’s MIB fell 5.6pc and Spain’s Ibex was down 1.6pc. In London the FTSE? 100 slid 0.5pc. The yield on Italy’s benchmark 10-year bonds almost entered the 6pc danger zone; Spain remained high at 6.3pc.
As experts called for the IMF and other international bodies to intervene, IMF managing director Christine Lagarde told French television she was “technically prepared for anything”. At the finance ministers’ meeting in Brussels, Germany’s Wolfgang Schaeuble warned that Greeks had to accept the terms of their bail-out or staying in the euro “isn’t possible”.
Monday, May 21, 2012
NY judge: Apple statements damage lawsuit position
NEW YORK (AP) -- A federal judge cited the confident voice of the late Apple founder Steve Jobs on Tuesday as she refused to toss out lawsuits alleging the company and various publishers conspired to drive up the price of electronic books.
U.S. District Judge Denise Cote noted in her written ruling that Jobs had made statements that agreements between the publishers and Apple Inc., based in Cupertino, Calif., would cause consumers to "pay a little more" and that prices would "be the same" at Apple and Amazon.com.
In a lawsuit this year, the U.S. government joined 15 states in suing Apple and publishers, saying they conspired in the fall of 2009 to force e-book prices several dollars above the $9.99 price charged by Amazon.com on its popular Kindle device. According to the lawsuit, the publishers were concerned that Amazon's e-book price was too far below the price of hardcover books and Apple was concerned because it was preparing to launch the iPad. By 2010, Amazon was responsible for 90 percent of e-book sales in the United States, the judge noted.
Amazon's $9.99 price for best-sellers was such a deep discount from list prices of $20 and more that it was widely believed Amazon was selling the e-books at a loss to attract more customers and force competitors to lower their prices.
The judge rejected the argument that Apple and the publishers were merely improving the efficiencies of distribution, saying: "It has everything to do with coordinating a horizontal agreement among publishers to raise prices, and eliminating horizontal price competition among Apple's competitors at the retail level."
The judge noted that Jobs told the publishers that "the customer pays a little more, but that's what you want anyway."
A lawyer for Apple did not immediately respond to a message for comment Tuesday. But Apple said last year the government's accusation that it conspired with major book publishers to raise the price of e-books was untrue. Apple said it instead had fostered innovation and competition by introducing its iBookstore in 2010 and said customers had benefited from e-books that are more interactive and engaging.
The judge wrote that Apple had a "strong incentive" to encourage publishers to agree together on the rules for e-book sales so that its iBookstore did not face stiff competition.
"With the fortuitous entry of Apple into the market for e-books, and the decision by Apple to join the price-fixing conspiracy, that horizontal conspiracy became a potent weapon for engineering a fundamental shift in an entire industry," the judge said.
The federal government has reached a settlement with three of the publishers, Hachette, HarperCollins and Simon & Shuster. But it is proceeding with its lawsuit against Apple and Holtzbrinck Publishers, doing business as Macmillan, and The Penguin Publishing Co. Ltd., doing business as Penguin Group.
Messages left Tuesday with lawyers for Holtzbrinck and Penguin were not immediately returned.
RBS investors say Stephen Hester 'not paid enough'
Despite receiving a compensation package this year worth £3.3m, the investors said Mr Hester's pay did not represent the "commercial rate" for the job he is doing.
Richard Buxton, head of UK equities at Schroders, which is the largest owner of RBS shares after the government and the bank's employees, with a 1.75pc stake, said Mr Hester's pay had become a "political football" as he gave evidence to a parliamentary committee yesterday.
"He can't at present be paid a commercial rate for doing that job," said Mr Buxton.
His comments were backed up by Robert Talbut, chief investment officer of Royal London Asset Management, which also owns shares in the bank.
"Its [RBS's] ability to retain a commercial management team is going to be severely inhibited if they [the bank's managers] do not believe they are going to receive a significant market rate," said Mr Talbut at the same hearing.
The support for Mr Hester comes after he last week said he thought the pressure on him over his pay was "unfair" and that he had been "within inches of quitting" after a row over his bonus earlier this year almost led to a vote in Parliament on his pay.
Mr Hester had been due to receive an all-share bonus worth £963,000, but waived the payment amid a public and political outcry.
Responding to the shareholders comments, former Liberal Democrat Treasury spokesman, Lord Oakeshott, said it was a case of "the tail trying to wag the dog".
"We own 82pc of it [RBS] and we didn't put the money in as a share price punt, we did it to get the bank lending again," he said.
Mr Hester's pay package is lower than that of the chief excutives of the RBS's two closest peers, Barclays and Lloyds Banking Group. As well as his £1.2m salary, the RBS chief received a £1.62m long-term incentive award, £420,000 towards his pension, and £26,000 of other benefits.
Lloyds boss, Antonio Horta-Osorio, received a package worth £4.56m even after waiving an annual bonus for 2011 that could have been worth as much as £2.39m, while Bob Diamond, chief executive of Barclays, was handed a total package worth £17.7m, though almost a third of this was in the form of a controversial £5.75m "tax equalisation" payment.
The scale of Mr Diamond's award led to a shareholder revolt at Barclays annual general meeting last month, with 32pc of investors failing to back the bank's remuneration report. Lloyds will hold its investor meeting on Thursday, but is not expected to face a similar level of discontent.
The investor support for Mr Hester came as bankers told MPs that the disposal of the state's holding in RBS would take at least five years and likely involve several offerings of the shares. Adam Young, co-head of equity advisory at Rothschild, said the government would probably have to begin selling its stake at a loss to drive interest in any disposal.
Discussing the potential sale of some of the holding to a sovereign wealth fund, Mr Buxton said he would be "disappointed" if the government pursued this option, adding that there was no "need to give the Exchequers money" to a large foreign investor.
JP Morgan faces FBI investigation over losses
The FBI and the US Department of Justice are examining whether there was any criminal wrongdoing in losses that have damaged the reputation that JP Morgan and Mr Dimon have built for risk management.
America's largest bank by assets has been battling to contain the fallout from the losses, which Mr Dimon described as "self-inflicted".
Yesterday, at the bank's annual shareholder meeting in Tampa, Florida, the banker admitted: "It should never have happened. I can't justify it."
The 56 year-old, one of the most powerful bankers on Wall Street, said he would consider clawing back the bonuses of any executives found to be responsible.
The losses have already cost Ina Drew, the head of the bank's chief investment office, her job and more are expected to leave the bank.
Mr Dimon yesterday refused to say how long its own internal investigation will take, but said the bank would "do the right thing".
In a further blow to Mr Dimon, whom President Barack Obama once described as his "favourite banker", 40pc of JP Morgan's shareholders voted to split his dual role as chairman and chief executive.
The crisis is the biggest that Mr Dimon has faced since shepherding JP Morgan through the financial crisis. Just a month ago, he dismissed reports about large trades the bank was making in an obscure corner of the derivatives market as nothing more than a "tempest in a teapot". Yesterday, he promised shareholders that "we will do the right thing" in investigating the losses.
But there was little sign of the controversy abating yesterday. John Liu, who runs New York City's pension fund, yesterday joined the call for bonuses of those executives responsible for the losses to be taken back.
The disclosure of the losses in the credit derivatives market has reignited the debate in the US over whether more regulation is needed to ensure the safety and soundness of the financial system.
Mr Dimon has been one of the most outspoken critics of the wave of regulation since the financial crisis, but insisted to shareholders that he was in favour of "sound and strong" regulation.
JP Morgan, which employs thousands of people in the City of London, has warned that the $2bn losses could deepen over the course of the year.
