On the slow train to financial reality

For years, Massachusetts has been blessed with leaders who understand the vital importance of public transportation, so planners are in the habit of thinking big, rather than saying no. But the need for restraint is apparent. Federal transportation officials rejected a long list of proposed transit and highway projects in 2007 in part because it lacked any fiscal modesty. While the state slashes health programs amid plunging revenues, it expects to spend $29 million to design a connection downtown between the Red Line and the Blue Line – never mind that the money to build the $300 million project won’t come through anytime soon.

A Privileged World Begins to Give Up Its Secrets

About 10 years ago, when I was working in Frankfurt, Germany’s banking capital, I was invited to the top floor of the glittering skyscraper headquarters of one of the country’s most venerable banks. There, I was treated to something that, it was made clear to me, few eyes usually had the privilege of seeing — a tour of its private art collection, an impressive spattering of modern and ancient European and American masters.

The point was, those pictures reflected the bank’s wealth. And the fact the secretive treasures were kept forever behind closed doors for the enjoyment of the privileged few reflected its power.

If that seems like a different era, it is. Banks around the world are reeling, as we know; the European banks’ losses are among the most ruinous. And their prestige and putative secrecy and independence received a further blow last week, when the government of Switzerland agreed to release to the United States the names of 4,450 American citizens suspected of using secret Swiss accounts at UBS, the country’s biggest bank, for tax evasion.

The victory for the United States was made possible by evidence from an American-born whistleblower — code name Tarantula — a disgruntled former UBS employee from the Boston area who was working in Switzerland. Until he left the bank, he was part of a UBS team that made frequent trips across the Atlantic to aggressively market investment strategies to rich Americans to elude the scrutiny of the Internal Revenue Service.

But it would be wrong to see the settlement as a one-off strike against just one bank by a single government. It is in fact the result of a broader political moment created in the wake of the global financial crisis when disenchantment with financial globalization is causing governments to repatriate wealth back to within national borders, especially at a time when countries badly need to balance their books.

Just a few years ago, in the pre-crisis era, the shadowy workings of cross-border banking — and what may or may not have been happening there — were generally overlooked.

And, while some of the alleged tax evaders may be the war criminals, gunrunners or despots usually linked with secret foreign bank accounts, the target of the latest efforts are much more likely to include rich businessmen and high-net-worth individuals. “There is a political movement because of the financial debacle,” said one veteran European banker who insisted on speaking anonymously because he has retired. “They are turning toward the so-called rich and want to hurt them.”

Of course, the United States looks at it a bit differently. Prosecutors have contended that in the UBS case alone, wealthy Americans hid billions of dollars, thereby evading taxes of hundreds of millions of dollars a year.

While Switzerland is arguably the largest off-shore center, it is not the only one. Supporters of its banking secrecy code point out that the code is wrapped up in the country’s claims to neutrality and being above the global political fray. But secrecy has also turned out to be immensely lucrative; according to some estimates one-quarter of the world’s offshore money now resides in Switzerland.

Other countries or territories have copied the model — Liechtenstein, Bermuda, the Cayman Islands, Macao and Hong Kong among them. And while Switzerland is probably seen as the most conservative, blue chip, upstanding offshore haven, the others are measured by a sliding scale of probity and association with dubious business practices, if not crime. The European banker said that in the early 1990s, following the fall of the Soviet Union, he worked in Switzerland where he said agents of Russian expats would show up with “boxes of cash” from Cyprus, a popular haven for capital fleeing the Russian authorities and the country’s post-collapse chaos.

The backlash against this illicit world has not been confined to the United States; it is apparent across Europe, too.

France will become of one of the first European countries to put in place a new tax treaty with Switzerland to improve transparency and access to banking information. Germany is in discussions with Liechtenstein over issues related to tax evasion by German companies and individuals. Liechtenstein has also struck a disclosure agreement with Britain, encouraging British clients of Liechtenstein banks to volunteer information to British tax authorities in return for reduced penalties. In Italy, tax officials have started an investigation into whether the estate of the late Gianni Agnelli, the former chairman of Fiat, has money hidden away in Switzerland. In Britain, the government has become particularly exercised by tax competition — the offering of low tax rates and other advantages like tax secrecy to lure capital away.

In the Swiss settlement last week, the American authorities got the information they needed after they saw an opportunity in the weakness of UBS, a bank that once enjoyed a sterling global reputation but has suffered billions of dollars in losses linked to United States subprime securities and had to be saved by a big government bailout last October. For the Swiss government, the deal lifts the immediate threat of heftier legal action and frees the bank — one of the mainstays of the Swiss economy — to concentrate on recovery.

But will anything really change? Although the United States is supposed to learn the identities of a few thousand tax evaders, those names will go first to an intermediate tax administration in Switzerland for review. The actual process of recovering the names may become lost in bureaucracy and foot-dragging.

Moreover, as The Times reported last week, smaller Swiss banks say they are confident that they can continue to profit by finding new, more elaborate ways to protect the privacy of their clients. Those banks continue to help clients hide billions of dollars through complex structures in offshore havens.

But the I.R.S. commissioner, Doug Schulman, said the agreement with UBS was a “major step forward” in the government’s efforts to pierce bank secrecy, and he warned that “wealthy Americans who have hidden their money offshore will find themselves in a jam.”

In the new political climate, expect to see a few rich Americans shifting uncomfortably.

Retirees Ignore Bonds At Their Own Risk

BOSTON — When it comes to investing, most retired Americans have it backwards. Instead of investing in bonds — things that provide a return on capital, those seeking retirement-income security tend to invest in things that provide a guaranteed return of capital. Doing so could lower one’s standard of living, especially when short-term interest rates fall.

“Retired households seeking a secure and dependable income should prioritize return on capital over return of capital,” wrote Anthony Webb, author of a report released this week by the Center for Retirement Research at Boston College.

“Households need to make a conscious effort to learn to focus less on the market value of their investments and more on the consumption they can support,” he said.

To Webb’s way of thinking, “the true risk-free asset is a portfolio of bonds and, in particular, inflation-protected bonds of appropriate maturities.” In other words, Treasury Inflation Protected Securities or TIPS. Read his report.

That’s not what most investors are doing now. Most retired Americans prefer investments such as Certificates of Deposit and T-bills — investments that provide safety and liquidity. For instance, 86% of households nearing retirement have bank accounts, while just 33% own stocks directly and just 7% own bonds directly, according to another CRR study. Read that study (PDF).

Yes, short-term deposits do provide a guaranteed return of capital, but they don’t offer guaranteed returns, Webb said. And that’s what most retired households need.

“The ultimate objective of retirement saving is to finance consumption,” Webb wrote. “The standard of living of a household that invests in short-term deposits is at risk if short-term interest rates fall. In contrast, changes in interest rates and bond prices may have no effect on the standard of living of a household investing in bonds.”

Given that, how might you re-jigger your portfolio?

Ladder your bonds

In a perfect world, if you knew in advance how much of your capital you planned to consume or spend in the future, you would put together a bond portfolio with income payments that matched your consumption needs. In other words, you would ladder your portfolio. And you would match your asset (the bond) with your liability (your expenses.)

For his part, Michael Zwecher, author of a forthcoming book on retirement, said another way to achieve the nearly same result is to ladder Treasury STRIPS or what are sometimes called zero-coupon securities. These are securities that pay a fixed rate of return and are stripped down to single payment components, he said. As single payments, they sell at a discount and rise over their life to pay par on maturity.

“They can be set up in a ladder to provide steady or customized income streams,” he said. Plus, STRIPS are highly safe and liquid. What’s more, STRIPS are standardized and mature on either Feb. 15 or Aug. 15 each year. Currently they can be bought to cover maturities ranging from 2010 to 2039, he said. Learn more about Treasury STRIPS at this site.

Meanwhile, Aaron Skloff, chief executive officer of Skloff Financial Group said that corporate bonds currently provide “excellent risk/reward” for retirees. “Fears of mass defaults have waned, as the ‘definite’ collapse of the global financial system has once again become a remote probability.” He said investors concerned about buying a “bad” bond should consider a basket through an ETF or bond fund.

Duration matching

Unfortunately, laddering a bond portfolio “probably requires more knowledge and patience than most households possess,” Webb said. Instead, you might try what he calls the simple version of this strategy. “Invest in a mutual fund or exchange-traded fund investing in bonds with an average duration that equals the household’s life expectancy,” he said.

“Early in retirement, the household would invest mostly in long-dated bonds. Later in retirement, it would gradually rebalance its remaining assets in favor of shorter maturity bonds, matching the reduction in its remaining life expectancy,” Webb said.

Optimize your asset allocation

To be sure, you wouldn’t invest 100% of your retirement nest egg in bonds. Instead, Webb suggests that to optimize the amount you invest between stocks and bonds. And to do that you need to consider your entire retirement-income portfolio. For instance, he said Social Security is similar to owning TIPS. And having a defined-benefit pension plan is similar to owning regular or what he calls nominal bonds.

