![[info]](/googleai/decoding-https-web.archive.org/web/20091225005455im_/http://l-stat.livejournal.com/img/userinfo.gif){kind=small}
Stephen Foley
Stephen Foley is Associate Business Editor of The Independent, based in New York. In a decade at the paper, he has covered personal finance, the UK stock market and the pharmaceuticals industry, and been the Business section's share tipster. And since arriving with three suitcases in Manhattan in January 2006, he has witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
The Miami Herald has got a lot of abuse for asking online readers for voluntary donations to support its free-to-air website. "Once-proud" newspaper "reduced" to "holding out the tin can" and "begging", seems to be the headline reaction. But how about "pioneering" media organisation "saves journalism" with "bold experiment" and "builds an online community that will protect its heritage"?
The Miami-based daily, whose history stretches back to 1903, is a typical case study of decline in the US newspaper industry. Sales of the print edition have collapsed by a quarter in just the past year and it has cut hundreds of jobs. Not surprisingly, it has been doing a lot of thinking about how it might make money from what is now its main way of delivering the news: publishing on the web.
Rupert Murdoch is off trying to put all his content behind a pay-wall and prevent it from even showing up in Google News (the equivalent of taking it off the newsagent's shelf). It is conceivable that this will shore up the profitability of his newspapers, but it will collapse his readership relative to publishers who deliver news for free online, and it may therefore amount to the unilateral surrender of his status as a political power-broker.
The Miami Herald's looks the much bolder move. It has started putting a link at the bottom of each online news story, asking readers to click to "support ongoing news coverage on MiamiHerald.com" and then to enter a credit card donation. Only a few people have done so to date, but it is not hard to imagine this snowballing. Public radio stations and public television in the US sustain themselves on regular pledge drives, appealing to listeners' and viewers' desire for unbiased factual information. And of course this is not just an old media phenomenon. On Tuesday, Wikipedia founder Jimmy Wales launched the online encyclopedia's annual fund-raising drive, generating over $430,000 from about 13,000 individual contributors, the most it has ever managed in a single day. It is shooting for $7.5m before the drive is done.
National Public Radio and Wikipedia are community organisations. Newspapers at their best also have a community feel, appealing to readers of a certain mind, and online journalism offers so many new ways for readers to deepen that relationship. By making an explicit link between donations and the quality of the journalism on offer, the Miami Herald strengthens those bonds further.
I bet it will be unique and powerful community stories which generate the most clicks through to the donations page. That ought to give editors the courage – and money – to pursue those stories and to stop duplicating news that appeared everywhere else on the internet yesterday. Forget Rupert Murdoch. I think the Miami Herald just changed the game.
The Miami-based daily, whose history stretches back to 1903, is a typical case study of decline in the US newspaper industry. Sales of the print edition have collapsed by a quarter in just the past year and it has cut hundreds of jobs. Not surprisingly, it has been doing a lot of thinking about how it might make money from what is now its main way of delivering the news: publishing on the web.
Rupert Murdoch is off trying to put all his content behind a pay-wall and prevent it from even showing up in Google News (the equivalent of taking it off the newsagent's shelf). It is conceivable that this will shore up the profitability of his newspapers, but it will collapse his readership relative to publishers who deliver news for free online, and it may therefore amount to the unilateral surrender of his status as a political power-broker.
The Miami Herald's looks the much bolder move. It has started putting a link at the bottom of each online news story, asking readers to click to "support ongoing news coverage on MiamiHerald.com" and then to enter a credit card donation. Only a few people have done so to date, but it is not hard to imagine this snowballing. Public radio stations and public television in the US sustain themselves on regular pledge drives, appealing to listeners' and viewers' desire for unbiased factual information. And of course this is not just an old media phenomenon. On Tuesday, Wikipedia founder Jimmy Wales launched the online encyclopedia's annual fund-raising drive, generating over $430,000 from about 13,000 individual contributors, the most it has ever managed in a single day. It is shooting for $7.5m before the drive is done.
National Public Radio and Wikipedia are community organisations. Newspapers at their best also have a community feel, appealing to readers of a certain mind, and online journalism offers so many new ways for readers to deepen that relationship. By making an explicit link between donations and the quality of the journalism on offer, the Miami Herald strengthens those bonds further.
I bet it will be unique and powerful community stories which generate the most clicks through to the donations page. That ought to give editors the courage – and money – to pursue those stories and to stop duplicating news that appeared everywhere else on the internet yesterday. Forget Rupert Murdoch. I think the Miami Herald just changed the game.
Surely this week’s fundraising debacle is the final straw for shareholders, when it comes to their tolerance of Vikram Pandit’s incompetent leadership at Citigroup.
Against the dubious benefits of being able to pay its top 100 executives and traders more in salaries and bonuses, made possible because Citigroup can now repay its second tranche of bailout money, we have to offset a string of very obvious negatives. First is that the process lopped one-fifth off the share price and diluted existing holders more than anyone feared. Second, by failing to find a price at which the US Treasury could sell its equity stake, Citigroup only extended and spotlighted the government’s influence over its affairs.
Third, and worst of all, it has shown itself a poor manager of equity fundraisings – something that will not go unnoticed by potential clients, or unremarked by its rivals. It misjudged markets and was outfoxed by Wells Fargo, which raised money a day earlier on much better terms. Where is the evidence for these talented Citigroup dealdoers, who Mr Pandit believes must be paid more?
Citigroup was a terrible candidate to launch the biggest equity sale in US history, a sale that was neither vital to rescue the company nor desirable to pay for a step-change in its growth prospects. It was just a diversion. With so much restructuring still to do (some 38 per cent of the company's assets have been labelled non-core) new investors were sure to demand a big discount on the share price because of the uncertainty. Mr Pandit would have built more shareholder value by working harder on the restructuring before trying to rid himself of the Treasury’s pay shackles.
Ken Lewis of Bank of America was forced into early retirement for much less serious sins against his shareholders. It is amazing that Mr Pandit does not face a similar fate.
Of course it's a coincidence.
This is Time's Michael Grunwald on Ben Bernanke, named last night as the magazine's Person of the Year 2009:
And this is me, in The Independent, on 29 August, 2009:
Great minds, etc etc.
This is Time's Michael Grunwald on Ben Bernanke, named last night as the magazine's Person of the Year 2009:
He's shy. He doesn't do the D.C. dinner-party circuit; he prefers to eat at home with his wife, who still makes him do the dishes and take out the trash. Then they do crosswords or read. Because Ben Bernanke is a nerd.
He just happens to be the most powerful nerd on the planet.
And this is me, in The Independent, on 29 August, 2009:
In finance, once a profession characterised by testosterone-fuelled braggadocio, a generation of brilliant nerds built the models that provided a pseudo-scientific foundation for the tower of debt whose collapse has buried us all.
And yet the most powerful nerd on earth is still standing, as the sight this week of a relaxed Ben Bernanke at the side of Barack Obama in Martha's Vineyard attests.
Great minds, etc etc.
Ben Bernanke has just stepped up his fight against Ron Paul's plan to "audit the Fed".
Introducing politicians into monetary policy decision-making only increases the chances of spooking financial markets, and the chances of under-cooking or overcooking the economic recovery, as any economist will tell you.
