Even during the darkest days of the financial crisis, nearly twenty financial firms managed to shell out an estimated $1.6 billion in "ill-advised" payments to their executives, according to a federal report issued Friday.
In his latest review of compensation practices at companies that were bailed out by American taxpayers, White House pay czar Kenneth Feinberg condemned those companies for how they rewarded employees between late 2008 and early 2009.
"These 17 exercised poor judgment," said Feinberg. "They shouldn’t have made these payments."
The review was part of a previously-announced effort to shed light on whether any of the early recipients of funds under the Troubled Asset Relief Program, or TARP, made excessive payments to employees before Congress passed legislation in February of 2009 requiring greater oversight at bailed-out firms.
Those implicated in Friday’s report included some of the biggest recipients of taxpayer aid. Wall Street investment houses like Morgan Stanley (MS, Fortune 500) and Goldman Sachs (GS, Fortune 500) were both cited as firms that made excessive payments to executives. More traditional lenders like PNC (PNC, Fortune 500) and Buffalo, NY-based M&T Bank (MTB) were included on the list, as was the troubled insurance giant AIG (AIG, Fortune 500) and small-business lender CIT Group (CIT).
Spokespeople for several of the 17 companies either declined to comment or were not immediately available.
But others said they supported Feinberg’s efforts to reform compensation practices and said they planned to review the proposal.
"Getting our compensation structure right is a priority for us," said a statement issued by a spokesman for Citigroup (C, Fortune 500), which also made the list.
More than 400 companies underwent review, although less than half of that number actually warranted a closer look because their executives made less than $500,000 payday loan. That was the cutoff point that was established when the program was announced last March.
Despite the breadth of the study, it offered few details about the size of payouts made by individual firms, or how much specific executives were paid — although Feinberg said that several people received more than $10 million during that period.
In a briefing with reporters in Washington Friday, Feinberg said the payouts were "not illegal" and not "contrary to the public interest." He added that he did not have the power to force companies to claw back those payments to employees.
"His mandate was very limited," said Alan Levine, an executive compensation and benefits partner with the New York-based law firm Morrison Cohen.
Feinberg did however, encourage the 17 firms to adopt new rules that would allow them to restructure or cancel pay packages in the event of another financial crisis.
"That’s all I can do," he said. Friday’s report represents the latest, and perhaps the last, ruling by Washington’s pay czar.
Last October, Feinberg slashed pay for top executives at the seven companies that were rescued more than once by the federal government — AIG (AIG, Fortune 500), Citigroup (C, Fortune 500) , Bank of America (BAC, Fortune 500), General Motors, GMAC, Chrysler and Chrysler Financial.
Two months later, he capped salaries for lower-level executives at those same firms at $500,000. Both rulings served as a benchmark for employee pay levels in 2010.
His role at the Treasury Department however is expected to quickly come to a close. He was recently appointed to handle claims related to the BP (BP) oil spill.
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ESPN The Magazine’s 2010 Ultimate Standings ranked the Orlando Magic first among all National Basketball Association teams in fan experience.
In addition, the Magic ranked second among all professional sports franchises — which includes the National Football League, Major League Baseball, the NBA and National Hockey League — based on a variety of categories such as the affordability of the experience, the quality of the team’s play and the treatment of the fans.
The Super Bowl champion New Orleans Saints finished first overall, one spot ahead of the Magic paydayloans.
According to the ESPN rankings, the Magic ranked first among all 122 teams in bang for the buck, defined as wins during the past three years per revenues directly from fans, adjusted for league schedules.
The Magic also ranked 13th in fan relations, 22nd in affordability, 18th in coaching, 18th in ownership, 20th in players, 33rd in title track and 96th in stadium experience.
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Caterpillar Inc. said Montgomery is one of three sites in the Southeast under consideration for a “significant” manufacturing facility.
The heavy equipment manufacturer (NYSE: CAT) did not disclose details, but said also in the running are Spartanburg, S.C., and Winston-Salem, N.C.
Jim Dugan, chief corporate spokesman at Caterpillar, said in a statement that location analysis will continue through the summer and a final decision is expected by August.
