Tag Archives: News event
by Liz Hester
After Jeff Bezos, CEO of Amazon, bought the Washington Post, and John Henry, billionaire owner of the Boston Red Sox, purchased the Boston Globe, questions began to circulate about coverage. Whenever newspapers change hands, it raises issues of corporate agendas, personal biases and other conflicts.
The New Yorker raised questions, writing about a Globe story in 2011 about the poor state of the Red Sox team. Here are excerpts from the column:
Would a Henry-owned Globe have run that story about the Red Sox? Or else, how might that story have been different? These questions are, of course, proxies for other ones—not just about the paper’s sports coverage but about the working model in which a newspaper must manage its editorial objectives while under the ownership of a wealthy, powerful figure with many business interests. In Henry’s case, those interests include, in addition to the Red Sox, a large share in the New England Sports Network television station, a NASCARracing team, and the storied Liverpool football club. (A spokesman for Henry didn’t respond to a request for comment.)
Brian McGrory, the editor of the Globe, was quick to dismiss speculation about the potential conflict of interest in sports coverage: “We have no plans whatsoever to change our Red Sox coverage specifically, or our sports coverage in general, nor will we be asked.” (In an e-mail, McGrory declined further comment.) This situation is not entirely novel: the former owner of the Globe, the New York Times Company, also had a stake in the Red Sox for ten years, before selling in 2012. During that decade, articles about the team carried a disclaimer explaining the relationship, a practice likely to be resurrected under Henry’s direct ownership. Eileen Murphy, a spokesperson for the Times, said that the sale to Henry “is the result of a very full and active sales process,” and that the company felt that the decision was “in the best interest” of shareholders, the newspapers being sold, and the Boston community.
The New York Times also ran a story after the purchase questioning how the Globe would deal with conflicts, especially given the history of tough coverage of the Sox:
“We don’t know what the new situation is going to be in terms of hierarchy, but I would hope to be able to continue to cover the Red Sox the way we always have, “ the sports editor, Joe Sullivan, said.
Acknowledging the potential conflict of interest, Sullivan said, “It will be there, hanging in the air.” He said the newspaper might need to include disclaimers when writing about Henry, as it did when The Times had an ownership stake in the team for 10 years. The Times sold its final stake in the group in 2012.
Dan Shaughnessy, The Globe’s lead sports columnist, has written critically about Henry since he became the principal owner of the Red Sox in 2002.
“There’s an inherent conflict of interest which no one can do anything about,” Shaughnessy said. “All we can hope for is that everyone is allowed to do his job professionally and that we are able to keep our independence.”
Ed Sherman wrote about the perception of biased coverage by talking about when he was covering baseball for the Chicago Tribune, which owned the Cubs at the time:
When I would hear about a Cubs bias, I used to tell people that the Tribune sports desk had many more Sox fans than Cubs fans. I was among a South Sider legion that included Bob Vanderberg, who continues to write books about the Sox. We all have fond memories of Dan Moulton, a cranky but beloved character nearly popping a vein after a Sox reliever blew a save.
Yet despite my protestations, people always thought the Tribune was in the bag for the Cubs. The paper owned the team. Hence, whenever the Cubs won (rarely, I might add during the Tribune‘s main ownership tenure), the newsroom surely exploded in a chorus of “Go, Cubs, Go…”
No matter what you say, people are going to believe what they want to believe. Perception easily was the biggest issue the Tribune sports staff encountered when it was the main owner of the Cubs.
As for his $250 million purchase, Bezos will take the Post private, freeing himself from the glare of shareholders and the need to report quarterly earnings. Amazon will have no role in the paper, the Washington Post reported on its own sale:
Bezos, in an interview, called The Post “an important institution” and expressed optimism about its future. “I don’t want to imply that I have a worked-out plan,” he said. “This will be uncharted terrain, and it will require experimentation.”
“There would be change with or without new ownership,” he said. “But the key thing I hope people will take away from this is that the values of The Post do not need changing. The duty of the paper is to the readers, not the owners.”
Despite the end of the Graham family’s control of the newspaper after 80 years, Graham and Bezos said management and operations of the newspaper will continue without disruption after the sale.