The Federal Reserve chairman, taking questions at the Economic Club of Washington, says Congressman Paul is deliberately misusing the word "audit".
An audit, he says, suggests an examination of facts and figures, but the effect of repealing the 1978 rule exempting the Fed's monetary policy from scrutiny opens up the Fed to something much more than an audit. "All of our financial books are open to Congress, he says. In this case, "audit means a policy review".
Congressman Paul's rabble-rousing cry to "audit the Fed" is as disingenuous as it is dangerous.
Introducing politicians into monetary policy decision-making only increases the chances of spooking financial markets, and the chances of under-cooking or overcooking the economic recovery, as any economist will tell you.
The Federal Reserve chairman, taking questions at the Economic Club of Washington, says Congressman Paul is deliberately misusing the word "audit".
An audit, he says, suggests an examination of facts and figures, but the effect of repealing the 1978 rule exempting the Fed's monetary policy from scrutiny opens up the Fed to something much more than an audit. "All of our financial books are open to Congress, he says. In this case, "audit means a policy review".
Congressman Paul's rabble-rousing cry to "audit the Fed" is as disingenuous as it is dangerous.
Ed Whitacre may or may not be "a selfish piece of shift", as a certain Sarah Henderson angrily mistyped into Facebook in the hours after Fritz Henderson was ousted as General Motors chief executive. Whatever he is, the GM chairman is certainly right.
The company's culture has been one of complacency and drift for longer than anyone in its upper echelons can remember. Mr Henderson was promoted to run the company in March not because he was the best man to introduce the necessary shake-up, but because he was the guy in the next room when the Obama administration fired his boss, Rick Wagoner.
Mr Whitacre, the telecoms industry veteran in charge at GM since July, is applying some much-needed shock therapy, and he was continuing to do it yesterday by promoting younger executives into powerful new positions.
Bob Lutz, the 77-year-old design guru who has reached untouchable status within the company, was stripped of his ill-fitting marketing responsibilities and made a special adviser to the chairman. All the signs are that Mr Whitacre will rely more heavily on another of his new advisers, Stephen Girsky, a former Merrill Lynch analyst.
It's a start. The real challenge comes with the search for a new chief executive. GM should follow Ford's lead when it selected Alan Mulally from Boeing, and look outside the car industry all together. Now that really would be a shock.
The company's culture has been one of complacency and drift for longer than anyone in its upper echelons can remember. Mr Henderson was promoted to run the company in March not because he was the best man to introduce the necessary shake-up, but because he was the guy in the next room when the Obama administration fired his boss, Rick Wagoner.
Mr Whitacre, the telecoms industry veteran in charge at GM since July, is applying some much-needed shock therapy, and he was continuing to do it yesterday by promoting younger executives into powerful new positions.
Bob Lutz, the 77-year-old design guru who has reached untouchable status within the company, was stripped of his ill-fitting marketing responsibilities and made a special adviser to the chairman. All the signs are that Mr Whitacre will rely more heavily on another of his new advisers, Stephen Girsky, a former Merrill Lynch analyst.
It's a start. The real challenge comes with the search for a new chief executive. GM should follow Ford's lead when it selected Alan Mulally from Boeing, and look outside the car industry all together. Now that really would be a shock.
When Brian Roberts unveiled Comcast's $30bn deal to take control of NBC Universal this week, he declared his cable TV and internet firm had become a leader in the "anytime, anywhere" media that American consumers are demanding.
Indeed it has, and it should worry us all. The deal combines one of the most powerful movie production and TV channel groups into the same company that pipes TV into more American homes than any other. This sort of vertical integration is fraught with conflicts of interest and competition issues, which is why for years regulators have enforced strict rules about how cable firms must offer fair access to all types of channels, not just those they own.
Comcast promises to abide by those rules, of course, but as Mr Roberts himself expressed, this deal is as much about future opportunities for content delivery over the internet as it is about cable TV. It could be tempted to give preferential treatment to NBC content on its internet services, say, by slowing down other kinds of video streaming.
Comcast has form in this area. It was forced to stop interfering with the popular BitTorrent programs used for file-sharing, after its covert practice of slowing down some users' service was exposed in 2007.
Its acquisition of NBC may not fall foul of any explicit competition rules, but it ought to attract prolonged and deep scrutiny by regulators. The Federal Communications Commission has recently expressed its commitment to protecting "net neutrality", demanding internet service providers treat all types of content equally. The rules it is planning will have to be watertight, and Congressional efforts should be stepped up to enshrine net neutrality into law.
Indeed it has, and it should worry us all. The deal combines one of the most powerful movie production and TV channel groups into the same company that pipes TV into more American homes than any other. This sort of vertical integration is fraught with conflicts of interest and competition issues, which is why for years regulators have enforced strict rules about how cable firms must offer fair access to all types of channels, not just those they own.
Comcast promises to abide by those rules, of course, but as Mr Roberts himself expressed, this deal is as much about future opportunities for content delivery over the internet as it is about cable TV. It could be tempted to give preferential treatment to NBC content on its internet services, say, by slowing down other kinds of video streaming.
Comcast has form in this area. It was forced to stop interfering with the popular BitTorrent programs used for file-sharing, after its covert practice of slowing down some users' service was exposed in 2007.
Its acquisition of NBC may not fall foul of any explicit competition rules, but it ought to attract prolonged and deep scrutiny by regulators. The Federal Communications Commission has recently expressed its commitment to protecting "net neutrality", demanding internet service providers treat all types of content equally. The rules it is planning will have to be watertight, and Congressional efforts should be stepped up to enshrine net neutrality into law.
When the US last emerged from recession, after the dot.com bust, the Bush administration presided over what became known as the "jobless recovery". If they get it right, a new generation of leaders might just spark a jobs-led recovery.
This week's White House "jobs summit" was a photo opportunity, but there is already the hum of ideas in the air about how government can support job creation. This is in contrast to the early 2000s, when the government cut taxes, sat back and waited for the jobs to materialise.
One eye-catching initiative has already been dubbed "cash for caulkers", in a twist on the $3bn cash for clunkers that handed government subsidies to car owners who traded up to a greener model. Its designer, venture capitalist John Doerr, says cash for caulkers could divert $23bn over two years to help millions of Americans weatherise their homes, cut energy bills, reduce greenhouse emissions and get unemployed construction workers back on the job.
Democrats and left-leaning economists, meanwhile, have a wish-list of other projects, including aid to the states to prevent forced lay-offs of teachers and emergency service personnel. The focus should be on those ideas that create and save jobs in the very short term, plugging the gap before the recovery really takes hold.
Key to this will be finding new money without provoking the deficit hawks. Happily, the $700bn Wall Street bailout fund has not been fully spent. The Obama administration must decide what to do with the remaining $216bn before it expires at the end of the year. Republicans want it to go to pay down the deficit rather than become a "slush fund", but they ought to be resisted.
One risk to the world's recovery is that the US acts too quickly to end its emergency aid to the economy. It is a resumption of growth, and the resulting cascade of tax revenues from corporate profits, that most quickly reduces deficits. Redirecting crumbs from the Tarp table to debt repayment would be largely symbolic – and it would be the wrong symbol.
