One in 465 homes in the Houston area received a foreclosure filing in March, according to a new report from RealtyTrac Inc.
That’s 53 percent higher than the number of filings in March 2009, and 29 percent higher than the number of filings in February of this year, according to RealtyTrac’s U.S. Foreclosure Market Report.
RealtyTrac is an Irvine, Calif.-based private marketer of foreclosure properties.
In Texas as a whole, 1 in 617 homes received a foreclosure filing and the nation as a whole saw 1 in 352 filings.
Foreclosure filings were reported on 367,056 properties in March, an increase of nearly 19 percent from the previous month, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005.
“Foreclosure activity in the first quarter of 2010 followed a very similar pattern to what we saw in the first quarter of 2009: A shallow trough in January and February followed by a substantial spike in March,” said James Saccacio, chief executive officer of RealtyTrac.
“One difference, however, is that the increases were more tilted toward the final stage of foreclosure, with REOs (bank repossessions) increasing 9 percent on a quarterly basis in the first quarter of 2010 compared to a 13 percent quarterly decrease in REOs in the first quarter of 2009.”
A Congressional panel investigating the causes of the financial crisis criticized two former leaders of Citigroup on Thursday for failing to understand the risks that eventually brought the company to its knees.
In testimony before the Financial Crisis Inquiry Commission, Charles "Chuck" Prince, former chief executive of Citigroup, apologized for his role in the crisis that roiled the U.S. economy.
"I’m sorry that the financial crisis has had such a devastating impact on the American people," Prince said. "I am deeply sorry that our management — starting with me — was not more prescient and that we did not foresee what lay before us."
Prince, who was CEO from 2003 to 2007, retired after Citi announced that it would write off up to $11 billion in losses related to its holdings of risky mortgage-backed securities. The bank eventually lost an estimated $30 billion on such securities and was forced to take a $45 billion bailout from the government.
Prince’s remarks came on the second day of this week’s three-day meeting of the commission, which was established last year to investigate the causes of the crisis. The hearings are aimed at exploring how the issuance of trillions of dollars worth of risky subprime mortgage debt contributed to the financial meltdown.
In addition to Prince, the commission heard from Robert Rubin, who was a board member and a top adviser at Citi until the end of 2009.
Rubin, who was Treasury Secretary under President Bill Clinton, said he had been concerned that market "excesses" would lead to a downturn. But he acknowledged that most regulators misjudged how severe the threats to the economy were.
"We all bear responsibility for not recognizing this, and I deeply regret that," he said.
In their defense, both executives argued that the scope of the crisis could not have been fully anticipated, echoing remarks former Federal Reserve chairman Alan Greenspan made before the commission Wednesday.
However, at least two of the 10 bipartisan commission members were not satisfied with the responses provided by the former Citi executives.
"It seems to me that, at the end of the day, the two of you in charge of this organization did not seem to have a grip on what was going on," said Commission chairman Phi Angelieds. "I’m not so sure apologies are as important as assessment of responsibility."
Bill Thomas, a former Republican Congressman who is vice chairman of the commission, criticized the panelists for reaping huge rewards while being out of touch with the risks Citi traders were taking.
Thomas said Prince and Rubin earned a combined $150 million over a four-year period when things were going up. "But that same team, on the way down, didn’t have a nickel clawed back," he added.
Rubin responded that Citi did not pay him a bonus in 2007 and 2008, per his request.
In response to an earlier question, Prince said the bulk of his pay was in the form of Citi stock, which he said he still holds today.
"My interests were aligned 100% with stockholders," he said. "I saw a substantial part of my net worth disappear because my company suffered as a result of these problems."
The problems he referred to stemmed from Citi’s exposure to "super-senior" collateralized debt obligations, which were considered at the time to be the safest CDOs. These securities were backed by mortgages, in some cases subprime loans, which were believed to be at low risk of default.