While some shareholders at the Florida AGM offered support to Mr Dimon, others were alarmed and baffled at the scale of the losses that the bank said it ran up in six weeks. "I'd like to have a clearer sense of the risk that I'm taking when I invest in JP Morgan," said Eric Vlahov, a shareholder. "Right now you don't."
Although the proposal to appoint an independent chairman failed to win the support of the majority of shareholders, the size of the vote in favour may have surprised the bank's board.
Most votes are likely to have been submitted before the trading losses were disclosed last Thursday. However, 91.5pc of shareholders backed the pay of Mr Dimon, which totalled $23m last year.
Numis says Man Group may not be worth more than "liquidation value"
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F&C on track to hit cost-cutting targets
The changes follow a boardroom coup led by the activist investor Edward Bramson, who was subsequently installed as executive chairman. After taking the top job last year, he admitted he had "no idea" what to do with F&C but has since transformed the business. Launching the second stage of its strategic review yesterday, the fund manager told investors it was on track to meet its cost-reduction targets and that it was overhauling the business to focus on areas such as property. It is also reforming its share-based pay award for senior managers.
F&C has already cut about 70 jobs as part of attempts to make cost savings of £33.2m by 2013. The savings will largely be delivered by repositioning the business to focus on fixed income assets and pensions.
The changes follow a boardroom coup led by the activist investor Edward Bramson, who was subsequently installed as executive chairman. After taking the top job last year, he admitted he had "no idea" what to do with F&C but has since transformed the business.
Yesterday, Mr Bramson said the company would make changes to the way it marketed its funds to take advantage of new rules, known as the retail distribution review (RDR), that will alter the way consumers can buy investment products.
"We see significant strengths in our consumer business and I believe we are uniquely positioned in the post-RDR regime. We believe the new strategies outlined today will create strong financial returns for shareholders and our new compensation structure directly aligns management's interests to this result," he said.
As part of the second stage of the strategic review, he outlined several new areas of focus, including property funds, as well as stepping up its provision of products and services for independent financial advisers.
The new compensation structure for senior managers will be linked to F&C earnings per share and will only pay out if the business is beating its target in 2015. F&C is also undertaking a review of the way it pays its fund managers.
Business leaders call for urgent Government meeting over aviation strategy
In a letter to the Prime Minister and Chancellor, 14 business leaders warn that the Government’s aviation policies “work directly against your stated primary objective of bringing about an economic recovery” and call for summit meeting.
The letter is the latest warning to the Government that it must expand the UK’s airport capacity and rethink its Air Passenger Duty departure tax.
The signatories of the letter include the chairman of Mothercare, Alan Parker, Sir David Michels, private equity boss Jon Moulton, and the heads of trade bodies including the Institute of Directors, the British Chambers of Commerce, and the British Air Transport Association.
Other vocal critics of the Government have included Willie Walsh, the chief executive of International Airlines Group, parent company of British Airways, and BAA, the owner of Heathrow airport.
Daniel Moylan, Boris Johnson’s aviation advisor, claimed yesterday that investment in a new hub airport in the Thames Estuary would benefit London for the next 500 years.
If airport capacity is not increased, he said, then Britain’s main hub airport could become Amsterdam’s Schiphol.
The business leaders have sent the new letter despite Theresa Villiers, the aviation minister, approving the extension of trials at Heathrow that will allow simultaneous take-off and landings on one runway – potentially increasing capacity.
The letter says: “Constraining UK airlines and airports with the world’s highest levels of aviation tax and a lack of positive policy development, including inhibiting additional airport capacity where it is most needed, work directly against your stated primary objective of bringing about an economic recovery.
“As a consequence, the UK economy is growing less quickly than it otherwise could, and we are losing business – and associated tax revenues – to continental Europe.
“We ask that you find time, at your earliest convenience, to meet with us to discuss how we can work together to achieve the economic growth which we all agree is essential to theeconomy and to the future of the country.”
There are particular concerns that Britain’s lack of airport capacity is costing the country income from emerging economies because of a lack of flights to countries such as China and India.
Research from the UN World Tourism Organisation shows that over the past 10 years, revenue from Chinese visitors has grown 125pc in the UK, but 400pc globally.
Italy's banks shaken as economic slump deepens
With the world's third largest debt after the US and Japan at €1.9 trillion (£1.18 trillion), it is big enough to bring the global financial system to its knees. It is also in the front line of contagion as the Greek crisis metastasizes.
Yields on 10-year Italian debt jumped 16 points to 5.86pc on Tuesday after Italy's data agency said the country is sliding even into deeper recession, with GDP shrinking 0.8pc in the first quarter.
Output is now 6pc below its peak in 2008. Italy has been trapped in perma-slump for a decade, the only major state to suffer a fall in real per capita income since 2000.
Rising anger has led to a spate of violent attacks by terrorist groups over recent weeks, all too like the traumatic 'years of lead' in the late 1970s. The government is mulling use of troops to protect targets after anarchists shot the head of Ansaldo Nucleare last week and hurled petrol bombs at tax offices.
The unelected government of Mario Monti is carrying out net fiscal tightening of 3.5pc of GDP this year even though Italy's budget is near primary surplus. This is three times the International Monetary Fund's "therapeutic" pace. All key measures of Italy's money supply have been contracting at 1930s rates over the last six months.
Hans Redeker from Morgan Stanley said the EU's mishandling of Greece has put Italy in grave danger. "The irrevocability of the eurozone is a valuable asset, and they are throwing it away. Global investors are preparing for the day Greece leaves," he said.
The IMF said Italian bank exposure to the state is 32pc of GDP, including all forms of lending. "We are looking at this number very closely," said Mr Redeker. Almost half of this is owed to foreigners. Italy's central bank owes a further €278bn in 'Target2' claims to peers in Germany, Holland, Finland and Luxembourg, reflecting capital flight.
Italy's former premier Romano Prodi said the EU risks instant contagion to Spain, Italy, and France if Greece leaves. "The whole house of cards will come down", he said
Angelo Drusiani from Banca Albertini said the only way to avert catstrophe is to convert the European Central Bank into a lender of last resort. Otherwise Italy faces "massive devaluation, three to five years of hyperinflation, and unbearable unemployment."
The ECB's emergency lending may have made matters worse, encouraging banks to buy their own states' debt. It has led to an incestous inter-linkange of fragile banking systems and fragile sovereign states, each propping the other up. Many of the banks used ECB money to buy state bonds until they need to roll over their own debt. They are now nursing stiff losses.
Moody's downgraded 26 Italian lenders on Monday night saying the slump itself is the killer, joining a chorus of voices warning that too much austerity may be self-defeating. "Banks are vulnerable to the renewed recession in Italy, given their already elevated levels of problem loans and weakened profitability," it said. Moody's expects the economy to contract 1.9pc this year.
The Italian Banking Association ABI accused Moody's of an "irresponsible, incomprehensible, and unjustifiable" smear. "Moody's decision is an attack on Italy, its companies, its families and its citizens," it said, calling on the EU authorities to clamp down "severely" on rating agencies.
The agency said the "problem loans" of Italian banks have reached 9.3pc. The figure may be higher, given "concerns about the accuracy of reported non-performing loan measures." They depend on capital markets for 36pc of their funds. This source of finance has largely dried up.
Sunday, May 20, 2012
Fla. county approves changes after oil spill fraud
Fort Walton Beach, Fla. (AP) -- Amid a criminal investigation into the alleged misuse of funds paid by BP after the 2010 Gulf oil spill, a Florida Panhandle county made big changes Tuesday in the way it oversees spending for promotion of the area's world-famous beaches.
An attorney advising Okaloosa County commissioners said they could not wait for state auditors, the sheriff's auditors and the FBI to finish investigations into misspending of bed tax and BP funds before making the changes.
