Economic Calendar

Saturday, January 7, 2012

Obama Adopts Bush Plan to Cut U.S. Combat Brigades in Europe, Hammond Says

By Viola Gienger - Jan 7, 2012 4:33 AM GMT+0700

The Obama administration plans to revert to a Bush-era plan to cut the number of U.S. Army combat brigades in Europe in half as part of the Pentagon budget (USBODEFN) cuts to be announced within weeks, U.K. Defense Secretary Philip Hammond said.

The decision is a retreat from the administration’s previous determination, announced last April, to leave in place three of the four brigade combat teams now stationed in Europe, three in Germany and one airborne brigade in Italy. A brigade combat team usually has 3,000 to 5,000 soldiers.

“My understanding is that there will remain two brigades,” Hammond said in an interview yesterday in Washington after meeting U.S. Defense Secretary Leon Panetta for their first talks at the Pentagon since they each took office. “But in addition to that, there will be some rotating presence” for training and exercises, he said.

The Obama administration’s April announcement had reversed a 2004 decision by the administration of President George W. Bush to cut the number of brigades in Europe from from four to two, or by 6,000 to 10,000 troops.

As of December 2010, the U.S. had almost 80,000 military personnel stationed in Europe, more than 54,000 of them in Germany, according to the Defense Department’s website.

Panetta and other Pentagon officials who unveiled a revised U.S. defense strategy yesterday refused to give specifics about future force size or weapons systems.

“We’re not going to discuss details of any specific programmatic or force-structure decisions right now,” Navy Captain John Kirby, a Pentagon spokesman, said in response to Hammond’s comment.

‘Adapt and Evolve’

Panetta told reporters at the Pentagon yesterday that the U.S. military’s force posture in Europe “will of necessity continue to adapt and evolve,” citing “emerging strategic priorities that we face elsewhere.”

A reduction of forces in Europe may limit the ability of the U.S. to deploy combat troops rapidly to hot spots in the Middle East, Africa and elsewhere. Many of the Americans sent to fight in Iraq and Afghanistan in the past 10 years have come from bases in Western Europe.

“The reason why they’re still in Germany has less to do with Europe than it has to do with the fact that it’s a lot easier to get to the Middle East from Europe” than from the U.S., said Gary Schmitt, director of advanced strategic studies at the American Enterprise Institute and a former Senate Intelligence Committee staff member.

Air Force Capability

The U.S. still plans to keep facilities available and maintain “significant Air Force capability in Europe,” Hammond said. That element may protect the U.K. from too much impact of American cuts because it hosts mostly U.S. Air Force units.

Returning the soldiers to the U.S. may not save much money because they’ll require facilities at home, and deploying them for meaningful exercises abroad is costly, Schmitt said.

European members of the North Atlantic Treaty Organization will need to “respond in a mature way” to the U.S. plans, Hammond told an audience at the Atlantic Council policy group earlier yesterday, before his meetings.

“Reductions in U.S. troop numbers are not going to be welcomed by European allies in the alliance,” Hammond said. “But I think we all understand the budget pressure the U.S., like all of us, are under.”

Germany Not Surprised

The German Defense Ministry said it doesn’t have information on possible U.S. base closings and isn’t surprised by Pentagon force-reduction plans.

“It’s understandable, and we’re following it with interest,” Stefan Paris, a ministry spokesman, said in an interview in Berlin today. “We are engaged in a similar process in Germany.”

Hammond said in the interview that he felt reassured by his meetings at the Pentagon that the U.S. is sensitive to allies’ concerns about weapons systems. The U.K. is among the partner nations in Lockheed Martin Corp. (LMT)’s F-35 Joint Strike Fighter, which the country intends to use on two new aircraft carriers it is building.

Joint Strike Fighter

“What I’ve heard today is reassuring on that score,” Hammond said. “We’ve had a confirmation of an in-service date for the carrier variant.”

He said he doesn’t see anything that would “drive a significant increase in unit cost either.”

Pentagon officials also expressed recognition that such programs are crucial to their allies, he said.

“If we’re going to have more programs in the future where we’re working collaboratively across a number of nations, then it’s very important that people can be confident that things that happen domestically politically or budgetarily won’t undermine those programs or undermine the position of the allies,” he said.

Panetta and his staff also gave “very clear assurance” that “nothing that’s being proposed by the Pentagon or the Navy is going to impact” the completion dates for a new class of American nuclear ballistic missile submarines, Hammond said.

The U.K. also is building a new submarine, and the two nations are collaborating on a missile compartment for their vessels. Falls Church, Virginia-based General Dynamics Corp. (GD) and Newport News, Virginia-based Huntington-Ingalls Industries, Inc (HII). are building the new U.S. submarines, while BAE Systems Plc. (BA/), based in London, is building the British version.

“There will be no slippage in the design program” for the compartment, he said, adding that it’s too soon to say whether the compartment would be built in the U.S. or in the U.K.

To contact the reporter on this story: Viola Gienger in Washington at

To contact the editor responsible for this story: John Walcott at


IMF to Make ‘Substantial’ Cut in Global Economic Forecast, Blanchard Says

By Vincent Del Giudice and Michael McKee - Jan 7, 2012 6:20 AM GMT+0700

The International Monetary Fund will make a “fairly substantial” cut to its forecast for global economic growth this year, Olivier Blanchard, the IMF’s chief economist, said today.

“I can’t give you a number,” Blanchard said in an interview on Bloomberg Television from a conference in Chicago. “It’s going to be substantial.”

In September, the Washington-based fund lowered its forecast for global growth to 4 percent in 2012 and warned of “severe” repercussions if Europe failed to contain its sovereign debt crisis.