However, after the housing bubble burst in 2008 and the financial markets went into a tailspin, the value of CDOs plunged and Citi was left with billions of dollars worth of illiquid assets.
Prince reminded the panel that most banks, regulators and rating agencies considered super-senior CDOs safe.
"In hindsight, it’s very hard to see how these structured products could have been accepted in the way they were accepted," he said.
In his testimony, Rubin said the main lesson of the recent crisis was that "the financial system is subject to far more downside risk that almost anyone had seen."
He said the private sector should take steps to avoid repeating the mistakes of the past, but he maintained that the government also needs to overhaul how it regulates the financial system.
"Financial reform is imperative," Rubin said.
Among the reforms he suggested was "resolution authority," which would give the government power to break up institutions considered to be too big to fail. Rubin also called for constraints on leverage, derivatives regulation and increased consumer protections.
Colorado legislators on Thursday changed a bill cracking down on payday lenders to allow the businesses to make more money from their loans, but opponents said that the amendment did not do enough to keep a large number of those shops from closing their doors.
House Bill 1351, sponsored by Rep. Mark Ferrandino, D-Denver, would limit the amount of interest that payday lenders can make off of loans. It was approved on a 7-4 vote by the House Judiciary Committee, with Democrats backing it and Republicans opposing it, and is headed next for debate on the House floor.
Under current law, payday lenders can charge a finance charge of $20 per $100 on the first $300 loaned and $7.50 per hundred dollars after that until the loan has reached its maximum $500 limit. The average payday loan in 2008 was $391, with an average annual interest rate of 317 percent, according to the nonpartisan Colorado Legislative Council.
HB 1351 originally proposed capping the annual percentage rate on each loan at 36 percent. However, Ferrandino amended the bill Thursday to increase that number to 45 percent APR and added a provision allowing a loan-origination fee of $10 per $100 lent for the first loan made to a person in any 12-month period.
The changes came after payday lenders, who made more than $566 million in loans in 2008, complained that the reduction in profits they would be able to make would shut down many of their businesses and put thousands of people out of work during an economic downturn. A number of Democrats have spoken against the potential effects of the bill as well.
Under current law, Ferrandino argued, lenders can make $75 off of a two-week loan, while his new bill would reduce that amount to $58.63, much higher than the $6.90 they could have made under the original HB 1351. The goal of his bill, he said, is to stop lenders from making large amounts off of future loans that keep borrowers in a perpetual cycle of debt.
"If people are using this responsibly for short-term loans, they‚re making close to what they're making before," Ferrandino said.
However, Rep. Steve King, R-Grand Junction, said that without that income on future loans, lenders will lose large amounts of money and be forced to shut their doors.
"We‚re talking about $1.75 on a $100 loan," King said of the change from 36 percent to 45 percent annual interest that lenders can charge. "It's still going to kill jobs. It's still going to cause businesses to go out of business."
The bill also would require the question to be referred to voters on the November ballot before the law were to take effect.
White House pay czar Kenneth Feinberg, who has clamped down on executive compensation at the nation’s biggest bailout firms, now has a new target: any firm that accepted a government lifeline.
Unveiling a bold new initiative Tuesday, Feinberg said he would examine compensation paid to top executives at 419 companies made between October 2008 until February 2009, a period when the nation’s financial system was teetering on the brink.
The review is part of an effort to shed light on whether any firms that accepted money under the Troubled Asset Relief Program, or TARP, paid employees any excessive bonuses or awards during that tumultuous period before Congress stepped in and required greater oversight on pay practices at bailed-out firms.
Feinberg is asking each company to provide information on bonuses, retention awards and all other compensation for their senior executives and next 20 most highly-paid employees within 30 days.
Much of his focus though will be on executives earning more than $500,000, Feinberg said during a press briefing, sparing the hundreds of community and regional banks that also took TARP funds.
His review however, could subject paychecks of hundreds of financial executives, who have otherwise been free from leering eyes, to intense government and public oversight.
