Unemployment surges to 9.6%

Job losses continued to mount in the U.S. economy last month, though at a more modest pace than expected, putting further pressure on policy makers to take action to spur growth and employment.

A separate report indicated the U.S. nonmanufacturing sector expanded at a much slower pace last month. Nonfarm payrolls fell by 54,000 last month, matching the level of revised losses recorded the previous month, the U.S. Labor Department said Friday. The revision in July layoffs to 54,000 followed an original estimate of a 131,000 drop in payrolls. Read more at Wall Street Journal. 

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Fast food chain Burger King SOLD to private equity firm for $3.26 billion

Burger King, the fast food chain offering burgers through some 12 thousand locations, has been sold to private equity firm 3G Capital for a reported $3.26 billion. The Associated Press argues that the company's new ruler could help it expand its empire.

3G Capital is said to have huge ties to Latin American businesses, and purchased Burger King in a deal worth around $24 per share for the company's existing owners.

"Hopefully they'll be able to even provide more of an accelerant to the fire," John Chidsey, the company's chairman and CEO, told the Associated Press.

More than a third of Burger King's locations are said to be outside of the United States, and top brass at the fast food chain say that there is still massive room for expansion. Overall, they remain upbeat about the prospects for the company as it heads into a new era of business ownership. "This will give them more of an opportunity to develop a compelling menu," Morningstar analyst R.J. Hottovy said.

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Ben Bernanke: Too big to fail problem must be solved

The need to eliminate firms that are effectively "too big to fail" was the top lesson from the recent financial crisis, Federal Reserve Chairman Ben Bernanke told an investigative panel Thursday.

Regulators "now have the tools to do that" under the recently passed Dodd-Frank law, he said, and will force firms to divest or restructure if they pose an untenable risk to the broader economy. Read the rest at the Wall Street Journal.

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The six richest politicians in Congress (PHOTOS)

Despite the economic downturn, many members in Congress are still sitting pretty (financially speaking, that is). Turns out, it's not just fat cats on Wall Street who are getting all the fun. Check out our list of the top ten richest politicians in congress. Captions via the Huffington Post.

Senator John Kerry: $188 million

Sen. John Kerry (D- Mass.) can thank wife Teresa Heinz Kerry for the bulk of his fortune. The heir to the Heinz ketchup company married the senator in 1995.

Darrell Issa (R-Calif): $160.1 Million

Rep. Darrell Issa (R-Calif.) made his money by founding Directed Electronics, the largest maker of car security systems in the United States.

Jane Harman (D-Calif.): $152.3 Million

The California Democrat is another case of marrying well. Rep. Jane Harman's (D-Calif.) husband, Sidney, founded Harman International Industries, which makes loudspeakers, CD and DVD players, and other electronics.

Michael McCaul (R-Texas): $73.8 Million

Rep. Michael McCaul (R-Texas) is married to Linda McCaul, the daughter of the founder of Clear Channel Communications, one of the largest radio empires in the United States.

Sen. Jay Rockefeller (D-W. Va.): $83.7 Million

An old money candidate, Sen. Jay Rockefeller's (D-W. Va.) money can be traced back generations to his great-grandfather, John D. Rockefeller, the Standard Oil tycoon.

View the top ten list at Huffington Post.

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Thought for college: The eight majors that will leave you penniless

When one heads off to college, or simply makes a career choice, it might be useful to check out the new list from PayScale.com which ranks the lowest paying College majors.

The New York Daily News did a review of the list:

1. Social work. The median starting pay is $31,800 per year and the median mid-career pay is $44,900. The job, which involves dealing with homelessness, drug abuse, and poverty, can be draining -- both emotionally and financially.

"Anybody who does this isn't in it for the money," Katie Stine-Hodges, a Portland State University graduate who majored in child and family studies, told CNN. Stine-Hudges, now a case manager for a foster program in Portland, added: "I feel lucky to be able to help people and go home at night and feel like I accomplished something."