Overall world growth will probably be “not very far” from 3 percent to 4 percent, he said, adding Europe is “very close to zero at this point” while the U.S. is in better shape than many other nations.

A government report today in Washington showed the unemployment rate in the U.S. declined in December to 8.5 percent, the lowest in almost three years.

Blanchard’s comments about revisions to the global outlook are stronger than those made today by his chief, IMF Managing Director Christine Lagarde, on a visit to Pretoria, South Africa.

The fund will publish revised forecasts on Jan. 24 or Jan. 25 that are “consistent with reality,” Lagarde told reporters. “We should all be prepared for a 2012 that will not be a walk in the park.”

To contact the reporters on this story: Vincent Del Giudice in Washington at; Michael McKee in New York at

To contact the editor responsible for this story: Chris Wellisz at


Morgan Stanley Buys Zynga Shares, Boosts Its Stake in LinkedIn

By Ari Levy - Jan 7, 2012 8:21 AM GMT+0700

Morgan Stanley (MS), the bank that underwrote the initial public offerings of Zynga Inc. and LinkedIn Corp. last year, bought shares of both social-media companies in the fourth quarter.

The New York-based firm now owns 15.7 million Zynga shares and increased its LinkedIn stake by 81 percent to 3.98 million shares, according to separate filings today. Zynga held its IPO last month, while LinkedIn went public in May.

As part of its underwriting agreements with the companies, Morgan Stanley agreed to buy shares in each of the offerings. The bank also managed the IPOs of music-streaming service Pandora Media Inc., vacation-rental site HomeAway Inc. and daily-deal provider Groupon Inc.

Morgan Stanley’s stake in Zynga, a social-gaming company, is worth about $138 million based on today’s closing price (ZNGA) of $8.81. According to the prospectus, Morgan Stanley agreed to buy the stock at the IPO price of $10 a share, so the shares have lost about 12 percent of their value.

Morgan Stanley’s LinkedIn stake is worth $255.5 million. Morgan Stanley didn’t say how much it paid for the 1.78 million shares it purchased most recently. LinkedIn (LNKD), the world’s biggest professional-networking website, has gained 43 percent since its IPO in May.

To contact the reporter on this story: Ari Levy in San Francisco at

To contact the editor responsible for this story: Tom Giles at


Jefferson County Judge Limits Authority of Sewer Receiver

By Steven Church and Martin Braun - Jan 7, 2012 6:00 AM GMT+0700

The bankruptcy of Jefferson County, Alabama, imposes limits on the power of the receiver who runs the county’s insolvent sewer system on behalf of bondholders owed more than $3 billion, a judge ruled.

U.S. Bankruptcy Judge Thomas B. Bennett in Birmingham ruled today that when the county filed its Chapter 9 case, the state court that appointed the receiver lost its authority over the sewer system. Bondholders, the bonds’ insurers and the receiver, John S. Young Jr., wanted the same judge who stripped the county of the sewer system in 2010 to have final approval over rate increases.

Bennett said Young may continue to receive and distribute revenue from the system to bondholders as long as operating expenses are paid first.

The ruling may make it harder for Young to negotiate with the county on behalf of bondholders because it “ties one hand behind his back,” Alan M. Schankel, director of fixed income at Janney Capital Markets in Philadelphia.

“I am not sure the receiver’s role is important if this stands,” Schankel said in an interview. Allowing Young to continue to collect and distribute revenues to bondholders means the ruling wasn’t a total defeat for bondholders, Schankel said.

Young didn’t return calls for comment.

Lawyers for the receiver and the bondholders cited the county’s past mismanagement in arguing that the system should remain under state court authority and Young’s management. In his ruling, Bennett said a new group of elected officials should be given a chance to operate the system.

‘Same Ilk’

“The current commissioners are not of the same ilk as the former ones,” Bennett wrote.

“It looks like this is good news for the county,” Commissioner Jimmie Stephens, head of the commission’s finance committee, said in an interview.

The ruling that limits Young’s powers means receivership isn’t as good a remedy as the municipal bond market had believed, Matt Fabian, a managing director at Municipal Market Advisors in Concord, Massachusetts, said in an interview today.

“Every investor needs to judge revenue bonds as a bit riskier than before,” he said.

Bondholders avoided the “catastrophe” of having their lien on the sewer revenue interrupted. Disrupting that payment stream would have redefined how the municipal bond market thinks about revenue bonds, Fabian said.

Largest Municipal Bankruptcy

Allowing the state court to retain jurisdiction over the sewer system would make it more difficult for the county to resolve the largest municipal bankruptcy in the U.S., Bennett said.

Jefferson County filed bankruptcy in November, more than a year after a state court gave Young control of the sewer system.

The county, state officials, the receiver and bondholders failed to implement a tentative agreement that would have required the sewer debt to be cut by about $1 billion, rates to increase and the Alabama Legislature to enact new laws to benefit the county’s finances.

The bankruptcy is tied to a sewer refinancing tainted by political corruption. In 2009, JPMorgan Chase & Co. (JPM) agreed to a $722 million settlement with the Securities and Exchange Commission over payments its bankers allegedly made to people tied to county politicians to win business.

Bribery Conviction

Former Commissioner Larry Langford was convicted on charges of accepting bribes. In 2008, a derivative-laden refinancing set up by JPMorgan unraveled as fallout from the subprime-mortgage market collapse rippled through Wall Street, sending debt costs soaring.

Justin Perras, a spokesman for JPMorgan, declined to comment on the ruling.

Jefferson County was the 13th Chapter 9 bankruptcy filing last year. Three other municipalities filed: Boise County, Idaho; Central Falls, Rhode Island; and Harrisburg, Pennsylvania.

The rest were special-purpose districts and public-benefit corporations eligible to use Chapter 9.