Among those likely to endure the greatest scrutiny would be employees at Goldman Sachs (GS, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Morgan Stanley (MS, Fortune 500). All three Wall Street firms are known for paying multi-million bonuses to top performers as well as senior executives in any given year.
And while investors have closely examined pay packages of their top executives, the trio avoided any federal scrutiny after paying back the billions of dollars received under TARP last year.
Morgan Stanley and JPMorgan Chase declined to comment. Goldman Sachs was not immediately available.
To date, Feinberg’s efforts have been focused on the seven firms that required an "exceptional" amount of government assistance. Two of those firms — Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) — have since repaid all of their bailout funds to the government though.
On Tuesday, Feinberg set 2010 compensation for executives at the remaining firms under his authority — AIG (AIG, Fortune 500), General Motors, its former finance arm GMAC, Chrysler and Chrysler Financial faxless cash advance..
Total pay for those executives would decline by 15% this year, with a larger portion of their compensation coming in the form of stock, according to Feinberg.
GMAC CEO Michael Carpenter, for example, who was appointed to lead the firm last November, will only be paid in the form of company shares.
Feinberg also said Tuesday that executives from AIG’s notorious financial products unit, which brought the firm to its knees, had repaid the entire $45 million in bonuses they originally pledged to return.
No Wall Street brain drain
There have been some questions about whether attempts to cap compensation at bailed-out firms would prompt top employees to seek work elsewhere.
But according to Feinberg’s latest ruling, more than 80% of the executives that submitted to Feinberg’s review in 2009 were still with the same firm earlier this year.
Feinberg’s forthcoming review of all firms that accepted TARP funds is expected to be made public by late spring or early summer.
The pay czar said Tuesday he will attempt to negotiate with those companies and employees that were awarded payments that were "contrary to the public interest."
One likely target could be bonuses paid to bank employees for fiscal year 2008.
An analysis of the original nine banks that received money under TARP published last July by New York Attorney General Andrew Cuomo revealed that those banks still paid out billions of dollars in bonuses in 2008, even as the firms suffered severe losses.
Citigroup, for example, paid an estimated $5.33 billion in bonuses in early 2009, despite suffering more than $27 billion in losses in 2008.
Goldman Sachs, which continues to face criticism over its pay practices, paid out some $4.8 billion in bonuses despite earning just $2.3 billion, according to the report.
It is unclear though, whether those firms may put up a fight. Others have questioned whether Feinberg will have the legal authority to renegotiate some of these employee payments.
–CNN’s Lisa Sylvester contributed to this report
When radio was invented in the late nineteenth century by the likes of Marconi, Edison, and Tesla, government and industry faced a conundrum. Who would own the limited band of electromagnetic frequencies that made this new invention possible?
By the 1920s the decision was made that the public would own the airwaves, with the government leasing frequencies to companies that were required to follow certain rules. A century later this system isn’t perfect, but it does bring us every day everything from text messages to Youtube, to the latest hits from Lady Gaga.
Society now faces a similar ownership predicament with who owns human genes — another kind of spectrum that always existed, but was unsuspected until we discovered it. This time, however, the story is different. Instead of a public ownership model granting licenses, the U.S. Patent Office has spent the last twenty years awarding patents to companies, universities and others who discover genes — with over 20% of human genes already claimed.
Controversial for decades, the validity of issuing these patents has erupted again in a case brought last year by the American Civil Liberties Union against Myriad Genetics (MYGN), which holds patents on two genes that in a mutated form can cause a person to be high risk for breast cancer. According to the ACLU and a long list of plaintiffs that includes research and patient advocacy groups, the U.S. Patent Office (also listed as a defendant) was wrong to issue these patents — and by extension all genetic patents.
"Genes are naturally occurring entities, like air or gravity," says ACLU attorney Chris Hansen, "and therefore under the law they are ineligible for patenting."