2. Athletic Training. The median starting pay is $32,800 and the median mid-career pay is $45,700. Athletic trainers put in long hours for not that much money, but their job can be rewarding. A 60-hour-plus work week is typical for Chris Shenberger, who got his degree in athletic training from Capital University and now treats injuries, teaches and handles insurance claims atCase Western Reserve University, where he's head athletic trainer.

"In terms of the amount of time I put in, it's definitely low-paying, and I make significantly less money than a good portion of head coaches," he told CNN. "But I'd rather get paid less money and be here until 10 p.m. because I like being around athletics a lot more than I would like sitting at a desk somewhere, even if it would bring me more money."

3. Recreation and leisure. Median starting pay is $33,300 and the median mid-career pay is $53,200. In this field, camp directors, community planners and park managers do everything from organizing events to planning activities for kids. The paycheck's relatively small, but the job may make up for it in terms of fun quotient.

Art. The median starting pay is $33,500 and the median mid-career pay is $54,800.  Many recent fine arts majors are still looking for work or trying to make ends meet from freelance gigs. Alison Tremblay majored in art with a concentration in photography at Alfred University, and took a job in data entry when she couldn't find a fulltime job in her field. But she's glad she studied art. "I guess I wish I had taken more practical courses like business, but I couldn't imagine not majoring in art and not having a camera in my hand," she told CNN. "I'm just trying to take my skills and turn them into something where I can actually make money -- that's the real struggle." [See the full list]

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Shop at Target? You could be funding an anti-gay group

Remember that $10 you spent on a t-shirt at Target? Well, that just may have gone to fund an anti-gay political group.

Discount retailer Target has come under fire for its donation to a group backing a gubernatorial candidate that, ABC reports, has 'a penchant for opposing gay rights'.

Read the full article at ABC News

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Apple profit rises 78%, may just be the most profitable religion on the planet

Microsoft could learn a thing or two from Apple. Their philosophy on making products that people actually want to buy appears to be working well for them; profit at the Cupertino based company skyrocketed 78% last quarter.

Apple said that the huge growth that the company continues to see is a result of a number of new products - which include the iPad and new iPhone.

The Vatican could take a tip or two as well. Another key to Apple's success is its huge cult-like following.

The company has a devoted fan base that quickly moves in when a product is released - immediately catapulting it into the spotlight of consumer desirability, particularly among technology lovers.

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Elon Musk, Tesla Motors CEO and PayPal founder is so very, very poor

The CEO of Tesla Motors, a former member of the PayPal 'mafia' and tech-boom poster-boy, has reported that he is out of cash, now unable to fund his extravagant lifestyle.

In a Dealbook column entry this morning, it was revealed that despite his fortune when he was thirty eight (it totaled about $200 million) he is now broke.

Musk says that he put his last few millions into Tesla, the company named after a Serbian electrical engineer which is trying (somewhat successfully) to put the sex appeal into electric cars.

The article compares the financially troubled tech baron to the fictional Iron Man character Tony Stark, and reveals Musk's 'liquidity issues'.

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Facebook feeling like an older company as Zuckerberg admits that growth has slowed

Although Facebook may have had some fairly daunting issues involving privacy and its public image (not to mention a film about the company's founder that reportedly makes him look like an asshole) no one had really expected that the company will have slowed by any considerable measure in growth.

Mark Zuckerberg, the founder and CEO of the company has said that the company's rapid growth is almost over, and that the company has slowed in terms of growth.

This isn't necessarily bad, however; Facebook is on track to reach what is perhaps over one billion dollars in revenue next year.

Perhaps the company will have to work on its public image, which, as of late, may have been something of a turn-off to potential users.

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Late king of pop still $300 million in debt

The post-death record sales of Michael Jackson may have been enough to silence some creditors, and keep debt collectors at bay...but the late "King of Pop" is still $300 million in debt.

The estate has reportedly generated some $200 million and paid off all his loans except one - worth around $300 million.