“Those sources of income are good substitutes for inflation-protected and nominal bonds in household portfolios, and households with large amounts of these sources of income should invest larger proportions of their financial assets in equities than otherwise similar households,” he said.

Others also urged investors not to over-invest in bonds just because they provide a guaranteed rate of return. Don’t confuse certainty with safety, said Harold Evensky, the president of Evensky & Katz. “The payment on bonds, assuming no default, may be certain but for most investors a total allocation to bonds is certainly not safe,” he said.

“The problem is that most investors require a real after-tax return that significantly exceeds the return provided by fixed-income investments. As a result, an over-concentration in bonds will result in a gradually decreasing living standard.”

What’s more, Evensky said it’s important to consider all the risks that come with investing in bonds, including interest-rate risk, credit risk, and inflation risk, before you start moving money out of CDs and T-bills.

“Unless the [Center for Retirement Research] is in the business of pumping bond sales, I think that it would do well to frame the results of its study with the reality of risks other than market volatility.” he said.

Robert Powell is the editor of Retirement Weekly. Learn more about Retirement Weekly here .

Copyright © 2009 MarketWatch, Inc.

Rocking no more

Its eye on sports, CBS pulls plug on legendary WBCN

By James Reed and Erin Ailworth, Globe Staff | July 15, 2009

It was more than 40 years ago, on a March night in 1968, when WBCN-FM (104.1) decided to break from its classical music format. Instead of Bach, listeners that evening heard “I Feel Free,’’ by the Eric Clapton-led rock band Cream, and right then Boston’s local music scene was transformed.

Yesterday, it was upended yet again, by the same station.

CBS Radio Boston, which owns WBCN, announced it would pull the plug on the station, which helped make household names of some of the biggest musical acts to come out of Boston, so it could accommodate other changes in local radio.

Next month, a sports talk radio station, The Sports Hub, will replace the music station WBMX, or Mix 98.5 FM, adding a third sports radio show in a town that seems to have an insatiable appetite for all things sports. Mix 98.5 will then take its “modern rock, conservative format’’ to WBCN’s slot.

And WBCN, whose slogan, “The Rock of Boston,’’ had become as seminal as some of the performers the station championed early on – including Aerosmith, The Cars, J. Geils Band, U2, and Elvis Costello – will morph into an online-only station available at wbcn.com.

New sports talk station will take on WEEI.

It was stunning news for generations of Boston music fans, who grew up with the station at a crucial time in rock music’s evolution, and for local bands, who had come to rely on WBCN as the one place that might land them their big break. WBCN came of age with some of rock’s pivotal figures, from Janis Joplin to Jimi Hendrix, and its disappearance from the dial is as much a signal of the changing musical scene as it is of drastically changed listening habits. (One word: iPod.)

“Once their ratings started going down the tubes, I thought to myself, ‘Somebody’s not getting it in corporate,’ ’’ Charles Laquidara, one of WBCN’s quintessential personalities from 1969 to 1996, said from his home in Hawaii. On his Facebook page, he addressed WBCN’s fans: “It was a great station. It was also a great time in radio history. I know we can never go back to that, but there will be something someday.’’

Mark Hannon, senior vice president and market manager of CBS Radio Boston, said in an interview yesterday it is a “sad moment to see a station with 40-plus years of heritage coming out of format.’’ But, he said, “the rock genre in this marketplace is extremely crowded, and ’BCN has struggled in the past few years to stay competitive.’’

The decision, which will take effect Aug. 13, will ripple well beyond the airwaves, too, given the station’s longtime support for local bands.

In addition to “Boston Emissions,’’ ’BCN’s two-hour, weekly program showcasing local talent, the WBCN Rock ’n’ Roll Rumble has been a popular battle of the local bands since 1979. Occasionally, its winners went on to find national success. After winning the Rumble in 1983, ’Til Tuesday, Aimee Mann’s new-wave band, was signed to Epic Records; the cabaret-punk duo the Dresden Dolls emerged victors in 2003.

Anngelle Wood, who organized this year’s Rumble, said yesterday she was not sure of the event’s future. “Boston Emissions,’’ which she also hosts, will move to sister station WZLX in August.

The longtime ’BCN personality who became known simply as Oedipus said the loss of the station will cut deeper than some might realize.

“WBCN was a fabric of the community,’’ he said. “It was part of Boston, like the Red Sox. It was more than just music. It completely enveloped the lifestyle of people in Boston and the Northeast. And it no longer does that. It had to make this change. It’s reflected in the ratings.’’

Word of ’BCN’s demise was greeted with mixed emotions at competing stations, where program directors, many of whom grew up listening to ’BCN, said they’d been expecting the downfall. A Cornerstone Research Inc. report looking at men ages 18 to 49 in metro Boston shows ’BCN ranking in the number 11, 12, and 13 spots from January to May, with roughly 4 percent of the area’s listening market.

“The general public must be very surprised, but industry insiders have known they had their problems – let’s just leave it at that – for a number of years. So, we’re not really stunned,’’ said Ron Valeri, program director at WAAF and Mike FM. Still, he said it’s “a bittersweet victory.’’

At 101.7 WFNX, program director Keith Dakin recalled the heyday of WBCN, when personalities like Laquidara and Mark Parenteau graced the station’s airwaves.

“It’s great for us. We’ve lost an alternative rock competitor,’’ said Dakin. “Don’t get me wrong. It’s sad to lose a legendary rock station in this market, but as far as the competitive landscape, it’s great for a station like ’FNX.’’

Parenteau, a DJ at WBCN for 20 years, beginning in 1978, said that before corporate ownership, the station encouraged its on-air talent to be outrageous and play what they wanted.

“We didn’t make a lot of money, but we had a lot of freedom. We could play jazz, comedy, whatever,’’ Parenteau said. “But as we made more money, we had less freedom. It was like a deal with the devil.’’

Still, the station was enormously influential.

“If ’BCN added a band, 30 or 40 stations would add that band because we seemingly knew what we were doing,’’ he said. “The sort of station ’BCN used to be is definitely dead. Radio today is all driven by boards of directors looking at the stock market. They want the sure thing, and they want to play it over and over.’’

Before he was lead singer in the J. Geils Band, Peter Wolf was one of the founding DJs at WBCN. He started there in 1968, interviewing the likes of Van Morrison, Jeff Beck, Sun Ra, and Roland Kirk. Wolf said he is neither surprised nor upset the station is going away. “For me, ’BCN ended a long time ago,’’ he said. “When it became corporatized, it lost the unique qualities that made it vital to the community.’’

Despite its founding in 1955 as a classical station, ’BCN became “the underground rock station in Boston,’’ said Scott Fybush, editor of NorthEast Radio Watch, an industry trade journal. “They were playing stuff that had no other home on the radio and people who had never had a reason to own an FM radio before were going out and buying an FM radio to hear this.’’

The station struggled for at least the last decade, propped up by its coverage of the Patriots and, at least for a time, Howard Stern’s syndicated show

Fybush called CBS Radio’s emphasis on building a sports station with Patriots coverage, a “smart move,’’ because it gives listeners something they can’t necessarily load onto their iPods – live coverage of games.

Of course, more sports and more talk means less rock for Boston listeners.

But Sean Ross, vice president of music and programming at Edison Media Research, said for many around Boston, that change had already begun.

“The ’BCN that most people are going to be sad about losing this afternoon,’’ Ross said, “went away a while ago.’’

Mark Shanahan and Don Aucoin of the Globe staff contributed reporting.

© Copyright 2009 The New York Times Company

Glossy in search of new sheen

Boston magazine hoping change at top will bring lift

By Megan Woolhouse, Globe Staff

Larry Platt, the top editor of Boston magazine, is from Philadelphia and it shows. During a breakfast interview last week, his description of an upcoming story about recently indicted former House speaker Salvatore F. DiMasi hit a pronunciation snag. “Is it Di-May-si or Di-Mah-si?’’ he asked with a hint of uncharacteristic bashfulness.

Platt – who is also editor of Philadelphia magazine, both owned by Philadelphia-based Metrocorp Inc. – is unfamiliar with the scene in the Massachusetts capital and unapologetic about it. But he intends to make Boston magazine a “must read’’ that “gets the movers and shakers in Boston shaking.’’

In the process, he also hopes to halt a sales slump that has caused the glossy monthly to lose money this year for the first time in its nearly 40-year history.

“I think an outsider can bring fresh perspective that can challenge the parochialism,’’ Platt said.

But the Philadelphia native, who became editorial director of both magazines in February, faces a daunting challenge.

Like magazines nationwide, Boston is struggling because of the recession and the migration of readers to online publications. Overall circulation has dropped 24 percent since 2005 to about 100,000. Newsstand sales – driven by customers who make an impulsive decision to pay full price – are off 35 percent since 1999, according to Metrocorp, which is privately held.

The magazine is noticeably lighter because of fewer advertisements and thinner content: The May issue was 152 pages, down from 282 last year.