Weymouth — who represents the fourth generation of her family involved in the newspaper — will remain as publisher and chief executive of the Bezos-owned Post; Martin Baron will remain executive editor. No layoffs among the paper’s 2,000 employees are contemplated as a result of the transaction, Bezos and Graham said.
Bezos said he will maintain his home in Seattle and will delegate the paper’s daily operations to its existing management. “I have a fantastic day job that I love,” he said.
Despite his statements, Post readers will likely watch the paper for coverage of Amazon. How the business section titles earnings stories and if it writes features about the giant retailer will likely be clues about how Bezos will handle covering his company.
When I worked at Bloomberg, we didn’t cover the mayor. We wrote about New York and important policy but left the details of reporting on our passive owner to the other news organizations. So, ownership does have some affect on coverage. While some argue that it’s just perception, that can be damaging in its own right.
by Liz Hester
The new health care laws are putting pressure on unions and municipalities to trim prices in anticipation of higher costs down the line, according to a New York Times story:
Cities and towns across the country are pushing municipal unions to accept cheaper health benefits in anticipation of a component of the Affordable Care Act that will tax expensive plans starting in 2018.
The so-called Cadillac tax was inserted into the Affordable Care Act at the advice of economists who argued that expensive health insurance with the employee bearing little cost made people insensitive to the cost of care. In public employment, though, where benefits are arrived at through bargaining with powerful unions, switching to cheaper plans will not be easy.
Cities including New York and Boston, and school districts from Westchester County, N.Y., to Orange County, Calif., are warning unions that if they cannot figure out how to rein in health care costs now, the price when the tax goes into effect will be steep, threatening raises and even jobs.
“Every municipality with a generous health care plan is doing the math on this,” said J. D. Piro, a health care lawyer at a human resources consultancy, Aon Hewitt.
But some prominent liberals express frustration at seeing the tax used against unions in negotiations.
The Associated Press (via the Washington Post) reported that some Democratic governors are concerned about putting the law in place:
Democratic governors say they are nervous about getting the new federal health care law implemented but add they will be better positioned in next year’s elections than many of their Republican counterparts who have resisted the far-reaching and politically polarizing measure.
Several of the 12 Democratic governors shared that sense of nervousness-veiled-by-optimism at the National Governors Association meeting Saturday in Milwaukee.
“There’s some angst, and you can see that from the decision the administration made a couple weeks ago,” said Delaware Gov. Jack Markell. “There’s a lot of work to do.”
By next Jan. 1, most people will be required to have insurance. States have to set up exchanges by Oct. 1, when uninsured individuals can start buying subsidized private health coverage that would go into effect Jan 1, and businesses with more than 50 employees working 30 or more hours a week were supposed to offer affordable health care to their workers or risk a series of escalating tax penalties.
But businesses said they needed more time, and on July 2, President Barack Obama’s administration abruptly extended the deadline one year — to Jan. 1, 2015.
That caused some Democrats in Congress to worry the program would not be ready on time, as states are building online platforms for their residents to use to comply with the law. Although the U.S. Supreme Court upheld the Affordable Care Act in June 2012, the Republican-controlled House has voted 40 times since Obama signed the law in 2010 to repeal, defund or scale it back, most recently Friday.
There are signs that the health care industry is struggling as well. MarketWatch reported that hiring is slowing:
Health-care providers are under more pressure in 2013 to freeze or reduce the number of employees, partly because of new federal regulations, according to survey of executives at U.S. service companies.
Critics of “Obamacare” have long warned the health-care law would cause businesses to hire fewer employees or shift to more part-time work to save money. And anecdotal evidence suggests it’s already happening at smaller companies.
One industry to watch carefully is health care itself, it turns out. “Sequestration and health-care reform causing uncertainty and lower revenues,” an executive at a health care and social assistance provider told the Institute for Supply Management in July. “Lower revenue due to health-care reform, causing pressure to cut costs and headcount,” an industry executive said in June.
Similar comments were reported by ISM in its reports for January, April and May. Health-care executives have reportedly cut jobs in four of the first seven months of 2013, according to the ISM survey.
Official U.S. employment data do not show an outright decline in health-care jobs, but current hiring trends are on track to be the lowest since 1990, the first year for which government records are available. From January to July, health care added an average of 15,700 jobs a month, according to the Labor Department.
