Archive for May, 2011


5 Highest Paid CEOs

5. Michael White, DirecTV

Income: $32.6 million

Since taking the helm of the satellite – TV provider in January 2010, White has earned millions from options and performance-based stock incentives. But don’t forget, he did bravely endure a week of fielding customer service calls and installing satellite dishes for an episode of Undercover Boss.

4. Martin Franklin, Jarden

Income: $45.2 million

Under Franklin’s leadership, Jarden, the manufacturer of several well-known brands such as Oster, Sunbeam, Coleman and K2, saw a net sales increase of 17 percent and raised 27 spots on the Fortune 500 List in 2010. Franklin clearly reaped the benefits.

3. Leslie Moonves, CBS

Income: $53.9 million.

Moonves has been the President and Chief Executive Officer of CBS since January 1, 2006. The corporation, which includes Showtime, the CW and Simon & Schuster, had a 29 percent increase in free cash flow this past quarter. Compared to the $853 million CBS now has to spend, taking home $53.9 really doesn’t seem unreasonable, does it?

2. Larry Ellison, Oracle

Income: $68.6 million

The CEO of Oracle, which provides business software and hardware systems to many of the top Fortune 100 companies, generously offered to forgo his salary this year. Although this may sound like a generous sacrifice, he did keep his options — which were valued at $61.9 million.

1. Philippe P. Dauman, Viacom Inc.

Income: $84.3 million

Dauman, Viacom’s CEO since 2006, received a $54.3 million equity award after renewing his contract for another five years. This bonus more than doubled his 2009 pay and put him at the top of the high-paid CEO heap. Viacom Inc. is made up of the MTV Networks, Paramount Pictures, Nickelodeon, BET Networks and COMEDY CENTRAL — just to name a few.


Debate rages over oil speculators

As the price of oil climbed over the past few months, a growing army of commentators and pundits grimly hinted about “speculators” who were manipulating the oil market and profiting from the misery of the American people. In the darkest depictions, these speculators were alleged to be aligned in a vast, global cabal bent on squeezing money out of the U.S. middle class by driving up the price of crude.

(Story continues after video)

These rumblings about speculators are hardly surprising: They echo the groundswell that emerged three years ago, the last time thatgas pricesexploded. For that matter, there’s no doubt that oil speculators exist: Oil futures are traded on the New York Mercantile Exchange (NYMEX), as well as on London’s Intercontinental Exchange (ICE) and through direct sales. But do those speculators wield the diabolical, nearly omnipotent power over the market that some critics claim, or are they — like the drivers who are now paying close to $4 a gallon for gasoline — merely riding pre-existing trends?

Supply and Demand vs. Speculation

In all likelihood, the answer is a bit of both. The traditional explanation for gas prices is that they move based on supply and demand: Put simply, there is a limited supply of petroleum available on world markets at any given time, and as a rapidly growing number of people in emerging economies like China and India buy cars and become drivers, Americans must compete for fuel in an ever-more-crowded marketplace.

With more drivers clamoring for a share of that limited supply of gas, oil companies, refineries and gas stations can charge more, and the price goes up. But rising prices may lead drivers to cut back on their gas consumption, which increases the available supply and pushes the price back down.

According to speculation theorists, this supply-and-demand equation is being short-circuited by commodities traders, who push the price of gas up in order to reap a quick profit. These traders buy oil futures at low prices using mostly borrowed money, encourage the price to rise, then sell the futures at the new, higher price and collect the difference. Meanwhile, when oil producers see the market rising, they try to hold on to their crude so that they, too, can sell it at an inflated price — which reduces supply further. Between the traders and the producers, oil prices shoot up, torturing drivers.

The Disappearance of Oversight

Up until a few years ago, oil speculation wasn’t really a problem: Crude oil futures could only be bought and sold on the NYMEX, where they were regulated by the Commodity Futures and Trading Commission (CFTC), a government organization that was created in 1974 to — you guessed it — protect the market against speculators. For decades, the CFTC did its job well, watching over sales of oil futures and ensuring that investors didn’t drive up prices to make a profit at the expense of consumers. But in 2000, everything changed.

That year, two events effectively crippled the CFTC. The first was the passage of a provision of theCommodity Futures Modernization Act— sometimes called the Enron loophole — that made it legal for companies to trade oil futures outside of the NYMEX in what are called over-the-counter (OTC) trades. The same year, the London-based Intercontinental Exchange made it possible for investors to buy and sell European oil futures, and offered a platform for OTC trading. In addition to driving up the global price of oil, futures trading on the ICE began to have a direct impact on U.S. gas prices in 2006, when the ICE gained the right to list U.S. oil futures. Since the CFTC could only regulate trades on the NYMEX, those events made it possible for speculators to escape oversight.