Caterpillar is based in Peoria, Ill., and had 2009 sales and revenues of $32.4 billion. It manufactures construction and mining equipment, diesel and natural gas engines and industrial gas turbines, according to its website. Its products and components are manufactured in 50 locations throughout the United States and in 60 locations in 23 countries.
Citigroup CEO Vikram Pandit offered a bold outlook for his troubled firm Thursday, saying he hoped his company would soon be able to deliver profits of approximately $20 billion.
Pandit, speaking at a company-sponsored conference, did not give a time frame for when the bank would generate this profit. He did stress however that the company would be able to earn big returns on the assets within its Citicorp division, which oversees both its investment bank and consumer banking businesses.
"It is time to shift our focus to the future which is Citicorp," he told an audience in New York.
The company split itself into two parts in January 2009 - Citicorp and Citi Holdings - as part of an effort to get the beleaguered bank back on track.
Citi Holdings, which was created as a dumping ground for its so-called "troubled assets", controls roughly $547 billion worth of assets. Losses within that division widened to $2.4 billion during fourth quarter of last year.
Capturing large profits within its Citicorp business though could offset any troubles within its Citi Holdings division.
It would also be a significant turnaround from the severe losses the bank has endured since the start of the crisis. During 2008 alone, Citigroup lost $27.7 billion.
The company already reached one major milestone late last year after paying back the $45 billion it received under the Troubled Asset Relief Program, or TARP.
U.S. taxpayers however, still own a 27% stake in the company.
At a hearing in Washington last week, a Treasury Department official said the agency planned to dispose of its remaining stake in the firm "as soon as possible."
Pandit noted Thursday that the government will not be able to sell any of its shares until at least later this month when a lock-up on Citigroup stock expires. Treasury would also have to give notice if it indeed planned to sell at least part of its stake.
"Given where the economy is, given where the stock is, I wouldn’t be surprised if they would think about doing that," said Pandit.
Citigroup (C, Fortune 500) shares gained nearly 5% in afternoon trading Thursday. The stock has gained nearly 20% so far this week.
U.S. retailers used extra promotions and extended hours to draw procrastinators and shoppers delayed by the East Coast snowstorm in the final stretch before Christmas.
Target Corp. extended its hours to midnight Dec. 21 through yesterday. Borders Group Inc., Wal-Mart Stores Inc. and Toys “R” Us Inc. also kept stores open longer. Best Buy Co. offered some DVDs for half off and Jos. A. Bank Clothiers Inc., a men’s clothing chain, deepened discounts to at least 50 percent.
“We didn’t intend to do everything, and now we’re doing everything,” Jos. A. Bank Chief Executive Officer Neal Black, 54, said Dec. 22 by telephone from the company’s Hampstead, Maryland, headquarters. “We’ll be slugging right down to the last minute.”
Sales will be compressed into the final days before Christmas, said Marshal Cohen, chief industry analyst at NPD Group Inc. The snowstorm disrupted the Saturday before Dec. 25. Last year, that was the second-biggest shopping day after Black Friday, the day after U.S. Thanksgiving. Shoppers already had procrastinated more than in recent seasons.
“Retailers will pull out all the stops this week,” Cohen said in a Dec. 21 Bloomberg Television interview. NPD is a Port Washington, New York-based market research firm.
Maintaining Forecasts
The Washington-based National Retail Federation was holding to its forecast for a 1 percent drop in holiday sales, Ellen Davis, a spokeswoman, said Dec. 20. The International Council of Shopping Centers reiterated on Dec. 22 its forecast for a 2 percent increase in sales at stores open at least a year in December, after reporting that the storm slowed growth to 0.4 percent year over year in the week ended Dec. 19.
Jos. A. Bank cut prices of all clothing Dec. 21 and Dec. 22, after store visits slowed, Black said. The chain had planned to offer some of that merchandise at 40 percent and 30 percent off, he said.
The retailer’s shares fell 17 cents to $42.82 at 1:30 p.m. after a shortened pre-Christmas session on the Nasdaq Stock Market. Target, based in Minneapolis, decreased 20 cents to $48.65 in New York Stock Exchange composite trading. Borders, based in Ann Arbor, Michigan, declined 3 cents to $1.22. Bentonville, Arkansas-based Walmart climbed 28 cents to $53.60. Best Buy, based in Richfield, Minnesota, dropped 6 cents to $40.70.