As Brian Moylan rightly put it, even while dead, Jackson still makes way more than you.

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Oil spill costs for BP top $2 billion

BP, the company deemed responsible for the oil spill currently occurring in the Gulf of Mexico has recently reported that their costs associated with their (as yet unsuccessful) cleanup effort have totaled above two billion dollars.

BP shares fell 4 percent in trading on the London Stock Exchange in response to further woes.



Clearly it has been $2 billion that hasn't been very well spent. BP is still nowhere near a completed clean-up.

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Barry Diller laughs at your online paywall

When asked about the new paywall that the New York Times is erecting around its website, Barry Diller, longtime media mogul and studio head turned internet entrepreneur, gave us his everlasting wisdom on the matter of paid online content. 

His wisdom: paywalls will fail at first, but will eventually succeed. 

In an interview with Bloomberg TV, Diller, who is the Chairman and CEO of IAC (the owner of Ask.com among other sites) said that free content will end because "people are used to paying for applications". 

Although I'm not entirely sure how he made that correlation between content and applications, and how the two relate in terms of people paying for digital products, he may very well have a point. 

"Everyone said, no one will pay for music. It took seven or eight years for the iTunes concept...and now it's a multibillion business," he said. "People are paying for music, they could get it free, but they're paying for it....these are industries so to speak that are going to push to say our content is, we think it's valuable at this. Steve Jobs did this in music. He said music is for 99 cents and he changed everything. Because he said I'm going to price it so low, that everyone is going to adopt it. So the same will happen."

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China set to overtake USA in manufacturing

The US remained, by a small margin, the world's largest manufacturer last year. But this year, as the FT has reported, that crown is set to be lost to China - well, as if we didn't see that coming.

Last year, the US created 19.9 per cent of world manufacturing output, compared with 18.6 per cent for China, with the US staying ahead despite a steep fall in factory production due to the global recession.

That the US is still top comes as a surprise, since in 2008 – before the slump of the past two years took hold – IHS predicted it would lose pole position in 2009.

However, a relatively resilient US performance kept China in second place, says IHS, which predicts that faster growth in China will deny the US the top spot next year.

Read the Financial Times article 

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Facebook revenue for 2009 almost $800,000,000?

Tech analysts may be having a community word-eating get-together, as revelations surface that social networking giant (which was previously shrugged off as being unprofitable) may have had revenues close to $800 million in 2009.

Facebook, which was founded and is managed by Mark Zuckerberg, a hacker and Harvard dropout, has only been in operation some six years, but is already showing signs of high profitability.

Sources even noted that the company had a strong net profit to match all of that revenue - meaning that the company is covering its huge costs.

This is particularly promising, especially when one considers that other popular 'Web 2.0' sites like YouTube, are still struggling to pay bandwidth bills. Facebook, unlike YouTube which sold to Google in 2006, is still an independent company.

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Telecom's laughably sentimental XT TV ad falls flat with viewers

It's true - some damage simply irreparable. Not least of which is the damage inflicted upon the reputation of Telecom's new (well, not really anymore) mobile network - dubbed XT - upon which was heaved millions of dollars and for a large part Telecom's own reputation as a consumer brand and reliable telecommunications provider.

However, it can surely be no secret that the new television campaign (the TV spot of which is embedded above) has fallen flat with consumers, particularly those who put their faith in XT as the next generation of mobile communications in New Zealand, but were sorrily disappointed. 

I particularly like the part where Reynolds, Telecom's CEO, utters "so you can find out just how good XT really is". You can almost hear the thousands of XT customers shouting in outrage "yeah we know just how crap it is, thanks." 

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Bernie Madoff: "F**k my victims"

It is fairly evident that ponzi scheming fraudster Bernard Madoff has very little remorse for the hurt he has caused his victims, not to mention the $19 billion he stole from them. The imprisoned white collar criminal was reported to have said to a fellow inmate, according to Britain's Daily Mail, "F**k my victims".