While it’s difficult to prove whether or not speculators are directly responsible for high gas prices, most analysts agree that some portion of the current high cost of gas is attributable to the buying and selling of oil futures. After the sharp rise and steep fall oil prices took in 2007 and 2008,investigators found that81% of gas contracts on the NYMEX had been held by speculators. In fact, 11% were held by a single company, Vitol. With that kind of pull, anti-speculation analysts argue, there’s no question that oil traders can manipulate oil prices.

We Have Met the Enemy and He Is Us

But are gas speculators really the diabolical masterminds that some analysts have made them out to be? Fred Rozell, director of retail pricing for theOil Price Information Serviceargues that these investors aren’t malicious.

“Oil is a good bet for investors who are looking to reap a solid return on investment,” he says. “This is especially true in the current economic climate, as a slowly improvingeconomypoints to increased consumption and tensions in the Middle East are fueling fears of a supply disruption.” In fact, Rozell notes, many of these oil speculators are 401(k) plans that benefit middle-class consumers.

Beyond that, there’s always a seasonal increase in the price of fuel. In the spring, gas companies switch over from their winter-grade fuel to their summer-grade. The summer mix contains different additives that, according to the EPA, cut down on pollution. To make the summer-grade fuel, refineries have to briefly shut down, a move that causes the price of gasoline to shoot up. Rozell calls this seasonal increase the “petronoia rally,” as the brief gas shortage fuels paranoia among consumers and investors. He notes that gas prices usually peak in early May, then slowly decline.

What Can Be Done?

With high gas prices threatening America’s fragile economic recovery, many people are asking what can be done to curb speculation. Last month, the Department of Justicelaunchedthe Financial Fraud Enforcement Task Force, which is tasked with fighting illegal oil speculation. While this might help somewhat, the sad fact is that most oil speculation occurs legally on the NYMEX, the ICE and in OTC trades. Ultimately, the solution is to increase the power of the CFTC.

Last year’sDodd-Frank Wall Street Reform and Consumer Protection Actwas designed to do just that: Among other things, it gave the CFTC the power to regulate OTC trades. However, conservative opponents of the law have fought against its implementation: U.S. Reps. Darrell Issa (R-Calif.) and Michele Bachman (R-Minn.)introduced legislationto repeal the law, and Rep. Frank Lucas (R-Okla.) recently proposedH.R. 1573, which would delay its implementation until 2013.

If the Dodd-Frank Act’s provisions go into effect, they could go a long way towardstabilizing gas prices, which would be a major boon for consumers. If not … well, public transportation is looking more and more attractive.

See full article from DailyFinance:

AIG share price falls short of expectations

Aig Stock

Posted: 05/11/11 08:22 AM ET


NEW YORK: American International Group and the U.S. Treasury will sell nearly $9 billion in AIG stock, they said on Wednesday, a huge offering but less than half of what had been contemplated earlier this year.

To be sure, when AIG was rescued in September 2008, few expected it would even exist today. The company received $182 billion in bailouts and managed to restructure while preserving two core businesses.

But the prospective offering of 100 million shares by the company and 200 million shares by the Treasury has been pressured by the slide in AIG’s stock.

A mix of heavy interest from short-sellers betting the shares would fall further, dilution fears for those with long positions and operational questions linked to legacy charges at two AIG units weighed on the shares, driving them from the mid-$40s range to the upper $20s.

AIG said last Friday it needed to raise $3 billion in the offering, which would imply a price of around $30 a share. But one investor said Wednesday the offering was more likely to price at a discount to where the shares are now, a view shared by most sources familiar with the process.

If the stock priced at a 5 percent discount to Tuesday’s close, as has been suggested is possible, the offering would be worth $8.44 billion.

When Wall Street banks offered their services to manage the stock sale in January, there was talk of an offering of more than $20 billion.

The U.S. Treasury also has the option to sell an extra 45 million shares to cover any over-allotments, which would raise the value of the sale to more than $10 billion.

Assuming the Treasury sells only the 200 million shares, the government’s stake in AIG would fall to 77 percent from the current 92 percent.