Kathryn Greenberg, a 41-year-old Washington resident who works in philanthropy, said she lucked into some “fantastic” late discounts yesterday 500 fast cash payday loan. She bought clothing for her children and other family members mostly at 60 percent off at a Gap store as well as one of Gap Inc.’s Banana Republic stores.
Bigger Savings, More Buying
“I am spending the same as last year, but getting more,” said Greenberg, who was carrying two bags and heading into Sephora, the cosmetics chain owned by Paris-based LVMH Moet Hennessy Louis Vuitton SA.
Walmart, the world’s largest retailer, will keep most of its 803 discount stores and its Sam’s Clubs open until 8 p.m. today, two hours later than last year, said John Simley, a spokesman. Amazon.com Inc. extended by one day, until Dec. 21, its cutoff for standard shipping.
Gap, based in San Francisco, retreated 20 cents to $20.71 on the New York Stock Exchange yesterday. LVMH gained 44 cents to 77.90 euros in Paris trading. Seattle-based Amazon.com, the largest Internet retailer, dropped 47 cents to $138.47 on the Nasdaq.
East Coast Snow
Stores along the East Coast closed early during the Dec. 19 snowstorm. Twenty-four inches of snow fell on Bethesda, Maryland and 23.2 inches were recorded at Philadelphia International Airport, according to the National Weather Service.
Consumers had completed 72 percent of their holiday shopping through Dec. 20, down from 80 percent a year earlier, the New York-based ICSC said Dec. 22.
Historically, the 10 days before Christmas have made up as much as 40 percent of total holiday sales for November and December, according to Joseph Feldman, a managing director at Telsey Advisory Group in New York.
Sales fell 13 percent to $6.9 billion on the last Saturday before Christmas from the previous year, according to Chicago- based researcher ShopperTrak RCT Corp.
Some of lost sales did translate into online purchases. Sales at Web sites jumped 24 percent on Dec. 18 and Dec. 19 from a year ago, according to Coremetrics, a San Mateo, California- based marketing company.
Some impulse buying and so-called self-purchases, however, were irretrievably lost during the storm, Richard Jaffe, an analyst with Stifel Nicolaus & Co. in New York, said in a Bloomberg Radio interview on Dec. 22.
“It’s not a delay, it’s lost sales,” Jaffe said. “You just don’t recover that.”
WASHINGTON–Home resales surged last month to the highest level in nearly three years, reflecting an extraordinary level of federal support that has pulled the housing market back from the worst downturn since the Great Depression.
Buyers were racing to complete their sales before the original expiration date of a tax credit for first-time buyers that was scheduled to expire Nov. 30. Last month, Congress decided to extend and expand the credit to ensure the housing market could sustain its recovery.
The Realtors estimated that about 2 million homebuyers have taken advantage of the credit so far and forecasts that another 2.4 million will use it by the middle of next year. First-time buyers made up about half of all transactions last month, driving sales up 44 percent above last year's levels, a record jump.
Sales are now up 46 percent from the bottom in January, but down 10 per cent from the peak more than four years ago.
The median sales price was $172,600, down 4.3 per cent from a year earlier, and up 0.2 per cent from October.
"Things are stabilizing," said Pete Flint, chief executive of real estate Web site Trulia.com. "There is a significant amount of buyer interest out there.''
November sales rose 7.4 per cent to a seasonally adjusted annual rate of 6.54 million, from a downwardly revised pace of 6.09 million in October.
Sales had been expected to rise to an annual pace of 6.25 million, according to economists surveyed by Thomson Reuters.
The inventory of unsold homes on the market fell about 1 percent to 3.5 million. That's a healthy 6.5 month supply at the current sales pace, the lowest level in three years.
Besides the existing tax credit of up to $8,000 for first-time buyers, homeowners who have lived in their current properties for at least five years can now claim a tax credit of up to $6,500 if they relocate. To qualify, buyers must sign a purchase agreement by April 30.
Postponing the deadline could mean sales will drop during the winter months and recover in the spring.
"Buyers have no sense of urgency now," said Gary DeRosa, an agent with ZipRealty Inc. in Seattle.
Clayton-based Enterprise Bank & Trust has agreed to acquire the assets and deposits of a small Arizona bank that failed on Friday.