The ACLU also claims that Myriad’s patents block access to the genes by researchers and patients who want a second opinion on breast cancer results, but are barred by the exclusivity of the Myriad patent. They criticize Myriad’s access prices, which can range as high as $3,000.
Myriad General Counsel Richard Marsh counters that Myriad and researchers working at the University of Utah — which co-own the patents, and are co-defendants in the suit — did discover something that exists outside of nature. By extracting the genes from the human body, the company claimed, and the U.S. Patent Office agreed, that it had created an isolated sequence that is patentable, whereas the sequence as it occurs inside a person is not — a contention being directly challenged by ACLU.
Marsh also insists that researchers and patients have benefited from Myriad patenting the BRCA I and BRCA II genes and certain mutations within these genes that are linked to breast and ovarian cancer. He also defended the company’s pricing, saying that it is the essence of patent protection — that Myriad can charge what it likes on something it has created, until the patent lapses and the gene enters the public domain.
More critically, Myriad and others in the pharmaceutical industry claim that without patent protections, no one would invest in developing products based on genetic markers for disease. "Without patents, who is going to do the work and spend the money to make this product accessible to people?" asks Marsh cheapest personal loan rates.
Both sides are now waiting for federal Judge Robert Sweet to rule on whether or not the case will go to trial in the U.S. District Court of the Southern District of New York. Last month Sweet refused to dismiss the case in a motion filed by Myriad, suggesting that he may want to hear the case, although no one knows for sure.
"If not now, it will have to be dealt with later, because there are core issues at stake that impact the entire pharmaceutical industry," says Robert Cook-Deegan, Director of the Center for Genome Ethics, Law & Policy at Duke University.
Which brings us back to the invention of the radio and the electromagnetic spectrum — and potential solutions that demand some imagination and creativity beyond the tried and true pharma track of slapping patents on everything in sight.
One idea would be to turn genetic discoveries — many of which are initially found using taxpayer funds — into publicly owned entities that could be licensed to companies like frequencies on the radio dial. Licensees would be required to follow certain rules such as allowing researchers and patients access to DNA sequences, and requiring that pricing be in line with costs.
A variation of this model has been used for decades to govern the extraction of natural resources such as oil and gold from public lands. Businesses bid on and receive licenses that allow them to extract these resources (and to earn back investments) for a period of time if they follow certain rules.
Yet another idea comes from a 2004 global agricultural pact — The International Treaty on Plant Genetic Resources for Food and Agriculture — ratified by the United States and other nations that allows patent holders to own a genetic discovery for modifying plants, but not to block others from licensing and using it. Last month, an advisory committee at the Department of Health and Human services issued recommendations that patents on genetic diagnostic tests also be modified to allow greater access by researchers and patients.
Ultimately, the tussle over who owns genes may be decided not by government agencies, lawyers, or judges, but by advancements in science. Already the notion that one gene marker can best determine a person’s risk for a common disease is becoming outmoded. The latest science suggests that risk factors for maladies such as diabetes are increased by the interaction of dozens — or even hundreds — of genes and other molecular structures in the body. A legal system that does not retain flexibility in incorporating this rapidly moving science will cause confusion down the line.
Finding clarity in the issue of who owns our DNA will take time, and will be far more complex than, say, a simple frequency on a radio carrying a song by Lady Gaga. Yet it’s crucial in this new age of genomics and molecular biology that we are as clever about how we implement new discoveries as the discoveries themselves.
On the last day of 2009, the state of Missouri gave $19.6 million to developer Paul McKee.
It came in the form of tax credits, from a program never before used, to pay back some of the cost of the land McKee spent five years secretly buying in north St. Louis.
It was a good day for McKee, and for his hugely ambitious $8.1 billion NorthSide project.
It was also a good day for his bankers.
Because after McKee sold the tax credits for cash, he used the money not on NorthSide itself but to pay down his debt, mostly to the small Washington, Mo., bank that is his primary lender on the project.
Yet nearly half of the $19.6 million was reimbursement for interest and fees already paid to lenders. In a sense, the bank got some added protection and a quick payback.