"These changes are not the end, they are merely the beginning but we feel they are crucial to the integrity of the process," attorney Greg Stewart told commissioners. They approved changes that included requiring all purchases over $25,000 by the Tourism Development Council be approved by the county's administrator or the county commission.
The move came less than two weeks after the county's former tourism director died of an apparent suicide. Investigators had unearthed more than $1.4 million in questionable spending on his home and a yacht.
The sheriff's office said last week it was expanding its inquiry, but said the investigation was ongoing did not release details.
The state is conducting forensic audits.
Also Tuesday, commissioners required that the agency's contracts conform to the rules for other county departments. Other departments require task orders detailing the purposes of the expenditures and requiring various levels of approval, Stewart said. The TDC contracts had no-such safeguards. Stewart said many other county tourism agencies in Florida require such task orders.
Interim tourism director Greg Donovan said he has spent his first week on the job fielding questions and trying to figure out the "jigsaw puzzle" that is the Okaloosa County Tourism Development Council. Donovan was the county's airport director before stepping into the interim post.
"Our first priority is to make sure we facilitate all law enforcement requests; that is paramount," he said.
But Donovan said there is another concern: What could happen if the Fort Walton Beach area falls behind in the aggressive competition to market itself as a vacation destination.
"There are thousands of communities out there competing and if you live in Tennessee and you are out there making that decision of where you are going to vacation and this location falls of the map for a year or two because of our lack of promotional capability, it will hurt us.
The TDC cancelled a plan to take an RV to South Carolina to promote the region in a "Boast the Coast" event, but the agency wants to continue a Father's Day giveaway of week's beach vacation and Jeep. Donovan told The Associated Press on Tuesday that he didn't immediately know how much the Father's Day package cost or if the money came from BP or bed tax funds. He said he would provide that information later Tuesday afternoon.
BP provided millions to Gulf counties after the oil giant's massive oil spill. Much of the money went to promote tourism along Florida's white-sand beaches after hotels, restaurants and other tourism-dependent businesses complained that the 2010 tourism season was ruined because of the perception that the oil had reached their beach.
The oil washed ashore on Pensacola Beach and tar balls and tar mats came on shore further east from Navarre Beach to Panama City. Nonstop news coverage of the spill cleanup and environmental monitoring and anxiety about the spill spreading throughout the Florida cause tourism to plummet for months.
Government ends A4e contract
Chris Grayling, the employment minister, said the DWP team found 'no evidence of fraud' at A4e. Photo: PAUL GROVEREmployment Minister Chris Grayling said the company's Mandatory Work Activity contract to help up to 1,000 jobless people in the South East find work was being ended.
The Department for Work and Pensions (DWP) has been auditing its commercial relationships with A4e after receiving an allegation against the company earlier this year.
"While the team found no evidence of fraud, it identified significant weaknesses in A4e's internal controls on the Mandatory Work Activity contract in the South East," Mr Grayling said.
"The documentation supporting payments was seriously inadequate and in a small number the claim was erroneous. There was also a high incidence of non-compliance with other relevant guidance (including A4e's own processes).
"The process established prior to March fell significantly short of our expectations. As a result, the department has concluded that continuing with this contract presents too great a risk and we have terminated the Mandatory Work Activity contract with A4e for the South East.
"Contingency plans are in place to ensure there is continuity of support for participants in the Mandatory Work Activity programme."
A4e held the prime contract for delivery of Mandatory Work Activity in the South East, covering Hampshire, the Isle of Wight, Surrey & Sussex, Thames Valley, Bedfordshire, Buckinghamshire and Oxfordshire.
The programme is aimed at helping jobseeker's allowance claimants identified as most in need of support. Participation is mandatory, with sanctions against those who fail to take part, or complete a placement.
A4e is keeping other contracts it has with the DWP, including those under the Work Programme, which tackles long-term unemployment.
An A4e spokesman said: "Following the DWPs review of A4e's small Mandatory Work Activity (MWA) contract, some specific issues were highlighted which relate to a period when A4e dealt with an unexpected volume of work which exceeded the anticipated monthly contract volume.
"During this time A4e’s focus was for staff and service partners to ensure customers swiftly found effective work placements. However, in the same period, our administrative processes fell short of our own standards and those required by DWP, and to this end we have accepted that the MWA contract will be terminated."
Oracle patent claims versus Google sent to jury
By Dan Levine
SAN FRANCISCO (Reuters) - A California jury began another round of deliberations on Tuesday in a high profile trial over allegations that Google's Android mobile platform violates Oracle's intellectual property rights.
The jury has already wrestled with Oracle's copyright claims against Google and delivered a partial verdict last week. Now, jurors are mulling Oracle's patent claims, but the potential patent damages appear far less than what is involved in the copyright allegations.
Oracle sued Google in August 2010, saying Android infringes on its intellectual property rights to the Java programming language. Google says it does not violate Oracle's patents and that Oracle cannot copyright certain parts of Java, an "open-source," or publicly available, software language.
The trial in San Francisco federal court has been divided into three phases: copyright liability, patent claims, and damages.
In court on Tuesday, attorneys for both companies made their closing arguments on patents. Oracle attorney Michael Jacobs said it does not matter that Oracle's patents only cover certain small parts of Android.
"You don't avoid infringement because Android is big," Jacobs said, adding that Google's conduct was reckless.
Google attorney Robert Van Nest said the company designed Android from scratch, and that there is no evidence Google encountered the patented technology until Oracle threatened litigation.
"There's not a single document, not an email," Van Nest said.
While Oracle is seeking roughly $1 billion in copyright damages, the patent damages in play are much lower. Before trial, Google offered to pay Oracle roughly $2.8 million in damages on the two patents remaining in the case, covering the period through 2011, according to a filing made jointly by the companies.
For future damages, Google proposed paying Oracle 0.5 percent of Android revenue on one patent until it expires this December and 0.015 percent on a second patent until it expires in April 2018. Oracle rejected the settlement offer.
During trial, U.S. District Judge William Alsup revealed that Android generated roughly $97.7 million in revenue during the first quarter of 2010.
The jury found last week that Oracle had proven copyright infringement for parts of Java. But the jury could not unanimously agree on whether Google could fairly use that material.
Without a finding against Google on that fair use question, Oracle cannot recover damages on the bulk of its copyright claims. Alsup has not yet decided on several legal questions that could determine how a potential retrial would unfold.
The case in U.S. District Court, Northern District of California, is Oracle America, Inc v. Google Inc, 10-3561.
(Reporting By Dan Levine; Editing by Tim Dobbyn)
New UK nuclear plants threatened by EU state aid rules
The Government’s energy strategy hinges on contracts to guarantee investors the price they will receive for power generated by new plants.
But Charles Hendry, the energy minister, said on Tuesday that the Government could not provide the direct Treasury-backed guarantees investors want, because of EU state aid rules.
Ministers are yet to explain exactly who will act as the counterparty instead of the Treasury, but industry figures warned the Energy Select Committee that alternatives would be less credit-worthy and so would push up costs.
Volker Beckers, chief executive of RWE npower, said the counterparty was “crucial”. When the contracts for difference (CfD) – the power price guarantee framework – were proposed last year, companies expected they would be “backed by government”, and that effectively the Treasury would ultimately be “signing the cheque”. “Now we are miles away from that point,” he said.
Investors could no longer count on a “AAA-backed contract” and that “inevitably has an impact” on the cost of capital, he said.
RWE and E.ON pulled out of a UK nuclear joint venture in March, citing financial difficulties in Germany, and are seeking a buyer.
A consortium led by EDF will decide this year whether to build new reactors in Somerset and is negotiating with ministers over its CfD.