A bankruptcy judge dismissed Harrisburg’s case last month, saying it wasn’t properly authorized.

The average price on a Jefferson County sewer bond maturing in 2027 declined to 51.8 cents on the dollar today from 55 cents on Dec. 30, according to data compiled by Bloomberg. The trades were for small blocks of $5,000 or $10,000 of debt.

The case is In re Jefferson County, 11-05736-9, U.S. Bankruptcy Court, Northern District of Alabama (Birmingham).

To contact the reporters on this story: Steven Church in Wilmington, Delaware, at; Martin Braun in New York at

To contact the editors responsible for this story: John Pickering at; Mark Tannenbaum at


Romney Denies Wall Street Ties

By Julie Hirschfeld Davis and Lisa Lerer - Jan 7, 2012 7:37 AM GMT+0700

Former Massachusetts Governor Mitt Romney, working to solidify support in New Hampshire’s Jan. 10 primary, pushed back against critics who call him beholden to big business.

“I’m independent of Wall Street,” Romney, 64, said in an interview with Bloomberg Television airing today. “By the way, I haven’t ever worked on Wall Street.”

Romney, who made his fortune at the private equity firm Bain Capital LLC he helped found, said Wall Street firms were merely “service providers” to his company. The second-time Republican presidential candidate also argued he had created more jobs than he eliminated in lucrative deals that sometimes resulted in layoffs.

“The jobs created at Bain Capital by companies that we helped start or that we helped manage, those companies today employ well over 100,000 more jobs than, than those that were lost,” Romney said.

Democrats are holding a series of news conferences featuring workers who lost their jobs after Bain took over their companies.

Romney defended his own jobs record even as he criticized President Barack Obama’s economic performance on a day that saw the release of the best U.S. jobs report since February 2009.

While Romney said he was “delighted” to see the unemployment rate drop, he said Obama’s record had been a “failure.” Romney acknowledged that an improving economy “may well” boost Obama’s re-election chances.

“I’ll have to make sure that my message is clear and honed well,” Romney said.

Central Qualification

His rivals are working to turn the business experience Romney cites as his central qualification to be president against him as they seek to squelch his momentum in the race for the Republican nomination.

“It becomes very difficult when you’ve taken tens of millions of dollars from the banking community, from Wall Street and for many, many years, to have a discussion that fundamentally alters their course,” said former Utah Governor Jon Huntsman Jr. in an interview with Bloomberg Television. “It can only be done, I would argue, by someone who isn’t a captive, a subsidiary of Wall Street.”

Romney held a 2-1 lead over his nearest rival in a poll of likely voters in the New Hampshire primary. Romney had 44 percent support compared with 20 percent for Texas Representative Ron Paul in a poll sponsored by WMUR-TV and conducted Jan. 2-5 by the University of New Hampshire Survey Center.

Lagging Behind

The poll showed former U.S. House Speaker Newt Gingrich and former Pennsylvania Senator Rick Santorum lagging behind, each with 8 percent, and Huntsman with 7 percent. All four of his competitors have been criticizing Romney with growing intensity as New Hampshire’s primary approaches.

“I’m ready for what anyone wants to bring my way,” Romney said of Gingrich’s recent attacks. “Politics ain’t beanbags.”

While confident of his chances in New Hampshire, where he owns a vacation home and is a familiar former governor of a neighboring state, Romney wouldn’t predict a victory. And he said he has work to do in the next contest in South Carolina, which holds its primary Jan. 21.

“South Carolina for me is a come-from-behind kind of state,” Romney said. “I’ve got to put in some real shoe leather there.”

To contact the reporter on this story: Julie Hirschfeld Davis in Tilton, New Hampshire at 1890 or; Lisa Lerer in Tilton, New Hampshire, at

To contact the editor responsible for this story: Mark Silva at


Yahoo’s Thompson May be Paid as Much as $27M

By Jordan Robertson - Jan 7, 2012 9:35 AM GMT+0700
Enlarge image Scott Thompson

Scott Thompson, president and chief executive officer of PayPal Inc., speaks during an event at the PayPal campus in San Jose, California, on Feb. 10, 2011. Photographer: Kim White/Bloomberg

Jan. 6 (Bloomberg) -- Mark Mahaney, an analyst at Citigroup Inc., talks about new Yahoo! Inc. Chief Executive Officer Scott Thompson and his pay package. Thompson may receive compensation of as much as $27 million. Mahaney speaks with Cory Johnson on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Yahoo! Inc (YHOO). Chief Executive Officer Scott Thompson may receive compensation of as much as $27 million, including salary, potential bonus, restricted shares and other forms of pay.

Thompson, formerly president of EBay Inc. (EBAY)’s PayPal, will get a base salary of $1 million and a possible annual bonus of as much as two times that amount, Sunnyvale, California-based Yahoo said in a regulatory filing.

Thompson is tasked with turning around a company that has struggled to vie with Google Inc., owner of the world’s most popular search engine, and Facebook Inc., the leader in social networking. He’ll oversee a strategic review that began after the board ousted former CEO Carol Bartz, and he’ll need to weigh the possible sale of Yahoo’s stakes in Asian companies, including Alibaba Group Holding Ltd (ALIBABZ).

“That seems unusually high,” Mark Mahaney, an analyst at Citigroup Inc., said of Thompson’s compensation during an interview on “Bloomberg West.” “That said, you know, you are taking him away from a very successful company. You’re putting him in a risky situation.”

Other compensation includes an equity grant with a target value of $11 million, a one-time “inducement grant” of $5 million, a cash bonus of $1.5 million and restricted stock units that carry a grant-date value of $6.5 million.