The pressure to lower costs across the board impacts cities, businesses, and the industry itself. What isn’t apparent from these stories is if any of the attempts to cut costs will be passed to consumers. Either way there’s a lot to write about as people shift through implementing the law.
by Liz Hester
The news that the U.S. vetoed a ban that would have stopped Apple from selling some products next week was a rare one for the White House. But what does it actually mean?
Here are some of the details from the New York Times, which had a clear lead explaining what the news meant:
The Obama administration has vetoed a federal commission’s ban that would have forced Apple to stop selling some iPhones and iPads in the United States next week, a rare intervention by the White House and a victory for Apple in its heated patent war with Samsung Electronics.
The United States International Trade Commission in June ordered a ban of older-model Apple products that worked with AT&T’s network, including the iPhone 4 and 3GS, after determining that Apple had violated a patent that Samsung owned related to transmission of data over cellular networks. The administration had until Monday to weigh in.
It was the first time that an administration has vetoed an International Trade Commission ban since 1987, according to Susan Kohn Ross, an international trade lawyer for Mitchell Silberberg & Knupp.
The Wall Street Journal added this context:
Such orders, and the role of the ITC, have split the technology industry, raising questions about how best to promote innovation. Companies including Intel Corp. and Microsoft Corp. fear that injunctions stemming from patents on tiny features of their products could restrict their ability to bring improved devices to consumers. They and some other tech companies argued against ITC sales bans in such cases.
Other companies that make money from licensing patents, including Qualcomm Inc., take the opposite position. They argue that courts and trade bodies need to be able to impose sales or import bans or the value of patented inventions will be diminished.
“Once you get a patent, how do you know what it’s worth because your expectations are changing on a daily basis because of what the courts say, what the ITC says and now what the White House says?” said Christal Sheppard, a former ITC attorney who is now an assistant professor at the University of Nebraska College of Law.
One of the industry’s starkest divides has been over the type of patent at issue in the ITC case, one of many covering basic kinds of functions that many companies’ products have to perform—in this case, connecting to a wireless network.
Such patents are deemed to be essential to creating products based on technical standards set by industry groups. Companies are expected to license these “standard essential” patents on fair, reasonable and nondiscriminatory terms.
The Financial Times reported that some critics are concerned about the message the veto sends to other companies:
But critics of the Obama administration’s approach to intellectual property in trade negotiations say the White House’s case has grown weaker and lacks consistency.
“If open technology standards benefiting the public interest are the rule for smart phones, why not for life-saving pharmaceuticals? Why not for other innovations that would improve the lives of billions of people around the world?,” asks Adam Hersh, an economist at the left-leaning Center for American Progress.
“The decision shows the untenability of stringent IPRs to which so many US trading partners have objected on social welfare grounds. The onus is now on [Mr] Froman to explain why this is good for American consumers, but not for the rest of the world,” Mr Hersh added.
Meanwhile, some in Washington were concerned about the message the Apple decision sent on foreign investment.
“US and international patent laws play a critical role in global competition. However, it is crucial to ensure that the president’s prerogative is used when the merits of the case warrant, and not to simply advantage a US company over a foreign competitor,” said Nancy McLernon, president of the Organization for International Investment, which represents US subsidiaries of foreign companies, including Samsung.
What isn’t clear is what this means for consumers. Some argued that companies may be less innovative since they won’t know if their ideas will be protected. I like the point that the FT story brings up about how this could be applied to other industries. I happen to agree that making standards more open to save lives is definitely more important than smartphones.
While the issues are complex and will likely continue to be debated, it does send a mixed message if the U.S. is relaxing standards and pushing for higher ones at other times.
by Chris Roush
The International Business Times, a business news operation that launched in 2005, has reached an agreement to acquire Newsweek magazine, reports Joe Pompeo of Capital New York.
Pompeo writes, “In a private deal, none of the details of which are yet clear, the Newsweek brand is now the property of a digital start-up that has flown under the public radar while rapidly increasing its real readership across the internet.
“International Business Times, with its 10 national editions worldwide, published in several languages, is a relative newcomer: Launching in 2005 as the brainchild of Etienne Uzaac and Jonathan Davis, an economics grad student and a computer programmer, the property experienced rapid readership growth in 2010 and 2011, and in 2012 announed the formation of an editorial team led by Jeffrey Rothfeder, a former National Editor for Bloomberg News.