Madoff, who was featured in a lengthy piece for New York magazine by Steve Fishman, also added that he "carried them for twenty years" - adding "and now I'm doing 150 years".

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Telecom shares take a dive as talks of separation continue

Shares in New Zealand's largest telecommunications firm, Telecom, fell to a new low today as talks of possible corporate breakups continue. That, combined with continued problems regarding the company's new XT Network, and a number of other issues continue to plague the company as it attempts to reinvent itself in the eyes of consumers after a number of PR fallouts.

Telecom CEO, Paul Reynolds, said that the company was focused on aligning the goals and interests of the company with that of New Zealanders, the Government and investors.

"In making a thorough assessment of structural separation we need to have a detailed understanding of the regulatory environment, and this warrants detailed discussion and analysis with Government before any decisions regarding its viability can be made," he said.

"Clearly potential partners are working hard to put their best foot forward", he said.

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Dubai lenders ink debt deal

Dubai World, a state owned company of the oil rich emirate, Dubai, has reached a deal to restructure its $23.5 billion worth of debt.

The deal emerged after many months of discussions between Dubai World executives and a number of bankers and world financial specialists. More specifically, a committee representing around 90 lenders was formed in order to work out a deal with the debt ridden company, which is involved in many of the high-profile real-estate developments currently taking place in the city.

The lenders, which include HSBC, Royal Bank of Scotland and Mitsubishi UFJ, have collectively agreed to extend the timeframe of Dubai World's loans, giving the company time to cut costs, sell assets and have a better chance of paying back its many billions in debt.

The banks will reportedly be given an interest rate based on currency and maturity. The interest rate will vary from lender to lender.

The Dubai Stock Market rose 1 percent on the news.

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Key isn't ruling out further tax cuts

Prime Minister John Key has indicated in the frenzy over the recent 2010 Budget that he isn't ruling out further tax cuts. Mr Key told reporters this afternoon that he was happy with the new tax structures.

He's not ruling out further tax cuts in the future, however. "I am not going to rule out that there might be other changes in the future. There always can be."

Mr Key also stated that his government hadn't actually changed the level of tax, just the overall mix. "It's about broadening the base", he said.

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Too Big to Jail: Executives unscathed as regulators let banks report criminal fraud

By David Heath

Republished with permission. 

The financial crisis has spawned hundreds of criminal prosecutions for alleged fraud. Yet so far, defendants have been mostly minor players such as real-estate agents, mortgage brokers, borrowers and a few low-level bank employees. No senior executives at large financial institutions face criminal charges.
That’s in stark contrast to prosecutions during the savings and loan scandal two decades ago, when the government’s strategy targeted and snagged some of banking's most powerful players. The approach back then succeeded in sending scores of S&L executives to prison, as well as junk-bond king Michael Milken and business tycoon Charles Keating Jr.


One explanation for the difference may be that key bank regulators – who did the detective work during the S&L crisis and sent more than 1,000 criminal referrals to prosecutors – have this time left reporting fraud up to the banks themselves.
Spokesmen for two chief regulators, the Comptroller of the Currency and the Office of Thrift Supervision, say that they have not sent prosecutors a single case for criminal prosecution.


An OTS spokesman said the agency, much like the banks themselves, does not see much evidence of criminal fraud inside the financial institutions. The spokesman, Bill Ruberry, citing the agency’s enforcement director, said, “There may be some isolated cases, but certainly there’s no widespread patterns.”


That surprises William K. Black, a former OTS official who helped coordinate criminal investigations during the S&L crisis.


“Dear God,” Black said when told bank regulators haven’t made any criminal referrals. “Not a single one?”

GRAPHIC: Cases Target Borrowers, Brokers Instead of Banks »
U.S. banks have reported an explosion of mortgage fraud since 2002, but primarily blame bit players instead of bank insiders. An Investigative Fund analysis of mortgage fraud prosecutions in California shows that only two bank employees have been charged in mortgage fraud cases in recent years. View a breakdown of fraud referrals by subject.