Mortgage restructuring may be imposed

Foreclosure Crisis

First Posted: 05/10/11 08:18 PM ET Updated: 05/10/11 08:30 PM ET


The nation’s five largest mortgage firms may be forced to reduce loan balances for distressed homeowners as part of an agreement with state attorneys general and the Obama administration to settle claims of faulty mortgage practices, a top state official involved in the negotiations said Tuesday.

The proposal is part of a set of remedies banks would have to agree to in order to settle the state and federal probes launched last autumn, which found that the largest mortgage firms illegally seized the homes of at least dozens of borrowers and engaged in shoddy practices that short-changed troubled borrowers.

Mortgage principal reductions would comprise part of a larger fine levied on Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial. Penalties could reach $30 billion, officials said.

The forced reduction of mortgage principal as a penalty against flawed past practices has proven contentious. Some Republican attorneys general have objected, as have some Republican members of Congress.

On Tuesday, however, a state official told The Huffington Post on condition of anonymity that the option “very much remains on the table.”

While officials have not determined how much would be exacted from the banks — and specific dollar amounts to settle the probes have not yet been discussed between the state and federal governments and the banks — the proposal to compel financial firms to cut loan balances is part of one of two documents circulated Tuesday at a hotel in northern Virginia, where bankers, state officials and policy makers from the Obama administration began a three-day meeting.

The targeted banks have argued vociferously, both in private discussions and in public, that they opposed cutting distressed homeowners’ principal balances.

During meetings two weeks ago, representatives from such banks conducted a presentation which they claimed illustrated that mandating principal reductions would not prevent a significant number of new foreclosures and would be harmful to the general economy.

The banks said “it would trigger a stampede of strategic defaults,” an official familiar with one of the two discussions said at the time, referring to instances in which borrowers who can afford to make good on their obligations choose not to. Strategic defaults are much more common in the business world than among homeowners, according to experts who study the issue. Homeowners generally feel a moral obligation to continue making their payments, whereas corporations view the breaking of contracts as pure business decisions.

Government officials questioned the banks’ assumptions and fought back against their claims.

The other document circulated Tuesday outlines standards that mortgage firms would have to adhere to for current and future borrowers, like forcing banks to ensure they have the right documentation when they move to repossess homes. The document was revised from an earlier draft first circulated in early March, The Huffington Post reported last week.

The standards are a response to investigations launched last fall after the nation’s largest lenders voluntarily halted home seizures when faulty document practices — like so-called “robo-signing” — came to light, erupting into a nationwide scandal. Currently, no national standards govern how mortgage firms should treat borrowers who fall behind on their payments or default on their obligations. Congress has taken up the matter, and officials generally agree on how mortgage firms should treat borrowers.

Tuesday’s bipartisan meeting included the Washington Attorney General Rob McKenna (R) and Colorado Attorney General John Suthers (R), who called in remotely. Top officials from Florida’s and Texas’ attorney general offices, both led by Republicans, attended, along with the Democratic attorneys general from Delaware, Iowa, Illinois, North Carolina and Connecticut.

Top officials from the Treasury Department, Department of Justice and the Department of Housing and Urban Development were also present.


White house braces for more investigations

White House Hires Communications Hand To Handle Issa Oversight

First Posted: 05/11/11 11:37 AM ET Updated: 05/11/11 12:07 PM ET


WASHINGTON — The Obama administration is staffing up in preparation for expanded oversight and inquiries from a Republican-run House of Representatives.

Eric Schultz, the former communications director of the Democratic Senatorial Campaign Committee, officially joined the White House on Monday. While his portfolio will include issues primarily dealing with the Department of Justice, another key function will be to handle matters relating to and resulting from investigations launched by Rep. Darrell Issa (R-Calif.), chairman of the House Oversight Committee.

“Eric Schultz started Monday. He will be one of three associate communications directors, alongside Kate Bedingfield and Sandra Abrevaya,” said a top administration official. “Eric’s portfolio of issues will focus mainly on DOJ and other oversight-related topics.”

Issa’s investigatory arm has thus far been a bit more subdued than early reports suggested it might be. But that doesn’t mean the California Republican lacks bite. Issa’s committee has held hearings on everything from environmental regulations to the Presidential Records Act, from freedom of information standards at the Department of Homeland Security to the underlying causes of the foreclosure crisis.

Currently, Issa’s office is entangled in an effort to uproot information on firearms being transferred via Bureau of Alcohol, Tobacco, Firearms and Explosives agents to straw purchasers in Mexico. On Tuesday, the Oversight Committee announced it would hold hearings on a draft executive order requiring federal contractors to reveal their campaign donations. An Obama administration official will testify at those hearings.