“One irony not lost on New York media locals: In a 2011 expansion, IBT Media moved into new headquarters at 7 Hanover Square, the previous headquarters of Newsweek. The move was characterized by The New York Observer as ‘braving bad juju.’
“An internal memo announcing the sale that went out to employees of Newsweek and the Daily Beast today said that Brown’s staff will continue to run the publication for a transition period of 60 days.”
by Chris Roush
Reuters reported exclusively Monday that American Airlines and US Airways will win EU approval for their $11 billion merger, creating the world’s largest carrier. The report, by senior competition correspondent Foo Yun Chee, was widely cited in the press and American Airlines shares jumped 1.75 percent following the scoop.
In a Reuters Best: Journalist Spotlight Q&A, Yun Chee offers an inside look at how she scored the exclusive news.
Here is an excerpt:
Q. How did you get this exclusive?
A. I monitor numerous mergers even before they reach the stage where they have to apply for antitrust approval because this helps me to understand what possible competition hurdles are ahead for the companies. When I read that the carriers were likely to face tough scrutiny from U.S. antitrust regulators, I sounded out my sources in Brussels for a read-through of the situation for the companies in Europe. Understanding the key issues right from the start was crucial as it demonstrated to my sources that I knew what was going on and ultimately helped me land the scoop.
Q. What types of reporting/sourcing were involved?
A. I read the companies’ reports, other media stories and analyst notes. I also talked to various people involved in the case to build up a picture of how the antitrust process would develop and conclude.
Read more here.
by Chris Roush
The judge overseeing the Fabrice Tourre trial became upset Thursday about a Bloomberg News story depicted the scene inside the jury deliberation room, reports Mark DeCambre of the New York Post.
DeCambre writes, “‘This is what makes me angry,’ fumed Judge Katherine Forrest, looking at the media section of the courtroom.
“The Bloomberg story provided a detailed description of the jury room — including the fact that the nine-person jury drew on a white board ‘a diagram of a tranched collaterized debt obligation.’
“The scene was visible to all reporters at the trial as the jury entered the courtroom through a door at the back of the room.
“Forrest said the story could give the public the impression that the proceedings weren’t ‘confidential.’
“Standing up in front of the courtroom and angrily gesturing toward the media corp, Judge Forrest, without naming names, told journalists waiting for the verdict to switch seats away from the door leading to the jury’s deliberation chamber.”
Read more here.
by Liz Hester
In a trial that was closely watched by those in finance, the journalists who cover them and not many others, Goldman Sachs trader Fabrice Tourre was found guilty of six of seven charges Thursday. The case, which centered around a mortgage-related security, was complicated and is being hailed as a victory for the Securities and Exchange Commission, but what does it mean for Goldman?
Here’s the Wall Street Journal’s lead:
A federal jury found former Goldman Sachs Group Inc. trader Fabrice Tourre liable for misleading investors in a mortgage-linked deal that collapsed during the financial crisis, delivering a historic win for a U.S. regulator eager to prove its mettle inside the courtroom.
The panel of nine jurors reached their verdict during the second day of deliberations, finding Mr. Tourre liable on six of seven claims that he violated federal securities law.
“It was a long, slow process,” said juror Beth Glover, a 47-year-old Episcopal priest, after the verdict.
The victory is an important one for the Securities and Exchange Commission, which has struck out in past efforts to make a convincing case to jurors in high-profile trials against individuals.
The New York Times offered this context about the trial:
Five years after the crisis, he is the only employee of a big American bank to lose a courtroom battle to Wall Street’s top regulator, the Securities and Exchange Commission. The S.E.C. took only a handful of employees to court over the crisis, but most cases were settled.
A spokesman for Goldman Sachs said, “As a firm, we remain focused on being more transparent, more accountable and more responsive to the needs of our clients.”
The verdict comes three years after the S.E.C. thrust Mr. Tourre into the spotlight with civil charges and a series of embarrassing e-mails. Those e-mails, in which Mr. Tourre referred to a friend nicknaming him the “Fabulous Fab,” a moniker that has come to define Mr. Tourre’s persona, transformed him from an obscure trader into a symbol of Wall Street hubris.