In addition, city and regional magazines like Boston have faced increased competition from a flurry of niche products. In recent years, The Improper Bostonian has grown into a slick biweekly angling to be the city’s “premier entertainment and lifestyle guide.’’ Boston Common, as well as specialty publications like FB, Lola, and Design New England – all three published by Boston Globe Media – also target a high-end demographic.

Last month, Platt made his first major moves by firing four staffers, including editor James Burnett. Platt replaced him with Andrew Putz of Minnesota Monthly, who will start July 22 and report to Platt.

The move stunned surviving staffers, who had just started assembling the annual “Best of Boston’’ issue.

“The biggest shock was the timing,’’ said Jolyon Helterman, the features editor who resigned in protest the same day. Helterman, 39, said the firings showed a lack of confidence in the content and unfairly condemned the staff for the magazine’s financial woes.

It was as though they were saying “editorial is broken,’’ Helterman said, when the real problem is “people aren’t buying ads because no one has any money.’’

Platt said economics made the layoffs necessary. As for the decision to cut jobs now, he said, “There is no good time to do this kind of thing. The longer you wait, the more of an economic hole you dig yourself into.’’

Samir Husni, director of the Magazine Innovation Center at the University of Mississippi in Oxford, said profits at city and regional magazines nationwide have dropped, causing them to cut employees and pages. Their lifeblood – ads for luxury services, restaurants, and jewelry stores – has dried up.

“When the economic collapse happened, it took the entire business model with it,’’ Husni said. “So everybody is trying to reinvent’’ themselves. For example, he said, some are charging more for subscriptions to offset losses in ad revenue.

Mark Jurkowitz, the Globe’s former media critic, now an associate editor at the nonprofit Project for Excellence in Journalism in Washington, D.C., said industry changes and the dour economy mean Boston will have a “rough go’’ this year. But masthead churn at the monthly is nothing new, he said.

“Philadelphia magazine was always seen as the star’’ by Metrocorp, said Jurkowitz, who had a brief stint at Boston. “Philly was always the big brother.’’

Stories about turmoil at Boston magazine almost always invoke the name of its owner, D. Herbert Lipson, who is a looming presence on the Philadelphia scene, and well known for trumpeting his conservative politics. Even at 80 years old, Lipson remains in charge of Metrocorp and does not hesitate to voice his opinion about the magazines.

He bought Boston magazine in 1970 from the Boston Chamber of Commerce, which produced it, sparking controversy from the start. Chamber members wanted to buy it themselves, so when Lipson outbid them, they promptly walked out.

Lipson, whose father purchased Greater Philadelphia Magazine from that city’s Chamber of Commerce in 1951, was hardly deterred by the exodus.

“We put together the magazine with spit and chewing gum,’’ he said in the 1987 anniversary issue of Boston. “Our first efforts were remote, with Philadelphia involved, and that led to some bad editorial choices. I wanted to address social issues, literary issues, and it took us a while to get on track.’’

Lipson, who writes a monthly “Off the Cuff’’ column for Philadelphia, lives outside Atlantic City, and has a few thin ties to Massachusetts: He spent his childhood summers on the North Shore and his father came from Worcester. Lipson declined to be interviewed for this report, but in Philadelphia magazine last year he talked about what inspired his publishing career five-plus decades ago.

“There was nothing worse than being ignored,’’ he said. “We were driven.’’

Over the years, Boston has published a wide range of stories, from an article on the 1970s busing crisis to a recent cover piece on Red Sox owner John Henry’s engagement, as told by a friend of the bride. But its staples include features on pricey restaurants, fashion boutiques, and luxury real estate. The magazine also pioneered the “best and worst’’ model, eventually dropping the “worst’’ in what was viewed as a concession to advertisers.

Both Metrocorp magazines, and several ancillary publications, have won a host of awards over the years and generated a steady stream of advertising dollars, making Lipson wealthy. At a company Christmas party five years ago at the Charles Hotel, Lipson proclaimed he was “backstroking in green,’’ according to someone who was there.

David Rosenbaum, editor of Boston from 1986 to 1991, said Lipson did not care much for editors, but tolerated them when profits were robust. “When the economy turns and it [the magazine] gets skinny, he figures the editor is an idiot,’’ he said.

And they often paid a price: A dozen editors came and went between 1975 and 2000.

Rosenbaum said Lipson frequently pushed him to be irreverent, “going after poor people, Democrats, the handicapped, minorities,’’ he said. “He’s to the right of Attila the Hun. At least he was. I haven’t spoken to him since the day he fired me.’’

John Wolfson, a former senior editor who left Boston last year, said he often cringed when Lipson spoke, but that his advice was sought after in industry circles. “Lipson’s a tough customer,’’ Wolfson said. “But he knows what he wants and puts out a good magazine.’’

Metrocorp’s 2009 revenues have fallen 10 percent to 15 percent from last year, according to David Lipson Jr., president of Metrocorp and Herb Lipson’s son.

Platt said he has a plan for reinvigorating Boston magazine: There are 250 influential people who compose any city’s power structure, he said, and the key is to write vivid stories about them. But sorting out the city and its workings might be tougher for Platt now that some staffers with deep local roots are gone, and his editor, Putz, is from Minnesota.

Marketing director Dawn Curtis Hanley, daughter of Boston newscasters Chet Curtis and Natalie Jacobson, was among those fired. So was Rockport resident and creative director Patrick Mitchell. And former publisher Dan Scully, a Boston native, retired last year after 24 years.

“I still have a few people I care about there, so I’d like to see the whole thing succeed for their benefit,’’ Scully said. “I wish them the best with these changes.’’

Burnett, the latest editor to be dumped, said his severance agreement prevents him from saying much publicly about his tenure. “I understood going in that the editor of Boston magazine could have a limited shelf life,’’ he said. “But what I tried to do is not let that inhibit us.’’

Platt began courting Putz, 35, about two months ago. Putz wrote “buzzworthy’’ stories for Minnesota Monthly, Platt said, including pieces on Al Franken’s senatorial bid and the massive I-35W bridge collapse. While city and regional magazine sales dropped 14 percent nationally in the last year, Minnesota Monthly’s sales grew 3 percent under Putz, according to Platt.

Putz acknowledged Boston editors often have a short tenure. “I’m going to be there as long Larry Platt and Herb Lipson want me,’’ he said.

Jim Bandera, a former sales director at Boston magazine who left the company last fall, said Putz will probably bring a fresh sensibility to the job and hire writers who understand Boston.

Putz said it is too early to say what changes he will make at the magazine. “I’m not going to pretend to have some knowledge that I don’t have,’’ he said. “I’m like a well-informed tourist.’’

Johnny Diaz of the Globe staff contributed to this report. Megan Woolhouse can be reached at mwoolhouse@globe.com.

By DAMIAN PALETTA

WASHINGTON — Documents unearthed by congressional investigators reveal disagreements among senior Federal Reserve officials about how to handle Bank of America Corp.’s acquisition of Merrill Lynch, fueling concern on Capitol Hill over giving the central bank even more power to regulate the financial system.

The glimpse inside the regulatory machinery provided by emails, memorandums and handwritten notes show a Fed that wrestled with how tough it should be on Bank of America, one of the biggest U.S. banks. It also shows Fed officials questioning more broadly their response to the financial crisis months earlier.

In December, Bank of America approached top U.S. officials about abandoning a deal, forged in the heat of the crisis, to buy investment bank Merrill Lynch. In the end, the government arranged a $20 billion rescue package for the bank to cover growing losses at Merrill.

In between, the documents show areas of disagreement within some of the Fed’s 12 regional reserve banks.

The Federal Reserve Bank of Richmond, where supervision of Bank of America’s parent company is based, pushed for a tougher approach than other regulators, emails suggest. Bank of America officials appealed more than once to the Fed’s Washington headquarters to intervene.

Bank of America CEO “Ken [Lewis] may also raise his favorite perennial issue — that is, is the Richmond supervisory team on the same page as the [Fed] Board,” Fed governor Kevin Warsh wrote in an email Dec. 30 to Fed Chairman Ben Bernanke and other senior officials. “Richmond staff was on our call today, but prior to the call, it sounds like they may have threatened a little more than ideal…”

On Jan. 10, Fed General Counsel Scott Alvarez wrote to Mr. Bernanke and others that Richmond Fed President Jeffrey Lacker was raising some issues over the final deal. Mr. Lacker wanted the entire Federal Open Market Committee to vote on any loan to Bank of America.

Mr. Bernanke responded at 2:01 a.m.: “Thanks. If we are nimble we can manage this.”

Whether or not Mr. Bernanke threatened Mr. Lewis’s ouster over the rescue remains a source of contention. Mr. Lewis suggested in testimony to New York Attorney General Andrew Cuomo that the Fed chief did just that. Mr. Bernanke has denied making such a threat to Mr. Lewis.

On Jan. 16, just days before government aid for the deal was supposed to be announced, Federal Reserve Bank of Boston president Eric Rosengren sent Mr. Bernanke an email saying that the Fed shouldn’t dismiss too hastily the idea of tossing management at Bank of America.