Much of the administration’s pushback to these inquiries or hearings has been done by the agencies themselves rather than by the White House’s own press team.

Schultz steps into a position that the president’s communications shop has been attempting to fill for some time. The original candidate for the role was former press aide Ben LaBolt, but he left the administration to head communications for Rahm Emanuel’s mayoral run in Chicago. Rather than returning to the White House upon Emanuel’s win, he signed on as press secretary for President Barack Obama’s reelection campaign.

Schultz is no stranger to hostile political climates. Prior to taking over at the DSCC, he handled press for Al Franken’s 2008 Senate campaign in Minnesota, including the months-long recount against former Sen. Norm Coleman. Before that, he was national press secretary for John Edwards’ 2008 presidential bid, at one point tasked with handling press inquiries relating to Edwards’ extramarital affair.


Gingrich White House bid pending

CNN Politics

Former House Speaker Newt Gingrich is expected to announce his presidential intentions Wednesday afternoon — bringing an end to speculation over his likely White House bid.

The Georgia Republican told reporters on Capitol Hill he will make his announcement via Facebook and Twitter.

“I have been humbled by all the encouragement you have given me to run. Thank you for your support,” Gingrich said Monday on his Facebook page.

House Majority Leader Eric Cantor, R-Virginia, said Wednesday morning that “the discussion around the presidential race will obviously increase” when Gingrich enters the race for the GOP nomination.

“I think Gingrich has always been an ideas man, and I’m sure that will provide a lot of positive input to the debate,” Cantor said.

The former speaker has traveled to key early voting states trying to build a network of support and has met with fundraisers. He has assembled a campaign team and told supporters he aims to raise $100 million.

Gallery: Potential 2012 GOP contenders

During his appearances, he has pushed a wide array of policy proposals in his bid to lay the foundation of a campaign and prove he is a serious candidate — not just a symbol of the past.

“I expect the American people in the end will be remarkably fair. They’ll render judgment and they’ll decide whether or not Newt Gingrich is somebody that they think can solve the country’s problems and be the kind of leader they want for this country,” Gingrich told Fox News in March.

March: Newt Gingrich for president?

2010: Gingrich takes jabs at president

2010: Gingrich: Obama is a ‘con man’

2010: Gingrich: Need to restore values

He has given his audiences a lot of political red meat and has not shied away from controversy. Speaking at the Iowa Faith and Freedom Coalition event in March, he said there is a difference between a majority of Americans and “the secular socialist people around (President Barack) Obama and the degree to which they do not understand America, cannot possibly represent America and cannot lead us to success.”

Recognized as probably one of the smartest Republican leaders, his agenda includes overturning the health care reform bill, eliminating the Environmental Protection Agency, pushing more development of energy sources and advocating tax cuts.

“He is a polarizing figure (who) comes with a fair degree of baggage,” Ford O’Connell, who worked on the 2008 McCain-Palin ticket, told CNN. He said Gingrich has to make himself relevant to the current political climate. “He does represent the past but has to show why he represents the future,” O’Connell said, adding that he thinks right now Gingrich is having difficulty doing that.

“If he can demonstrate why he is relevant to the future in the current political climate,” O’Connell said, “the baggage will dissipate.”

Some Republican activists not affiliated with a campaign have said Gingrich may not be disciplined enough to focus his ideas in order to run a successful campaign.

Pollster David Winston, who worked with Gingrich during his years in the House, said he can.

“There isn’t any question Newt Gingrich is a person with lots of ideas,” Winston told CNN. “The step for Newt here is to not just merely focus on the future … (but to) focus on the problems the country is most worried about.”

The former House speaker, who converted to Catholicism, the religion of his current wife, has especially reached out to the social conservative wing of the party — critical to success in the key states of Iowa and South Carolina.

“Some people may tell you we should stay away from values and stay away from social issues. I am here to tell you if you don’t start with values and you don’t start by describing who we are as Americans, the rest of it doesn’t matter. Life is not just about money,” he told the Conservative Principles Conference in Iowa.

Many of those activists are skeptical of him because of his two divorces.

“There’s no question at times of my life, partially driven by how passionately I felt about this country, that I worked far too hard and things happened in my life that were not appropriate,” Gingrich explained to the Christian Broadcasting Network’s David Brody.

After the Georgia Republican lost two runs for Congress in the 1970s, his third attempt in 1978 was successful. He was aggressive and rose to the second spot in the House Republican leadership. He was instrumental in helping to craft the 1994 Contract with America — a blueprint that helped the Republicans take control of the House. He was elected speaker but, after a disappointing GOP showing in the House elections in 1998, decided to retire in 1999.