The S.E.C.’s case against Mr. Tourre hinged on the claim that he and Goldman sold investors a mortgage security in 2007 without disclosing a crucial conflict of interest: a hedge fund that helped construct the deal, Paulson & Company, also bet it would fail. In his opening argument to the jury, Mr. Martens, the S.E.C.’s lead lawyer, depicted the commission’s case as an assault on “Wall Street greed,” arguing that Mr. Tourre created a deal “to maximize the potential it would fail.”
Mr. Tourre was living in a “Goldman Sachs land of make believe” where deceiving investors is not fraudulent, Mr. Martens declared on Tuesday when delivering his closing arguments.
Lawyers for the former Goldman trader, however, portrayed their client as a scapegoat who was 28 at the time of the crisis. Throughout the trial, the defense lawyers reminded the jury that senior Goldman executives approved the deal.
Goldman, which paid a $550 million fine in July 2010 to settle with the SEC over the deal, paid for Tourre’s legal defense, according to Reuters:
The win could give the SEC ammunition to address critics who have long argued the agency has been insufficiently aggressive in holding individuals on Wall Street accountable for their roles in the events leading to the financial crisis.
“The SEC can tout the victory and use it to show it’s been able to go after bad actors associated with financial collapse and do it successfully,” said David Marder, a former lawyer with the SEC and partner at Robins, Kaplan, Miller & Ciresi.
The verdict may not assuage all those critics. Dennis Kelleher, chief executive of financial regulation advocacy group Better Markets, said that regardless of the verdict the case was “a waste of SEC resources and efforts” that targeted a junior staffer.
“The SEC is hunting for a headline to cover up their years of total failure to police Wall Street or to go after any senior executives at any of the major firms,” Kelleher said on Wednesday, the day before the verdict.
The SEC says it has brought charges against 157 entities and individuals in financial crisis-linked enforcement actions. It has obtained $2.68 billion in penalties and other judgments from defendants, largely through settlements.
The SEC’s trial record in financial crisis cases before the Tourre verdict had been mixed.
Goldman hired a new global head of public relations, Richard “Jake” Siewert in March of 2012. At the time, the New York Times said it would bolster its PR ranks as well as help the large bank battle negative headlines.
Now that Goldman’s name is in the headline and lead of every story about someone convicted of fraud, the firm is taking another beating. They’ve gone to great lengths to distance the bank from Tourre and his actions, but the Google test still remains. Today’s news links the words “Goldman” and “fraud” in the same sentence, not exactly the place you want your firm to be.
While this story and the outcome have little to do with regular investors, it is probably causing some salespeople to call clients to reassure them that this was the act of an individual. Again, the damage is in the amount of control that’s likely being done.
by Liz Hester
The U.S. gross domestic product numbers were reported Wednesday and came in stronger than many economists expected. But much of the media coverage talked about how the uptick is still considered lackluster.
The Wall Street Journal story ran with this simple headline, “U.S. Economy Grows Faster Than Expected.” Here’s the lead of the piece:
The U.S. economy is faring a little better than previously thought, but the overall picture is still one of lackluster growth.
The nation’s gross domestic product, the broadest measure of goods and services produced across the economy, expanded at an annualized 1.7% pace from April to June, beating expectations for a 0.9% increase. The second quarter reading follows a downwardly revised 1.1% for the first quarter of 2013.
But broad revisions to GDP figures also showed that the U.S. economy expanded at a stronger pace in 2012 than was previously thought. GDP last year expanded at a 2.8% pace versus a previous estimate of 2.2%, according to the revised figures released by the Commerce Department. The change comes as part of a comprehensive overhaul of gross domestic product data dating from 1929 through the first quarter of 2013.
The second-quarter report—led by businesses, consumers and the resurgent housing market—suggests that the U.S. economy may be gaining a little momentum after absorbing hits from slow growth abroad, domestic political uncertainty, higher taxes and sweeping federal budget cuts. But it also shows a recovery that remains slow by historical standards four years after the recession ended.
The New York Times chose to go with a straightforward GDP is up better-than-expected lead and headline. Here’s the top of its story:
The United States economy performed a bit better than expected in the second quarter, shrugging off some of the impact from higher taxes and lower federal spending in the spring, the government reported Wednesday.
The gross domestic product grew at an annual rate of 1.7 percent, hardly indicative of an economic boom, let alone enough to bring down elevated levels of unemployment soon. It is also the third quarter in a row in which growth failed to top 2 percent, the average since the recession ended in 2009.