Bartz’s Pay

He succeeds other CEOs who have backgrounds outside Internet advertising. Bartz, who was ousted in September after less than three years, previously ran Autodesk Inc. (ADSK), a San Rafael, California-based maker of design software. Yahoo lured Bartz in 2009 with a compensation package that the company valued at $47.2 million. That figure was mostly stock options and restricted stock that didn’t immediately become available.

Another predecessor, Terry Semel, was a Hollywood executive hired in 2001 to help turn Yahoo into a media company. He resigned in 2007 and was succeeded by Yahoo co-founder Jerry Yang.

Yahoo fell less than 1 percent to $15.52 at the close today in New York.

Dana Lengkeek, a Yahoo spokeswoman, declined to comment on Thompson’s pay.

To contact the reporter on this story: Jordan Robertson in San Francisco at

To contact the editor responsible for this story: Tom Giles at


Huntsman Urges Romney to Release Tax Returns

By Lisa Lerer - Jan 7, 2012 3:46 AM GMT+0700
Enlarge image Jon Huntsman

Republican presidential presidential candidate, former Utah Gov. Jon Huntsman, speaks to employees during a campaign stop at Goss International on Jan. 5, 2012 in Durham, New Hampshire. Photographer: Alex Wong/Getty Images

Jan. 6 (Bloomberg) -- Republican presidential contender Jon Huntsman Jr. talks with Bloomberg's Al Hunt about New Hampshire's Jan. 10 primary, former Massachusetts Governor Mitt Romney's policies and issues facing the U.S. Bloomberg's Julie Davis and Lisa Lerer discuss the Republican presidential race. Julianna Goldman comments on the U.S. economy, President Barack Obama's re-election strategy and Republican candidates. Commentators Margaret Carlson and Kate O'Beirne discuss prospects for Rick Santorum and Mitt Romney in New Hampshire and South Carolina. (Source: Bloomberg)

Republican presidential contender Jon Huntsman Jr. charged that Mitt Romney would be a “status quo president” with respect to Wall Street and Washington influence peddling.

Romney, who’s leading in opinion polls, should release his tax returns because “transparency” and “trust” are central issues in the campaign, Huntsman said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. Romney, a former Massachusetts governor and multimillionaire former private equity manager, has so far refused to release his returns.

Huntsman has yet to release his own tax returns. Campaign spokesman Tim Miller said the candidate would disclose his returns if he won the party’s nomination.

Huntsman, a former Utah governor and multi-millionaire businessman, has proposed limiting the size of the country’s largest banks to avoid any future taxpayer liabilities.

If the U.S. banks “get infected with the flu that’s making the rounds in Europe, they have to be bailed out, because if they fail, we all go down,” Huntsman warned, saying that’s “right for the taxpayers.”

He suggested that some of his Republican rivals, particularly Romney, who has received the most campaign contributions from the financial community, would be captives of Wall Street if elected.

Wall Street ‘Captive’

“It becomes very difficult when you’ve taken tens of millions of dollars from the banking community, from Wall Street, and for many, many years, to have a discussion that fundamentally alters their course,” he said. “It can only be done, I would argue, by someone who isn’t a captive, a subsidiary of Wall Street.”

Huntsman, whose family owns a petro-chemical conglomerate, rejected Romney’s claim that his experience as chief executive officer of the private equity firm Bain Capital LLC was an important credential to be president and create jobs. As he campaigns across the country, Romney has made his business experience a central argument for his candidacy.

Instead, Huntsman said voters should look at his four-year record as governor of Massachusetts.

“If you’ve got dead last, practically, in terms of job creation, that’s going to stand out a lot more prominently in people’s minds, I believe, than anything you did in the private sector,” he said.

Unemployment Numbers

During Romney’s term, unemployment in Massachusetts averaged 5.1 percent, compared with a national average of 5.3 percent, and 45,800 jobs were added. Utah’s jobless rate (USURTOT) during Huntsman’s governorship averaged 3.8 percent, compared with a national average of 5.5 percent for that period, and 91,800 jobs were created.

Huntsman, who served as U.S. ambassador to China under President Barack Obama until last year, also said that Romney’s frequent reversals on issues such as immigration and how to deal with China make him ill-suited “to generate the kind of trust that is so needed among the electorate.”

Huntsman came back to the trust question, a major theme of his campaign, in criticizing Romney for not releasing his tax returns.

“If the citizens and the voters of New Hampshire and beyond are going to trust us and our message and how we’re going to lead this country, transparency needs to be part of that,” Huntsman said.

Financial Disclosure

On federal financial disclosure forms, Huntsman reported owning assets valued between $16 million and $71 million, including between $5 million and $25 million in his family’s holding company, which owns stock in Huntsman Corp., a Salt Lake City-based chemical maker. Romney reported between $190 million and $250 million in assets, which his campaign said were in a blind trust. He did report owning between $50,000 and $100,000 apiece in Boeing Co., Visa Inc., and Bank of America Corp.

One of the other candidates, former Pennsylvania Senator Rick Santorum, in an appearance earlier this week compared gay marriage to polygamy, asking voters “what about three men?”

Huntsman described that kind of rhetoric as divisive, saying the conversation ought to be based on “fairness and dignity.”

Huntsman, who’s based his entire campaign on a strong showing in New Hampshire, continues to run well behind Romney.

Romney had the support of 40 percent of likely Republican primary voters in New Hampshire, according to a Suffolk University/7 News tracking poll taken Jan. 4-5. U.S. Representative Ron Paul was backed by 17 percent, compared with 11 percent for Santorum, 9 percent for former House Speaker Newt Gingrich and 8 percent for Huntsman.

Huntsman suggested that he could do better.

“We’re going to exceed market expectations,” he said.