Confidence is still fragile. Better to signal the government stands firmly behind a recovery and ready to do what it takes to bring down the scandalously high jobless rate. US firms hired 52,000 more people as "temporary help" in November; with a bit more confidence, these could turn into permanent jobs. US consumers hit the shops in greater numbers after Thanksgiving this year; with a bit more confidence, they might turn their attention from the discount aisles to full-price items.
Yesterday's US jobs figures were better than expected, but that does not mean they were good. One in 10 Americans is still out of work. And that means, for the country's politicians, there is work to do.
This week's White House "jobs summit" was a photo opportunity, but there is already the hum of ideas in the air about how government can support job creation. This is in contrast to the early 2000s, when the government cut taxes, sat back and waited for the jobs to materialise.
One eye-catching initiative has already been dubbed "cash for caulkers", in a twist on the $3bn cash for clunkers that handed government subsidies to car owners who traded up to a greener model. Its designer, venture capitalist John Doerr, says cash for caulkers could divert $23bn over two years to help millions of Americans weatherise their homes, cut energy bills, reduce greenhouse emissions and get unemployed construction workers back on the job.
Democrats and left-leaning economists, meanwhile, have a wish-list of other projects, including aid to the states to prevent forced lay-offs of teachers and emergency service personnel. The focus should be on those ideas that create and save jobs in the very short term, plugging the gap before the recovery really takes hold.
Key to this will be finding new money without provoking the deficit hawks. Happily, the $700bn Wall Street bailout fund has not been fully spent. The Obama administration must decide what to do with the remaining $216bn before it expires at the end of the year. Republicans want it to go to pay down the deficit rather than become a "slush fund", but they ought to be resisted.
One risk to the world's recovery is that the US acts too quickly to end its emergency aid to the economy. It is a resumption of growth, and the resulting cascade of tax revenues from corporate profits, that most quickly reduces deficits. Redirecting crumbs from the Tarp table to debt repayment would be largely symbolic – and it would be the wrong symbol.
Confidence is still fragile. Better to signal the government stands firmly behind a recovery and ready to do what it takes to bring down the scandalously high jobless rate. US firms hired 52,000 more people as "temporary help" in November; with a bit more confidence, these could turn into permanent jobs. US consumers hit the shops in greater numbers after Thanksgiving this year; with a bit more confidence, they might turn their attention from the discount aisles to full-price items.
Yesterday's US jobs figures were better than expected, but that does not mean they were good. One in 10 Americans is still out of work. And that means, for the country's politicians, there is work to do.
The fact that Hank Greenberg is getting back a Persian rug and some photos of him meeting Chinese leaders, as part of his ceasefire with AIG, tells you all you need to know about the insurance industry's most pathetic feud.
Their legal settlement stipulates that AIG must no longer be "disparaging" of its former chief executive. So allow me.
The pettiness with which Mr Greenberg has pursued revenge on the insurer that ousted him in 2005 has irreparably tarnished his reputation. It was galling enough to watch AIG having to take him so seriously in the years before its collapse; since the insurer was nationalised in last year's financial panic, his continued haunting of the company has been beyond the pale. Infuriatingly, AIG is going to pick up Mr Greenberg's $150m legal bill, using money which by rights should be diverted to the US taxpayer, to which AIG is in hock to the tune of $180bn.
At 84, Mr Greenberg is super-humanly fit and as competitive as ever. He plays tennis, lifts weights and speaks in military metaphors, as befits someone whose own service included taking part in the D-Day landings. He ran AIG as a dictatorship. Such aggression can take you so far – very far, he proves – but it can also unhinge you.
There's no quibbling with Mr Greenberg's mammoth achievement in 45 years, turning AIG from an unknown Asia-focused insurer into the largest on the planet. I understand, too, why some people feel he was hard done by when, at the height of Eliot Spitzer's campaign against Wall Street, he was forced out amid a $2bn accounting scandal for which he was ultimately never charged with criminal wrongdoing. He did pay $15m this year to settle the remaining minor civil case with the Securities and Exchange Commission, though, and did so with his usual bad grace, arguing most of the accounting restatements had been unnecessary.
Mr Greenberg's campaign of revenge against the board that voted to oust him, his public rubbishing of his successor, Martin Sullivan (who he anointed), and his legal campaign for compensation were unbecoming of the insurance industry's elder statesman.
The two sides fought over the ownership of boardroom trinkets, such as the rug and artworks. He sued when the share price went down, claiming management misled him. There were tit-for-tat suits over the ownership of $4.3bn in AIG shares. To call him a "distraction" isn't the half of it.
While AIG's credit derivatives insurance business was spinning out of control, managers had to spend time and money dealing with Mr Greenberg's interventions. He repeatedly signalled to journalists that he would launch a shareholder vote to take back control of the company, but never did. Ludicrously, at the height of last year's panic, when AIG was already done for and negotiating its government bailout, he emailed the company to suggest he buy it.
Mr Greenberg has behaved since last year as if the collapse of AIG is vindication for him, proving he shouldn't have been let go. I can't count the times that I have heard investors, analysts and writers assert that the firm would be a picture of health today under his continued leadership and before Congress this spring, he claimed he would never have allowed the financial products group to swell to such a size.
There's no way to know, of course, but I am sceptical. In three years of whingeing about the management of AIG after his ouster, I can't find any sign of Mr Greenberg having raised that particular alarm. He never hedged any of those toxic credit default swap positions when he was at the helm, what's to make us think he would have started? When in the spring he was warning of a "crisis" at the company, he spent as much time talking about the management of the general insurance businesses he knows best.
No doubt this week's settlement has been possible because Bob Benmosche, AIG's latest chief executive and an aggressive character in the Greenberg mould, has been better at massaging the billionaire's enormous ego. It is undoubtedly the right thing to have done, but it leaves a horrible taste in the mouth all the same.
Their legal settlement stipulates that AIG must no longer be "disparaging" of its former chief executive. So allow me.
The pettiness with which Mr Greenberg has pursued revenge on the insurer that ousted him in 2005 has irreparably tarnished his reputation. It was galling enough to watch AIG having to take him so seriously in the years before its collapse; since the insurer was nationalised in last year's financial panic, his continued haunting of the company has been beyond the pale. Infuriatingly, AIG is going to pick up Mr Greenberg's $150m legal bill, using money which by rights should be diverted to the US taxpayer, to which AIG is in hock to the tune of $180bn.
At 84, Mr Greenberg is super-humanly fit and as competitive as ever. He plays tennis, lifts weights and speaks in military metaphors, as befits someone whose own service included taking part in the D-Day landings. He ran AIG as a dictatorship. Such aggression can take you so far – very far, he proves – but it can also unhinge you.
There's no quibbling with Mr Greenberg's mammoth achievement in 45 years, turning AIG from an unknown Asia-focused insurer into the largest on the planet. I understand, too, why some people feel he was hard done by when, at the height of Eliot Spitzer's campaign against Wall Street, he was forced out amid a $2bn accounting scandal for which he was ultimately never charged with criminal wrongdoing. He did pay $15m this year to settle the remaining minor civil case with the Securities and Exchange Commission, though, and did so with his usual bad grace, arguing most of the accounting restatements had been unnecessary.