This is exactly how the new tax credit program was intended to work, supporters say. The credits provided the backup a bank needed to see before accepting the risk of financing a long, complex process of assembling land in beleaguered north St. Louis neighborhoods.
"We’ve got to understand, these are high-risk loan areas," said Missouri Sen. John Griesheimer, who pushed the Distressed Areas Land Assemblage tax credit in the Capitol. "This is where bankers and developers don’t want to go."
But the way the program has worked so far speaks to the heart of a lawsuit against it to be heard this week in Cole County. The tax credits won’t create jobs, said attorney Irene Smith. They won’t build buildings or generate any other public good, at least not directly.
"You’re basically just incentivizing the collection of land," she said. "You’re not incentivizing any development."
When state lawmakers established the program in 2007, they designed it to encourage lending on a speculative project such as NorthSide, something risky that might take years to pan out. Indeed, many say it was written specifically for McKee.
Griesheimer, a Republican from Washington, Mo., chairs the Senate’s economic development committee and helped author the credit. Early on in that process, he said in a recent interview, the senator consulted with McKee and with L.B. Eckelkamp, a constituent of his and chief executive of McKee’s primary lender, the Bank of Washington.
They met, Griesheimer said, "to explain what they needed." And after talking with a few other experts, he inserted the tax credit program, worth $95 million, into a massive state economic development bill. It had the vocal support of Lt. Gov. Peter Kinder, St. Louis Mayor Francis Slay and St. Louis County Executive Charlie Dooley. And it passed.
The measure included a 100 percent reimbursement for money spent on interest and loan fees to buy at least 50 acres of land in low-income neighborhoods, and a 50 percent reimbursement for the cost of land itself. It was structured that way, Griesheimer said, to protect any banker willing to take a chance on a major project such as this. It was, he said, the only way NorthSide would happen.
"It was a very high-risk area," he said. "The banks and everybody wanted to make sure that they’re going to recoup at least some of their losses, some of their money."
Indeed, beyond a $27 million loan from the Bank of Washington, McKee has struggled to attract lenders, even with the support of the tax credits. He has pitched NorthSide to a number of local banks, but none has publicly committed to him.
The Bank of Washington’s money did not come cheap. Since 2005, McKee’s NorthSide Regeneration has paid at least $9.25 million in interest and fees on loans held by the bank, according to documents obtained from the Missouri Department of Economic Development under state open records laws. Another $529,000 in interest went to a small Illinois bank that’s now defunct. Now, every cent of that has been reimbursed by the state.
In a recent e-mail, McKee acknowledged that his interest costs were high. But so, he argued, was the risk.
"The loans were unique," McKee wrote. "They were the only loans made in decades for large-scale site development in north St. Louis that were not backed by government guarantees."
Once he sold the tax credits in January, McKee used the proceeds to pay a substantial portion of his debt. The bank "required a pay down," he wrote, and it makes sense for the project. Paying off debt will reduce interest payments — which were nearly $3.8 million last year — and free up cash for actual redevelopment.
But some say all this focus on protecting lenders reflects misplaced priorities.
"Half of the money is going to pay interest on loans," Smith said. "What public benefit do we gain from a tax credit being used to pay someone’s interest?"
That question will be up to a judge.
Smith said she planned to focus her case on the constitutionality of the tax credits, an issue, she says, that’s never been thoroughly vetted in court. It’s a fairly narrow legal question, Smith said, and she expects the trial, set for Wednesday, to be brief.
In the mean time, McKee continues to buy property in north St. Louis.
His tax credit application says he has spent $25.1 million on 98 acres across two square miles near downtown. It estimates another $66 million in land-buying costs to come. And there’s still about $75 million in the pot of money available through the Distressed Areas credit; McKee’s financial plans project his getting nearly all of it.