To contact the reporter on this story: Lisa Lerer in Washington, at

To contact the editor responsible for this story: Mark Silva at


Gingrich Leaves Freddie Mac Consulting Contract Release to Firm’s Partners

By Clea Benson and Lorraine Woellert - Jan 7, 2012 2:57 AM GMT+0700

Republican presidential candidate Newt Gingrich said today that he still can’t release his contract with Freddie Mac (FMCC) -- even though the mortgage finance company gave him permission to do so -- because the decision is up to his business partners in his consulting firm.

Gingrich’s comments came after Freddie Mac told Bloomberg News yesterday that the former U.S. House speaker was cleared to make the documents public. Before that, Gingrich said the reason he couldn’t release the contract was that Freddie Mac wouldn’t waive a confidentiality agreement.

Gingrich’s consulting firm was paid at least $1.6 million over eight years for his services.

Gingrich does not have the power to make decisions about releasing the contract because he is only one partner in the Center for Health Transformation, the consulting firm that he founded, Gingrich spokesman R.C. Hammond said in an interview today.

“It’s their decision,” Hammond said. “His partners have to sign off on it.”

The Center for Health Transformation will not release the documents today, Susan Meyers, the firm’s director of media relations, said.

Lawyers Still Deliberating

“The lawyers are still reviewing the files to see if it is possible to even release it at all based on the language of the consulting contracts signed long ago,” Meyers said in an e- mail.

Gingrich said in a Dec. 30 interview with Bloomberg News that his campaign had asked Freddie Mac to lift the confidentiality clause but “they wouldn’t do it.”

Freddie Mac Vice President Sharon McHale said in an interview yesterday that Gingrich was “welcome to release the contract.”

Gingrich has faced questions in debates from his Republican presidential rivals about his relationship with the mortgage finance company. Freddie Mac and its sister company, Fannie Mae (FNMA), have drawn about $153 billion in taxpayer aid since losses from risky mortgages caused them to be brought under U.S. conservatorship in September 2008.

Unanswered Questions

The contract presumably would answer some of the outstanding questions surrounding the deal, including what Gingrich was paid and how much of it went directly to him. Since Bloomberg News first reported the story on Nov. 16, these accounts have varied, with the former speaker lately claiming his firm was paid at least $1.6 million while he personally only got about $35,000 a year.

Gingrich’s description of the work he performed has differed from that of company insiders.

During a Nov. 9 Republican debate, Gingrich initially said he was paid to offer Freddie Mac advice as a “historian” and warned officials that its business model was “insane.”

Former Freddie Mac officials familiar with Gingrich’s work for the company said he didn’t disparage their business model and instead was paid to build bridges to Capitol Hill Republicans and develop an argument on behalf of the company’s public-private structure that would resonate with opponents seeking to dismantle it.

Attack Ads

The former House speaker, who didn’t register as a lobbyist, has a lot of attack TV ads about his relationship with Freddie Mac, which have coincided with a decline in his poll standings. He finished a distant fourth in the Jan. 3 Iowa caucuses, behind Massachusetts Governor Mitt Romney, former Pennsylvania Senator Rick Santorum, and Texas Representative Ron Paul, respectively.

From Dec. 1 through Dec. 29, 45 percent of all ads airing in Iowa highlighted Gingrich’s shifting policy positions and advocacy for Freddie Mac, according to data from New York-based Kantar Media’s CMAG, a company that tracks advertising. The commercials were financed primarily by Paul, Perry and an outside committee that backs Romney.

In the Dec. 30 interview with Bloomberg, Gingrich said he personally received only about $35,000 a year. The rest of the money went to his firm, he said.

According to three people familiar with Gingrich’s contract with Freddie Mac, the company was paying Gingrich’s firm only for the services of Gingrich himself, not for work by any of his staff.

First Contract

Gingrich’s first contract with the mortgage company was in 1999, five months after he resigned from Congress and as House speaker, according to a Freddie Mac press release.

His consulting firm was paid a self-renewing, monthly retainer of $25,000 to $30,000 between May 1999 until 2002, according to three people familiar with aspects of the business agreement.

Gingrich’s second contract with Freddie Mac was a two-year retainer for which he was paid a total of $600,000, said two people familiar with the agreement.

Throughout the campaign, Gingrich has distanced himself from Freddie Mac, criticizing its business model and even suggesting some Democrats should be jailed for associating with the company’s officials at a time when the housing market (ETSLTOTL) was about to collapse.

“You ought to start with Barney Frank,” when talking about people to put in jail, Gingrich said during an Oct. 11 Republican presidential debate, referring to the Massachusetts congressman who serves as the ranking Democrat on the House Financial Services Committee. “Go back and look at the lobbyists he was close to at Freddie Mac,” Gingrich said in the debate, sponsored by Bloomberg News and the Washington Post.

To contact the reporters on this story: Lorraine Woellert in Washington at; Clea Benson in Washington at

To contact the editor responsible for this story: Mark Silva at


Iranian Fishermen Are Rescued From Suspected Somali Pirates by U.S. Navy

By Tony Capaccio - Jan 7, 2012 5:47 AM GMT+0700

The U.S. Navy said it rescued 13 Iranian fishermen held hostage by pirates in the Northern Arabian Sea days after an Iranian military leader warned against sending a U.S. aircraft carrier into the Persian Gulf.

A boarding team from the guided-missile destroyer USS Kidd -- part of the John C. Stennis Carrier Strike Group -- detained 15 suspected pirates aboard a fishing dhow, the Al Molai, according to a statement yesterday from the U.S. Naval Forces Central Command Public Affairs Office. The dhow had been abducted and used as a “mother ship” for pirate operations throughout the Persian Gulf, according to the Navy.