Mr Hendry told MPs that, instead of Treasury-backed guarantees, the proposed CfD system would be “delivered” by National Grid – but if a future government reneged on agreed power prices, the energy companies could then sue the Government for costs.
“EDF says that there are other ways in which it would be cheaper for them but we are yet to be persuaded that that would be permissible under state aid rules,” he told The Daily Telegraph.
Tim Yeo, energy committee chairman, said the proposal was “bound to push up the cost of capital and, at worst, may deter investment”. He urged ministers to raise the issue of state aid with the European Commission “urgently”.
'Britain must copy hard-working South Korea'
Jeremy Browne will say that Britain has “many lessons” to learn from countries like South Korea as it tries to recover from the financial crisis.
In a speech in Seoul, Mr Browne will highlight the long hours worked by most South Koreans and call the country “an example to already developed countries like my own”.
In comments echoing William Hague’s controversial call at the weekend for Britain to “work harder”, Mr Browne will praise South Korea as the hardest-working country in the developed world.
According to the Organisation for Economic Co-operation and Development, the average South Korean works 2,193 hours a year, or 42.2 hours a week. In Britain, the figure is 1,647 hours, or 31.6 hours a week.
South Korea is “a model with many lessons for us to emulate,” Mr Browne will say.
“You export more than Britain, even though your economy is smaller than ours. The literacy and numeracy rates of your children are, by many measures, the best anywhere in the world. Your research and development is cutting edge and well supported. Your population is the hardest working in the OECD. And your government debt levels are low by international standards.”
Mr Browne will also highlight South Korea’s “astounding” record on education.
As well as having the highest-performing school pupils in the developed world, the Asian nation educates almost three-quarters of its people to post-graduate level,
“This is an amazing level of attainment which is underpinning your economic advance,” Mr Browne will say at Korea University.
Only by forming closer contacts with fast-growing, high-productivity countries like South Korea will Europe and the West recover, he will conclude.
“ It is well known that many Western economies are still suffering from the financial crisis and its aftershocks in the Eurozone. Levels of growth are low and levels of public debt and unemployment are high. I am convinced that getting our economies back on track requires us to be more outward-looking – to export more, to be more competitive – to invest in infrastructure and education, and to reduce government debt.”
George Osborne wins battle for tougher rules on UK banks
The agreement struck in Brussels yesterday between European Union finance ministers will allow the UK to implement key policies recommended by the Independent Commission on Banking (ICB) last year, such as retail ring-fences and 10pc capital buffers, designed to protect the country from another financial crisis.
The Chancellor fought off stiff opposition from France in particular, which wanted to strip national supervisors of authority by centralising banking regulation in Brussels.
However, he failed to overturn attempts to water down Basel 3, the internationally agreed standards on banking regulation, and was threatened with a new battle after Michel Barnier, the EU’s financial services commissioner, revealed plans for a controversial bonus cap.
Under governance reforms he is championing, Mr Barnier wants to limit bonus awards to a multiple of both salary and the bank’s lowest wage.
Mr Osborne is already facing a fight with the European Parliament over plans to prevent banks paying bonuses that are larger than salaries in the next round of negotiations over regulation.
Mr Barnier said he wanted shareholders to set the ratios and, echoing Vince Cable’s reforms in the UK, intends to give investors a binding vote on pay.
Mr Barnier’s plans will have soured the Chancellor’s mood after the European Council agreed that banks should comply with the central Basel 3 requirements of holding 4.5pc core tier one capital and a further 2.5pc counter-cyclical buffer against potential losses.
Mr Osborne was less successful on the issue of too-big-to-fail banks, though. The directive did not enforce Basel 3 rules that require the largest banks to hold a further 1pc to 2.5pc of capital.
Britain will still be able to implement Basel 3 in full, however, thanks to a clause clearly added for the UK’s benefit that said “member states would be able to apply systemic risk buffers of up to 3pc for all exposures?.?.?. without having to seek prior Commission approval”.
An earlier draft would have required sign-off from Brussels for any decision to raise capital ratios above 7pc, which Mr Osborne said at the time would have made him “look like an idiot”.
Although the directive as it stands will allow countries to opt out of the stricter Basel 3 rules,
Mr Osborne said any member states that did would be punished by the markets.
The directive also gave national regulators the power to use macro-prudential tools, such as loan-to-value mortgage caps, to rein in excessive lending without consulting Brussels. Supervisors could increase the risk weighting of assets by up to 25pc, as well.
Coalition needs to sort out growth before it can sell RBS
They're right. Stephen Hester should be paid more, quite a lot more, for running one of the world's biggest and most complex banks. But he's also working for the Government, RBS's biggest shareholder, which is capable of precipitating the most crass outcomes when bending to its Parliamentary opponents.
Hester's pay row was just one more example of the contradictions that bedevil a government-owned bank. What's good for taxpayers (and voters) as bank shareholders may be seen as bad for the same people as bank customers.
This was clear in 2008 when we recapitalised RBS and Lloyds Banking Group, although I assumed then the Treasury, with £66bn tied up in the two banks, would act to protect and enhance the value of its investments not damage them, which has been the case.
Anyway, all this highlights how undesirable it is for the Coalition to continue owning the stakes. Which brings us to the question of selling them.
Given how under water the shares are, the debate's a tad premature. But the answer is to sell to the highest possible bidder as quickly as possible.
Distributing shares to taxpayers is costly, impractical and not particularly fair or risk-free politically. Some don't want them, some will lose them, some won't get them, some won't understand them and quite a lot will be insulted by them when they see the small allocation each taxpayer is entitled to after enduring years of austerity. It would be more cost-effective, practical and fair to all if the Treasury sells our stakes and uses the bulk proceeds to pay down debt or fund tax cuts to stimulate growth.
The practicalities of selling such large stakes means the process will have to be done in relatively small tranches using all methods, including stake sales to institutions such as sovereign wealth funds and hedge funds, placings on the stockmarket and cheap retail offers too.
What it won't be is quick. If we begin during this Parliament (big if), the process may not be complete before the end of the next Parliament. But none of this can happen until banks start to recover, which in turn requires confidence to recover. So a government lacking a coherent growth strategy is unlikely to enjoy a successful exit strategy for its bank stakes.
One man watching the fate of Jamie Dimon with more interest than most will be rival rainmaker Lloyd Blankfein.
The two men have one thing in common, well two to be exact, and that's their jobs. Both hold down the dual roles of chief executive and chairman – a habit frowned upon by UK shareholders but tolerated in the US – until now.
Dimon's butter fingers in allowing JP Morgan to drop $2bn, possibly more, in botched risk management has prompted serious shareholders to call for him to split the roles. If that applies to Dimon then surely it applies to Blankfein's Goldman Sachs roles too. Effective risk management requires the chief executive to hive off some responsibilities to an independent chairman, who can better keep an eye on what's happening on behalf of shareholders than an all- powerful, dual-role banker. If you're a Goldmans shareholder, why wait for a $2bn Dimon-style cock-up before this little penny drops?
The more Heathrow and its advocates roar about its limitations as a global hub, the more they highlight the attractions of its nearest rival – Gatwick. Under newish ownership, Gatwick has received £1bn of investment with another £1bn to come. It has plenty of capacity with improved terminals built to take bigger, quieter planes. It has just added Air China to Beijing. If BA's oneworld alliance is Heathrow-centric then rival Star Alliance could be more Gatwick-biased. An upgraded link to London is needed but Gatwick's case should be heard.
damian.reece@telegraph.co.uk
Saturday, May 19, 2012
Facebook lifts price range for $100bn IPO
The social network had been targeting between $28 and $35 a share, valuing the company at up to $96bn, but has now raised its top-end ambition to $104bn after being inundated with requests for its shares from potential investors.
