American International Group Inc Chief Executive Robert Benmosche said on Wednesday he remains “totally committed” to staying at the company, countering an earlier report that he was considering stepping down.
In a letter to employees obtained by Reuters, Benmosche said he and the company’s board are “frustrated” about restrictions on pay and are in discussions with the U.S. government about them.
AIG, which has received up to $180 billion of federal aid, including more than $80 billion in loans, and is now 80 percent-owned by U.S. taxpayers, posted its second straight quarterly profit last week, helped by a recovery in the value of its investments.
Benmosche said compensation restraints present a “barrier that stands in the way of restoring AIG’s value.”
The Wall Street Journal reported that Benmosche was so frustrated that he told the company’s board last week he was considering stepping down payday cash advance loans. The newspaper cited people familiar with the matter.
The giant insurer’s chief executive said in his letter that he is particularly concerned with the pay of the company’s top 100 executives, which are under the purview of Kenneth Feinberg, the U.S. government’s pay czar.
Benmosche told AIG directors that he was “done” but agreed to think it over when they reacted with shock, the people told the paper.
(Reporting by Steve Eder in New York and Ajay Kamalakaran in Bangalore; editing by Valerie Lee, Andre Grenon, Leslie Gevirtz)
Although the recession isn’t officially over yet, there is a growing sense that the economy is now in a recovery. But there is also a growing debate about who deserves the credit.
The question of who should receive praise for helping to get the economy back on track may seem trivial. But knowing what policies worked, and which ones need to stay in place, could keep the recovery from stalling out.
Many in Washington have gone to extraordinary lengths to try and turn around the economy over the past year or so
Last year, Congress signed a blank check to Treasury to cover losses at mortgage finance giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and created the $700 billion Troubled Asset Relief Program for banks. Earlier this year, lawmakers passed a $787 billion stimulus package.
Meanwhile the Federal Reserve slashed interest rates to nearly 0% and pumped more than $1 trillion into the economy with its bailout of AIG (AIG, Fortune 500), its support for mortgage-backed securities and various lending programs.
Federal Reserve chairman Ben Bernanke said in a speech last month that the Fed and Congress, as well as other governments and central banks around the world, deserve credit for stopping the global economy from falling into a depression.
"Without these speedy and forceful actions, last October’s panic would likely have continued to intensify, more major financial firms would have failed, and the entire global financial system would have been at serious risk," he said.
A number of economists agree that the Fed, Congress and both the Bush and Obama administrations all deserve credit for steps taken to end of the recession.
"The actions of the Fed and Treasury starting last October actually worked, regardless of how unpopular they were," said Bill Hampel, chief economist of the Credit Union National Association. "It was messy. It was dirty. It required a lot of money. But they were successful in preventing the implosion of a lot of institutions."
Of course, it is easy to find fault with any particular program though.
"They tried an awful lot of things, some worked, some didn’t," said Kurt Karl, chief U.S. economist for Swiss Re. "Mistakes were made. It was an ad hoc solution. It would have been surprising if they made no mistakes."
Turnaround or sugar rush?
To be sure, some economists worry that all the efforts taken will lead to greater problems down the road. For example, the Fed may be risking a bout of inflation in the future if the money that has been pumped into the economy isn’t withdrawn at just the right time.
There are also concerns about how the looming deficits from stimulus and other Congressional spending can only be repaid through higher taxes — which will be a drag on the economy in the future.
"The economy needed a jolt and it got a jolt," said David Rosenberg, chief economist and strategist for asset manager Gluskin Sheff. "It gave us a sugar high, but there was no follow through Business Card Holders. So it’s going to come at the expense of future quarters."
But most economists still support the Fed’s actions. The National Association of Business Economists (NABE) released a survey Monday that showed broad agreement about current monetary and fiscal policies.
And even though few economists believe that the stimulus package has been an unmitigated success, there is widespread agreement that government spending is providing a necessary boost to the economy right now.
"I don’t think it’s any accident that the recession ended when the stimulus was providing its greatest impact," said Mark Zandi, chief economist with Moody’s Economy.com.