Still, the increase was an acceleration from growth in the first quarter of 2013, which was revised downward to 1.1 percent from an earlier estimate of 1.8 percent by the Bureau of Economic Analysis.
“It was a reasonable performance,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “In the long run, it’s not enough, but I’ll take growth wherever I can get it.”
Note the fairly positive quote for the lead.
The Reuters lead struck the most positive note of all, wrapping in decent ADP job numbers as well:
U.S. economic growth unexpectedly accelerated in the second quarter, laying a firmer foundation for the rest of the year that could bring the Federal Reserve a step closer to cutting back its monetary stimulus.
Gross domestic product grew at a 1.7 percent annual rate, the Commerce Department said on Wednesday, stepping up from the first quarter’s downwardly revised 1.1 percent expansion pace.
The economic picture was further brightened by the ADP National Employment Report, which showed private employers added 200,000 jobs in July, maintaining June’s pace. It offered hope the government’s comprehensive employment report on Friday could show a recent run of fairly strong job gains extended to July.
“The economy is improving and the ADP report is emblematic of a pattern of growth that will continue to tilt to the upside,” said Eric Green, chief economist at TD Securities in New York. “That is enough for the Fed to taper in September.”
Economists polled by Reuters had forecast the economy growing at a 1.0 percent pace after a previously reported 1.8 percent advance in the first three months of the year.
The surprisingly better GDP report buoyed U.S. stocks and lifted the dollar against a basket of currencies. Investors sold U.S. Treasury debt, with the price on the 30-year government bond falling a full point at one stage.
The Washington Post’s WonkBlog had a post saying people should be “horrified” by the GDP number:
When the Commerce Department reported the latest numbers on U.S. economic growth Wednesday morning, it was received with cheers. Gross domestic product rose at a 1.7 percent annual rate in the spring months! And that is a higher number, you may note if you are good at math, than the 1 percent that analysts had forecast. It is what markets and the journalists who write about them like to call a “huge beat.”
The good news first: The economy is growing a little faster than economists had feared. And it seems to be relatively well-balanced growth, with personal spending driving the growth train (responsible for 1.22 percentage points of the total growth) and business investment and housing making significant contributions. Trade was a significant negative, as imports rose faster than exports, and government spending subtracted from growth for the third straight quarter, though less dramatically than in the recent past.
The economy also did better in 2012 than had been earlier thought. In the Commerce Department’s re-benchmarking of data reflecting new calculation methods for GDP, the growth numbers came in at 2.8 percent, not the 2.2 percent earlier believed.
But the bad news is this: The better-than-expected second-quarter number came at the expense of a downward revision to estimates to the first part of the year, from 1.8 percent to 1.1 percent. Add in anemic growth (at only an 0.1 percent pace) in the fourth quarter of 2012, and we’ve now faced nine months of an expansion at a bit less than a 1 percent annual rate. Every two steps forward for growth seems to be accompanied by a step and a half back.
While it is just one of many economic indicators, GDP is an important number. Delving beyond the headlines and parsing the real meaning can be difficult, especially when the “beat” comes from revising old numbers and other moving parts. The picture for the economy might be mixed, but it’s clear that journalists are looking at all the angles given this coverage.
by Liz Hester
Much has been written in the last couple of weeks about Larry Summers becoming the next chairman of the Federal Reserve Board. The press is speculating about a possible horse race between him and Janet Yellen, currently the Fed’s vice chair.
A lot of time has been devoted to trying to determine what monetary policy each of the candidates would follow, and the coverage this week was no different.
Here’s the story from Tuesday’s Wall Street Journal about Summers:
Lawrence Summers, a leading candidate to be the next Federal Reserve chairman, likely wouldn’t beat a rapid retreat from the easy-money policies pursued by Ben Bernanke if he gets the job.
A close reading of Mr. Summers’s columns and speeches, as well as conversations with people familiar with his thinking and a June interview with him, show that Mr. Summers has been skeptical about the benefits of the Fed’s huge bond-buying programs, known as “quantitative easing,” but that he also has said he sees few harmful side effects stemming from them.