Facebook will sell 337.4m shares in its IPO on Thursday, marking the biggest technology flotation in history and immediately catapulting Facebook ahead of companies like Disney and Ford in valuation terms.
The value of the company is expected to surge even higher when trading in its shares start on the Nasdaq stock exchange on Friday, under the ticker FB, despite concerns about its long-term business model.
Nearly two thirds of Americans who actively invest in the stock market think Facebook would be overvalued at $100bn, according to a poll by CNBC and the Associated Press. Billionaire Warren Buffett, arguably the world's most succesful investor, has said he will not be buying shares in the company.
Nonetheless, Facebook's IPO was already oversubscribed last week, leaving some institutional investors that had placed large orders scrabbling around syndicate desks for more shares so they could increase their stakes.
Some of the social network's underwriters were reportedly closing their books early on Tuesday because they had no shares left to sell.
Facebook's road show, which got underway last week, appears to have overcome anxieties over its corporate governance and potential growth.
The social network warned last week that the surge in people accessing Facebook on their mobiles is threatening the company's long-term financial prospects, because it has not yet worked out how to monetise that usage.
Mr Zuckerberg, who founded Facebook from his bedroom at Harvard, ruffled feathers by wearing a "hoodie" sweater on Facebook's roadshow. He has turned down an invitation to go to ring the Nasdaq bell in New York on Facebook's first day of trading - opting to ring it remotely from Facebook's Cupertino headquarters instead.
Okla. court favors state in tax collection lawsuit
OKLAHOMA CITY (AP) -- The Oklahoma Supreme Court on Tuesday ruled that the state can require cities to use the Oklahoma Tax Commission to collect city sales taxes.
The decision overturns a lower court ruling in a lawsuit filed by the city of Tulsa.
Tulsa spokeswoman Michelle Allen said attorneys for the city planned to meet later with Mayor Dewey Bartlett to discuss the ruling.
"The legal department is reviewing it and we don't have a comment this time," Allen said.
The state attorney general's office did not immediately respond to phone calls seeking comment.
The state Legislature, on the final day of its 2010 session, approved the bill that was later signed into law that required the Tax Commission to collect municipal sales taxes in what was called an effort to streamline tax collections statewide.
On June 1, 2010, one month before the law went into effect, Tulsa contracted with Alabama-based Revenue Discovery Systems to collect its taxes. Officials estimated the city would save about $700,000 from the $2 million a year it paid the Tax Commission in collection fees.
The city's lawsuit, filed in August 2010, claimed the law unconstitutionally impaired the city's contract and infringes on the city's powers granted under the state constitution and the city charter.
An Oklahoma County District Court judge ruled in favor of the city in May 2011 and the state appealed.
The state Supreme Court's unanimous ruling said the Legislature has the authority to develop a uniform tax collection system and that the Legislature's authority supersedes the city charter.
New legal threat to Apple over ebooks
The company and five major book publishers are facing multiple lawsuits after claims that they colluded to fix the price of e-books. Apple wanted to loosen the stranglehold Amazon's Kindle has on the ebook market and to give its own iPad device a boost, it has been alleged.
The US Department of Justice and the European Union are both taking action against the companies, alongside a group of consumers and more than 30 US states who have launched their own lawsuits to recover "unfair" charges from Apple and the publishers.
All the cases centre on the so-called agency model for ebook pricing, whereby publishers are allowed to set the price of books as long as they hand over 30pc of the profits to the retailer.
Penguin Group, Simon & Schuster, Macmillan, HarperCollins and Hachette all signed up to the scheme with Apple, before it was adopted by other retailers.
The "multi-state" filing includes a note to publishers, purportedly from former Apple chief executive Steve Jobs, explaining why it would be better to "throw in" with Apple and "hold back your books from Amazon".
Some of the publishers have settled their cases, but Penguin, Apple and Macmillan are fighting the DoJ charge.
JP Morgan's Jamie Dimon finds it's less stormy in the south
The bank's Highland Oaks Campus maybe just 20 miles outside Tampa but it felt much further from the storm that has engulfed the bank's chairman and chief executive Jamie Dimon at his Park Avenue headquarters in Manhattan over the last five days.
The bank, though, had clearly prepared for the storm to follow it south. There was a pen for protesters outside the entrance. Shareholders driving up were met by a small army of security staff and assorted JPMorgan staff manned with lists, clipboards and iPhones. Once inside, it was obvious JPMorgan had not planned for this to be an all-day event.
Those shareholders that made the trip needed to have eaten before they arrived. The sandwiches and drinks that lure pensioners to AGMs up and down Britain, were absent. The only refreshment - at least that this correspondent could see - was a water fountain. The desire to wrap up proceedings quickly was strengthened as Dimon opened the meeting by talking about "what is probably on your minds after reading the newspapers over the last few days."
Known for speaking quickly, the 56-year old moved up a gear as phrases like "embedded gains" "chief investment office" and "our original intent" were all showered on the audience of about 200 people in the first couple of minutes. Any shareholders, meanwhile, who wanted to take the floor were limited to three minutes.
Fears that JPMorgan may have harboured that the meeting could take a disorderly turn were misplaced. The egg that Dimon said last week had been left on the bank's face in the wake of the trades did not turn into anything more physical. Not that shareholders ignored the loss that has wiped almost $20bn from JPMorgan's market value in the last five days.
Father Seamus Finn of the Interfaith Centre on Corporate Responsibility asked Dimon whether the losses would change his well-known opposition to the Volcker Rule, which bans banks from gambling with their own money. Dimon insisted he was in favour of strong and simple regulation but "didn't want to bore the whole crowd" with the minutaie of the regulation. Most shareholders looked relieved.
The real flashes of investor anger were not sparked by JPMorgan's backfiring bets, but from its role in the US mortgage market. Why, one woman implored, won't the bank make modifications to some of its mortgages to keep people in their homes? JPMorgan was one of five banks that earlier this year signed up to a $25bn agreement with authorities to settle allegations that lenders had abused procedures used to repossess homes.
The mortgage questions were also a reminder of the sheer scale of activities of JPMorgan, which has grown bigger since the financial crisis. Dimon said that he did not believe that the trading losses would not stop the bank's ambition to keep raising its dividend. There were many who had made the trip to Tampa with stronger reason to agree.
"I live on my dividends. I'm 81," said Robert Van Winkle who had come from neighbouring Bel Air. It was not raucous, but the meeting kept its punch till the last minute when it was disclosed that 40.1pc of shareholders had voted for an independent chairman. Van Winkle was a firm supporter of Dimon, but the vote suggests that there are plenty of shareholders questioning whether the bank really is doing its best to look after the dividends that are so valuable to many.
Debt crisis: as it happened May 15, 2012
I do appreciate the suffering the Greek people are going through. The Greeks must know that through measures of growth and supporting activity, we will move towards them.
20.45 They may be the largest economies in Europe, but English is still the lingua franca of the French and German leaders “when the interpreters are not around,” Mrs Merkel says.
20.42 Mr Hollande says that "without growth, whatever efforts we produce, we will not reach our targets."
20.40 Mrs Merkel says that countries in a single currency should “never go to war with each other."
20.33 Mr Hollande calls for growth measures that are backed by "tangible actions". He wants leaders to put "everything on the table" at the upcoming summits. He says they should consider a range of measures, improving competitiveness, mobilising funds, and even eurobonds. "Everything needs to be examined [...] and then we draw the conclusions," he says.