Too soon to declare a winner
Still, it’s reasonable to wonder if the current signs of recovery have more to do with how economic cycles work. In other words, the markets, and not the government, solved the crisis.
Worries about job losses and tight credit caused consumers to cut back spending, resulting in some pent-up demand. In addition, businesses slashed production, leaving inventories at very low levels.
"Now that everyone has figured out the bottom is not falling out, businesses will have to replenish the inventories," said Karl
As such, many experts think it will be important for the Fed and Congress to not go overboard in its attempts to stimulate the economy. The NABE survey found 76% of economists don’t think another round of stimulus is needed at this point.
"It’s very difficult to appropriately assess the true state of the economy, given how much medication it is on," said Rosenberg.
Others argue that the Congress and the Fed shouldn’t stop trying to jump start the economy. Despite signs of progress, additional help will be required.
"I think the recovery is very fragile and we could lose it," said Zandi. "It’s far from evolving into a self-sustaining economic expansion. Stimulus is temporary. It very likely will need more help from policymakers."
With that in mind, it’s highly unlikely that any elected officials will rush to take credit for a turnaround just yet.
"As long as unemployment is near 10%, and we’re still losing jobs, it doesn’t feel like a recovery to anyone but economists," said Zandi. "They don’t want to hang up a ‘Mission Accomplished’ banner."
Have you recently been laid off? Lost most of your retirement or college savings in the stock market? Dealt with the loss of the family breadwinner with no life insurance? If you’ve been confronted with some challenge during this recession and would like to have an expert review your situation, send an email to realstories@cnnmoney.com and you could be profiled in an upcoming segment on CNN. For the CNNMoney.com Comment Policy, click here.
The popular Cash for Clunkers program gave a strong boost to auto sales in August, resulting in the industry posting its best month this year by far. But sales dropped sharply in the last week of August — after Cash for Clunkers ended.
A preliminary reading from sales tracker Autodata shows that industrywide sales rose 1% compared to a year ago, to 1.2 million vehicles. That’s the first annual sales gain since October 2007, and sales were about 26% above July’s levels.
Ford (F, Fortune 500) reported the best results among the nation’s six largest automakers. Its sales rose 17% compared to August 2008, its biggest jump in sales in four years. Still, Ford sales’ gain was short of the 22% increase forecast by sales tracker Edmunds.com. Ford shares were down more than 4% following the release of the report.
The situation wasn’t as good at the other two major U.S.-based automakers. General Motors posted a 20% drop in sales from a year ago, while Chrysler Group reported a 15% decrease from last August. But the news was not all bad. The declines were not as large as the forecasts from Edmunds.com.
And both GM and Chrysler, which went through bankruptcy reorganizations earlier this summer, reported sales gains from July. GM’s sales were up 30% from a month ago, while Chrysler’s sales climbed 5%.
Looking at the Asian automakers, Toyota Motor (TM), which had more Clunker sales than any other automaker, reported a 6% rise in sales, its first year-over-year gain since April 2008, and its best gain in two years. Honda Motor (HMC) reported a 10% rise in sales, ending a 14-month string of declining U.S. sales.
Among the other Asian automakers, Korean automaker Hyundai, which is now the No. 7 automaker in terms of U.S. sales, posted a 47 spike in sales compared to a year ago. And Kia, the other major Korean automaker Kia posted a 60% jump in sales.
Nissan was the one Asian car company to not post a sales increase — its sales fell 3%.
Better times ahead or just a Clunkers boost?
Ford director of sales analysis George Pipas said in a conference call Tuesday that industrywide sales probably increased by about 400,000 vehicles during the month from the program. Pipas added that a significant percentage of sales would have taken place even without the program.
Still, sharp declines in sales during the last week of August have raised doubts about the outlook for sales for the remainder of the year, said Edmunds.com senior analyst Jessica Caldwell.
Cash for Clunkers left dealers with limited inventory of new vehicles once the program ended and also with fewer buyers interested in buying cars now that they are no longer eligible for $4,500 in rebates.