Mr. Rosengren suggested such a shake up might be necessary, “particularly if we believe that existing management is a significant source of the problem.”

Mr. Bernanke, at a contentious hearing Thursday, defended the Fed against suggestions it had been too lenient with management.

“The supervisory process is not a onetime thing. It’s an ongoing process, and in an ongoing supervisory process, we have made demands of the Bank of America on terms of their board and management,” he told Rep. Dennis Kucinich (D., Ohio).

The documents reveal Fed officials questioning the central bank’s response to the financial crisis even before negotiations began on the effort to aid Bank of America’s acquisition of Merrill Lynch.

“At this point I have [the] sense that the hearts and minds war in Iraq was handled better than it has been in this crisis, particularly within the Fed system,” wrote Meg McConnell, a top Federal Reserve Bank of New York official, on the day the House of Representatives voted down the Bush administration’s first financial-rescue package, sending the Dow industrials down almost 800 points.

The Obama administration earlier this month proposed giving the Fed powers to oversee and examine the largest companies in the financial system.

The disclosures could bolster the central bank’s argument that it needs more power to manage future crises. One reason for the government’s lurching response last year, officials say, was that it didn’t have the needed tools.

The Fed has been dealing with a steady stream of criticism from Republicans. Democrats have recently joined in, and the disclosures being aired through the congressional inquiry have put the central bank on the defensive.

Write to Damian Paletta at damian.paletta@wsj.com

Despite the weak economy, comedy clubs around Boston like the Improv Asylum are seeing a steady flow of customers.

Comedy clubs bank on

recession laughs

When the economy is bad, laughter is often an effective way to cope. That’s a good thing for area comedy clubs, several of which say patrons are still crowding their venues for much-needed escapes.

Richard Jenkins, owner of the Comedy Studio in Harvard Square, said business is up 10 percent compared to last year. He pointed to tickets of $10 or less as a major selling point to customers yearning for entertainment on the cheap.

“Stand-up comedy is one of most affordable entertainment options someone has, so to be able to have a good night out and save money looks very appealing,” Jenkins said. “We’re turning away more people, and we’re selling out on a regular basis.”

At ImprovBoston in Central Square, managing director Daniel Binderman said, “Sales holding up pretty well.” Meanwhile, at the Improv Asylum in the North End, a third show on Saturday nights and a Sunday evening show were added in April to meet the growing demand.

“I think the fact that people are looking for more local things at home to do has helped,” said events manager Kristin Martin.

It’s not just smaller venues that are enjoying the business. Sales remain strong at the Comedy Connection — which moved from Faneuil Hall to the 1,100-seat Wilbur Theatre last July — according to marketing director Andrew Mather.

“We are actually are selling very well,” said Mather, who credited part of the reason to more customers from the suburbs, perhaps opting to stay closer to home for excursions. “We’ve haven’t seen a lag in sales at all.”

Boston Comedy Clubs CLICK HERE

Fed’s specter could steer GE Capital revamp

By Scott Malone – Analysis

BOSTON (Reuters) – The possibility of the Federal Reserve gaining regulatory authority over General Electric Co’s hefty finance arm could influence how the company restructures that business.

When President Barack Obama this week unveiled his proposal for the most sweeping overhaul of U.S. financial regulations since the 1930s, he proposed the central bank oversee not just banks but “other large firms that pose a risk to the entire economy in the event of failure.”

That was a reference to troubled insurer American International Group, which has received roughly $180 billion in government bailout money. But GE investors said the label could just as easily apply to the U.S. conglomerate’s finance business, a major commercial lender.

“I could definitely see that potentially becoming an issue if companies like GE and their finance arms came under more scrutiny,” said Perry Adams, vice president and senior portfolio manager at Huntington Private Financial Group in Traverse City, Michigan, which holds GE shares.

The Fairfield, Connecticut-based company is already working to scale back GE Capital, which has faced a sharp drop in profit through the recession and is a major reason for the 58 percent drop in GE shares over the past year, a sharper decline than the 30 percent slide of the Dow Jones industrial average.

Finance had accounted for half of GE’s profit in 2007, but Chief Executive Jeff Immelt said he plans to downsize the unit so that in the future the world’s largest maker of jet engines and electricity-producing turbines would rely on it for just 30 percent of earnings.

Last year GE Capital earned $8.6 billion, about one-third of the corporate total, and executives said in March it could earn $2 billion to $2.5 billion this year if the conditions envisioned in the Fed’s base case for the economy pan out.

GE aims to reduce its reliance on investments including real estate and on consumer finance, instead focusing more on financing GE products and other heavy equipment.

‘POUND OF FLESH’

While Obama did not name GE Capital, investors said it could easily come in for more federal oversight.

“Anybody who got aid of some sort, whether it was direct or indirect, probably is going to find that the government is going to extract their pound of flesh, have more regulation just because they don’t want to do that again,” said Peter Klein, senior portfolio manager at Fifth Third Asset Management in Cleveland, Ohio, which owns GE shares.

GE did not seek capital under the Troubled Asset Relief Program, but it did participate in Washington’s Commercial Paper Funding Facility and issue debt backed by the Temporary Liquidity Guarantee Program.

GE Capital has braced for more government oversight, but is waiting to see how it will be affected, said spokesman Russell Wilkerson.

“We have anticipated and planned for increased regulation of financial institutions and are supportive of the broad themes of addressing systemic risk and increased transparency,” Wilkerson said. “However, many elements of the administration’s proposal are new and bear further scrutiny.”

Given that the company is already working to downsize its finance arm, it may choose to exit businesses that will face substantial new regulations, investors said.

“What happens with regulation, obviously, is the returns come down,” Klein said. “All things being equal, it will find less pleasure in being a regulated entity, and there may be less emphasis on GE Capital.”

BANK WITHIN FIVE YEARS?

During the worst of the credit crisis last year, GE officials considered seeking a bank holding company charter, which would have given them access to the Fed’s lending window but also would have subjected them to more regulation. They ultimately opted not to seek a federal charter.

But under the new regulatory framework, the company may need to become a bank holding company within the next five years, wrote Goldman Sachs analyst Terry Darling, in a note to clients.

That is not necessarily a bad thing for GE investors, who in March watched the shares fall briefly below $6 — about half their current level — as Wall Street worried that GE Capital contained a “time bomb” or some sort of massive liability that investors did not know about.

GE executives responded by holding a day-long investor briefing where they reviewed GE Capital in great detail, in a bid to assuage Wall Street’s anxiety.

“We believe the ultimate outcome is unlikely to be perilous for GE shares,” Goldman’s Darling wrote. “A strong (GE Capital) is in the best interest of the economic recovery the government is trying to foster.”

(Reporting by Scott Malone, editing by Matthew Lewis)

Prez targets finance system

Seeks to prevent Wall St. abuses

President Obama’s plan to overhaul the nation’s financial regulatory system received support yesterday from key Massachusetts congressional members who said changes are long overdue.

Saying America had allowed a “culture of irresponsibility” to grow within the financial industry, Obama proposed giving the Federal Reserve more regulatory powers and creating a new consumer watchdog agency to review new financial products peddled by firms.

“This was a failure of the entire system,” Obama said at a White House event, referring to last fall’s near collapse of the nation’s financial system. “An absence of oversight engendered systematic, and systemic, abuse.”

U.S. Rep. Barney Frank (D-Newton), chairman of the influential House Financial Services Committee, said the plan is an important step toward overhauling the regulatory system. He predicted Congress will have a bill on Obama’s desk before the end of the year.

Frank, who has parted with the administration over some issues, said there will be changes to Obama’s plan, but he said Democrats agree with the “fundamental” thrust of the package.

U.S. Sen. Edward M. Kennedy (D-Mass.) and Rep. William Delahunt (D-Quincy) won a major victory when Obama agreed to create a new Consumer Financial Protection Agency, something the two Bay State pols have pushed for in recent months.

“The plan announced by the president today will protect consumers and investors by restoring much of the regulatory oversight of our financial system that has been systematically dismantled in recent years,” said Delahunt.

But business leaders and Republicans didn’t like most of the proposals.

David Hirschmann, president of the U.S. Chamber of Commerce’s capital markets center, said the president’s plan adds an extra layer of red tape without really fixing the problems that led to last year’s Wall Street meltdown.

“We can’t simply insert new regulatory agencies and hope that we’ve covered our bases,” he said.

U.S. Rep. Scott Garrett (R-N.J.) said the president’s plan could create a cycle of more bank bailouts.

“It perpetuates what we’ve had in the past, said Garrett,” a member of Frank’s Financial Services committee.

The financial industry, including some of Boston’s most powerful mutual-fund companies, have been wary of too much government intervention in the sector, fearing their interests might be hurt.

Article URL: http://www.bostonherald.com/business/general/view.bg?articleid=1179683

US push to overhaul banking worries some
/business/general/view.bg?articleid=1179686

New investors face tough road ahead to right Saab

by The Associated Press

Tuesday June 16, 2009, 11:19 PM

Eric J. Shelton / APSaab automobiles are seen on the lot of Herb Chambers Saab of Boston on Tuesday. Saab Automobile, General Motors Corp.’s struggling Swedish unit known for its family cars, was rescued Tuesday by a consortium led by Koenigsegg Automotive AB, a tiny company that produces only a dozen custom-made super cars a year.