Even the program’s critics express little surprise in how it’s been used so far. In floor debate three years ago, Sen. Brad Lager, R-Savannah, raised questions about so much reimbursement for borrowing costs and whether the state should spend $95 million on this sort of project. But he lost that debate.
"And right, wrong, or indifferent, they’re using the credit exactly how it was written," Lager said recently. As for whether it will work, he said: "Only time will be the judge."
Tampa Bay Sports and Entertainment LLC is officially the new owner of the Tampa Bay Lightning.
Jeff Vinik, a Boston-based asset manager, avid hockey fan, and minority owner of the Boston Red Sox, controls the company.
Terms of the deal that closed Wednesday were not disclosed. The purchase also includes the lease to the St. Pete Times Forum and ownership of adjacent real estate, the club said in a release.
Vinik becomes the Chairman of the Lightning and the club’s Governor on the National Hockey League’s Board of Governors. Earlier Wednesday, the NHL Board of Governors approved the acquisition of the team unanimously. A purchase agreement to buy the team on Feb. 4, 2010
“The Lightning is a great franchise in a terrific community,” said Vinik in a prepared statement. “We thank [former owner] Oren Koules and his partners for beginning the turn-around of the Lightning hockey club. Our goal now is to build a world-class organization, on and off the ice.”
Vinik, 50, is the founder and chairman of Vinik Asset Management free credit score online. Prior to forming Vinik Asset Management, he managed Fidelity’s Magellan Fund, at that time the world’s largest equities mutual fund. A Phi Beta Kappa graduate of Duke University with a Bachelor of Science degree in Engineering and Economics, Vinik went on to earn his Masters of Business Administration degree from the Harvard Business School.
The team has scheduled a press conference March 5 to discuss the sale.
The Lightning was founded in 1990 by NHL Hall of Famer Phil Esposito and began play in 1992. The team won the Stanley Cup in 2004. Previous owners of the Lightning include Kokusai Green Ltd (1992-1998), Art Williams (1998-99), Palace Sports & Entertainment (1999-2008) and Lightning Enterprises LP (2008-2010).
The team currently has 20 games remaining in the 2009-10 regular season and it sits in 11th position in Eastern Conference, just two points removed from a playoff position.
Greece’s debt rating may be cut within a month as it struggles to pare the European Union’s largest budget deficit, driving up borrowing costs and renewing pressure on the euro.
Standard & Poor’s said late yesterday it may lower its BBB+ rating by the end of March and Moody’s Investors Service said today it may reduce its A2 grade in a few months. The warnings further complicate the government’s effort to persuade investors that it can slash its fiscal shortfall from last year’s 12.7 percent of gross domestic product.
The euro slumped to a one-year low against the yen, most stocks dropped and the premium on Greek 10-year bonds over German debt widened to the most since Feb. 8 on concern that the country may need EU assistance to avoid missing debt payments. Unions yesterday staged a strike to protest Prime Minister George Papandreou’s drive to slash spending.
“It’s getting more difficult than anticipated for the Greek government to implement the spending cuts it promised,” said Susumu Kato, chief economist in Tokyo at Credit Agricole Securities Asia. Further downgrades “may spread sovereign concerns through other European nations,” he said.
The country’s willingness to keep funding itself in the commercial bond market is key to S&P’s assessment, the company said. The rating could be pressured by lower profitability at the country’s banks or a decline in public support for the budget plan, it said. EU assistance could help if it was likely to lead to a “sustained reduction” in borrowing costs.
Two Grades
“We believe that a further downgrade of Greece of one to two notches is possible within a month,” S&P analysts led by Marko Mrsnik in London said in a statement.
Pierre Cailleteau, managing director of sovereign risk at Moody’s, said in an interview in Tokyo today it may act “in a few months” if policy makers appear to be deviating from their deficit-reduction plan. At the same time, Moody’s may stabilize its rating if Greece follows through with its austerity measures, he said.
“We have to let the government implement its plans,” Cailleteau said. “You can’t expect a government to be able to turn around public finances in a few days.”