Black sees many signs the the government is less aggressive than during the S&L era – and could result in more bad behavior.


“This crisis was not bad luck," he said. "It was done to us. When you bring those convictions, you hope that at least for a while to deter.”


Banks have reported massive amounts of fraud to the Treasury Department but have not held themselves – or their top executives – responsible, instead pinning blame on borrowers, independent mortgage brokers, and others.


That may account for the dearth of prosecutions against big fry. For instance, in California, among states where the mortgage meltdown hit hardest, the Huffington Post Investigative Fund identified 170 mortgage fraud prosecutions in federal courts. Only two are against employees of a regulated lender.


An Investigative Fund analysis shows that two-thirds of the 170 prosecutions are against mortgage brokers, real-estate professionals or borrowers – the same groups blamed by the banks when they report suspicious activities to regulators.


Besides the absence of criminal referrals, other plausible factors for the lack of major prosecutions may include a skittishness among prosecutors about filing cases they could have trouble winning, and a severe decline in investigative resources. The FBI dramatically shifted resources away from white-collar crime after the 2001 terrorist attacks.


To be sure, there are also notable differences between the S&L and current financial crisis, in the behavior of lenders during both periods, and between civil allegations of fraud and proving that someone committed a crime – all of which could account for the lack of big prosecutions.


But interviews with several law enforcement authorities suggest another explanation: A lack of active assistance to prosecutors by bank regulators who played key roles during the S&L crackdown. 


Those regulators sent detailed reports to prosecutors of known and suspicious criminal activity.
"Only the regulators can make a lot of these cases," Black said. "The FBI can make a few, but the regulators are the ones that understand the industry."





Banks Report on Themselves


Under intense political pressure in the late 1980s, the Justice Department and thrift regulators developed a strategy to thoroughly investigate failed S&Ls for evidence of fraud and to focus their resources on the highest ranking executives.


In the early years, between 1987 and 1989, there were more than 300 prosecutions. Some bank executives were already behind bars. In 1989, Woody Lemons, chairman of Vernon Savings and Loan in Texas, was sentenced to 30 years.


In June 1990, then-OTS director Timothy Ryan told Congress that his agency had established criminal-referral units in each of 12 district offices. In addition, more than 30 OTS employees were assigned as full-time agents of grand juries or assistant US attorneys to help prosecutions. And the agency prioritized prosecutions to a Top 100 list, targeting senior S&L executives and directors.


While data on criminal referrals during the S&L crisis is spotty, the Government Accountability Office reported that in the first ten months of 1992 alone – a random snapshot – financial regulators sent the Justice Department more than 1,000 cases for criminal prosecution.


One study showed that 35 percent of criminal referrals in Texas – ground zero for the S&L problems – were against officers and directors.


This time, prosecutors are relying more heavily on banks to report suspicious activity to the Treasury Department. Banks are required to report known or suspected criminal violations, including fraud, on Suspicious Activity Reports designed for the purpose. In effect, the reports, which can be many pages in length, provide substantive leads for criminal investigations.


Black scoffs at the strategy of leaving it to banks to ferret out all the fraud. “Institutions will not make criminal referrals against the people who control the institutions,” said Black.


A white-collar criminologist and law professor at the University of Missouri-Kansas City, he argues that there's ample evidence of fraud. Insiders working for lenders openly referred to loans they made without proof of income as “liar loans.” Many banks actively sought inflated appraisals in their rush to make as many loans as possible. As previously reported by the Investigative Fund, such lending practices contributed to the demise of Washington Mutual.


Not everyone agrees that such a case can be successful. Benjamin Wagner, a U.S. Attorney who is actively prosecuting mortgage fraud cases in Sacramento, Calif., points out that banks lose money when a loan turns out to be fraudulent. An investor in loans who documents fraud can force a bank to buy the loan back. But convincing a jury that executives intended to make fraudulent loans, and thus should be held criminally responsible, may be too difficult of a hurdle for prosecutors.