The Navy responds to piracy and it didn’t matter that the fishing vessel was Iranian, U.S. Defense Secretary Leon Panetta said in an interview for the “CBS Evening News with Scott Pelley.”

While there was no immediate response from the Iranian government, Panetta said, “It makes it very clear to them that, despite how much they often try to provoke us, the United States in this kind of situation is going to respond as we should in a very humanitarian and responsible way.”

The pirates didn’t resist the U.S. Navy and surrendered quickly in the rescue, according to the Navy statement.

At about 12:30 p.m. local time Jan. 5, an SH-60S Seahawk helicopter from the Kidd detected a suspected pirate skiff alongside the Iranian-flagged Al Molai, according to the Navy account. Simultaneously, a distress call was received from the master of the Al Molai saying he was being held captive by pirates.

Held Hostage

“The Al Molai had been taken over by pirates for roughly the last 40-45 days,” Josh Schminky, a Navy Criminal Investigative Service agent aboard the Kidd, said in the statement. The Iranians “were held hostage, with limited rations, and we believe were forced against their will to assist the pirates with other piracy operations.”

“After securing the ship and ensuring the safety of all persons on board, we began distributing food and water to both the crew and the suspected criminals as is our standard practice in counter-piracy operations,” Schminky said.

The pirates were detained on the Al Molai by the Kidd boarding party until the next morning when they were transferred to the aircraft carrier USS John C. Stennis, where the matter will be reviewed for prosecution, according to the statement.

U.S. Commander

The pirates are suspected of being Somalis, the U.S. Strike Group commander, Rear Admiral Craig Faller, told reporters yesterday during a telephone conference call from the region.

U.S. vessels have periodically rescued Iranian fisherman in distress, he said. In this case “we saw a need -- there was some distress -- and helped. That’s what we do out here.”

The movements of the Stennis, which sailed out of the Persian Gulf though the Strait of Hormuz Dec. 27, have been the subject of tensions between the U.S. and Iran this week. The head of Iran’s army warned the U.S. on Jan. 3 against sending an aircraft carrier back into the Persian Gulf.

“We usually don’t repeat our warning, and we warn only once,” Ataollah Salehi was cited as saying by the state-run Fars news agency. “We recommend and emphasize to the American carrier not to return to the Persian Gulf.”

The Stennis on Dec. 27 passed eastward through the Strait of Hormuz on a routine voyage and was operating in the northern Arabian Sea, according to the U.S. 5th Fleet, which has a base in Bahrain. The U.S. said it will continue operations in and around the Persian Gulf to promote freedom of navigation.

Iranian ‘Interactions’

Faller said the carrier group “had interactions” with Iranian Navy and aircraft “and those have all been professional.”

Faller said his battle group, if called on, “would do what was necessary to ensure” the Strait was not closed to shipping. Iranian Vice President Mohammad Reza Rahimi said Dec. 27 that Iran would block the strait if sanctions are imposed to prevent Iranian oil exports.

Asked if the Stennis planned to return to the Persian Gulf, Faller said “as our mission dictates, Stennis will operate in this area. If that means moving back through the Strait, that’s what we’ll do. Our mission changes. For now, it’s business as usual as we focus on” providing aircraft for combat missions over Afghanistan, he said.

The Stennis has the full range of combat capabilities “that we exercise and train every day,” Faller said. “We are ready to use those capabilities if the need arises.”

To contact the reporter on this story: Tony Capaccio in Washington at

To contact the editor responsible for this story: Mark Silva at


U.S. Payrolls Beat Forecasts

By Timothy R. Homan - Jan 7, 2012 1:18 AM GMT+0700

Payroll growth in the U.S. beat forecasts in December and the unemployment rate dropped to the lowest level in almost three years as the economy gained strength heading into 2012.

The 200,000 increase followed a revised 100,000 gain in November that was smaller than first estimated, Labor Department figures showed today in Washington. The jobless rate unexpectedly fell to 8.5 percent, while hours worked and earnings climbed.

“You got the trifecta -- more people working, wages up and the average work week up,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, who accurately forecast the December payrolls gain. “You can’t really argue that that isn’t a sign of significant improvement in the job market.”

Sustained hiring is needed to support the household spending that accounts for about 70 percent of the world’s largest economy. Today’s report follows gains in manufacturing (NAPMPMI) and consumer sentiment (CONCCONF) that suggest the U.S. is withstanding the economic crisis in Europe.

Stocks and Treasury yields fell after William C. Dudley, president of the Federal Reserve Bank of New York, said the outlook for unemployment remains “unacceptably high” relative to the Fed’s goals. The Standard & Poor’s 500 Index declined 0.3 percent to 1,277.77 at 1:15 p.m. in New York. The yield on the 10-year Treasury note fell to 1.96 percent from 2 percent late yesterday.

Payrolls were forecast to rise by 155,000 in December, according to the median estimate in a Bloomberg News survey of economists. Regular monthly revisions subtracted a total of 8,000 jobs from payrolls in October and November.

Separate Survey

The unemployment rate, derived from a separate survey of households, was forecast to climb to 8.7 percent from a previously reported 8.6 percent in November. The November rate was revised to 8.7 percent.

Private hiring, which excludes government agencies, rose 212,000 after a revised gain of 120,000 in November. It was projected to climb by 178,000, the survey showed.

Retail trade payrolls climbed 27,900 as companies kept hiring for the holiday shopping season. Among companies planning to take on more staff as consumer demand strengthens is Fort Worth, Texas-based Pier 1 Imports Inc. (PIR)

“Sales are robust, merchandise margins are strong, operating margins are growing,” Chief Executive Officer Alexander Smith said on a Dec. 15 conference call with analysts. “There’s going to be a little more hiring in the first part of the year without a doubt.”