The two leaders speak in Berlin on Tuesday (Photo: Reuters)
20.30 Mr Hollande wants to “mobilise the new generation” in the eurozone through a range of growth measures.
On Greece, he says:
we had to talk about Greece […] I would like Greece to remain in the eurozone. Efforts have been made on both sides. So we have to allow the Greeks to find solutions. They are going to be consulted through new elections on June 17. I wish that Greeks will express through these elections how attached they are to the eurozone.
20.28 Mr Hollande, who had not met Mrs Merkel until tonight, describes the Franco-German relationship as a “constant force” with “very strong ties”. He says it is a “very balanced and respectful relationship”.
20.22 Mrs Merkel says this meeting is the start of several meetings to come later this month and in June.
She reiterates that "we wish to have Greece within the euro and we know the majority of Greek people agree with us". She says that the pair talked about "what we can do to help Greece".
"We want Greece to remain part of the European Union and eurogroup," she reiterates.
20.18 The press conference has started. Mrs Merkel welcomes Mr Hollande and says the lightning that hit his plane earlier could even be a "good omen" (!).
19.41 Or not. We can expect to hear from Frangela shortly - they're doing the sound checks as I type. For the French and German speakers out there, their presser will be broadcast live here in French, and here in German. If, like me, you speak neither, it's also on BBC and Sky News.
19.19 It could be quite late before we hear from Frangela. For a start, Francois Hollande arrived more than an hour late after his plane was hit by lightning, forcing him to turn back and board another flight. Once safely in Berlin he was greeted with full military honours and whisked into initial talks, then there will be a news conference and a working dinner. Quite a busy day for the brand new French President...
19.06 The Fake Angela Merkel making a nice lightning pun here, at the same time as coining a new portmanteau: Merkozy is dead, long live Frangela.
18.56 As soon as we mention the red carpet, Francois Hollande arrives in Berlin. He will now enter talks with Angela Merkel and make a statement later in the evening.
18.46 The red carpet is being laid out in front of the German Chancellery at the moment (apparently by camouflaged workers), ready for Francois Hollande.
18.24 Voting is still very much open in our poll, but it's worth taking a look at the results so far...
18.14 We had François Hollande's plane being hit by lightning as he made his way to Berlin, now we have a truck crashing in New York, spilling 36,000lbs of Greek yoghurt. Are we to take these as bad omens?
17.59 Official Eurostat data showed today that the eurozone escaped a technical recession - just - but David Owen of Jefferies has just issued a report claiming that the main reason was that the extra day this year wasn't accounted for:
...make no mistake the region is very likely back in recession. What we do not know at this stage is how severe this second down-leg will prove to be. Adding to the uncertainty surrounding today’s release was the additional working day implied by this being a leap year. GDP data is working day adjusted, but Eurostat leaves it to the individual national agencies to adjust their own series. According to the German Statistical Office, for example, the additional working day boosted German by 0.4% on the year to Q1 2012.
17.43 This is how the euro ends – not with a whimper but a bang - writes Jeremy Warner.
With Greece unable to form a government and therefore now set on new elections, how's this going to pan out? Very badly, is the almost certain answer.
The outcome of the last election was basically just a protest vote – the Greeks are against austerity, against the programme, but they also want to stay in the euro. They want to have their cake and eat it too, and they are gambling that when the Germans come to look into the abyss and realise the devastation a Greek exit will cause, they'll give them the cake – oh, and let them default on all their external debts and provide big Marshall Plan style grants to rebuild their shattered economy to boot.
Next month's election will be different. Even the Greeks must realise that it's now a straight choice – the programme or the dreaded drachma.
17.29 Reports suggest that - all being well - François Hollande will land in Berlin at 8.30pm.
17.16 Despite the slightly ominous nature of Hollande's travel problems, he's not one to give up easily (he has just collected the keys to the Élysée Palace, after all): he's already on another plane and making another attempt for Berlin. Hollande can take some comfort from the fact that lightning never strikes twice in the same place...
17.08 François Hollande was due to speak with Angela Merkel today, running straight from his swearing-in ceremony to the airport and on to Berlin. First we heard that he was 40 minutes late for his flight - not that flights leave without the French President if he's running late - now we hear that it's been struck by lightning and forced to turn around and return to French soil.
A slow clap for Channel 4's economics correspondent Faisal Islam for his speedy tweet:
And The Sunday Times's Iain Dey says:
17.04 The pound's rise against the euro has been given a further nudge by today's news. One pound will now buy you €1.2551. Handy for tourists heading to the continent, but a further burden for UK companies which export to Europe.
16.50 European markets have closed for the day, shaken downward by failure on the part of Greek politicians to form a government. Neil Veitch, fund manager at SVM UK Opportunities fund, said:
With the resumption of sovereign debt concerns, investing is again akin to playing chess on three levels - the micro, macro and political - with a myriad of different outcomes and probabilities.
The FTSE 100 slipped 0.51pc, the DAX dropped 0.79pc, the CAC fell 0.61pc.
16.34 Christine Lagarde has spoken, saying that a Greek exit from the euro would be "messy" and have consequences for growth. But she didn't rule it out as a possibility, saying: "we have to be technically prepared for anything". There was also a hint about a possible lowering of interest rates, as she claimed that the ECB had "room for manoeuvre".
16.09 So, Greece will hold a fresh round of elections in June. What do you think the outcome will be? Vote in our poll:
15.50 François Hollande is now on his way to Berlin to meet Angela Merkel, after meeting reporters at the Hotel de Ville in Paris.
Devorah Lautner reports that he is running 40 minutes late for his flight. One of the perks of being President, presumably, is that it will wait for him....
15.45 Greek political leaders are already back on the campaign trail after talks to salvage a coalition from indecisive elections two weekends ago collapsed earlier thie afternoon.
Antonis Samaras, leader of the right-leaning New Democracy party, has called for Greeks to vote to secure the country's position as part of the euro.
He said in a TV interview:
Our future is under threat. We will not lay down our arms. Europe understands now that one-way austerity destroys growth.
Greece needs to change the bailout terms and make an effort to return to growth while staying in the EU, he said.
15.20 Moving away from Greece for a moment, Devorah Lauter has an update from Paris on François Hollande's presidency. He has made two key appointments, she writes.
For the positions of prime minister, and general secretary to the Élysée, the self-described, “normal” president appears to have chosen similarly “normal,” male candidates who are reputedly easy to work with. The remaining government appointments will be officially announced Wednesday.
Jean-Marc Ayrault, 62, is anticipated as the next prime minister of France after serving on the French parliament for 15 years. He is a major figure in the Socialist Party, and a so-called “elephant,” a term reserved for veteran party members. Mr Ayrault’s fluency in German is also viewed as a potential asset for German-French negotiations.
Pierre-René Lemas, 61, is expected to become the new general secretary at the Élysée, a position likened to vice president. Another old friend and fellow alumni from the prestigious ENA school (Ecole nationale d’administration), which Mr Hollande attended, Mr Lemas is the cabinet director for the Socialist senator, Jean-Pierre Bel. However, he is better known as the former prefect to Corsica, where he earned a reputation for leading reforms in decentralization.
15.05 Greek economist Yiannis Mouzakis gives us a clue about what the next few weeks hold for the country:
14.45 Here's some more detail on the politics of Greece's new elections:
A spokesman for President Karolos Papoulias announced this afternoon that the process of seeking a compromise had been declared a failure and a new vote must be held.
The president didn't give a date for a new poll, but electoral rules indicate it would not be until mid June.
Evangelos Venizelos, leader of the Socialist PASOK party which wanted to be part of a coaltion and supports the EU-IMF bailout and austerity measures, said:
For God's sake, let's move towards something better and not something worse. Our motherland can find its way, we will fight for it to find its way.
However recent polls show the left-wing Syriza party, which came second in the elections on May 6 and wants to abandon the austerity programme of wage and spending cuts altogether, would win an election if it was held now.