Mr Greenberg's campaign of revenge against the board that voted to oust him, his public rubbishing of his successor, Martin Sullivan (who he anointed), and his legal campaign for compensation were unbecoming of the insurance industry's elder statesman.
The two sides fought over the ownership of boardroom trinkets, such as the rug and artworks. He sued when the share price went down, claiming management misled him. There were tit-for-tat suits over the ownership of $4.3bn in AIG shares. To call him a "distraction" isn't the half of it.
While AIG's credit derivatives insurance business was spinning out of control, managers had to spend time and money dealing with Mr Greenberg's interventions. He repeatedly signalled to journalists that he would launch a shareholder vote to take back control of the company, but never did. Ludicrously, at the height of last year's panic, when AIG was already done for and negotiating its government bailout, he emailed the company to suggest he buy it.
Mr Greenberg has behaved since last year as if the collapse of AIG is vindication for him, proving he shouldn't have been let go. I can't count the times that I have heard investors, analysts and writers assert that the firm would be a picture of health today under his continued leadership and before Congress this spring, he claimed he would never have allowed the financial products group to swell to such a size.
There's no way to know, of course, but I am sceptical. In three years of whingeing about the management of AIG after his ouster, I can't find any sign of Mr Greenberg having raised that particular alarm. He never hedged any of those toxic credit default swap positions when he was at the helm, what's to make us think he would have started? When in the spring he was warning of a "crisis" at the company, he spent as much time talking about the management of the general insurance businesses he knows best.
No doubt this week's settlement has been possible because Bob Benmosche, AIG's latest chief executive and an aggressive character in the Greenberg mould, has been better at massaging the billionaire's enormous ego. It is undoubtedly the right thing to have done, but it leaves a horrible taste in the mouth all the same.
If you are the head of a retail chain in the US, you'll have been talking for months now about the continuing cautious state of the consumer, the prudent approach you are taking to planning for the holiday season and your limited expectations for the coming, critical weeks of trading. Don't be fooled.
Below the surface, there is genuine optimism, and the anecdotal evidence from yesterday's "Black Friday" festival of consumerism is that the US shopper is indeed no longer a drag on the economy.
Last year's holiday season was the worst in the shops for 40 years, as consumers feared for their jobs and their savings at a time when it still looked as if the financial system could fail again. This time out, US retailers have been putting more money into advertising, and doing so further in advance of the season.
The discounts on offer this Black Friday – the day after Thanksgiving when people traditionally hit the shops and which supposedly marks the point when retailers go into the black for the year – were smaller and more carefully targeted than the desperate price cuts of a year ago. To the extent that these things can be gauged, the crowds at malls and superstores were noticeably bigger yesterday than Black Friday 2008.
Because of the uncertain jobs market and the reduced availability of – and desire for – credit, households are rebuilding their savings. But after a year of relative frugality, it seems worth betting that there is pent-up demand for luxuries such as a new computer or television, and for restocking depleted wardrobes. A savings pause seems likely. After all, 'tis the season.
Below the surface, there is genuine optimism, and the anecdotal evidence from yesterday's "Black Friday" festival of consumerism is that the US shopper is indeed no longer a drag on the economy.
Last year's holiday season was the worst in the shops for 40 years, as consumers feared for their jobs and their savings at a time when it still looked as if the financial system could fail again. This time out, US retailers have been putting more money into advertising, and doing so further in advance of the season.
The discounts on offer this Black Friday – the day after Thanksgiving when people traditionally hit the shops and which supposedly marks the point when retailers go into the black for the year – were smaller and more carefully targeted than the desperate price cuts of a year ago. To the extent that these things can be gauged, the crowds at malls and superstores were noticeably bigger yesterday than Black Friday 2008.
Because of the uncertain jobs market and the reduced availability of – and desire for – credit, households are rebuilding their savings. But after a year of relative frugality, it seems worth betting that there is pent-up demand for luxuries such as a new computer or television, and for restocking depleted wardrobes. A savings pause seems likely. After all, 'tis the season.
If you wanted to read about Oprah Winfrey quitting her chat show, or Michelle Obama’s wardrobe, you could go to AOL’s website. But of course you don't have to. There’s lots of coverage of Oprah out there on the web. And if you were after something more entertaining by half, you might watch a Barack and Michelle elf dance on YouTube.
There is way too much internet.
To put it another way, there are more people and corporations creating ever more content for the web than can possibly make a living from ads placed alongside the material being uploaded. It is an inauspicious time to be ramping up one’s journalism on the internet, yet that is precisely what AOL is doing.
It has been boxed into this. The other half of its business is demonstrably and imminently doomed. Its dial-up internet service provider operations put America Online in the Nineties, but in an era of broadband its paid subscription model is an anachronism. It is withering.
Now AOL is relying more heavily on attracting readers to its news and entertainment sites. Trouble is, it provides neither the high-quality content of newspaper and broadcaster websites, nor the belly laughs or vibrancy of user-generated content. Visitor numbers are down 11 per cent year-on-year; it is laying off 2,500 people, a third of its staff.
AOL’s websites could disappear tomorrow and no one would be in the slightest bit disadvantaged or upset. I can’t think of a better definition of value-less. The company is being spun off from Time Warner, but this is no flotation. More likely, it will sink like a stone.
There is a conflagration coming that will wipe a lot of professional content providers from the web. AOL is one of the nearest to the flames.
There is way too much internet.
To put it another way, there are more people and corporations creating ever more content for the web than can possibly make a living from ads placed alongside the material being uploaded. It is an inauspicious time to be ramping up one’s journalism on the internet, yet that is precisely what AOL is doing.
It has been boxed into this. The other half of its business is demonstrably and imminently doomed. Its dial-up internet service provider operations put America Online in the Nineties, but in an era of broadband its paid subscription model is an anachronism. It is withering.
Now AOL is relying more heavily on attracting readers to its news and entertainment sites. Trouble is, it provides neither the high-quality content of newspaper and broadcaster websites, nor the belly laughs or vibrancy of user-generated content. Visitor numbers are down 11 per cent year-on-year; it is laying off 2,500 people, a third of its staff.
AOL’s websites could disappear tomorrow and no one would be in the slightest bit disadvantaged or upset. I can’t think of a better definition of value-less. The company is being spun off from Time Warner, but this is no flotation. More likely, it will sink like a stone.
There is a conflagration coming that will wipe a lot of professional content providers from the web. AOL is one of the nearest to the flames.
Elizabeth Warren does a disservice to herself and to Congress when she misrepresents her own report into the Wall Street bailout. The Harvard professor heads the Congressional Oversight Panel – not coincidentally abbreviated to COP – monitoring the bailout, and she popped up all over the place yesterday to highlight the panel's latest work on the financial guarantees that the Fed and the US Treasury gave last year. These included promises to backstop money market funds, to cover losses on some banks' loans, and to insure new debt issued by financial institutions.
Obviously there are eye-popping numbers involved. At the height of the panic, the US government was "on the hook" for up to $4.5 trillion, Professor Warren incanted in her media appearances. And in the tut-tutting manner of someone who has just discovered the source of a bad smell, she talked about moral hazard, without pointing out her panel has suggested precisely nothing that can be done about that.