DETROIT (AP) — For the new owners of Saab Automobile to make money selling small numbers of cars across the globe, they have to return to the Swedish automaker’s roots, industry analysts say.

Somehow, a consortium of investors led by custom sports car maker Koenigsegg Automotive AB must restore Saab to the quirky, cutting edge and reliable brand once favored by professionals who wanted to look smart rather than wealthy.

“It was seen as a discerning choice,” said Tim Urquhart, senior automotive industry analyst with the consulting firm IHS Global Insight in London. “It was a professional’s vehicle, a doctor’s or an architect’s. A quality vehicle, but not an obvious statement like Mercedes or BMW.”

GM announced Tuesday that it has struck a tentative deal to sell the storied brand, which started as a Swedish aircraft maker. The sale is to include a $600 million funding commitment from the European Investment Bank, guaranteed by the Swedish government. Additional funding would be provided by GM and the new investors.

GM gave no details on the financing but said the sale should close in the third quarter. The troubled Detroit-based GM initially will get no return on its investment and apparently will have no stake in Saab. If the new company turns a profit, GM could receive the $150 million in cash that Saab has left over from GM’s ownership, plus the value of Saab’s assets.

The lack of an immediate payoff for GM is similar to the position of Chrysler LLC’s former owners, New York private equity firm Cerberus Capital Management LP, which exited the Chrysler bankruptcy with nothing to show for its $7.4 billion investment.

Koenigsegg, (KOH-nigs-egg), a tiny company which produces only a dozen super cars a year costing more than $1 million each, was founded in 1994 by von Koenigsegg, a Swedish sports car fanatic and entrepreneur who remains chief executive. Its factory and headquarters are located at a former air force base in southern Sweden.

Analysts say GM, which bought half of Saab in 1990 for $600 million and the rest for $125 million in 2000, was unable to differentiate the brand from its other products or find a sales niche.

Von Koenigsegg, in an interview with Swedish television, seemed to agree, saying that the new owners would try to restore some of the brand’s heritage while finding a place in the market between upscale and mainstream.

“This is neither a luxury or a people’s car, but it has its own niche — a bit of postmodern comfort, sporty, but with environmental thinking,” von Koenigsegg said. “We want to capture the Swedish aspect too. GM had a bit more of an international approach, and Saab drowned a little bit in that context.”

GM CEO Fritz Henderson, in a Web chat with reporters on Tuesday, said Saab was never profitable since the acquisition, despite great vehicles and loyal customers.

“We ran out of money just on the eve of launching the newest generation of Saabs, which we think will be outstanding,” he wrote, adding that GM will continue to make vehicles for the new company as well as provide engines, transmissions and other technology.

IHS analyst Urquhart said GM didn’t seem to know what to do with Saab, and failed to set its models apart from mainstream brands. The Saab 9-7X sport utility vehicle, for example, is very similar to a Chevrolet TrailBlazer, and the 9-3 midsize sedan is a close relative of the Pontiac G6.

“Without being too rude about it, GM sucked all the brand value out of it,” Urquhart said.

But Max Stephenson, owner of a Saab-Cadillac dealership near Milwaukee, said GM made Saab interiors far more luxurious and the performance better than other brands. All he has to do to convince customers is get them to drive one, he said.

“When you get people behind the wheel and you’re in the trenches, they’re like ‘Wow, this is a lot more than a TrailBlazer,” Stephenson said of the 9-7X.

But he said the models were a bit too pricey, especially when money for leasing dried up when credit got tight.

Tom Libby, an independent Detroit-area auto analyst, agreed that Saab lost its uniqueness in the now-crowded luxury segment and will have to find a new niche.

“We know that safety is addressed. We know that performance is addressed. We know that pure upscale luxury is addressed,” he said. Saab has to find a “white space that’s not covered. I don’t know what that is right now.”

Urquhart said the company must return to its roots of innovation. Saab was among the first with front-wheel-drive and turbocharging.

Yet it will be difficult, he said, to make money with Saab’s historically small sales volume of around 130,000 units per year. That volume, Urquhart said, has held steady since GM’s acquisition, dropping to 92,000 last year in the global automotive slump.

Von Koenigsegg dismissed criticism about his company having no experience in large-scale production, saying it isn’t needed because Saab has that knowledge. He said Koenigsegg can contribute green solutions and engine technology.

Saab employs about 4,000 worldwide, while Koenigsegg has a full-time staff of 45.

Shareholders in the new company were listed as Koenigsegg Automotive AB with a 23.4 percent stake, von Koeningsegg’s firm Alpraaz AB with 42.6 percent, Norwegian holding company Eker Group with 11.8 percent and San Diego-based Mark Bishop with 22.2 percent.

Saab went into creditor protection Feb. 20, and analysts say it remains to be seen whether the new group has the money to restore its health. Even Sweden’s Enterprise Minister, Maud Olofsson, who said she was pleased to see new owners, said they will need to show proof of resources.

Koenigsegg told Swedish news agency TT that the group has the resources it needs.

Massachusetts denies $50M for movie studio

PLYMOUTH — Officials with the company building a movie studio in Plymouth are vowing to forge ahead despite the state’s decision not to provide $50 million in bond money for infrastructure upgrades.

Bill Wynne, real estate manager for Plymouth Rock Studios, says the company is “disappointed and frustrated,” but that construction of the $500 million studio will start this summer regardless.

A spokeswomen for the state Executive Office for Administration and Finance tells The Boston Globe the money was denied because the project will not produce enough in tax revenue to cover the bond payments.

The facility, expected to open late next year, will include 14 sound stages, a 10-acre back lot, a theater, a 300-room hotel and an education center.

Article URL: http://www.bostonherald.com/business/general/view.bg?articleid=1178282

With 2 acquisitions, AOL looks to tap local ad market

Boston’s Going Inc. Web firm bought

By Hiawatha Bray, Globe Staff | June 12, 2009

AOL, the troubled Internet company that is being spun off by parent company Time Warner Inc., is buying itself a parting gift. It is acquiring a pair of start-ups, including one in Boston, that run websites featuring neighborhood news.

Going Inc. of Boston, founded in 2006, offers information on local parties and entertainment events. The company runs websites targeting 30 US cities, including Boston, Chicago, Miami, and New York. Patch Media Corp., based in New York, publishes community news online, covering five towns in New Jersey. Patch was launched in 2007 and funded by an investment company owned by AOL chief executive Tim Armstrong. Financial details of the transactions were not released, but the Associated Press reported AOL paid less than $10 million each for the two privately held companies.

“By joining with AOL, we have the opportunity to greatly expand the reach of our platform to more cities both in the US and around the world,” said Evan Schumacherm, Going’s chief executive.

“They want the local advertising dollars,” said Carl Howe, Internet analyst at Yankee Group in Boston. Howe said that small and midsize businesses throughout America spend vast sums on ads, mostly with local newspapers and radio and TV stations. Howe said newspapers alone took in $29 billion in local advertising in 2008, and acquiring Going and Patch will help AOL tap this market. “It lets them approach a different set of customers than the national advertisers,” Howe said.

Last month, Time Warner said it intended to spin off AOL, nine years after the two companies merged in a deal valued at $166 billion. At the time, most users connected to the Internet over dial-up telephone lines, and AOL was the dominant US provider of dial-up Internet service. But over time, millions of customers abandoned AOL and switched to high-speed cable and DSL Internet service. In addition, the company’s Internet advertising business has been unable to gain ground on rivals, including industry leader Google Inc.

Hiawatha Bray can be reached at bray@globe.com.

Potential Globe buyers emerge

3 businessmen have local roots

By Keith O’Brien and Beth Healy, Globe Staff | June 12, 2009

Three Boston businessmen – a Boston Celtics owner, a former advertising mogul, and a member of the family that ran the Globe for generations – have emerged as prominent potential buyers of the Globe, according to people knowledgeable about their interest in the city’s leading daily.

Actively mulling bids for the newspaper, according to these people, are Stephen Pagliuca, a private equity executive and Celtics co-owner; Jack Connors, co founder of a major advertising firm and chairman of Partners HealthCare; and Stephen Taylor, a former Globe executive and member of the family that sold the Globe to the New York Times Co. in 1993.

The sources, who requested anonymity because they are not authorized to comment on the potential bids, said the three businessmen are in various stages of reviewing the Globe’s finances and assembling investors who could be part of their groups.

But whether these men will actually make formal bids on the newspaper is not known. Decisions may be delayed until the standoff between the Times Co. and the Boston Newspaper Guild, the Globe’s largest union, has ended, according to the sources with knowledge of the bidding process. And at least one of the three interested parties, Jack Connors, is still weighing whether he will proceed, according to one source knowledgeable about his thinking.