Caldwell said that the pace of sales went from a seasonally-adjusted annual rate of 15 million vehicles while the program was in effect in August to only about 8 million currently.
"Cash for Clunkers sent the sales rate on a wild roller coaster ride," she said.
But auto executives said that they believe that signs of improvement in the economy should leave the industry in good shape going into this fall, a time when companies will start to roll out new models.
"The Cash for Clunkers program was certainly a success, but our momentum continues to build on the strength of our new cars and crossovers," said GM sales vice president Mark LaNeve in a statement.
Pipas pointed out that sales of smaller cars are now higher than they were when gas hit a record of more than $4 a gallon last year.
Ford said in its release that sales were also lifted by signs of recovery in the U.S. economy overall. Sales of trucks and vans, for example, rose 12%. In a statement, Ford vice president of U.S. sales Ken Czubay said the company was hopeful that "small business owners are seeing signs of recovery and gaining confidence in the outlook for stronger business conditions."
Chrysler said its sales were limited by low inventory of some of its vehicles. It said it essentially sold out of many models by the end of the month. Chrysler has joined Ford and General Motors in announcing additional production of vehicles this fall in order to replenish dealers’ supplies.
GM said Tuesday it now plans to build 655,000 vehicles in the fourth quarter, up 20% from its third quarter production target. GM had previously announced it was adding 60,000 vehicles to its production plans during the rest of the year to restock depleted inventories.
Still, the low inventories mean that some GM dealerships that had originally been set to close in January will now be closing early rather than trying to restock, LaNeve said.
GM announced plans to cut about 1,100 dealerships as part of its bankruptcy reorganization, but many of those dealerships are due to stay in business for another 12 months.
Talkback: Do you think that auto sales will continue to improve or did Cash for Clunkers just provide a short-term boost? Share your comments below.
On the face of it, a reverse mortgage sounds like a no-lose deal for older homeowners. A lender gives you what amounts to a cash advance on your home equity — no minimum income or credit score required. And you don’t have to pay it back until you move or die, when the proceeds from the house sale typically will be used to close out the loan. But in fact, reverse mortgages have some serious drawbacks. Here’s what you need to know.
You may not be able to borrow that much. A provision in the economic stimulus package raised the maximum home value that could be counted for reverse mortgages from $417,000 to $625,500. But you won’t be able to tap your home up to its full price. The formula for determining loan amounts takes into account your age (the older you are, the more you can borrow) and current interest rates, as well as your home’s value. Anything you owe on your home is subtracted from that amount, as are the loan fees you’ll pay. To see how much you might qualify for, use the calculator at revmort.com/nrmla.
Expect to pay some pretty hefty fees. A reverse mortgage is an expensive loan. In addition to regular closing costs, you’ll pay an origination fee of 2% on the first $200,000 of the loan balance and 1% thereafter, plus a mortgage insurance premium of about 2% and a monthly service charge as well. Though recent legislation has capped the origination fees at $6,000, by the time you add all the other fees you’ll have to pay, the total generally reaches $10,000 to $15,000. So a reverse mortgage doesn’t make sense if you expect to move anytime soon, says Dallas financial planner Michael Anderson.
There’s more risk than you think. Reverse mortgages are particularly appealing to retirees looking to supplement dwindling income from a battered investment portfolio — that’s one reason these loans are up nearly 50% over the past two years. The big risk, especially for younger borrowers (you have to be at least 62 to get the loan): You’ll live longer than you anticipate, run out of money, and won’t have any home equity that you can fall back on. Over the past decade the average age of reverse-mortgage borrowers has fallen from 76 to 72. "One of the first questions to ask yourself is whether you can make the money last," says reverse-mortgage counselor Brenda Grauer.
Other options may suit you better. Before you can get a reverse mortgage, you’ll be required to attend a session with a counselor who is not affiliated with a lender. This person is supposed to clearly explain the loan’s terms and its drawbacks. But a recent study by the Government Accountability Office found that counseling sessions often fail to warn seniors of all the risks. So before you or your folks sign up, make sure you’ve looked into all the alternatives, such as cutting expenses, taking out a home-equity line of credit, or downsizing your home. Says Grauer: "It’s best to put off taking this loan for as long as you can, so that when you really need it, the money is there."