He then went about rehabilitating his political career, forming a conservative policy think tank called American Solutions, starting a string of successful businesses and becoming a political commentator. He has an impressive record of fundraising, he has developed a large network of supporters and he has authored almost two dozen books and produced movies on a wide range of topics.

Gingrich still has some work to do on his reputation. Forty-four percent of those surveyed in a recent CNN/Opinion Research Corp. poll said they had an unfavorable opinion of him, while 30% said they had a favorable one. That gives him one of the largest unfavorable rankings of the GOP presidential contenders, although it also shows he has high name recognition.

When Republicans are asked who they favor for the nomination, 10% choose Gingrich, tying him with Rep. Ron Paul but behind Sarah Palin, Mitt Romney, Donald Trump and Mike Huckabee.

“He brings a lot to the debate. But there are a lot of candidates in the process of going through a presidential primary. We’ll sort out the good from the bad, and we’ll end up with a good candidate,” House Speaker John Boehner, R-Ohio, said on NBC’s “Today” show Tuesday regarding a Gingrich candidacy.

It has not been all smooth sailing as Gingrich tested the waters. He admitted his advisers flubbed the initial announcement in March that he was exploring a run and starting a website, when expectations were built up that they would announce a more formal step.

“It led to unfortunate confusion,” he told the Des Moines Register. “I wish we had been a little more structured… but I don’t take it as a serious problem.”

Gingrich also drew some criticism for not giving a coherent critique of the Obama administration’s policy on Libya. He told Fox News on March 7, when asked what he would do, that he would “exercise a no-fly zone this evening.” But later, after a no-fly zone was put in place, he said on NBC’s “Today Show” that “I would not have intervened. I think there are a lot of other ways to affect (Libyan leader Moammar) Gadhafi.”

For his part, Gingrich has denied he flip-flopped, saying he was just commenting on the circumstances as they changed and posting on his Facebook page, “President Obama said publicly that ‘it’s time for Gadhafi to go.’ Prior to this statement there were options to be indirect and subtle to achieve this result without United States military forces.”

“The president, however, took those options off the table with his public statement,” he continued. “That’s why during a March 7th Greta van Susteren interview, I asserted that the president should establish a no-fly zone ‘this evening.'”


Miss. Delta Area Prepares for Flood Disaster

Mississippi Delta

HOLBROOK MOHR and SHELIA BYRD   05/10/11 11:12 PM ET   AP


TUNICA, Miss. — The bulging Mississippi River rolled into the fertile Mississippi Delta on Tuesday, threatening to wash away stately homes and shotgun shacks, and destroy fields of cotton, rice and corn in a flood of historic proportions.

The river took aim at one of the most poverty-stricken parts of the country after cresting before daybreak at Memphis, Tenn., just inches short of the record set in 1937. Some low-lying neighborhoods were inundated, but the city’s high levees protected much of the rest of Memphis.

Over the past week or so in the Delta, floodwaters along the rain-swollen river and its backed-up tributaries have already washed away crops, forced many people to flee to higher ground and closed some of the dockside casinos that are vital to the state’s economy.

But the worst is yet to come, with the crest expected to roll through the Delta over the next few days. The damage in Memphis was estimated at more than $320 million as the serious flooding began, and an official tally won’t be available until the waters recede.

To the south, there were no early figures on the devastation, but with hundreds of homes already damaged, “we’re going to have a lot more when the water gets to where it’s never been before,” said Greg Flynn, a spokesman for the Mississippi emergency management agency.

Across the region, federal officials anxiously checked and reinforced the levees, some of which could be put to their sternest test ever.

About 10 miles north of Vicksburg, Miss., contractors lined one side of what is known as a backwater levee with big sheets of plastic to keep it from eroding if floodwaters flow over it as feared – something that has never happened to the levee since it was built in the 1970s.

In Vicksburg, at the southern tip of the rich alluvial soil in the central part of the state, the river was projected to peak on Saturday just above the record set during the cataclysmic Great Flood of 1927. The town was the site of a pivotal Civil War battle and is home to thousands of soldier graves.

Wearing rubber boots and watching fish swim up and down his street, William Jefferson stood on a high spot in his neighborhood just outside Vicksburg. He said he had not had a hot meal since water started coming into his house a few days ago. On Tuesday, the house was under at least 3 feet water, as were dozens of other homes in the neighborhood. Nearby, his brother Milton cast a fishing rod.