S&P cut Greece’s rating in December from A- and signaled at the time it may reduce it again from BBB+. Moody’s lowered its rating by one step the same month.
ECB Rules
If Moody’s cuts its credit rating to the same level as the other major ratings companies, it could exacerbate Greece’s financial distress at the end of this year when the European Central Bank is due to revert to old collateral rules that were loosened during the global recession. Greek government bonds would then no longer be eligible as collateral at the ECB, making it even more difficult for the nation to borrow.
The euro dropped to 120.51 yen as of 11:20 a.m. in London from 122 cash advance america.03 yen in New York yesterday. It earlier touched 120.24 yen, the lowest since Feb. 24, 2009. The single currency has fallen about 6 percent against the dollar this year on concern Greece’s fiscal woes may extend to Spain, Portugal and other European nations seeking to pare budget gaps.
Credit-default swaps protecting the debt of Greece rose 10 basis points to 392, according to CMA DataVision. The spread between 10-year Greek bonds and similar-maturity German debt widened by 13 basis points, or 0.13 percentage point, to 352 basis points.
Tear Gas
Papandreou’s government is running into opposition at home to its strategy. Air-traffic controllers, customs and tax officials, train drivers, doctors at state-run hospitals and school teachers walked off the job yesterday to protest spending cuts. Police fired tear-gas and clashed with demonstrators in central Athens after a march organized by labor unions.
Greek bonds have slumped, driving up borrowing costs, as investors fear the government will fail to meet its pledge to cut its budget gap to 8.7 percent of GDP this year. It aims to cut the deficit below the EU’s 3 percent limit in 2012.
The premium investors demand to hold Greece’s 10-year securities instead of Germany’s rose to the most in more than two weeks.
The government needs to sell 53 billion euros ($72 billion) of debt this year, the equivalent of 20 percent of GDP. The yield on the country’s two-year note yesterday rose to the most since Feb. 9.
EU governments are looking for guarantees that Papandreou will slash spending before they spell out what help they may offer. EU and ECB officials visited Athens this week to verify that budget cuts are being implemented.
Additional Measures
Under proposals adopted this month by euro-area finance ministers, the Greek government will have to take additional measures to cut its budget gap if it fails to satisfy the European Commission next month that its current strategy is on track. These may include higher value-added tax, a levy on luxury goods, higher energy taxes and spending cuts, they said.
“There will be some conditions attached” to European assistance for Greece, Cailleteau said. “I don’t see the evidence that would justify these kinds of assertions that Europe will not help Greece.”
German, French and Greek voters are “in denial” about Greece’s ability to get its deficit under control without external aid, Barry Eichengreen, an economics professor at the University of California at Berkeley and author of a 2006 history of the European economy, said in a Bloomberg Television interview yesterday.
Finance Minister George Papaconstantinou said Feb. 23 that the government will do “everything it needs to meet” its targets and that any decisions on possible new measures will be announced after talks with European governments.
Toyota is planning to suspend production at two U.S. plants as sales lag following the automaker’s massive recall of its vehicles.
Mike Goss, a Toyota spokesman, said the company will retain all of its workers during the suspensions, which will take place at plants in Kentucky and Texas in the weeks ahead.
The temporary shutdowns are aimed at adjusting production levels following a series of recalls that forced Toyota to halt sales of some of its most popular models.
"We don’t want inventory to build up for our dealers," Goss said. "We can’t keep sending vehicles to dealers until they can start moving those vehicles."
He said the company has used other methods to slow production in the past, such as limiting overtime, but that "elimination days are kind of the final step in that process."
The Kentucky plant, where Toyota’s top-selling Camry is made, will not produce cars on Feb. 26. Goss said the plant could go dark on a few more days the following week, though no official plans have been made.
The Texas plant will halt production the week of March 15 and again in mid April. The plant, where Toyota makes Tundra pickup trucks, will be modified to begin producing Tacoma trucks during the suspension, Goss said.