Stocks surged Thursday, hitting their highest levels in nearly 9 months, as investors eyed the latest batch of better-than-expected profits and forecasts and a report that suggested the labor market is starting to stabilize.
The Dow Jones industrial average (INDU) rose 83 points, or 0.9%, ending at its best level since Nov. 4. It was also the highest close for the blue-chip index in 2009.
The S&P 500 (SPX) index added 11 points, or 1.2%, ending at its highest point since Nov. 4.
The Nasdaq composite (COMP) gained 16 points, or 0.8%, to reach its highest close since Oct. 1.
The major gauges had managed bigger gains earlier in the session, but lost a little momentum by the close.
Stocks drifted for the first three sessions of this week, as the recent euphoria that lifted markets faded out. The major gauges all gained between 11% and 12% in the previous two weeks as investors welcomed a spate of better-than-expected quarterly results.
But after this week’s early volatility, stocks charged ahead Thursday.
"The market is finally getting its arms around the fact that we are close to being out of this recession," said Burt White, chief investment officer at LPL Financial.
White pointed to three supporting factors: the drop in the continuing claims portion of the weekly jobless report, the cumulative effect of better profit reports, and lessening fears about a slowdown in Asia and the global economy.
Friday brings the biggest economic report of the week, the first reading on second-quarter gross domestic product growth. GDP is expected to have shrank at a 1.5% annualized rate, according to forecasts. GDP shrank at a 5.5% annualized rate in the first quarter.
"It’s important than GDP is roughly in line," said Ron Kiddoo, chief investment officer at Cozad Asset Management. "If we get a bad number, you’re going to see a selloff."
The Chicago PMI, a regional reading on manufacturing, is due shortly after the start of trading and is expected to have risen to 43 in July from 39.9 in June.
Also on tap: quarterly results from Dow component Chevron (CVX, Fortune 500). The oil services firm is expected to report earnings of 90 cents per share, versus $2.90 a year earlier.
Labor market: The number of Americans filing unemployment claims for a week or more, a measure known as continuing claims, slipped by more than expected.
According to a Labor Department report, continuing claims dipped to 6.2 million last week, from a revised 6.25 million the previous week, for their lowest level since mid-April and short of forecasts for 6.3 million.
The continuing claims report overshadowed the regular weekly jobless claims report, which showed a bigger-than-expected rise to 584,000. However, that rise was largely related to seasonal issues related to auto plant shutdowns cashadvance.
Quarterly results: Two Dow components reported results Thursday morning.
Oil behemoth Exxon Mobil (XOM, Fortune 500) reported a steep drop in second-quarter income due to weaker demand and falling oil and gas prices. Weaker quarterly earnings missed estimates on weaker revenue that topped estimates. Shares fell 1%.
Dow component Travelers (TRV, Fortune 500) also reported weaker profit that missed forecasts. But the financial company also boosted its full-year earnings forecast. Shares fell 2%.
Among other companies reporting results, telecom Motorola (MOT, Fortune 500) posted higher quarterly earnings that topped forecasts on weaker revenue that missed. The company shipped 14.8 million phones in the quarter, nearly half what it shipped a year ago, but more than what analysts expected. Shares gained 9.4%.
Other movers: Stocks gains were broad-based Thursday, with 25 of 30 Dow components rising, led by IBM (IBM, Fortune 500), Chevron (CVX, Fortune 500), Johnson & Johnson (JNJ, Fortune 500), Caterpillar (CAT, Fortune 500), Coca-Cola (KO, Fortune 500) and United Technologies (UTX, Fortune 500).
Shares of Dow component General Electric (GE, Fortune 500) gained nearly 7%. Goldman Sachs upgraded it to "buy" from "neutral" after legislators appeared to back down on the question of whether GE should separate itself from its troubled finance unit GE Capital.
A variety of financial shares gained, including Dow components Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and American Express (AXP, Fortune 500).