Valley Capital Bank in Mesa, Ariz., was closed Friday by state regulators.
The Federal Deposit Insurance Corp. was appointed as receiver. However, the FDIC reached an agreement with Enterprise Bank.
Valley Capital’s single branch in the Phoenix suburb will reopen Monday as a branch of Enterprise.
Enterprise paid the FDIC a 2-percent premium for the right to assume all the deposits of Valley Capital, the FDIC said. Enterprise agreed to purchase "essentially all" of the bank’s failed assets. Full details on the transaction were not available.
Valley Capital Bank had assets of about $40.3 million and total deposits of about $41.3 million as of Sept. 30.
As part of the deal, the FDIC and Enterprise Bank entered a loss-share agreement on about $30 million of Valley Capital’s assets, meaning the FDIC would absorb 80 percent of losses on loans and foreclosed properties.
The acquisition is small compared to Enterprise’s size, which is about $2.5 billion in assets. But it allows the bank to expand in Arizona, where Enterprise already has a loan production office in Phoenix easy payday loans.
Last year, Enterprise applied to open retail banking in Arizona, but the state’s banking regulators curtailed new charter approvals due to troubles in the Arizona real estate market. The bank later withdrew its application.
The deal "allows us now to operate as a full-service bank in Arizona through our new Enterprise Bank & Trust location in Mesa," Peter Benoist, President and CEO of Enterprise Financial Services Corp., the parent of Enterprise Bank, said in a statement. "Also, it enables us to open additional Enterprise locations in the greater Phoenix area, subject to the normal regulatory approvals."
Currently, Enterprise Bank has 11 branches in the St. Louis and Kansas City metro areas.
Besides Valley Capital Bank, the FDIC also on Friday took over Overland Park, Kan.-based SolutionsBank and Miami-based Republic Federal Bank. Those operations were acquired by other banks. The three failures brought the number of FDIC-insured institutions to fail in the nation this year to 133.
Citigroup Inc said on Sunday it has agreed to sell its stake in Japanese telemarketer Bellsystem24 to U.S. private equity firm Bain Capital for 93.5 billion yen ($1 billion).
Bain has been widely expected to buy Bellsystem24 after securing exclusive negotiation rights earlier this month.
Sources had told Reuters last week that Bain was close to finalizing a roughly 100 billion yen deal for the company, marking the largest buyout by a foreign private equity firm in Japan in nearly two years.
Bain has beaten off rivals Permira and a team of CVC Capital and Blackstone, which had also made offers in the final round of bidding for Bellsystem24.
Citigroup said in an e-mailed statement that it had agreed to sell its 93.5 percent stake in Bellsystem24 for 93.5 billion yen in cash in a tender offer to be launched by a firm owned by funds advised by Bain Capital.
The tender offer will likely start on or before November 20 and be completed on December 30, Citigroup said.
The U.S. bank said the deal was not expected to have a material impact on its net income or capital ratios.
Citigroup put Bellsystem24 up for sale as part of a global effort to raise cash and replenish its capital.
Citigroup has already sold broker Nikko Cordial, a fund management firm and a trust bank this year in Japan. Including the Bellsystem deal, it will have raised a total of about 964 billion yen ($10.8 billion), according to company press releases.
The sale of Bellsystem24 initially drew strong interest from a number of private equity firms including Kohlberg Kravis Roberts & Co, which teamed up with trading house Itochu Corp before dropping out of the race.
The Nikkei newspaper said the total cost of the deal for Bain would reach 120 billion yen, including a special dividend payment. No one at Bain Capital could be reached for comment.
The deal will rank as Japan’s largest buyout by a foreign private equity firm since March 2008, when Permira bought agrichemical company Arysta LifeScience Corp for more than $2 billion.
Bellsystem24 is Japan’s largest telemarketing firm. It competes against Moshi Moshi Hotline Inc and Transcosmos Inc in Japan.
Bellsystem24 is now owned by Citigroup Capital Partners, which was known as Nikko Principal Investments, a private equity arm of brokerage group Nikko Cordial, which was bought by Citigroup in 2007.