“The Steve Taylor group continues to be interested and is likely to continue trying to raise the money to buy the Globe. And Jack Connors has certainly been interested,” the source said. “But he’s trying to decide if he is going to go forward.”

The three names emerged yesterday just one day after potential buyers confirmed that the Times Co. has hired the Wall Street firm Goldman Sachs to manage the potential sale of the Globe and is planning to seek bids for the newspaper in the weeks to come.

All three potential bidders declined to comment about their interest in buying the newspaper.

“Like a lot of other readers and concerned citizens of Boston, I have high hopes for the future of the Globe,” said Taylor. “I wish them well and have no comment on a possible acquisition.”

The three businessmen said to be considering a play for Boston’s 137-year-old newspaper have diverse backgrounds but share deep roots in the community and region.

Pagliuca, 54, was born in Framingham, played basketball at Duke University, and rose to the top echelons of the private equity world after earning his master’s degree in business administration at Harvard and doing stints in accounting and consulting.

He’s known in financial circles for his role as managing director at Bain Capital, the Boston buyout firm that Mitt Romney ran before he became governor, taking a leading role in such leveraged buyouts as Hospital Corp. of America and Burger King. But Pagliuca is also known in Boston’s sports world as part of the ownership group that bought the Celtics in 2003 and helped lead them to a championship last year. And he has some experience in media investing. He helped start Information Partners at Bain Capital, a media technology venture fund, and sits on the boards of the Weather Channel and the Gartner Group, a research and publications company.

Connors, a 67-year-old Roslindale native who now lives in Brookline, made his name as a prominent Boston advertising executive. He sold the Hill, Holliday, Connors, Cosmopulos agency he cofounded in 1998 for more than $115 million, and has a net worth estimated at $500 million, according to published reports. He is chairman of Partners HealthCare, the region’s largest hospital system, is a major philanthropist and has been a forceful player in business matters across the city for many years. Connors has expressed interest in buying the Globe before, making his interest known in 2006.

And then there’s Taylor, 58, a cousin of past Globe publishers and a former Globe executive who left the newspaper nine years ago. Taylor, who lives in Milton, started at the Globe as a summer intern in 1971, joined the paper full time in 1980 and stayed for 20 years, becoming executive vice president of the paper and president of Boston Globe electronic publishing.

As lecturer in media at Yale University, Taylor has kept his hand in journalism in recent years, teaching a course on the economics and financing of journalism. Taylor also has connections to the world of finance, heading up a small private investment office called Densefog Group LLC.

Spokespeople for both the Times Co. and the Globe declined to comment yesterday. Also yesterday, a person connected to the Intercontinental Real Estate Corp. refuted a report that the real estate investment and management firm is interested in buying the Globe. This person, who requested anonymity because he was not authorized to speak about the matter, said the report in the Boston Herald was not accurate.

If the Times Co. were to sell the Globe, it would mark the end of a relationship that began in June 1993 with smiles, handshakes, and a press conference at the Parker House. The deal was not only the largest ever paid for a newspaper – $1.1 billion – but was seen by many as a merger of two of the most prominent American newspaper families: the Sulzbergers and the Taylors.

Dubbed a “royal marriage” by some at the time, the relationship paid off through much of the 1990s as the Globe continued to reap high advertising revenues, especially through its classified department. However, as internet advertising became more common about a decade ago, and newspaper circulation started to fall as more people began to get their news online, revenue at the Globe and most other papers fell rapidly.

Two months ago, these problems came to a head when the Times Co. threatened to shut down the Globe if the paper’s unions didn’t agree to $20 million in concessions through steep wage cuts and other measures. Most of the major unions have since ratified the cuts, making the Guild, the Globe’s largest union, the last holdout when its members narrowly voted down concessions Monday.

The Times Co. has since imposed a 23-percent pay cut, effective Sunday, and the union has filed unfair labor practice charges against the company. The two sides will meet again Monday, with the financial fates of nearly 700 Globe staffers unclear.

The ongoing battle is giving some potential bidders pause, according to people with knowledge of the process. However, an expert in media mergers and acquisitions said he expects the Times will find a buyer for the Globe, given the cuts the Times Co. has demanded and won.

Larry Grimes, president of the Maryland-based W.B. Grimes & Company, said it appears the Times may have even had potential buyers in mind when asking for the cuts.

“I just think there’s been a scenario put forth to the Times. ‘Under these circumstances, we’ll buy the paper. Meet these conditions,’ ” said Grimes, whose company has overseen the sale of 1,400 publications since 1959. “And it looks like that’s what they’re trying to do.”

Keith O’Brien can be reached at kobrien@globe.com. Beth Healy can be reached at bhealy@globe.com. Globe reporter Casey Ross contributed to this story.

© Copyright 2009 The New York Times Company

Boston Power Inc.

(Source: Boston Herald) By Jay Fitzgerald, Boston Herald

Jun. 1–About 600 jobs will be created at a new Boston-Power Inc. battery-manufacturing plant in Auburn, contingent on the company securing millions of dollars in defense and federal stimulus money.

Christina Lampe-Onnerud, founder and chief executive of Westboro-based Boston-Power, Gov. Deval Patrick and other dignitaries are expected to appear at an event today to announce that Boston-Power plans to renovate an old 455,000-square-foot Filene’s Basement distribution facility into a manufacturing plant to make state-of-the-art automobile batteries.

Boston-Power, which already makes lithium-ion batteries for Hewlett-Packard notebook computers, still needs to secure federal money, but it’s already signed a tentative lease agreement in anticipation of federal funds eventually flowing into the project.

The state is prepared to invest about $9 million in matching funds, perhaps from its Clean Energy Center, created last year by the Legislature.

Lampe-Onnerud, a native of Sweden and a post doctorate grad from MIT, said her 4-year-old company, which has already received about $125 million in venture capital, is in a sweet position due to the new emphasis on developing alternative energy products.

“It’s almost like a perfect storm,” she said, adding she hopes a retrofit of the Auburn facility can start later this summer, with up to 600 jobs added over the next three years.

The plant, which other states sought to have built in their regions, will make lithium-ion batteries for all-electric, plug-in cars. Lampe-Onnerud declined to say which automakers are interested in her firm’s cutting-edge battery technology.

State officials, who have been pushing to make Massachusetts a center for alternative-energy development and manufacturing, were ecstatic that Boston-Power is expanding here.

“It’s fantastic,” said Ian Bowles, Patrick’s secretary of energy and the environment. “We see it as a cornerstone of our growing clean-energy sector.”

Among other firms, Marlboro’s Evergreen Solar and Tyngsboro’s Beacon Power have recently announced expansion plans in Massachusetts.

—–

To see more of the Boston Herald or to subscribe to the newspaper, go to http://www.bostonherald.com.

He seeks to build community and turn a profit

By Jenifer B. McKim, Globe Staff | June 7, 2009

Kirk Sykes, president of the Boston-based Urban Strategy America Fund, strives to create affordable housing and economic development with a solid return to investors. His projects include Olmsted Green, the fund’s first investment and mixed-use development in Mattapan that was built from the ground up. The development started selling condominiums this fall. Sykes’s efforts are being tested during a recession that is pushing buyers and investors to the sidelines. He recently spoke with Globe reporter Jenifer B. McKim.

Considering the difficult economic times, do you wish you got into a different business?

No. For me this is the culmination of a life’s objective of transforming communities. I’m in my third career. I was an architect, I was a developer, and now I’m a fund manager. I have tried improving communities with a pencil, a brick, and a dollar. The dollar was working pretty well until we hit the current financial crisis. What it takes to be rewarding as a life’s vocation is to be able to make that difference. We are continuing to do that although it’s gotten more challenging.

How so?

When debt is less available and not available at all, it is hard to do a project or if you are doing a project, you have to put more equity into it to get a lesser return. You get to do less projects. The guidelines are much more stringent. Each project becomes a project to get it done.

What is the triple bottom line you talk about?

Make money, make a difference, and make it green, or the three “Ps” – people, planet, and profit.

Is that harder to do now?

This notion of responsible property investing, which is blending financial returns with sustainable and economic development is becoming mainstream. You have seen it with green building. Five years ago, green building was a notion that was somewhat esoteric. Now through legislation, greater social consciousness, and investment, sustainability has become more mainstream.

Do you have any new plans?

We are in the process of executing projects that are in process and awaiting opportunities that will come as the economy continues to recover.

To attract buyers to Olmsted Green, you have dropped prices twice, this time by 20 percent. How many units have you sold, and do you expect another price decrease?

This price decrease just happened, and we’ve seen a significant increase in interest over the last couple of weeks. I don’t anticipate another price drop. With the combination of the price reduction, the federal first-time home buyer tax credit, and substantially lower interest rates, we’ve started to see some yield. We have two units under agreement of 19.

What’s happening with Parcel 24, the mixed-used development slated for Chinatown?

Right now it’s on hold. Parcel 24 is permitted and entitled and waiting for the market and buyers to return.

When will the market return?