The real meat in the report is its totting up of the fees the US taxpayer has earned from those guarantees. Any bank that sold debt with taxpayer default insurance had to pay for the privilege, which rather takes the edge off the moral hazard argument. Some $17.4bn has come into the coffers and, so far, only $2m has been lost. Only the insurance of Citigroup's toxic loans threaten to swell that figure, with perhaps $4bn being lost under a really dire economic scenario.
The problem is that one doesn't get on telly by praising the government for saving the financial system and making money to boot. Professor Warren's schoolma'am soundbites and chat-show charm gave her a powerful role in explaining and challenging the bailout. But where initially she elevated the public debate, now she seems intent on dumbing it down.
The unsung heroes of Ford's return to profitability this week are the men and women of the carmaker's finance department.
It is three years this month since they mortgaged almost all of the company's assets – from assembly plants to the intellectual property behind the iconic blue oval logo – and began to hunker down for a recession. Good timing, not unrelated to the arrival at the company of Alan Mulally, ex of Boeing, the first chief executive to come from outside the clubby and emotional auto industry.
The finance department's sharp moves have included buying back Ford bonds, when they were trading at depressed levels, and issuing new shares to investors when that was the cheapest way to fund a new workers' healthcare trust.
In raising absolutely as much as the debt and equity markets would allow, whenever a brief window opened, the company managed to avoid the fate of its Detroit rivals. And while General Motors and Chrysler made a pitstop in bankruptcy court to fill up on taxpayer cash, Ford was able to steal market share from them.
But there is time only for a quick toot on the horn in appreciation. Unsupported by bailout money, Ford now has higher debts than its peers and its financiers have already had to turn their attentions to rearranging its debt repayment schedule. They are pros. They'll keep Ford on the road.
There is both beauty and beastliness in round numbers. The US unemployment rate has been marching determinedly upwards for two years, but the fact of its passing 10 per cent is no less startling for that. That it has happened a month or two earlier than most forecasters predicted only added to the breathlessness of the headlines.
But round numbers tempt us to overestimate their significance. Like Dow 10,000 – the stock market bar that journalists describe, deliberately vaguely, as "psychologically important" – the difference between 9.8 per cent in September and 10.2 per cent in October is not actually that significant.
For the family on food stamps, or the freelancer who has been without a project for months, or the assembly line worker hearing rumours of lay-offs, it is not the number in the newspaper that is driving their decisions about how much to spend and how much to save this Christmas. It's a grim economy out there. Tell us something we don't already know.
It has always been unreasonable to assume that the US consumer, burdened by debt, anxious of their employment prospects and traumatised by the collapse in the value of their houses and pensions, would be the motor that brings us out of recession.
Re-employment always lags the economic rebound, as businesses squeeze as much extra juice as possible out of their existing workers. Little wonder productivity gains in the third quarter were four times the historic average. If anyone had thought the snap-back in employment would be quicker this time, perhaps because the lay-offs had been so swift in the first place, yesterday's numbers dashed that hope.
There were a few good signs buried underneath the headline gloom, though. The number of temporary workers rose, indicating that employers are in need of more hands, even if they are not willing to hire full time. The average weekly wage rose.
And there were reasons to be cautious about that large jump in the unemployment rate. It comes from a phone survey of households, and has a higher margin of error than the survey of employers that gives us the actual payroll numbers. According to that more statistically robust report, the US economy shed 190,000 jobs last month, still on an improving trend. Taken together with the upward revisions to the September figure, that puts the number of jobs in the economy exactly in line with forecasts.
Employers make investment decisions based on their own, on-the-ground business experience, not on round numbers. Third-quarter earnings beat expectations at more than three-quarters of the companies in the S&P 500, freeing up money to start the process of rehiring in the near future. The broad outlines of a recovery – a stuttering, shallow recovery, but a recovery none the less – remain in place.
If there is one thing that is definitely too big to fail, it is the US Treasury's plans for Wall Street reform. So it was dispiriting that the Obama administration has put forward a proposal with a hole in its heart.
The proposed legislation published this week creates a "third way" for dealing with collapsing companies, so that regulators and politicians are never again faced with the choices of last year, between allowing an uncontrolled bankruptcy (à la Lehman Brothers) or a taxpayer-funded bailout (à la AIG). But the Treasury has botched the central, and the most politically charged, issue – namely, how to pay for it.
This third way is a "resolution authority", overseen by a council of regulators, that allows the unwinding of a failed firm in an orderly fashion. It's a bigger version of the system for seizing retail banks, which is proving invaluable this year. The Federal Deposit Insurance Corporation (FDIC) has seized more than 100 US banks, transferred their good assets to new owners and absorbed losses on the bad assets, all without causing a ripple.
The resolution authority will cover all financial companies deemed too-big-to-fail-in-an-uncontrolled-fashi
So far, so consensus. The trouble is that winding down a firm takes money. Even your common or garden industrial bankruptcy usually involves some debtor-in-possession financing, so that the company can keep paying its employees while it restructures. For failing financial firms, deeply intertwined with their peers, the cost of meeting counterparty obligations could quickly run into the billions. This is no small matter to leave unresolved.
Under the Obama plan, the money would come initially from the public purse and be recouped later by a levy on the other companies in the too-big-to-fail category, the "survivors", if you like. Sheila Bair, who heads the FDIC, says it would be better to get all the institutions to pay up front into an insurance fund, the same way the retail banks do. The stubborn Ms Bair once again finds herself taking a harsher tone with Wall Street and on a collision course with the Treasury. Once again, she is right.
It hardly seems fair that the one firm that escapes having to pay into the scheme is the one firm that triggers its use, but that is the least of the problems with an unfunded resolution authority.
The collapse of a systemically important financial firm is hardly likely to be happening in isolation. More likely, it will be in the context of some wider economic calamity or capital market seizure that affects many of its healthier peers, too. The "survivor pays" model implies that these other firms will be tapped for money just when they are trying to rebuild their own balance sheets. They may be survivors, but they are also likely to be walking wounded.
The threat of an onerous levy at that sensitive time could weaken the system further. And these firms' lobbyists might find a sympathetic ear if they ask to be let off the hook – which would mean taxpayers being back on the hook, exactly the outcome everyone is trying to avoid.
A pre-funded scheme also has one wonderful advantage in the present climate. As Wall Street returns to health, it can be presented as a tax on those newly-minted profits, and a means of reducing bonuses.
Tim Geithner, the Treasury Secretary, had a pretty unconvincing answer when lawmakers pressed him on Capitol Hill. A pre-funded scheme, he said, would create "an expectation of explicit insurance" that encourages risky behaviour. Come on, Tim. The US government just spent $700bn bailing out the financial system. That's an expectation that already exists.
It is a mystery why the administration is so adamant against a pre-funded scheme. One can only assume that the Wall Street lobbyists have nobbled it. Why else would the Treasury have a tin ear to the politics of this, to such an extent that it is endangering the whole vital project?
The proposed legislation published this week creates a "third way" for dealing with collapsing companies, so that regulators and politicians are never again faced with the choices of last year, between allowing an uncontrolled bankruptcy (à la Lehman Brothers) or a taxpayer-funded bailout (à la AIG). But the Treasury has botched the central, and the most politically charged, issue – namely, how to pay for it.