Mr. Summers’s views are of intense interest, both in Washington and on Wall Street, because the next Fed chairman likely will have to manage the exit from extraordinarily easy policies intended to bolster the economy. Investors have become unsettled about any mention of the Fed’s pulling back from the bond buying, and both Democrats and Republicans have been vocal about what they would like to see from the next Fed chief.
Their records show that both Mr. Summers and his apparent chief rival for the Fed nomination, Janet Yellen, currently the central bank’s vice chairwoman, have said the government, in general, should do more to support the current weak economy. Mr. Summers has been an outspoken advocate of more federal spending now, particularly on infrastructure, to boost growth. His views on monetary policy are more nuanced.
Congress is weighing in with their opinions on who the next nominee should be, according to Bloomberg:
Senator Richard Durbin’s comments in an interview at the Capitol reflect anxiety within the Senate that President Barack Obama may nominate Summers. Durbin is among 19 Democratic senators and one independent who signed a July 26 letter to the White House praising Federal Reserve Vice Chairman Janet Yellen and urging Obama to nominate her to lead the central bank.
“If Summers is the nominee, I sure would have a lot of questions to ask him,” Durbin of Illinois said yesterday. “He’s served several administrations, and I’d like to hear his point of view on the role of the Fed in terms of helping the middle class and creating jobs.”
Although the letter didn’t mention other potential candidates, it shows that Yellen is gaining support for the nomination and points up possible difficulties Summers, if nominated, may encounter in winning Senate confirmation.
Last month, Obama said in an interview with Charlie Rose that Bernanke had stayed in the post “longer than he wanted.” The Fed chairman hasn’t indicated whether he would seek or accept a third term. Bernanke’s four-year term ends Jan. 31.
The New York Times did a big piece on July 25 about Yellen and Summers, outlining their differences and reasons why President Obama would select each one:
Janet L. Yellen, the Fed’s vice chairwoman, is one of three female friends, all former or current professors at the University of California, Berkeley, who have broken into the male-dominated business of advising presidents on economic policy. Her career has been intertwined with those of Christina D. Romer, who led Mr. Obama’s Council of Economic Advisers at the beginning of his first term, and Laura D’Andrea Tyson, who held the same job under President Clinton and later served as the director of the White House economic policy committee. But no woman has climbed to the very top of the hierarchy to serve as Fed chairwoman or Treasury secretary.
Ms. Yellen’s chief rival for Mr. Bernanke’s job, Lawrence H. Summers, is a member of a close-knit group of men, protégés of the former Treasury Secretary Robert E. Rubin, who have dominated economic policy-making in both the Clinton and the Obama administrations. Those men, including the former Treasury Secretary Timothy F. Geithner and Gene B. Sperling, the president’s chief economic policy adviser, are said to be quietly pressing Mr. Obama to nominate Mr. Summers.
The choice of a Fed chair is perhaps the single most important economic policy decision that Mr. Obama will make in his second term. Mr. Bernanke’s successor must lead the Fed’s fractious policy-making committee in deciding how much longer and how much harder it should push to stimulate growth and seek to drive down the unemployment rate.
Ms. Yellen’s selection would be a vote for continuity: she is an architect of the Fed’s stimulus campaign and shares with Mr. Bernanke a low-key, collaborative style. Mr. Summers, by contrast, has said that he doubts the effectiveness of some of the Fed’s efforts, and his self-assured leadership style has more in common with past chairmen like Alan Greenspan and Paul A. Volcker.
But the choice also is roiling Washington because it is reviving longstanding and sensitive questions about the insularity of the Obama White House and the dearth of women in its top economic policy positions. Even as three different women have served as secretary of state under various presidents and growing numbers have taken other high-ranking government jobs, there has been little diversity among Mr. Obama’s top economic advisers.
The decision is a big one that will shape the future of our economy. While that might sound a bit hyperbolic, it’s true. The Fed’s actions on quantitative easing will have a lasting impact on investor sentiment, bond prices, and stocks in the coming months. While both front-runners seem to have pros and cons, what’s most important will be stabilizing the nascent economic growth and a smooth transition.
by Liz Hester
The advertising giants Publicis Groupe, based in Paris, and Omnicom Group, in New York, announced during the weekend they would seek to create the world’s largest advertising conglomerate by merging.
Here are some of the details from the New York Times:
Two leading advertising companies, Omnicom Group and Publicis Groupe, announced a merger on Sunday that would create the world’s biggest family of agencies, with a stock market value of $35.1 billion and 130,000 employees.