Payroll-Tax Cut

President Barack Obama said the jobs report shows the economy is healing, and he appealed to lawmakers to extend a payroll-tax cut through the rest of the year to assure growth continues.

“We’re starting to rebound,” Obama said at the offices of the Consumer Financial Protection Bureau in Washington. “We’re creating jobs on a consistent basis.”

Employment at service providers increased 152,000, with a 50,200 advance in the transportation industry. United Parcel Service Inc. (UPS) said in November that it planned to hire 55,000 holiday workers this year, a 10 percent increase from 2010, to help with shipping gains tied to online shopping.

Last month’s gain in transportation jobs was the biggest since September 1997. In December 2010, a 50,100 gain in the industry’s payrolls was almost entirely reversed a month later.

Payroll increases got “some help from temporary factors,” which also included milder weather that probably boosted hiring by construction companies, Bruce Kasman, chief economist for JPMorgan Chase & Co. in New York, said on a conference call. Builders added 17,000 workers last month.


Other companies also saw increased demand during the holidays. Same-store sales at U.S. retailers excluding Wal-Mart Stores Inc. rose 3.5 percent in December from a year earlier, according to figures yesterday from the International Council of Shopping Centers.

In the final three months of 2011, “clear signs emerged that U.S. consumers are more confident and that other underpinnings of our economy are either stable or slowly improving,” Don Johnson, vice president of U.S. sales for Detroit-based General Motors Co. (GM), said on a Jan. 4 conference call.

Factory payrolls (USMMMNCH) increased by 23,000, the strongest since July, after a 1,000 gain in the previous month. Manufacturing job growth last year was the strongest since 1997.

Gains among private employers were partly offset by cuts in government payrolls, which decreased by 12,000 in December.

Little Headway

For all of 2011, employers added 1.64 million workers, the best year for the American worker since 2006, after a 940,000 increase in 2010. Even with the gains, little headway has been made in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009.

“The tide is beginning to come back in,” James Glassman, senior economist at JP Morgan Chase in New York, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “We’ve got a long way to go. This is all positive, though, that we’re actually moving forward, and that’s an important trend.”

The New York Fed’s Dudley, in a speech today to bankers in Iselin, New Jersey, said the central bank still needs to consider monetary-policy easing.

“Because the outlook for unemployment is unacceptably high relative to our dual mandate and the outlook for inflation is moderate, I believe it is also appropriate to continue to evaluate whether we could provide additional accommodation in a manner that produces more benefits than costs,” Dudley said.

Hourly Earnings

Average hourly earnings rose 0.2 percent to $23.24, today’s report showed. The average workweek for all workers increased six minutes to 34.4 hours.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 15.2 percent from 15.6 percent.

Annual benchmark revisions to the household survey showed the unemployment rate averaged 8.9 percent in 2011, down from 9.6 percent and 9.3 percent in the previous two years. It still marked the worst three-year period since 1939 to 1941.

The report also showed a decrease in long-term unemployed Americans. The number of people unemployed for 27 weeks or more fell as a percentage of all jobless, to 42.5 percent from 43.1 percent.

To contact the reporter on this story: Timothy R. Homan in Washington at

To contact the editor responsible for this story: Christopher Wellisz at


Stocks End Lower as Jobs Gains Fail to Impress

By Nikolaj Gammeltoft and Ksenia Galouchko - Jan 7, 2012 5:08 AM GMT+0700

U.S. stocks fell as better-than- forecast jobs growth and a drop in the unemployment rate failed to extend a weekly rally and lift the Standard & Poor’s 500 Index above its October high.

Goldman Sachs Group Inc. (GS) and Morgan Stanley fell more than 1.2 percent after analysts lowered the banks’ fourth-quarter earnings estimates. Bank of America Corp. (BAC) lost 2.1 percent after surging 8.6 percent yesterday. Alcoa Inc., due to start the earnings season on Jan. 9, slid 2.1 percent after saying it will close 12 percent of its global smelting capacity.

The S&P 500 (SPH2) fell 0.3 percent to 1,277.81 at 4 p.m. New York time. The index snapped a three-day advance, trimming its gain for the week to 1.6 percent. The Dow Jones Industrial Average dropped 55.78 points, or 0.5 percent, to 12,359.92 today.

“It’s definitely a solid report, but not a blowout surprise,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $44 billion, said in a phone interview. “The drop in the unemployment rate is good news, but it may reflect sluggishness in the labor force growth and it suggests that from a policy perspective we still have a lot of work to do.”

The S&P 500 has jumped 16 percent from its 2011 low as better-than-expected economic data boosted optimism that the world’s largest economy can weather Europe’s sovereign-debt crisis. The rally has brought the index toward the top of a trading range (SPX) it has be stuck in since August.

More Workers

U.S. employers added 200,000 workers to payrolls in December, Labor Department figures showed in Washington, more than the 155,000 gain projected in a Bloomberg News survey. The unemployment rate unexpectedly fell to 8.5 percent, the lowest since February 2009. The growth in payrolls did not beat estimates by as wide a margin as data from ADP Employer Services yesterday that helped trigger gains in equities.

Equities also dropped earlier as German factory orders fell 4.8 percent, the biggest decline in almost three years, fueling concern that Europe was heading into a recession.

Most U.S. stocks rose yesterday as banks rallied and a private report showed payrolls climbed, offsetting reduced profit forecasts at companies including Target Corp. and J.C. Penney Co.

Alcoa (AA) fell 2.1 percent, the most in the Dow, to $9.16. The biggest U.S. aluminum producer said yesterday it would close 12 percent of its smelting capacity amid falling prices. Alcoa is scheduled to mark the unofficial start of the fourth-quarter earnings season next week. Profit at S&P 500 companies rose 6 percent during the September-December period (SPX), according to analyst estimates compiled by Bloomberg, which would mark the slowest growth since the third quarter of 2009.