This third way is a "resolution authority", overseen by a council of regulators, that allows the unwinding of a failed firm in an orderly fashion. It's a bigger version of the system for seizing retail banks, which is proving invaluable this year. The Federal Deposit Insurance Corporation (FDIC) has seized more than 100 US banks, transferred their good assets to new owners and absorbed losses on the bad assets, all without causing a ripple.
The resolution authority will cover all financial companies deemed too-big-to-fail-in-an-uncontrolled-fashi
So far, so consensus. The trouble is that winding down a firm takes money. Even your common or garden industrial bankruptcy usually involves some debtor-in-possession financing, so that the company can keep paying its employees while it restructures. For failing financial firms, deeply intertwined with their peers, the cost of meeting counterparty obligations could quickly run into the billions. This is no small matter to leave unresolved.
Under the Obama plan, the money would come initially from the public purse and be recouped later by a levy on the other companies in the too-big-to-fail category, the "survivors", if you like. Sheila Bair, who heads the FDIC, says it would be better to get all the institutions to pay up front into an insurance fund, the same way the retail banks do. The stubborn Ms Bair once again finds herself taking a harsher tone with Wall Street and on a collision course with the Treasury. Once again, she is right.
It hardly seems fair that the one firm that escapes having to pay into the scheme is the one firm that triggers its use, but that is the least of the problems with an unfunded resolution authority.
The collapse of a systemically important financial firm is hardly likely to be happening in isolation. More likely, it will be in the context of some wider economic calamity or capital market seizure that affects many of its healthier peers, too. The "survivor pays" model implies that these other firms will be tapped for money just when they are trying to rebuild their own balance sheets. They may be survivors, but they are also likely to be walking wounded.
The threat of an onerous levy at that sensitive time could weaken the system further. And these firms' lobbyists might find a sympathetic ear if they ask to be let off the hook – which would mean taxpayers being back on the hook, exactly the outcome everyone is trying to avoid.
A pre-funded scheme also has one wonderful advantage in the present climate. As Wall Street returns to health, it can be presented as a tax on those newly-minted profits, and a means of reducing bonuses.
Tim Geithner, the Treasury Secretary, had a pretty unconvincing answer when lawmakers pressed him on Capitol Hill. A pre-funded scheme, he said, would create "an expectation of explicit insurance" that encourages risky behaviour. Come on, Tim. The US government just spent $700bn bailing out the financial system. That's an expectation that already exists.
It is a mystery why the administration is so adamant against a pre-funded scheme. One can only assume that the Wall Street lobbyists have nobbled it. Why else would the Treasury have a tin ear to the politics of this, to such an extent that it is endangering the whole vital project?
There is something more than a little fishy about the $87.4m (£53m) fine levied on BP by the US Occupational Safety and Health Authority, over alleged failings at its troubled Texas City oil refinery.
The deaths of 15 people at the plant in March 2005 was BP's blackest day, and – along with an environmentally catastrophic oil spill in Alaska around the same time – revealed that the company's shiny green image was more marketing trick than real corporate policy.
But four years after signing up to a list of safety improvements at the plant, and accepting a first OSHA fine of $21.3m it has been diligently working to instill a better safety culture, and has been funding upgrade work along the lines agreed with the regulator. It is work that has won support from the unions, whose criticisms of shoddy management and underinvestment were ignored before the blast.
It was only late last year that it started to appear as if BP and its regulator disagreed over the timing of the improvement works – a moment that coincided with a change of leadership in Washington. Regulators, whose senior staff are all political appointees, are acutely sensitive to these political winds. In that context, the desire for headline-grabbing fines is not unnatural. But given BP's good faith, this is a case where there should have been plenty of opportunity for compromise.
The oil giant has every right to feel hard done by, when one apparently agreed timetable is ripped up in favour of a tighter one, and it is then fined four times as much for the supposed delay as it was for the egregious safety lapses that caused the deaths of so many.
The deaths of 15 people at the plant in March 2005 was BP's blackest day, and – along with an environmentally catastrophic oil spill in Alaska around the same time – revealed that the company's shiny green image was more marketing trick than real corporate policy.
But four years after signing up to a list of safety improvements at the plant, and accepting a first OSHA fine of $21.3m it has been diligently working to instill a better safety culture, and has been funding upgrade work along the lines agreed with the regulator. It is work that has won support from the unions, whose criticisms of shoddy management and underinvestment were ignored before the blast.
It was only late last year that it started to appear as if BP and its regulator disagreed over the timing of the improvement works – a moment that coincided with a change of leadership in Washington. Regulators, whose senior staff are all political appointees, are acutely sensitive to these political winds. In that context, the desire for headline-grabbing fines is not unnatural. But given BP's good faith, this is a case where there should have been plenty of opportunity for compromise.
The oil giant has every right to feel hard done by, when one apparently agreed timetable is ripped up in favour of a tighter one, and it is then fined four times as much for the supposed delay as it was for the egregious safety lapses that caused the deaths of so many.
The public is a mad dog, throwing itself against a wall. Rage against bankers and their outsize bonuses, far from diminishing with distance from the crash, is becoming more intense, now that the Wall Street train is back on the rails with barely a drop of gravy being spilled. The popular fury is fuelled by an acute sense of our own impotence. But what if this rage is not really about bankers at all?
The burning sense of injustice that underlies the present anger has its roots not in the calamities wrought by Wall Street last year, but more deeply. It has been forged over time, through waves of revulsion at fat-cat pay and hedge-fund greed. To find a balm, we need to confront the vast disparities of income that have been allowed to open up in our society.
It is a subject which has gained surprisingly little currency despite the centrality of income inequality, not just to the realisation of injustice now, but also to the economic causes of the credit crisis and recession.
Tell me if this is a coincidence. The income of the top 10 per cent of earners in the US has accounted for about 50 per cent of the total on only two occasions in the past 100 years, first in 1928 and then again in 2006-7. The two great crashes of the past century occurred the following years.
Thanks to the award-winning work of economists Emmanuel Saez and Thomas Piketty, we can trace income inequality over more than a century and see that, after flatlining for decades after the Second World War, it began relentlessly rising with the birth of the Reagan revolution in the US, and its intellectual twin, Thatcherism. Devil-may-care capitalism sent chief executive pay at the biggest US companies – not just in finance – to 275 times the average of their staff in 2007. It was a tenth of that in the mid-1960s. We may have been doomed to the present disaster for some time. J K Galbraith, in his definitive work The Great Crash, 1929, identified "the bad distribution of income" as one of five contributory factors to the stock-market plunge and subsequent Great Depression. With more money than they know what to do with, the super-rich spend on luxuries and speculative investments only to pull them back sharply when exuberance is exhausted and fear threatens to take over. This sort of economy is more volatile than one which is more broadly based.
And something else: the economics of envy. To the greed of the few, add the jealousy of the many, and the fear of being left behind. Those toxic "liar loans" and "ninja mortgages" were not, in the main, foisted on unsuspecting naïfs. They were grabbed for gladly by people who knew they were taking a risk for their extra holiday, for the extension they built to match their neighbours – or for that move to a leafier suburb to keep their kids out of a sink school.