Nikko Principal paid 220 billion yen to buy Bellsystem24 in 2004. While the sale price is roughly half its purchase price, Citigroup has generated returns from its investment by restructuring the company’s debt to take some cash out, a method known as recapitalization.
Bain’s financing will be supported by banking units of Mitsubishi UFJ Financial Group Inc, Mizuho Financial Group Inc and Sumitomo Mitsui Financial Group Inc, sources familiar with matter have told Reuters.
(Reporting by Junko Fujita and Nathan Layne; Editing by Will Dunham)
CIT Group is likely to file for bankruptcy in the coming days, analysts and experts said.
The lender to small and medium-sized businesses is trying to restructure its debt, and is offering investors two options.
One path would be getting its unsecured debt holders — who hold a total of about $30 billion — to voluntarily exchange their bonds for new securities and equity. That path would avoid a bankruptcy filing.
The other and more likely option would be approving a reorganization plan before the company files for bankruptcy. CIT had about $70 billion of assets and $65 billion of total debt in the middle of this year, according to the latest publicly available figures.
CIT investors are entitled to vote for the exchange or the prepackaged bankruptcy by the end of Thursday. CIT spokesman Curt Ritter declined to comment.
The company has $800 million of debt due on November 1 and 3, and total liabilities as of mid-June of $64.9 billion.
Sources familiar with the matter have told Reuters that the voluntary debt exchange is unlikely to happen, and bankruptcy is much more likely.
Analysts have argued that the debt exchange was doomed from the start, because it required too many different kinds of investors with too many competing interests to comply.
“The market is by and large sending signals that a prepackaged is the most likely outcome, and it makes sense given the exchange offer,” said Kevin Starke, senior analyst at boutique brokerage CRT Capital Group.
If the company files for bankruptcy, it will likely try to complete the restructuring process as quickly as possible, experts said . In general, borrowers prefer to borrow money from lenders they are confident will be around for the life of the loan.
“A business like this has to get in and out of bankruptcy fast, because if they’re lingering, I would think competitors would start poaching customers,” said Stephen Lubben, a law professor at Seton Hall’s School of Law who focuses on corporate finance and financial distress issues.
The plan needs to win approval from investors holding two-thirds of the company’s debt, and half of the number of investors.
Activist investor Carl Icahn is encouraging individual investors to vote against CIT’s prepackaged bankruptcy plan. The company hopes its plan will eventually help it fund more new business out of its bank but Icahn wants the company to stop planning to make new loans and use its maturing assets to pay off its debt.
A prepackaged bankruptcy requires the approval of investors holding two-thirds of the dollar amount of every type of debt. Of the voting investors, one half by number must also approve.
Icahn has tried to rally retail investors to vote against the plan, in an effort to ensure that CIT does not get half of voting noteholders to approve the deal.
(Reporting by Dan Wilchins; Editing by Gary Hill)
would have to commit to increasing their lending, too.
So far, that hasn’t happened. Bank of America’s small business lending has dipped 4.1% in the last five months. The Charlotte, N.C.-based megabank says the decrease stems from the recession’s grim effect on small businesses’ balance sheets. As a result, Bank of America has tightened its lending standards, according to spokesman Don Vecchiarello.
Increasing the max loan size: The second major component of the President’s proposal involves lifting the maximum on SBA loans.
"These are the type of loans that Joe and Doug used to expand this business and create new jobs," Obama said, referring to his hosts for the day, Metropolitan Archives co-owners Joe Incarnato and Doug Peters. "Larger loans will help more small business owners and franchisees grow."
However, the majority of small businesses looking for loans are not pushing up against the SBA’s loan ceiling. Of the 44,000 loans the SBA backed last year, fewer than 15,000 were for more than $150,000, according to SBA data.
That has some small business owners scratching their heads over the new initiatives. Chuck Blakeman, president of Denver-based small business advisory firm Team Nimbus West, blasted Wednesday’s announcements as "another photo op for politicians that does absolutely nothing to solve the crisis for small business owners."
To score an SBA loan, businesses still have to convince a bank to issue it. With SBA lending down sharply, that’s a daunting challenge. "Somebody please tell me how raising the limits on loans people can’t get is helping them," Blakeman said.
Obama left the door open to further intervention, if these new efforts don’t spark a turnaround.
"[There’s] no question that we have a long way to go," he said.
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