Banks Tumble

Financial shares (S5FINL) dropped 0.6 percent as a group in the S&P 500. Bank of America lost 2.1 percent, the second-most in the Dow, to $6.18. It surged 8.6 percent yesterday amid speculation the U.S. may introduce a new mortgage refinancing program. The shares retreated today after an Obama administration official, who asked for anonymity, denied that the White House is considering a trillion-dollar plan to refinance home loans.

Goldman Sachs slipped 1.2 percent to $93.42, while Morgan Stanley (MS) lost 2.3 percent to $15.90. The major U.S. banks most reliant on trading had their earnings estimates reduced by analysts at Sanford C. Bernstein & Co. and Ticonderoga Securities LLC as a weak fourth quarter dimmed prospects for a capital-markets rebound in the first half of 2012. Meredith Whitney Advisory Group LLC also cut fourth-quarter estimates on the banks.

Family Dollar Falls

Family Dollar Stores Inc. (FDO) fell 7.5 percent to $53.63 for the biggest retreat in the S&P 500. The discount retailer reported fiscal first-quarter revenue of $2.15 billion, missing the average analyst estimate of $2.17 billion. Comparable store sales increased 4.1 percent, compared with the average analyst estimate of 4.9 percent.

Stocks of companies that rely on consumer discretionary spending had the biggest gain among S&P 500 industries, rising 0.2 percent as a group.

J.C. Penney (JCP) advanced 3.5 percent to $34.96 after being raised to “outperform” from “neutral” at Macquarie Group Ltd. The third-largest department-store chain lost 2.7 percent yesterday after cutting its fourth-quarter profit forecast, citing declining sales and deeper discounts than anticipated during the holiday season.

Best Buy Co. gained 3.3 percent to $24.22. The world’s largest consumer-electronics retailer posted a same-store sales drop in December that was in line with analysts’ estimates and repeated its forecast for profit this year.

Highest Closing

With the S&P 500 this week approaching its highest closing since Oct. 28 and Aug. 1, chart levels fixated investors today.

The S&P 500 ended yesterday at 1,281.06, within 0.4 percent of its highest level since Aug. 1. Its relative strength index, a measure of how fast prices have risen in the last two weeks, was 61.2. Readings above 70 are considered by some traders as evidence a rally has been too rapid.

“The feeling in the market is that we need more catalysts to break above the resistance levels we are bumping up against right now,” Dan McMahon, director of equity trading at Raymond James Financial Inc. in New York, said in a telephone interview. “We’re in the high end of the trading range that we’ve been stuck in since August.”

To contact the reporters on this story: Nikolaj Gammeltoft in New York at; Ksenia Galouchko in New York at

To contact the editor responsible for this story: Nick Baker at


Vail Resorts Struggle as Snowless Season Hits

By Aaron Kuriloff and Amanda J. Crawford - Jan 7, 2012 4:05 AM GMT+0700
Enlarge image Vail Resorts Struggles as Snowless Ski Season Hits U.S. West

A skier goes down a trail at Breckenridge Ski Resort in Breckenridge, Colorado. Photographer: Liam Doran/Vail Ski Resorts Inc. via Bloomberg

Vail Resorts Inc. (MTN) shares have fallen 15 percent since Dec. 23 as major ski trails were closed at the company’s mountain properties in the western U.S. because of a lack of snow.

Visitors to the company’s resorts were down 15.3 percent compared to this time last year, Rob Katz, chief executive of the Broomfield, Colorado-based company, said in a statement.

Lift ticket revenue was up 0.6 percent and revenue from ski school was up 0.9 percent, even though “very unusual” weather had reduced skier visits and the use of season passes, he said.

“For the first time in 30 years, a lack of snow has not allowed us to open the back bowls in Vail as of January 6, 2012, and, for the first time since the late 1800s it did not snow at all in Tahoe in December,” Katz said in the statement.

Shares of the Broomfield, Colorado-based company traded at $38.30 at 4:02 p.m. today in New York after closing at $45.11 on Dec. 23.

Nationally, about 16 percent of the U.S. is covered by snow, compared to about 45 percent at this time last year, according to the National Weather Service. Ski resorts in Europe have also suffered from lack of snow, leading to the cancellation of World Cup skiing events such as one scheduled for Munich on New Year’s Day.

Snowless Landscape

Martin Pyykkonen, a senior analyst with Wedge Partners of Greenwood Village, Colorado, said people who live in Denver have been amazed by the lack of snow this season.

“People who have lived here all their life say they’ve never seen anything like it,” he said today in a telephone interview.

From his window looking out over Denver and the Rocky Mountains, Pyykkonen said, all he sees is brown.

“It looks like springtime except it is all gray and brown, because there is no snow anywhere,” he said. “It’s a terrible year, bottom line.”

Pyykkonen says Vail Resorts makes more money from out-of- town visitors than from locals. Even if there is a good snowfall in the next few months, he said, it may be too late for families now planning spring vacations.

“Those people are listening to the weather reports and saying, ‘Let’s not go there, it won’t be a ski vacation,’” he said.

Vail Resorts operates ski resorts including Vail, Beaver Creek, Breckenridge and Keystone in Colorado; Heavenly and North Star in the Lake Tahoe area of California and Nevada; and the Grand Teton Lodge Co. in Jackson Hole, Wyoming.

Katz said the company wasn’t revising earnings numbers issued in September 2011, though it “would acknowledge that those targets will be more difficult to achieve given the results over the holidays.”

To contact the reporter on this story: Aaron Kuriloff in New York at; Amanda J. Crawford in Phoenix at

To contact the editor responsible for this story: Michael Sillup at