Other financial gainers included Morgan Stanley (MS, Fortune 500), Goldman Sachs (GS, Fortune 500) and Wells Fargo (WFC, Fortune 500). Regional banks KeyCorp (KEY, Fortune 500), Regions Financial (RF, Fortune 500) and Fifth Third Bancorp (FITB, Fortune 500) advanced as well.
Market breadth was positive. On the New York Stock Exchange, winners beat losers three to one on volume of 1.36 billion shares. On the Nasdaq, advancers topped decliners two to one on volume of 2.57 billion shares.
Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.60% from 3.66% late Wednesday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, European and Asian markets both gained on improved profit reports.
U.S. light crude oil for September delivery rose $3.57 to settle at $66.72 a barrel on the New York Mercantile Exchange.
In currency trading, the dollar gained versus the euro and fell against the Japanese yen.
COMEX gold for December delivery rose $7.60 to settle at $937.30 an ounce.
Sportscar maker Porsche conceded a months-long power struggle to mass-market rival Volkswagen by axing its chief executive and saying it would raise at least €5 billion in equity as the two prepared for a merger.
After an all-night meeting of its board of directors, Porsche said Wendelin Wiedeking, Germany’s best-paid executive and its CEO for the past 16 years, along with finance chief Holger Haerter, would quit the group immediately.
Their hasty exit will be sweetened by payoffs of €50 million and €12.5 million, respectively.
Wiedeking, who had opposed selling Porsche to Volkswagen, which would have helped the company reduce the debt he had run up in a botched attempt to take over VW, will be succeeded by Porsche’s production head Michael Macht, the board said in a statement early on Thursday.
The meeting of the non-executive directors, which include the Piech and Porsche families that between them control Porsche, approved Wiedeking’s proposal to raise fresh equity — either in cash or through a contribution in kind — and endorsed talks to sell a stake to the Gulf state of Qatar.
"This should lay the foundations for the creation of an integrated automobile group consisting of Porsche SE and Volkswagen," Porsche said.
It was unclear from Porsche’s statement who would contribute to the capital increase and whether it would be taken up by Qatar. A Porsche spokesman declined to comment further.
The board’s unanimous approval signals that the powerful Porsche and Piech clans may be open to surrendering some of their influence at the maker of the 911 sports coupe.
Between them they control 100% of Porsche’s voting shares and have resisted selling a stake to an outsider.
At 0820 GMT, Porsche shares were up 1%, while Volkswagen’s were down around 3%, compared with a 0 life insurance quote.8% fall in the DJ Stoxx auto index and a flat German market.
Joining forces
A source at Volkswagen, speaking on condition of anonymity, told Reuters it was still open whether oil-rich Qatar would take a stake in the Porsche SE holding company or directly in Volkswagen, or in both groups.
The issue was due to be discussed by Volkswagen’s own board of directors, which gathers for an extraordinary session on Thursday in Stuttgart, where Porsche’s Zuffenhausen headquarters are based, rather than its own headquarters in Wolfsburg.
Volkswagen, Europe’s biggest carmaker, declined to comment.
The moves came as Porsche enters the final stretch of negotiations with Volkswagen to create what both sides have called an "integrated" auto group, in which Porsche would essentially become the 10th brand in Volkswagen’s sweeping automotive empire.
Porsche SE, the holding company that controls sportscar maker Porsche AG, needs to bolster its finances after accumulating more than €10 billion in debt through its botched attempt to seize control of VW.
Porsche was forced to abandon attempts to win control over 75% of VW, leaving it with a stake of nearly 51%. The failed takeover attempt opened the door to Ferdinand Piech, VW’s powerful chairman and himself a part-owner of Porsche, to turn the tables on Porsche.
The Porsche and Piech families had been at loggerheads for months over how to resolve the company’s debt woes and the role VW would play. Piech has pushed for VW to take over Porsche, on condition that Porsche fixes its finances first.
Californians have fewer places to redeem IOUs issued by the cash-strapped state.
At least three major banks, Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500), stopped accepting the IOUs after Friday.
More than 60 credit unions, however, continue to accept the paper.