The combination of Publicis, based in Paris, and Omnicom, based in New York, would supplant the advertising industry leader, WPP of London. Although Omnicom is slightly bigger than Publicis, the deal is shaped as a merger of equals, combining companies that had total revenue of $22.7 billion last year. The new company would be called the Publicis Omnicom Group.
In the early going at least, the combined company would have co-chief executives: John Wren of Omnicom and Maurice Lévy of Publicis. But after 30 months, Mr. Wren, who is 60, would become sole chief executive and Mr. Lévy, 71, would be nonexecutive chairman.
The marriage, if it passes muster with antitrust regulators in the United States and Europe, and is given the blessing of the French government, would bring under one roof separate networks of ad agencies — including BBDO, TBWA and DDB under Omnicom, and Leo Burnett and Saatchi & Saatchi under Publicis. Collectively, the conglomerates represent some of the world’s largest brands, including AT&T, Visa and Pepsi at Omnicom and McDonald’s, Coca-Cola and Walmart at Publicis.
That’s an incredible list of clients, but Forbes questions whether they’ll be able to maintain service while pushing together the two behemoths:
It remains to be seen to what extent the integration logistics will affect the client experience. When asked how the new entity will handle integration and simultaneously attend to clients, Wren responded, “We will continue to work hard for the clients. We will make whatever effort we have to to make sure our clients are happy will be able to deliver even more resources [combined that we could have individually].”
“We will form a transition team,” Levy added. “They will have to build a plan. Both of us have great experience at merging, acquiring, so it’s not something that’s totally new to us.”
Bloomberg wrote a sidebar about the banks working on the deal, and how it wasn’t who you’d normally see in a deal this large:
Instead, New York-based boutique Moelis & Co. and Rothschild, the storied Paris-based merger adviser, worked with Omnicom and Publicis, respectively, shutting out their bigger competitors. The deal, which will create a globe-spanning advertising company with a market capitalization of more than $30 billion, will also give both firms a significant jump up the league tables for merger advice.
The transaction was a rare example of a major deal that didn’t draw in large banks like Goldman Sachs Group Inc. (GS) and Deutsche Bank AG. Proponents of smaller firms say their focus on merger advice allows them to provide impartial counsel to corporate executives, while bankers at large firms say their suite of financing products and broad role in the financial markets provide a key advantage.
“The reason we didn’t add more advisers is because we didn’t need them at the end of the day,” Omnicom Chief Executive Officer John Wren said at a press conference in Paris today. “Maurice and I settled many of the issues,” he said, referring to Publicis CEO Maurice Levy.
The Wall Street Journal story pointed out that anti-trust issues could cause problems for the deal, which would create one of the biggest media buying agencies in the world. Excerpts from the story are below:
As advertisers have been shifting more and more ad dollars into digital communication and advertising that is driven by data about consumer behavior, ad holding companies have rushed to bulk up their digital expertise over the past 10 years, as well as boost their presence in emerging markets.
Publicis, along with London-based rival WPP, has been particularly aggressive in acquiring digital ad firms, such as LBI, Razorfish and Digitas, giving it a strong presence in that sector.
The French group also has been sweeping up numerous small to midsize agencies in emerging markets such as China, Brazil and India. Omnicom, on the other hand, has preferred mainly to work with technology companies and build internal Web capability. Omnicom also has acquired many companies in overseas markets.
Analysts said the transaction could face antitrust scrutiny, particularly as a combination of the companies would dominate the ad-buying world, spending roughly a combined $100 billion a year, which represents about 20% of the global media business.
“We were advised by some of the best lawyers and we do not expect any regulatory obstacles,” Mr. Wren said.
Another potential hurdle is likely account conflicts, as the ad firms work for major rivals. For example, Omnicom counts PepsiCo as one of its biggest clients, while Publicis does work for Coca-Cola Co. Such conflicts that arise after a merger sometimes cause marketers to move their business to another agency.
That’s a huge amount of media buying. It will be interesting to see if it will make it past regulators on both continents. It may seem like an auxiliary business since the company isn’t creating a product, but this merger could create a huge corporation with the ears of many senior executives across industries. And that’s a lot of power to shape what consumers are buying and to influence those at the top of business.