Reversing the problem of rising inequality requires more than bashing banks. Governments shouldn't dictate pay levels in any particular sector of the economy, in any case. How, practically, could we? We agree bankers should be paid according to their performance, which means according to their profits (as measured over a cycle, we would now add). And banks' profits are what they are: the sum of thousands of transactions, often advice paid for by a client, or trades voluntarily entered into by other market players. Which particular activities do we want to deprofitise, and how?
Drag someone away from the angry soundbite and the problem is, suddenly, obviously intractable. Which is why none of the reform plans on the table – between the British government and the banks operating in the City of London, for example, or the G20 nations, or even the Federal Reserve's strictures this week – have anything to say about the level of pay, only about its structure.
None of this is to say that Wall Street doesn't need root and branch restructuring. Of course it does. And if regulators do their job, profits should moderate overall, as banks are prevented from juicing their returns with risk-taking on borrowed money. Shareholders should be the ones to set pay levels, and they should be roused from their behinds to do so. The only really legitimate tool that a government can wield on behalf of taxpayers is the tax system itself, and this it should wield without discriminating against employees of a particular profession.
Tackling the moral and economic problem of inequality implies an across-the-board approach. And it is an opportune moment to debate higher taxes on the highest incomes. Paying back skyrocketing government debt will require that those best able start to pay a fairer share.
Of course, I'm being naïve to suggest that debating redestributive taxes will be a civilised affair, particularly in this gutturally anti-tax nation. But are we getting anywhere otherwise?
For now, the Obama administration halves executive pay at the bailed-out companies still under its influence, only to expose how few people and how few companies it can touch (700 at seven). Admonishments on pay keep coming from politicians and central bankers on both sides of the Atlantic, but record bonuses keep coming, too, and so do the bumper payouts for top executives in other industries.
How much healthier it would be to tax these salaries and bonuses fairly, instead of railing against our inability to prevent them from being awarded in the first place. Maybe that way we can start to create an economy at ease with itself.
The burning sense of injustice that underlies the present anger has its roots not in the calamities wrought by Wall Street last year, but more deeply. It has been forged over time, through waves of revulsion at fat-cat pay and hedge-fund greed. To find a balm, we need to confront the vast disparities of income that have been allowed to open up in our society.
It is a subject which has gained surprisingly little currency despite the centrality of income inequality, not just to the realisation of injustice now, but also to the economic causes of the credit crisis and recession.
Tell me if this is a coincidence. The income of the top 10 per cent of earners in the US has accounted for about 50 per cent of the total on only two occasions in the past 100 years, first in 1928 and then again in 2006-7. The two great crashes of the past century occurred the following years.
Thanks to the award-winning work of economists Emmanuel Saez and Thomas Piketty, we can trace income inequality over more than a century and see that, after flatlining for decades after the Second World War, it began relentlessly rising with the birth of the Reagan revolution in the US, and its intellectual twin, Thatcherism. Devil-may-care capitalism sent chief executive pay at the biggest US companies – not just in finance – to 275 times the average of their staff in 2007. It was a tenth of that in the mid-1960s. We may have been doomed to the present disaster for some time. J K Galbraith, in his definitive work The Great Crash, 1929, identified "the bad distribution of income" as one of five contributory factors to the stock-market plunge and subsequent Great Depression. With more money than they know what to do with, the super-rich spend on luxuries and speculative investments only to pull them back sharply when exuberance is exhausted and fear threatens to take over. This sort of economy is more volatile than one which is more broadly based.
And something else: the economics of envy. To the greed of the few, add the jealousy of the many, and the fear of being left behind. Those toxic "liar loans" and "ninja mortgages" were not, in the main, foisted on unsuspecting naïfs. They were grabbed for gladly by people who knew they were taking a risk for their extra holiday, for the extension they built to match their neighbours – or for that move to a leafier suburb to keep their kids out of a sink school.
Reversing the problem of rising inequality requires more than bashing banks. Governments shouldn't dictate pay levels in any particular sector of the economy, in any case. How, practically, could we? We agree bankers should be paid according to their performance, which means according to their profits (as measured over a cycle, we would now add). And banks' profits are what they are: the sum of thousands of transactions, often advice paid for by a client, or trades voluntarily entered into by other market players. Which particular activities do we want to deprofitise, and how?
Drag someone away from the angry soundbite and the problem is, suddenly, obviously intractable. Which is why none of the reform plans on the table – between the British government and the banks operating in the City of London, for example, or the G20 nations, or even the Federal Reserve's strictures this week – have anything to say about the level of pay, only about its structure.
None of this is to say that Wall Street doesn't need root and branch restructuring. Of course it does. And if regulators do their job, profits should moderate overall, as banks are prevented from juicing their returns with risk-taking on borrowed money. Shareholders should be the ones to set pay levels, and they should be roused from their behinds to do so. The only really legitimate tool that a government can wield on behalf of taxpayers is the tax system itself, and this it should wield without discriminating against employees of a particular profession.
Tackling the moral and economic problem of inequality implies an across-the-board approach. And it is an opportune moment to debate higher taxes on the highest incomes. Paying back skyrocketing government debt will require that those best able start to pay a fairer share.
Of course, I'm being naïve to suggest that debating redestributive taxes will be a civilised affair, particularly in this gutturally anti-tax nation. But are we getting anywhere otherwise?
For now, the Obama administration halves executive pay at the bailed-out companies still under its influence, only to expose how few people and how few companies it can touch (700 at seven). Admonishments on pay keep coming from politicians and central bankers on both sides of the Atlantic, but record bonuses keep coming, too, and so do the bumper payouts for top executives in other industries.
How much healthier it would be to tax these salaries and bonuses fairly, instead of railing against our inability to prevent them from being awarded in the first place. Maybe that way we can start to create an economy at ease with itself.
So Ticketmaster, that dreadful pickpocket who preys on concertgoers everywhere, is scrambling to save its $1.3bn merger with Live Nation, the giant concert promoter. It should stop trying. It is time to give up on an outrageous, monopolistic deal that should never have been contemplated in the first place.
Fresh from having the merger blocked by the UK's Competition Commission earlier this month, the two sides have now been told they must make major concessions if they want to avoid the same fate in their much more important home market.
Ticketmaster is the dominant concert ticket retailer, and it also owns Front Line Management, one of the most powerful artist management groups in the world. Live Nation is the world's largest concert promoter and the owner of 140 major venues, and has been dabbling in artist management deals of its own. For starters, it signed what it calls "360 degree" deals with stars including Jay-Z and Madonna, to promote merchandising and even digital music on their behalf.
Like the consumers who have to pay surcharge on top of surcharge to buy through Ticketmaster, Live Nation had gotten fed up with the fees charged to concert venues and artists whose tickets it sold, so it set up its own rival online service. That would be snuffed out by this deal, eliminating any hope it might bring down ticket costs.
Indeed, the deal is explicitly about raising ticket prices, since both sides say it would make it easier to arrange auctions of tickets for sell-out concerts. I'm sympathetic to the need for artists to make more from live shows, now music is free to anyone with file-sharing software. But I see no reason why prices can't be raised to market levels unilaterally by performers and their promoters, without creating a vertically integrated industry behemoth riven with conflicts of interest.