State Controller John Chiang started issuing the IOUs on July 2 to conserve cash, while lawmakers and Gov. Arnold Schwarzenegger tussle over closing a $26 billion budget gap. Friday also marked the start of a mandatory third furlough day for most state employees.
The state, the world’s eighth largest economy, has issued more than 90,000 IOUs worth nearly $355 million. Also called registered warrants, the IOUs pay an interest rate of 3.75% and can be redeemed on Oct. 2 or earlier if divided state officials reach a budget deal.
Recipients will include state contractors, social service agencies and those owed income tax refunds.
Banks will work with customers on an individual basis to assist them, perhaps offering them home equity lines or short-term loans, said Beth Mills, spokeswoman for the California Bankers Association. But the institutions are also hoping to send a message to Sacramento.
"What’s ultimately in the best interest of everyone will be for the state to act quickly and resolve the budget impasse," she said.
Bank of America’s decision stems from its experience in 1992, the last time the state issued IOUs amid a financial crisis. The bank, along with Wells Fargo, were among the first to stop accepting the IOUs. A budget was signed about a month later.
"The longer the registered warrants were accepted, the longer it took the legislature to resolve the matter," said Britney Sheehan, a Bank of America spokeswoman. "We do not want our acceptance of registered warrants to deter the state from reaching a budget agreement as soon as possible."
Customers at participating credit unions can continue to redeem the IOUs. The institutions are bracing for a crush of people looking to turn the warrants into cash.
"There are options," said Daniel Penrod, senior industry analyst at the California Credit Union League. "If people look for those options, they’ll realize they are not stuck past the July 10 deadline."
IOUs to be regulated
Some people actually want to get their hands on the registered warrants, posting ads on online marketplaces such as Craigslist payday loans. Several postings offer to buy the paper for 85 cents on the dollar, while another listing is looking to sell the IOUs for 95 cents.
This practice, however, has heightened fears that desperate IOU holders might be taken advantage of and that counterfeiters might make copies of the warrants.
State Treasurer Bill Lockyer last week said that warrant buyers must obtain a notarized bill of sale from the recipient when purchasing the IOUs. This will help ensure that the person redeeming the IOUs is the legitimate owner, said Bill Dresslar, Lockyer’s spokesman.
The Securities and Exchange Commission on Thursday said that the IOUs are securities and are subject to federal anti-fraud provisions. The agency also issued an investor alert warning both buyers and sellers to be careful when trading the warrants.
"If you hold an IOU and wish to sell it prior to maturity you should consider whether you think you are getting a fair price," the alert said. Investors who wish to buy IOUs should also understand who the seller is. If you are buying from a third party, ask if the person is registered to do this business.
The SEC’s action has both positive and negative impacts on IOU recipients, experts said.
It should cut down on scams because the warrants would have to be traded through registered brokers, said Joseph Fichera, who heads Saber Partners, a financial consulting firm for governments and corporations. Sellers would have to provide disclosure and make sure they are marketing the products properly.
This, however, would also make it harder to offload the IOUs, which could frustrate recipients in need of cash.
"The SEC is trying to provide some sort of framework for investor protection in the middle of uncharted territory," Fichera said.
How have California’s IOUs affected your life? Have you received one? Are you trying to get your hands on one? We want to hear your experiences. E-mail your story to realstories@cnnmoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.
— One of the executives whose hapless job it was to determine whether Michael Jackson really had it in him to mount a 50-show concert gig in London slated to begin next month told me a few weeks ago that Jackson was surprisingly robust.
What was clear, the executive recalled, was that Jackson was motivated not just by financial gain or rehabilitating his career — though he had dug himself quite a hole in both areas over the years. More than that, Jackson was doing it for his three young kids and his wish for them to see him back on top of his game — more "King of Pop" than the "Wacko Jacko" the tabloids had branded him (with considerable justification).
Buz Kohan, a producer, longtime friend and collaborator of Jackson’s — he wrote the lyrics to the now sadly apt ballad "Gone Too Soon" — was planning to attend a full rehearsal of the show at Los Angeles’ Staples Center this weekend. "He was very enthused and his energy level was high as well as his optimism," said Kohan. "Not that it was a last hurrah — but it was like a reawakening."