That would throw the country's bailout into disarray because European leaders have said any more bailout funds will be cut off if the austerity programme is ignored.
14.35 US markets are open for the day and trading slightly higher - clearly they are more sanguine about Greek elections than traders on this side of the Atlantic.
The Dow Jones is up 0.2pc at 12,715 points, while the S&P 500 traded flat.
14.25 In Athens, stock markets are falling too, as far as their lowest level since 1990, and now trading down 4.6pc.
14.20 European stock markets are all now in retreat and Italian bond yields briefly rose above 6pc, where Spain's are already trading.
The FTSE 100 is down 0.6pc to 5,433.8 points, the CAC is off 1.1pc and the DAX lost 1.4pc. The IBEX fell 1.6pc in Spain and Italy's FTSE MIB slipped 1.8pc.
The yield on Italian 10-year bonds jumped to 6.011pc before falling back to trade at 5.97pc, while Spain's widened to 6.34pc.
14.10 The news that Greece will have to hold a fresh round of election has sent the euro sliding against the dollar as the graph below shows:
14.05 BREAKING ...
Greece will be holding a new round of elections, having failed to agree on a coalition government after the inconclusive elections of 9 days ago.
14.00 JPMorgan faces the music this afternoon at its annual shareholders meeting down in Tampa, Florida.
Many investors will have cast their votes in favour of the board and pay report before last week's revelation that the bank had racked up trading losses of more than $2bn (£1.25bn).
However the question and answer session is sure to be interesting - Richard Blackden, our US business editor, is reporting from Florida. The meeting is due to start at 3.30pm London time.
13.40 US retail sales figures came in rather weakly for April.
Sales were up just 0.1pc, after clothing and building materials sales declined. March figures were also revised to show a gain of 0.7pc, down from 0.8pc in the previous estimate.
12.30 An appropriate metaphor for the ecnomic conditions ahead? François Hollande has been sworn in as president of France amid torrential rain. Surely there is a presidential unmbrella he could have borrowed?
12.20 François Hollande has made little attempt to gild his predecessor's reputation at this morning's presidential handover ceremony in Paris.
Devorah Lauter reports:
Francois Hollande was sworn in as president in a sober ceremony, as intended, this morning.
Personal guests were kept to a minimum, with the notable absence of Ségolène Royal, Mr Hollande’s former partner and the Socialist Party’s 2007 presidential candidate. Valérie Trieweiler, Mr Hollande’s current girlfriend, was at his side in a black, low-cut dress with sheer sleeves and high-heeled gray pumps.
Mazarine Pingeot, the daughter of former French president, Francois Mitterrand and his mistress, Anne Pingeot, whose existence was a long-kept secret, was also present at the inauguration ceremony today.
“I am very moved to come back here under different circumstances,” she said following the ceremony. “It’s very strange, because I came here in different ways that were not necessarily official,” she said. “It’s like a loop that’s come full circle,” she added.
Other guests included Socialist Party veterans, former prime ministers and French Nobel Prize winners. In his first speech after the official swearing in, Mr Hollande said that under his watch, “power would be exercised with…scrupulous behavioural sobriety,” a thinly veiled pique at Nicolas Sarkozy, often criticized for a volatile temperament.
However, Mr Hollande did not refrain from a direct strike at the out-going president. As he concluded his speech, Mr Hollande thanked previous French presidents for their work and contributions to the country, but when he reached Sarkozy, he did not mention a single one of the outgoing president’s positive accomplishments. “Nicolas Sarkozy, to whom I address my wishes for a new life that opens before him,” was all that Mr Hollande said about his predecessor.
11.50 Greece has confirmed it will repay the full €450m bond which matures today (see 08.35 post), after it failed to reach any deal on a reduction with investors who ehdl out against the debt restructuring which went on earlier this year.
A government source told AFP the repayment was intended to avoid any dispute, at a time when Greece is still trying to form a government after voters widely reject the harsh austerity terms of the EU-IMF debt deal in an election 9 days ago.
Private creditors in effect lost 70pc of their investment in a debt writedown agreed earlier this year as part of Greece's bailout agreement with the IMF and EU. Nearly 97pc of the total debt was eventually covered, leaving some €6.5bn outstanding, including the €450m bond which matured today.
11.15 Henry Samuel, our man in Paris, has been listening to new French president François Hollande, who has mentioned his plan to agree a new fiscal pact among eurozone countries, overthrowing the one agreed earlier this year.
The president said:
Today many peoples, starting with those in Europe, are awaiting and watching us. To overcome the crisis hitting it, Europe needs projects, it needs solidarity, it needs growth.
To our partners I will propose a new pact that will combine the necessary reduction of public debt with indispensible stimulation of the economy.
11.00 Britain's trade deficit narrowed slightly in March - it inched down to to £8.56bn from £8.59bn in February. Economists had forecast a gap of £8.4bn.
Both overall goods exports and importsvalues reached a record high. The increase in exports of cars and and pharmaceuticals was balanced by imports of oil.
10.40 For those of you as interested as me in how Nicolas Sarkozy managed to look taller than François Hollande at today's presidential handing-over, FT Alphaville has kindly supllied the two men's heights - so it must have been the shoes...
10.35 Today's cartoon from The Daily Telegraph on the eurozone crisis is another beaut:
10.10 European shares are showing a bit of a mixed picture after the growth figures:
The FTSE 100 is up 0.1pc at 5,470.6, while the CAC rose 0.4pc in Paris, but the German DAX is flat.
10.05 More from the eurozone - the currency bloc may have avoided a recession overall, but there is a huge split between the muscular growth in Germany and the depressed growth in Italy and Greece.
Mads Koefoed, a senior economist at Saxo Bank, said:
Germany is leading the bloc, but this doesn't mean we will have a strong rebound, austerity is not going away and southern European economies are really struggling. We are looking at stagnation to very mild growth in the year to come.
10.00 BREAKING ...
The eurozone has narrowly avoided going back into recession, with the region's economy showing 0pc growth in the first quarter. The region's economic output went backwards in the last quarter of 2011, shrinking 0.3pc.
09.50 Apologies we're a bit slow getting this one to you - Italy's GDP figures are also out this morning, and show the economy shrank more than expected in the first quarter.
The economy contracted 0.8pc in the first three months of the year, more than the 0.7pc forecast and worse than the 0.7pc decline in the previous quarter.
09.40 The news we all need to know - how Nicolas Sarkozy managed to appear taller than François Hollande as he handed over the keys to the Elysee Palace this morning:
09.35 Following the eurozone finance ministers' meeting last night, the full EU group is getting together this morning.
Bruno Waterfield says our Chancellor is going to give some ground on the Basel III banking changes, which the UK has opposed so far.
Conveniently sheltering behind a row over who’s to blame for eurozone “uncertainty”, Osborne is expected to surrender sovereignty over how Britain imposes tough capital rules on its banks
Current draft of socalled CRD4 still includes a limit on how high national authorities can raise capital requirements on banks without EU permission, and provisions that soften “Basel III” definitions of what counts as capital
Chancellor will insist that nothing in EU legislation stops him implementing Vickers banking reforms and will highlight progress on bank liquidity and leverage.
Here is the Chancellor speaking in Brussels:
09.25 Henry Samuel sends an update from François Hollande's swearing-in ceremony in Paris:
François Hollande has arrived at the Elysée Palace to be sworn in, walking up the red carpet on its steps. The handshake with Nicolas Sarkozy, the outgoing conservative was "without effusion or warmth and very brief," TV commentators said.
He certainly has a hugely busy day ahead both in national and European politics. Mr Hollande will later try to "find a compromise" with Angela Merkel over the German-led focus on austerity as the solution to Europe's economic crisis.