What Irving Azoff, the Front Line founder who runs Ticketmaster, and Michael Rapino at Live Nation plan is a straightforward land grab in the anarchy that has followed the collapse of the record labels' empires. Their merger could roll back some of the dynamism seen in the music industry, as emerging stars are frozen out of concert venues in favour of artists managed in-house. Other problems are legion. Independent concert promoters could find themselves second-class citizens on the centralised ticketing platform. The merger proposes just the sort of vertical integration that the Obama administration has promised to scrutinise more closely.
Fresh from having the merger blocked by the UK's Competition Commission earlier this month, the two sides have now been told they must make major concessions if they want to avoid the same fate in their much more important home market.
Ticketmaster is the dominant concert ticket retailer, and it also owns Front Line Management, one of the most powerful artist management groups in the world. Live Nation is the world's largest concert promoter and the owner of 140 major venues, and has been dabbling in artist management deals of its own. For starters, it signed what it calls "360 degree" deals with stars including Jay-Z and Madonna, to promote merchandising and even digital music on their behalf.
Like the consumers who have to pay surcharge on top of surcharge to buy through Ticketmaster, Live Nation had gotten fed up with the fees charged to concert venues and artists whose tickets it sold, so it set up its own rival online service. That would be snuffed out by this deal, eliminating any hope it might bring down ticket costs.
Indeed, the deal is explicitly about raising ticket prices, since both sides say it would make it easier to arrange auctions of tickets for sell-out concerts. I'm sympathetic to the need for artists to make more from live shows, now music is free to anyone with file-sharing software. But I see no reason why prices can't be raised to market levels unilaterally by performers and their promoters, without creating a vertically integrated industry behemoth riven with conflicts of interest.
What Irving Azoff, the Front Line founder who runs Ticketmaster, and Michael Rapino at Live Nation plan is a straightforward land grab in the anarchy that has followed the collapse of the record labels' empires. Their merger could roll back some of the dynamism seen in the music industry, as emerging stars are frozen out of concert venues in favour of artists managed in-house. Other problems are legion. Independent concert promoters could find themselves second-class citizens on the centralised ticketing platform. The merger proposes just the sort of vertical integration that the Obama administration has promised to scrutinise more closely.
The US Justice Department is undoubtedly taking into account the outpouring of opposition from independent concert promoters, artists and a concert-going public that, frankly, wants Ticketmaster to face an investigation for the price gouging it already conducts as a standalone company. One last heave ought to be enough to kill this deal.
Whether you choose the formal Special Master for Compensation, or the shorthand "Pay Tsar", Ken Feinberg's title reeks of authoritarian power. The Washington lawyer, appointed to dictate remuneration at America's taxpayer-owned banks, car companies and insurers, is showing that he is determined to use it.
I have been struggling to get comfortable with Mr Feinberg's order to zero out the 2009 pay of Ken Lewis, the humiliated and soon-to-depart boss of Bank of America. Of course Mr Lewis wasn't going to put up a fight. The $1.5m salary is irrelevant to his already comfortable retirement, and he has suffered far too much public opprobrium already.
But what principles is Mr Feinberg operating on? He has promised to set them out publicly soon, but I am not optimistic they will be coherent, or even fair. I dislike their retroactive nature, and am nervous about ripping up contract law.
The only way to see this is as an exercise in raw power. I'm a US taxpayer, so $1.5m less for Ken Lewis is $1.5m more we might get back of the bailout funds. It is a model that shareholders might want to follow for future pay rounds: private-sector pay tsars, appointed to represent investors, who would sit on remuneration committees and talk down the awards – before they are written into contracts.
I have been struggling to get comfortable with Mr Feinberg's order to zero out the 2009 pay of Ken Lewis, the humiliated and soon-to-depart boss of Bank of America. Of course Mr Lewis wasn't going to put up a fight. The $1.5m salary is irrelevant to his already comfortable retirement, and he has suffered far too much public opprobrium already.
But what principles is Mr Feinberg operating on? He has promised to set them out publicly soon, but I am not optimistic they will be coherent, or even fair. I dislike their retroactive nature, and am nervous about ripping up contract law.
The only way to see this is as an exercise in raw power. I'm a US taxpayer, so $1.5m less for Ken Lewis is $1.5m more we might get back of the bailout funds. It is a model that shareholders might want to follow for future pay rounds: private-sector pay tsars, appointed to represent investors, who would sit on remuneration committees and talk down the awards – before they are written into contracts.
If there is a corporate metaphor for our intoxication with finance over the credit boom years, than General Electric is it. What started out as a small financial services division offering credit to homeowners who wanted to buy its appliances swelled and swelled until it was generating more than half the company's profits in 2007.
Obviously, it plunged to huge losses last year, on sub-prime mortgage lending, but results yesterday reveal that it is further from a return to health than many had hoped.
Jeff Immelt, GE chief executive, said he was shrinking the business quickly back down to size, but there should be more urgency, if not for GE's shareholders then for the financial system as a whole. GE Capital is just the sort of "too big to fail" institution that shouldn't be allowed to exist outside of a heavily regulated bank, yet GE's efforts at the moment are concentrated on (successfully) lobbying to fend off quick implementation of the new financial sector reforms, which could have forced it to immediately recapitalise and probably divest the division.
GE Capital was again the weak spot of quarterly earnings yesterday, and the company admitted that its commercial real estate investments were tacking close to the most adverse scenario imagined under the US government's "stress test". Its insistence that the business does not need to be recapitalised – with big dilution to GE shareholders – looked even more hollow last night than it did before. It certainly will need to be when the financial reforms are enacted and newly empowered regulators sweep through, and it is endangering the financial system while it remains so shaky and so reliant on wholesale funding markets. GE should face up to its responsibilities sooner rather than later.
Obviously, it plunged to huge losses last year, on sub-prime mortgage lending, but results yesterday reveal that it is further from a return to health than many had hoped.
Jeff Immelt, GE chief executive, said he was shrinking the business quickly back down to size, but there should be more urgency, if not for GE's shareholders then for the financial system as a whole. GE Capital is just the sort of "too big to fail" institution that shouldn't be allowed to exist outside of a heavily regulated bank, yet GE's efforts at the moment are concentrated on (successfully) lobbying to fend off quick implementation of the new financial sector reforms, which could have forced it to immediately recapitalise and probably divest the division.
GE Capital was again the weak spot of quarterly earnings yesterday, and the company admitted that its commercial real estate investments were tacking close to the most adverse scenario imagined under the US government's "stress test". Its insistence that the business does not need to be recapitalised – with big dilution to GE shareholders – looked even more hollow last night than it did before. It certainly will need to be when the financial reforms are enacted and newly empowered regulators sweep through, and it is endangering the financial system while it remains so shaky and so reliant on wholesale funding markets. GE should face up to its responsibilities sooner rather than later.
So, the bosses of Goldman Sachs and Morgan Stanley think the press, the public and the politicians should stop obsessing about the size of their employees' bonuses.
To David Viniar and John Mack I would say: in my experience, we are only reflecting the amount of time some of their employees spend thinking about the size of their bonuses.
Long may this important debate continue.
To David Viniar and John Mack I would say: in my experience, we are only reflecting the amount of time some of their employees spend thinking about the size of their bonuses.
Long may this important debate continue.