Another executive who had dealings with Jackson over the years recalled hearing of his being rushed to hospital in Los Angeles on Thursday: "The first thing everybody thought was ‘here he goes again,’ " this person said. "Three weeks before a TV show or concert he gets sick to get out of things."
Very quickly, of course, it became clear that Jackson, 50, had suffered apparent cardiac arrest, and he was pronounced dead after being rushed to UCLA Medical Center. It was all over except for the speculation about his final days, the tributes, and the messes that Jackson’s untimely death has left behind.
Jackson’s was a life and career of staggering talent and towering weirdness, and perhaps the ultimate cautionary tale of the perils of child stardom. We’ll leave most of the saga for others to parse, but marvel instead at how Jackson is now something more: the ultimate story of the Hollywood comeback that was never to be — at least not the way it was planned.
In business, as in life, Jackson did nothing in small measure.
When tickets for Jackson’s 50-date comeback concert series went on sale in March, some 750,000 tickets sold out in five hours. The shows had been arranged by AEG Live Entertainment, an arm of former telecom billionaire Phil Anschultz’s private empire, which also owns 02, the large London arena where the shows were scheduled to take place over several months.
Swarovski, the crystal-maker, had prepared a new suit for Jackson to perform in encompassing 300,000 crystal elements that is reportedly worth 1 million pounds. Jackson’s comeback was to include a concert DVD, video game, and the release of the singer’s first new singles in years. And the London dates were just the beginning of a tour that, if it all panned, out, might have earned Jackson more than $400 million and even spawned a "Thriller" casino in Macau — the name coming from his 1982 album that remains the best-seller of all time.
There’s no question Jackson needed the money, having dug himself into a hole of close to $500 million in debts over the years by living beyond even his own outsized fantasyland means and fending off a seemingly endless stream of litigation fast cash. He also certainly had assets — mostly notably his own music royalties plus his stake from a music publishing library with more than 200 Beatles songs that he had shrewdly purchased in 1985.
But after various financial reorganizations aimed at staving off creditors, Jackson today owns 25% of the library — the remainder is held by Sony Music — and it is held in a trust designed to shield it from future claims against his estate.
Jackson only released one album in the past decade –it didn’t sell well — and his last few years were marked by controversy and strange dealings.
In 2005, Jackson paid $22 million to settle a civil lawsuit brought by the parents of a 13-year-old boy who had accused Jackson of molesting him, even though he had been acquitted of those charges in a criminal trial. Last year, Jackson narrowly avoided foreclosure on his Neverland Ranch after defaulting on a $24.5 million mortgage when the note was acquired by a big private equity firm that specializes in real estate, Colony Capital. And in April, an auction of Jackson’s possessions from Neverland — from sequined gloves to artwork — was called off after Jackson arranged a settlement with the auction house. (The timing of this, coming right after tickets for Jackson’s London shows sold out and presumably he was paid something, might suggest that the two events are related.)
Colony Capital’s CEO, Thomas Barrack Jr., has done billions of dollars of real estate deals that are often much larger than his firm’s bet on Neverland — for which Jackson was given a piece of the note on the property.
But the purchase was part of a bigger mission by Barrack to rehabilitate Jackson’s career, and in turn (and in theory) boost the market value of Neverland. According to the Los Angeles Times, it was Barrack who called his friend Anschultz to pitch the idea of Jackson’s comeback concert series. After all, AEG was behind other megastar shows like Celine Dion’s concert run in Las Vegas.
In all, AEG has reportedly invested more than $30 million in Jackson’s comeback that will never be. Judging by the throngs holding vigils for Jackson, Neverland still has obvious potential to pay off as a kind of Graceland (i.e., a museum for Jackson devotees) if Barrack decides to go that route. And speaking of Graceland, it’s also the case that Elvis Presley sold more records in the six months following his death in 1977 than he had over the previous decade. And, yes, Presley’s daughter was married to Jackson briefly wasn’t she?