Mr Hollande will travel to Berlin with the backing of the French electorate to renegotiate the fiscal pact, but he's already had some bad news: official figures released this morning show the French economy showed no growth in the first quarter of 2012. Growth in the final quarter of 2011 was also revised down to 0.1% from 0.2%. Germany's economy, meanwhile, grew by a stronger than expected 0.5% in the first three months of the year.
Difficult for a French president to stand as tall as his German counterpart given its waning economic clout.
09.00 Shares across Europe are trading higher this morning:
The FTSE 100 is up 0.4pc to 5,489.4 points, the CAC added 0.9pc in Paris and the German DAX rose to 0.5pc.
08.35 BREAKING ...
No default from Greece just yet - the country will pay holders of the €430m bond which matures today, a government official has told Reuters. "The bond will be paid," the official said.
As mentioned in the 07.15 post, the holders of the debt are hedge funds which refused to participate in the debt restructuring earlier this year.
08.15 Jeremy Warner has taken issue with the Chancellor's complaint that Angela Merkel and others are damaging the chances of a recovery in UK by spooking markets with talk of a eurozone exit:
08.05 London markets are open for the day and trading higher:
The FTSE 100 was up 0.4pc to 5,486.8 points shortly after trading started.
07.50 Economists have welcomed Germany's strong GDP figures this morning, but warned such a pace will be unsustainable if conditions in the rest of the eurozone don't improve:
Joerg Kraemer, an economist at Commerzbank, said:
This is a very strong comeback. The decline in the fourth quarter was not the start of a recession but just an economic dip.
Germany is faring better than the rest of the eurozone. But I do not believe that it will continue at this speed.
07.35 Looking ahead to European markets opening, the futures markets are betting shares will rise, recovering slightly from yesterday's sharp falls:
The FTSE 100 is set to open flat at 5,450 points, the CAC is expected to rise 0.4pc and the DAX to add 0.2pc.
07.25 As well as meeting, meeting, meetings, the big news this morning is growth figures from the eurozone.
Germany has turned in a very respectable set of figures - its economy grew by 0.5pc in the first quarter of 2012, beating forecasts for a 0.2pc increase, on the back of strong exports. It also meant Germany avoided going back into recession, following a 0.2pc contraction in the final quarter of 2011.
France on the other hand, has an economy which has stalled altogether - growth was 0pc in the first quarter, and the rate of growth for the final quarter of 2011 was revised down to 0.1pc from 0.2pc.
At least the two big powerhouse economies of the eurozone have avoided going back into recession, unlike the UK...
07.20 Jeremy Warner says a Greek exit from the single currency could be the "fatal blunder" that crowns the list of failures by eurozone leaders to contain the crisis.
Mistakenly, eurozone leaders have convinced themselves that it won't much matter if Greece leaves, and indeed that it might even help resolve the wider crisis to get rid of this persistent thorn in the flesh.
Bring it on, they mutter callously; it will be a lot worse for them than for us. On one level, this is just bravado. It's an attempt to put as nonchalant a face as possible on the now apparently inevitable. But they also seem to believe in their validity of their own analysis – that they have indeed used the past two years well, and are now fully prepared for a Greek exit.
Believe it if you will. The ineptitude to date of the eurozone's crisis response strongly suggests a different conclusion – both that the likely contagion from an exit has been hugely underestimated, and that by prompting a wider breakup, thereby tipping Europe into depression, it may end up as bad for everyone else as it is for Greece.
The threat comes from market contagion to other eurozone countries worst hit by the debt crisis. To Germany, Greece has always been a special case, a nation which cheated its way into the euro, whose citizens are lazy and won't pay their taxes, and is in any case basically ungovernable. There is a very different attitude to Spain and Italy. Germany's determination to make the rest of the eurozone work should not be underestimated.
The trouble is that once one has left, and the principle has been established that it is indeed possible to leave the euro, it's going to be tough to impossible to contain the crippling capital flight which is certain to set in elsewhere. Greece is just the canary in the mineshaft, an outrider for the much wider problem of imbalances and divergent competitiveness.
07.15 Meanwhile Greek politicians are making a final effort to form a coalition government, after last week's inconclusive elections - a new poll may have to be called if they can't agree. The uncertainty dragged down share prices and pushed up bond yields across Europe.
Louise Armitstead reports:
Politicians in Athens were urged last night to make the “right decision” and avert the “terrible consequences” of their deadlock, as fears of a Greek exit from the euro gripped financial markets.
Germany’s finance minister, Wolfgang Schaeuble, said Europe can “only hope” for political agreement in Athens as European stock markets tumbled and the euro fell to its lowest level against the pound for three and a half years.
Highlighting the threat facing the eurozone, credit rating agency Moody’s last night downgraded its view of 26 Italian banks which are heavily exposed to government bonds.
While politicians wrangled, traders fretted over whether Greece would default on a €430m (£344m) bond due today – the first real test of its resolve over its financial commitments.
Alexis Tsipras, leader of Greece’s second biggest political party Syriza, said: “There’s a bond to pay back tomorrow and the government doesn’t know if they’ll pay it or not.”
The bond is a rump of old Greek sovereign debt that is held by hedge funds that refused to participate in €250bn of restructuring in March.
07.10 Last night's eurozone finance ministers meeting was fairly uneventful, with the ministers claiming they didn't discuss a Greek exit from the single currency - making them the only people in Brussels yesterday NOT discussing that question...
However ahead of today's EU finance ministers meeting (aka Ecofin) George Osborne has expressed frustration with Angela Merkel's comments about a possible Greek departure from the euro (aka Grexit - keep up at the back!), which helped to send shares down across Europe yesterday.
The Telegaph's Robert Winnett, David Blair and Bruno Waterfield report:
Speaking after he arrived in Brussels for meetings with other European finance ministers about the worsening eurozone crisis, Mr Osborne implied that the German chancellor was destabilising the global economy.
“The eurozone crisis is very serious and it’s having a real impact on economic growth across the European continent, including in Britain, and it’s the uncertainty that’s causing the damage,” said Mr Osborne, the Chancellor.
“Of course countries have got to make difficult decisions about their public finances. We know that in Britain. But it’s the open speculation from some members of the eurozone about the future of some countries in the eurozone which I think is doing real damage across the whole European economy.”
07.05 Today is all about meetings - France's new president Francois Hollande is due to be sworn in, after which he will race off to meet German Chancellor Angela Merkel for the first time.
And finance ministers from across the EU will meet today, following the gathering of eurozone finance minsters last night.
Henry Samuel in Paris has more on the key first Merkel-Hollande meeting:
Mr Hollande's aides insist the inauguration will be a “sobre” ceremony with little of the pomp and family glitz so prevalent at Mr Sarkozy’s inauguration five years ago.
But the victory lap ends there, as he must immediately leave for a bruising clash with Ms Merkel over crisis in the eurozone this evening – a showdown which, as his campaign manager, Pierre Moscovici put it, could set his presidency on a trajectory of “success or failure”.
Mr Hollande has championed the idea of renegotiating the fiscal pact that enshrines budgetary discipline in the eurozone to include a growth chapter. Mrs Merkel insists the pact, signed by 25 of the 27 EU countries and already ratified in some, must stay as it is.
The Chancellor has promised to welcome him with “open arms” and that the visit was just a "getting-to-know-you" gathering, but Benoît Hamon, the Socialist Party spokesman set the stage for a clash by saying on Sunday: “We didn't vote for an EU president called Mrs Merkel who makes sovereign decisions for the rest of us.”
07.00 Good morning and welcome back to our live coverage of the European debt crisis.
Debt crisis live: archive
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