Toyota has recalled more than 8.1 million vehicles worldwide for problems related to sudden acceleration and unresponsive break pedals, among other things. The company has apologized for the safety lapses and pledged to repair the recalled vehicles quickly.
Meanwhile, the number of customer complaints filed with federal safety regulators has spiked in recent weeks. According to the National Highway Traffic Safety Administration, there have been a total of 34 Toyota complaints alleging fatalities since 2000.
The widely publicized safety issues have taken a toll on sales. Earlier this month, Toyota said January sales fell 16% from a year earlier, worse than a forecast of a 12% year-over-year decline from sales tracker Edmunds.com.
To help revive sales, the automaker is considering a variety of incentive options aimed at drawing customers back into its showrooms.
At the same time, Toyota has launched a public relations campaign aimed at salvaging the company’s once-sterling reputation.
Toyota’s president, Akio Toyoda, and other company executives will take questions about the recall efforts Wednesday at a press conference in Tokyo.
The company has been ramping up lobbying, consulting and attorney teams ahead of appearances on Capitol Hill. Toyota is scheduled to go before two House committees next week and a Senate committee next month.
Money is overrated: In fact, pay has little, if anything at all, to do with motivation in the workplace. That’s the controversial argument put forth by best-selling author Daniel Pink in his new book, Drive: The Surprising Truth About What Motivates Us (Riverhead Books). "Pay for performance has to be exposed as folklore," he says.
Pink contends that, provided employees receive a baseline level of compensation, three other factors matter more than moola: a sense of autonomy, of mastery over one’s labor, and of serving a purpose larger than oneself.
One case in point: the results-only work environment at Best Buy’s Richfield, Minn., corporate offices. Beginning in 2008, salaried workers there were allowed to shape their work day, putting in only as many hours as they felt necessary to get their jobs done. Productivity increased by 35% and turnover fell sharply, according to The Harvard Business Review.
Hmmm. There may be something in all this — but the executives at Goldman Sachs (GS, Fortune 500) aren’t exactly busting a gut to adjust. Like others on Wall Street, the banking giant, which is expected to earn $6 per share in the fourth quarter, argues that fat bonuses are crucial to making its numbers.
Responds Pink, in a now common refrain: That’s precisely the attitude that led to the recent financial meltdown, as traders and mortgage brokers focused on short-term rewards that encouraged "cheating, shortcuts, and unethical behavior."
Moreover, the 45-year-old author and former Al Gore speechwriter cites social-science experiments and experiences at such workplaces as Google (GOOG, Fortune 500), JetBlue (JBLU), 3M (MMM, Fortune 500), online shoe retailer Zappos, and software companies Meddius and Atlassian.
In one 2005 experiment he describes, economists working for the Federal Reserve Bank of Boston tested the power of incentives by offering monetary rewards to those who did well in games that included recalling a string of numbers and tossing tennis balls at a target. The researchers’ finding: Over and over, higher incentives led to worse performance — and those given the highest incentives fared worst of all.
From this and other cases, Pink deduces that monetary inducements remove the element of play and creativity, transforming "an interesting task into a drudge." It’s even possible, he elaborates, for outsized rewards to have dangerous side effects, like those of a drug dependency in which a recipient requires ever larger doses. He cites neuroscientific testing that shows the promise of cash rewards activates a chemical surge in the brain similar to that brought on by cocaine or nicotine.
Pink says his approach isn’t just for knowledge workers — it can motivate even those doing less creative work. He points to Zappos, where call-center employees are not given scripts and are instead instructed to handle relations with customers in whatever way they think best. Turnover, ordinarily high at call centers, is minimal at Zappos.
Pink is aware that his company examples — no GE, no IBM, no Microsoft — hardly represent the commanding heights of the economy. But he thinks his approach will catch on, even in the biggest outfits. "Executives tend to be pragmatic, and in time they will respond," he says.
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