Anyway, people will speculate for years about whether Jackson’s London concerts would have worked or even happened had he lived. One person close to Jackson said that he did a full rehearsal of the show on Wednesday night, but wasn’t feeling well when he got home. AEG is just the latest — and last — Jackson business partner to be left with something of a mess to sort out. But there is an unmistakable irony in this tragedy: In death, Jackson’s long-awaited comeback looks to already be well underway.
The United Auto Workers union has ratified a package of concessions designed to reduce General Motors Corp.’s labor costs, completing a key piece of the automaker’s massive restructuring effort.
UAW President Ron Gettelfinger said at a news conference Friday that 74 percent of GM’s 54,000 U.S. production and skilled-trade workers voted in favor of the deal, which took effect Friday afternoon.
Workers at GM’s Wentzville assembly plant OK’d the changes to the contract with a 59 percent approval rate, said Tom Brune, the sourcing representative for UAW Local 2250, which represents more than 1,700 hourly workers at the full-size van plant.
UAW leaders last week agreed to the revised contract that freezes wages, ends bonuses, eliminates noncompetitive work rules and ends the possibility of a strike until the next contract expires in 2015 payday loans. The UAW said the cuts would save GM $1.2 billion to $1.3 billion a year.
The agreement also gives a union-run retiree health care trust 17.5 percent ownership of a postbankruptcy protection GM, with a warrant to buy another 2.5 percent. The stock will come in exchange for part of the company’s $20 billion obligation to the trust.
Post-Dispatch reporter Angela Tablac contributed
to this report.
At least four U.S. insurers won approval on Thursday to raise billions of dollars through the government’s bank bailout plan, the U.S. Treasury Department said.
Hartford Financial (HIG, Fortune 500), the No. 4 U.S. insurer beset by worries about capital, got preliminary approval to raise $3.4 billion via the Troubled Assets Relief Program, known as TARP.
Three other insurers that also secured a greenlight included Prudential Financial Inc. (PRU, Fortune 500), Lincoln National Corp. (LNC, Fortune 500), and the Principal Financial Group (PFG, Fortune 500), a Treasury spokesman said.
The Wall Street Journal reported that Allstate Corp. (ALL, Fortune 500) and Ameriprise Financial Inc. (AMP, Fortune 500) had been cleared too.
Shares in a raft of U.S. insurers soared between 3% and 6% in after-hours trade amid reports the Treasury Department had doled out approvals.
Investors have worried about the health of Hartford and other insurers since the near-collapse in September of American International Group (AIG, Fortune 500).
The four firms confirmed by the Treasury Department qualified because of their status as bank holding companies and because they applied for access before a Nov. 14, 2008, deadline, the Treasury spokesman said.
A Prudential spokesman declined to comment.
Executives at Allstate and Ameriprise were not immediately available for comment. Lincoln and Principal spokesmen did not return calls for comment.
Hartford, which in April posted its third straight quarterly loss because of dismal financial markets, said in a statement it received preliminary approval for the capital participation — subject to final negotiation and approval pay day loans.
"Applying for participation in the CPP was a prudent step for the Hartford, particularly given the continued economic uncertainty," Chief Executive Ramani Ayer said.
"These funds would further fortify our capital resources and provide us with additional financial flexibility during one of the most volatile market climates in our nation’s history."
Life insurers such as Hartford have endured criticism in the past year for taking reckless bets, such as "variable annuities" or policies that promised unrealistic guarantees to buyers.
Walloped also by tanking financial markets, the largest U.S. insurers have sought government aid to tide them over the financial and economic crisis.
As a condition for taking part in the Treasury Department’s Capital Purchase Program, Hartford had agreed to buy Florida-based Federal Trust Corp, a small savings and loan.
Hartford said at the time it would be eligible to sell $1.1 billion to $3.4 billion of preferred shares to the government under the Treasury Department’s $700 billion TARP.
Shares in Hartford climbed to $15.65 in after-hours trade from a $14.75 regular close. Stock in Lincoln rallied 4.6%. Principal gained more than 3%.
But Allstate, Ameriprise and Prudential, which had gained between 2.5% and 6.4% during the regular session, held steady in extended trade.
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