It goes up and down every few weeks. In general, I think we are starting to see the bottom. The question is how long is the flat part. I also think it’s regional. I think we are closer to recovery in our own market and in the mid-Atlantic.

What kind of fires do you put out on a day-to-day basis?

The world of real estate is challenged and requires new creativity. It’s about being smarter, learning new ways to finance projects, finding out how to stimulate these public-private partnerships.

Tighter lending regulations have added another challenge to condominium developments. How will this affect new developments in Boston?

The trend is toward urban living and conserving on energy. People are downsizing their footprints and minimizing. All those things support the idea of condominium living. Right now it’s a challenge, but I think it will come back because urban living in space-constrained markets needs this form of ownership.

What advice do you have for other developers?

As a city we have some very unique things going for us. They probably have most to do with our medical and educational environments. I’m an advocate of cities. Suburban development would be more challenging for some time to come. Developers: Be near the city. Be near transit lines. Be near our world-class institutions.

Boston moves ahead in world finance rank

The global recession has actually enhanced Boston’s reputation as one of the top financial centers in the world.

A new report ranks the Hub within the top 10 financial centers in the world, moving from 11th place to ninth place, as many other financial hotspots tumbled along with the global economy.

The “Global Financial Centres Index,” prepared for the City of London Corp., indicates that major investment players across the globe appreciate Boston’s steady environment for financial firms and experts at a time of deep market turmoil.

Previous rankings by other firms usually have Boston in top 20 lists of financial cities – thanks to the large number of mutual-fund, wealth-management, venture capital and private-equity firms based here.

But the City of London Corp.’s study, which was conducted by the UK-based Z/Yen Group, stands out because, in addition to data measuring the amount of funds flowing through a city, it relies on surveys of financial executives who are asked to rate cities.

Those interviewed are also dominated by European executives, confirming that Boston has an international, Old World flare appealing to those on the other side of the Atlantic.

Jim Lowell, editor of Fidelity Investor, an independent print and online newsletter, said Boston is considered a “hidden gem” by some international investors.

“Boston has long been known for being staid, fiduciary (minded) and for its long-term asset management,” said Lowell.

Those somewhat conservative traits have apparently helped Boston during tough financial times.

London and New York remain the unquestioned leaders of the financial world, the index report said.

If anything, London and New York’s leads may have solidified, despite London, in general, and New York, in particular, being epicenters of the current financial crisis. The two cities have maintained their lead partly because many up-and-coming, fast-growing cities in Asia and elsewhere took heavy hits during the current economic crisis, the City of London report said.

Boston was also a beneficiary of the recession, in terms of rankings.

The Hub rated particularly high for its financial “infrastructure” and “market access” to funds and deals, the report said.

How long Boston can maintain its strong, top-tier status is in question.

Cities throughout Asia and the Middle East – such as Shanghai, Beijing and Dubai – are emerging as financial powerhouses that want a larger piece of the funds and jobs flowing to more established financial centers, the report said.

Article URL: http://www.bostonherald.com/business/general/view.bg?articleid=1174535

Men are from Facebook, women are from Twitter?

Studies show the genders really are different online.

Find this article at: http://money.cnn.com/2009/05/20/technology/kattan_gender.fortune/index.htm

Originally published at: http://www2.ljworld.com/news/2009/may/19/china-emerging-auto-epicenter/

Emergency small business loans coming in June

To kick off National Small Business Week, the government announced its timetable for a hotly awaited assistance program.

The news came during a speech by SBA head Karen Mills kicking off the SBA’s annual National Small Business Week program of publicity and networking activities. Known as America’s Recovery Capital (ARC), the emergency loans were authorized in February’s stimulus bill. The SBA has been working since then to pull together guidance for the new program, which will back short-term loans of up to $35,000 that business owners can use to temporarily cover their payments on existing debt. No repayment on the ARC loans will be due for 12 months, and owners will have up to five years to repay them.

The SBA plans to release guidance to banks by June 8 and will be ready to accept lender loan packages by June 15. Business owners will need to apply directly to banks for the loans, but the SBA will offer those banks a 100% guarantee on the ARC loans they make. If the business owner defaults, the SBA will pay off the loan.

SBA Administrator Mills called the ARC loans “risky” and very different than the loans her agency typically backs. Aimed at businesses with “immediate financial hardship” but a past track record of financial success, the loans are intended to aid companies that “are in a situation where they just need a little extra help to bridge the troubled waters,” she said.

Right now, many small businesses find themselves struggling against the economic tides. Mills acknowledged that her constituents are in trouble and looking to the government for help.

“I have started to think of the SBA not just as a backbone for small business, but as an entire bone structure,” she said before a crowded audience at the Mandarin Oriental hotel in Washington.

Sworn in last month as the SBA’s leader, Mills’ talk on Monday marked one of her first public speeches in her new role. In her remarks, she said that the top three priorities for her agency are more progress on fulfilling the small business provisions of the American Recovery Act, revitalizing the agency, and “making the SBA the strongest possible voice for small businesses in the U.S.”

The Recovery Act, better known as the stimulus bill, allocated $730 million for initiatives aimed at shoring up the country’s small business. So far, “the results are good,” Mills said. Since one stimulus provision took effect in mid-March, offering banks higher guarantees and waived fees on SBA-backed loans, the average weekly loan volume is up more than 25%, she said.

But that increase comes against a dismal backdrop for small business lending. In the quarter ended March 31, the number of loans made through agency’s popular 7(a) loan program dropped 57% compared to the prior year, and several major lenders have sharply reduced their activity.

Senator Mary Landrieu, D-La., the chair of the Senate’s small business committee, joined Mills in a small press conference after the public speech. Landrieu told reporters that it’s a top priority for the committee and the agency to determine why 50% of the nation’s banks aren’t partnering with the SBA. The SBA itself does not directly loan money, but works with partner banks to offer government-backed loans.

“I would love to see any small business owner just walk around the corner to their local bank and say they’re looking to expand their business,” she said. “That bank should ask the SBA – would you be a partner with me?”

Landrieu also said that finding a better health care solution for small businesses is a top priority for her.

As for the agency, which employs 2,000 full-time workers, Mills said she plans to invest in “training, planning and better communication across the SBA … and for repeated calls to break down silos, to give up sacred turf.”

Internal reform was also a priority for Mills’ predecessor, Steven Preston, who served as SBA chief from July 2006 to April 2008. After a 2005 government survey found that the SBA had the lowest employee morale of any major government agency, Preston devoted much of his energy to streamlining the agency and improving morale. To top of page
First Published: May 18, 2009: 4:33 PM ET

Independent Broker/Dealers – Investors Capital

NEWS RELEASE

Contact:
Robert Foney, Director of Public Relations
781.477.4814
rfoney@investorscapital.com
www.investorscapital.com

Investors Capital Corporation top independent broker/dealer according to Google rankings

Company credits recent SEO project

Lynnfield, Mass. (May 1, 2009) – Investors Capital Corporation (ICC), the premier independent broker/dealer of Investors Capital Holdings, Ltd. (AMEX: ICH), is tops when it comes to Google. Search engine results for the search phrase “top independent broker dealers” and numerous others phrases rank Investors Capital Corporation in the top broker/dealer spot due to the firm’s recent focus on Search Engine Optimization (SEO). SEO is the process of improving the volume and quality of website traffic via organic (“natural”) search results.

“I’m extremely pleased with our in-house SEO initiative,” said Robert H. Foney, Director of Marketing and Public Relations for Investors Capital.

The company has already seen an increase of over 100% in website leads since undertaking the project in late-February. ICC has also seen a marked increase in the quality of those leads.

“We’re working on a $2 million advisor who recently came through our website,” said Mr. Foney. “Both wirehouse and independent advisors are coming to our site via Google, warming to our value proposition, and submitting an online form to join. SEO has done wonders for our brand.”

The Investors Capital SEO project has yielded more motivated prospects and improved the company’s brand identity by being at the top of the search results, which, in turn, yields more qualified prospects. The firm is considering making SEO available to its advisors.

“As a top independent broker/dealer, we believe we should be in the top spot,” said Foney. “It’s only natural.”

About Investors Capital Holdings, Ltd.:
Investors Capital Holdings, Ltd. (AMEX:ICH) of Lynnfield, Massachusetts is a diversified financial services holding company that operates primarily through its independent broker/dealer and investment advisor subsidiary, Investors Capital Corporation.

Our mission is to provide premier, concierge-level service and support to our valued registered representatives, including advisory programs, strategic practice management and marketing services, and technology, to help them grow their businesses and exceed their clients’ expectations.

Business units include Investors Capital Corporation, Investors Capital Advisory Services, ICC Insurance Agency, Inc., and Investors Capital Holdings Securities Corporation. For more information, please call (800) 949-1422 x4814 or visit www.investorscapital.com.

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Investors Capital

Independent broker/dealer

Definition of Financial Term:

Any individual or firm in the business of buying and selling securities for itself and others.

Broker/dealers must register with the SEC. When acting as a broker, a broker/dealer executes orders on behalf of his/her client.