“It doesn’t make any sense to me that they would be deliberately defrauding themselves,” Wagner said.
So far, only sporadic news reports suggest that the Justice Department has ongoing criminal investigations against major banks such as Washington Mutual and Countrywide, as well as investment bank Goldman Sachs.


Fewer Cops on the Beat


The Justice Department, in response to written questions from the Investigative Fund, acknowledged the absence of criminal referrals from financial regulators. A new Financial Fraud Enforcement Task Force, formed by President Obama last fall, was trying to work out communication problems between Justice and the regulatory agencies, according to the head of the task force, Robb Adkins. Adkins has said that criminal referrals from regulators have been “too often the exception to the rule.”


At a Congressional hearing in December, Assistant Attorney General Lanny Breuer was asked why there have been no criminal cases brought yet against CEOs. “Don’t for a moment think [these cases] aren’t being investigated,” Breuer replied. “They are complicated cases. It took a long time in hatching them and developing them. But they will be brought.”


The system that tracks Suspicious Activity Reports, or SARs, detected a dramatic increase in mortgage fraud starting in 2003, when reports of mortgage fraud nearly doubled within a year from 5,400 to 9,500. By 2007, the number had exploded to 53,000. During those same years, many mortgage lenders dramatically lowered their lending standards. Banks often required no proof of income. Borrowers could even get loans without be able to repay them.


Yet in their reports, banks overwhelmingly have blamed others for fraud. Whenever a borrower's income was wrong on a loan application, the banks fingered borrowers 87 percent of the time and independent mortgage brokers 64 percent of the time, according to a 2006 Treasury analysis of the SARs. But the bank’s own employees were almost never blamed – only about four times in every 1,000 reports.
That might explain why so few prosecutions have targeted bank insiders.


Another reason for fewer prosecutions against bank employees is that the Federal Bureau of Investigation has far fewer agents working on the current crisis. Deputy Director John Pistole testified before Congress last year that the bureau had 1,000 people working on the S&L crisis at its height. That compares to about 240 agents working on mortgage fraud cases last year.
The FBI dramatically shifted its resources away from white-collar crime and to terrorism after the Sept. 11 attacks.


“We just didn’t have the cops on the beat” during the recent crisis, said Sen. Ted Kaufman, the Delaware 
Democrat who conducted a hearing on the lack of criminal prosecutions. “I was around during the savings and loan crisis [as a Congressional aide] and we had a lot more folks working it when it went down.”


Even with additional funding from Congress, which Kaufman helped push through, the FBI is budgeted to have 377 people working mortgage fraud cases this year, about a third as many as during the S&L investigations.


Charges Harder to Prove?
Charges in the recent banking crisis may be harder to prove, said Robert H. Tillman, who teaches at St. John’s University and who analyzed data about S&L prosecutions. Savings and loan executives who were convicted often personally approved large commercial loans for projects doomed to fail. Some would use federally insured deposits to pay themselves excessive salaries or to lend money to their own real estate projects. A few even took kickbacks.


This time, lending executives may have encouraged the making of bad loans, but they generally did not personally approve the loans, Tillman said. They didn't send emails telling the troops to make fraudulent loans but paid big commissions to loan offers who made risky loans. Then the executives were able to reap huge bonuses for making the company look so profitable.


So far, the biggest cases have been civil lawsuits brought by the Securities and Exchange Commission, including most recently a highly publicized securities fraud case against Goldman Sachs and one of its vice presidents, Fabrice P. Tourre. News reports suggest that a referral from the SEC's enforcement division to the Justice Department has led to a criminal inquiry.


Typically, federal authorities deal with massive financial scandals by picking a few cases they are confident they can win, said Henry Pontell, an expert on fraud at the University of California – Irvine.
This time, the administration may have been more focused on saving failing banks – and an entire financial system – than in prosecuting bank executives, Pontell said. Giving billions in bailout dollars to executives who encouraged fraudulent practices not only could complicate a case, it could prove embarrasing, he added.

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