When acting as a dealer, a broker/dealer executes trades for his/her firm’s own account.

Securities bought for the firm’s own account may be sold to clients or other firms, or become a part of the firm’s holdings.

Fidelity wants to hold your hand

As investors reel, the fund giant and others step up their advice-giving
By Robert Weisman, Globe Staff | March 11, 2009

• It’s not easy peddling financial advice when people are queasy about opening their quarterly retirement account statements.

But Fidelity Investments, seizing on what it views as an opportunity in uncertain times, will introduce a three-pronged financial guidance program in an effort to reassure wary investors buffeted by the turbulent economy, the company said yesterday.
Fidelity will host more than 500 free seminars for customers and noncustomers this month at its investment centers across the country, including more than 50 at New England branches. The sessions will cover more than a dozen topics, from market intelligence to retirement road maps, promising “actionable financial strategies” for investors at different stages of their lives. Fidelity said it may extend the seminars beyond March if there’s demand.

• It also is rolling out free online calculators and other Web-based tools to help investors evaluate their portfolios. And it is launching an advertising campaign promoting its program, called Guide to Personal Savings, or GPS, a play on the acronym for the navigational system that guides drivers.

The mutual funds giant, based in Boston, declined to say how much money it will spend on the program.
“Many individuals are looking at their portfolios with a fresh set of eyes,” Kathleen A. Murphy, the president for personal investing at Fidelity, said in a conference call with reporters yesterday. Fidelity’s goal is “to make this process easier” for those people, she said.
Murphy cited research showing 83 percent of Americans have not sought financial help in the past year because they feared it would be too costly or was designed solely for the affluent.
The campaign is designed to educate ordinary investors so they can “get back on track with their finances,” in Murphy’s words, not explicitly to sell stock-based mutual funds.

• Fidelity unveiled its program on a day the Dow Jones industrial average jumped 379.44 points, or 5.8 percent, to 6,926.49 in a bounce-back rally. It was the biggest point gain for the Dow since Nov. 24.

Famously bearish investor Jeremy Grantham, chairman of the Boston investment firm Grantham, Mayo, Van Otterloo and Co., meanwhile, posted a commentary on his firm’s website yesterday, urging investors to start moving money from cash to stocks and suggesting stocks may now be undervalued by 30 percent.
The broad market retreat has hurt mutual fund firms particularly. More money has flowed out of stock mutual funds than into the funds in five of the seven months ended Jan. 31, the most recent period for which data are available, according to the Lipper unit of the Thomson Reuters research firm. That lowers the amount of assets fund firms manage, which in turn reduces the fees they collect. The lower revenue means fund companies don’t have as much money to reach out and give new customers financial help.
“The assets in the fund industry, like every other industry, are down, especially equity fund assets,” said Greg Ahern, spokesman for the Investment Company Institute, a mutual funds industry group in Washington. “You’re seeing the demand for professional advice increase exponentially at a time like this, not only for advice about retail funds but about 401(k)s and other retirement funds.”

• Analysts said mutual fund companies and other financial firms have stepped up their hand-holding in recent months as the market has tumbled and the financial crisis has deepened, sending out investment newsletters, sponsoring Internet seminars called “Webinars,” and having more frequent phone conversations with rattled customers.

Other firms, such as Vanguard Group and T. Rowe Price, also host free seminars, though they are usually restricted to customers, and offer their own online planning tools. “We are continually coming up with new analyses helping people prepare for retirement and manage through this environment,” said Brian Lewbart, a spokesman for T. Rowe Price, a mutual funds firm based in Baltimore.
Fidelity’s program may be unique, analysts said, not only because it is backed by advertising but because it is tailored to investors – including noncustomers – spooked by the recession. The campaign, reaching out to individual investors and employees who are investing retirement funds through managed workplace accounts, is following the playbook of businesses that seek to capitalize on bad conditions to boost their market share in downturns, they said.

• “A lot of fund firms are ramping up communications,” said Dan Sondhelm, partner at SunStar Strategies, an Arlington, Va., marketing consulting firm for the financial industry. “They’re getting more phone calls and Web hits than ever because investors are scared. But not a lot of firms can afford to invest in advertising right now when their revenue is down 50 or 60 percent” because of the stock market slump.

Fidelity said details of its program, including its interactive online calculators and the times and locations of its educational seminars, will be posted on its website, www.fidelity.com.
Robert Weisman can be reached at weisman@globe.com.

Trade deficit falls to $36 billion in January
By Martin Crutsinger, AP Economics Writer  |  March 13, 2009

WASHINGTON –The U.S. trade deficit plunged in January to the lowest level in six years as a deepening recession cut demand for imported goods at an even faster rate than for exports.

The Commerce Department said Friday the trade imbalance dropped to $36 billion in January, a decline of 9.7 percent from December and the lowest level since October 2002.

The improvement was better than the $38 billion deficit that economists had expected and reflected the fact that crude oil imports dropped to the lowest point in three years and demand for a wide variety of other foreign goods from autos to heavy machinery and household appliances declined.

The import declines helped offset a continued slide in U.S. exports which fell to their lowest level since September 2006, a drop that has contributed to the severe recession in U.S. manufacturing.

For January, exports of goods and services fell 5.7 percent to $124.9 billion. Demand for a wide variety of U.S.-made products from farm goods to autos to civilian aircraft all dropped in January.

Boeing Co. and Caterpillar Inc. are among a number of major U.S. exporting companies that have announced layoffs due to falling demand for their products in key overseas markets.

Imports fell even more sharply in January, declining by 6.7 percent to $160.9 billion, the lowest level for imported goods since March 2005. The decline in imports was led by a 25.2 percent drop in imported crude oil, which fell to $11.9 billion in January, the lowest level since February 2005. The average price for a barrel of crude dropped to $39.81, also the lowest point since February 2005.

America’s deficit with many of its trading partners declined sharply although the politically sensitive imbalance with China bucked the downward trend, rising by 3.5 percent to $20.6 billion. U.S. exports to China plunged by 19.7 percent, a much bigger drop than the 1.3 percent decline in Chinese goods shipped to the United States.

U.S. manufacturing companies who have been battered by what they view as unfair competition from China said that the continued high deficit with China, the largest U.S. trade gap with any nation, pointed to the need for the Obama administration to take a tougher line than the Bush administraiton with China.

“The United States will not be able to jumpstart its economy unless it stops trade cheats like China from decimating U.S. manufacturing,” said Auggie Tantillo, the executive director of the American Manufacturing Trade Action Coalition, a group which is pushing the new administration to impose trade sanctions on China.

The overall January deficit of $36 billion, if it continued for the entire year, would result in a deficit of $432 billion for 2010, a drop of 36.5 percent from the $681.1 billion deficit recorded in 2008. That deficit represented a 2.7 percent drop from 2007, the first year that the trade gap had narrowed after setting records for five straight years.

Many economists believe the improvement for this year will be sizable as the country’s most severe recession in decades trims Americans’ appetite for foreign goods.

U.S. exports are also falling as the recession that began in the United States spreads worldwide. However, so far, the drop in imports is larger than the fall in exports, reflecting in large part the fact that oil prices have plummeted from the record levels they hit last year.

The trade deficit has now declined for a record sixth straight month, beating the prior record for declines of five straight drops set in 2007.

By country, the U.S. deficit with Canada, America’s biggest trading partner, dropped by 10.7 percent to $2.5 billion, the lowest imbalance since May 1999. The deficit with Japan fell 18.4 percent to $4.3 billion, the lowest trade gap with that country since January 1998. The deficit with the 27-nation European Union plunged 50.1 percent to $3.5 billion.

Many economists are worried that the spreading global economic weakness could prompt countries to resort to raising trade barriers in an effort to protect their domestic industries.

Treasury Secretary Timothy Geithner was meeting in Britain on Friday with finance ministers from the Group of 20 countries, which include the world’s wealthiest economies and major developing countries such as China, Brazil and India. President Barack Obama is pushing the G-20 nations to adopt sizable economic stimulus programs to jump-start their stalled economies. The U.S. Congress recently passed a $787 billion stimulus package that had been championed by Obama.

Former Dallas mayor Ron Kirk, tapped by Obama to be the nation’s top trade official, told the Senate Finance Committee at his confirmation hearing on Monday that his main objective as U.S. trade representative would be to enforce existing law and insist that U.S. trade partners play by the rules.
 
© Copyright 2009 The New York Times Company

A Marblehead investment adviser who allegedly defrauded two of his elderly clients of a combined $750,000 was charged Monday with wire fraud.

Ryan Nestor, 32, formerly was registered with an affiliate of Mass Mutual, according to U.S. Attorney Michael Sullivan’s office, which brought the criminal case. He worked out of a Boston office.

Prosecutors said Nestor invested funds in what the government called a “massive ponzi scheme,” planning to keep some of the proceeds. His clients allegedly did not know how the money was being invested.

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Feds say adviser defrauded elderly clients

By Julie Manganis
Staff writer

March 09, 2009

Index Funds Win Again