To deal with the deficit, let the tax cuts expire
By Fareed Zakaria
Copyright by The Washington Post
Monday, August 2, 2010
http://www.washingtonpost.com/wp-dyn/content/article/2010/08/01/AR2010080103287.html
For the past few months, we have heard powerful, passionate arguments about the need to cut America's massive budget deficit. Republican senators have claimed that we are in danger of permanently crippling the economy. Conservative economists and pundits warn of a Greece-like crisis in which America will be able to borrow only at exorbitant interest rates. So when an opportunity presents itself to cut those deficits by about a quarter -- more than $300 billion! -- permanently and relatively easily, you would think that these people would be leading the way. Far from it.
The "Bush tax cuts," passed in 2001 and 2003, remain the single largest cause of America's structural deficit -- that is, the deficit not caused by the collapse in tax revenue when the economy goes into recession. The Bush administration inherited budget surpluses from the Clinton administration. What turned these into deficits, even before the recession? There were three fundamental new costs: the tax cuts, the Medicare prescription-drug bill and post-9/11 security spending (including the wars in Iraq and Afghanistan). Of these the tax cuts were by far the largest, adding up to $2.3 trillion over 10 years. According to the Congressional Budget Office, nearly half the cost of all legislation enacted from 2001 to 2007 can be attributed to the tax cuts.
Those cuts are set to expire this year. Republicans say they want to keep them all, even for those making more than $250,000 a year (less than 3 percent of Americans), because higher taxes will hurt the recovery. But for months Republicans have also been arguing that the chief threat to the economy is our gargantuan debt and deficit. That's what's scaring consumers, creditors and businesses. Yet given a chance to address those fears by getting serious about deficit reduction, they run away. By contrast, British Prime Minister David Cameron, a genuine fiscal conservative, concluded that to deal with his country's deficit, which in structural terms is not so different from America's, he would have to raise taxes as well as cut spending.
Democrats, for their part, are also running scared, proposing to keep all the tax cuts except those affecting the very rich. But they were opposed to these tax cuts in 2001 and 2003. If they were a bad idea when budget deficits were small, why are tax cuts a good idea when deficits are around $1.3 trillion?
The idea that the average American is overtaxed is a nice piece of populist pandering. In fact, federal taxes as a percentage of the economy are at their lowest level since the Truman administration. Chuck Marr and Gillian Brunet of the Center on Budget and Policy Priorities have calculated that a family of four at the exact middle of the income spectrum will pay only 4.6 percent of its income in taxes. Remember, almost half of the country pays no income taxes at all. The top 2 percent of Americans contribute almost 50 percent of federal income taxes.
The simple facts are these: All of the Bush tax cuts were unaffordable. They were an irresponsible act of hubris enacted during an economic boom. Conservatives thought they would force us to shrink the government. But with Republicans controlling the White House and both houses of Congress, did reduced taxes cause reduced spending? No. They led to ever-increasing borrowing and a ballooning deficit.
We have one of the smallest governments among all the world's rich countries. Yet we refuse to pay for it. (Yes, health-care spending is the big exception and, yes, we will have to get those costs under control.) I understand the fear that this is not a good time to raise taxes. But the impact of marginal shifts in tax rates on growth is pretty unclear. Bill Clinton raised taxes in 1992 and ushered in a period of extraordinarily robust growth. George W. Bush cut taxes massively in 2001 and got meager growth in return. Three tax cuts enacted since the financial crisis have done little to spur growth. In any event, if timing is the issue, Congress could extend all the tax cuts for a year but then let them expire. Better yet, spend money on far more efficient ways to spur job creation, such as tax credits for jobs, which the Congressional Budget Office estimates would create four to six times as many jobs as would tax cuts.
I don't like our current tax system. It's unwieldy, it taxes the wrong things (income instead of consumption) and its loopholes are legalized corruption. But we are not going to create the perfect tax code today. In front of us is a simple, easy way to bring America's fiscal house in order, reduce our dependence on foreign borrowing, restore U.S. credibility and power, and provide a stable revenue base from which to make key investments for future growth. All we need is for Congress to do what it does so well: nothing.
Fareed Zakaria is editor of Newsweek International. His e-mail address is comments@fareedzakaria.com.
More Post content on the Bush tax cuts: Alan S. Blinder, Mark Zandi, Robert Greenstein and other economic experts on whether to extend the tax cuts. Columnist Ruth Marcus says we can't afford quack medicine on taxes. Five myths about the Bush tax cuts.
Monday, August 2, 2010
U.S. regulators lack data on health risks of most chemicals
U.S. regulators lack data on health risks of most chemicals
By Lyndsey Layton
Copyright by The Washington Post
Monday, August 2, 2010
http://www.washingtonpost.com/wp-dyn/content/article/2010/08/01/AR2010080103469.html?hpid=topnews
This summer, when Kellogg recalled 28 million boxes of Froot Loops, Apple Jacks, Corn Pops and Honey Smacks, the company blamed elevated levels of a chemical in the packaging.
Dozens of consumers reported a strange taste and odor, and some complained of nausea and diarrhea. But Kellogg said a team of experts it hired determined that there was "no harmful material" in the products.
Federal regulators, who are charged with ensuring the safety of food and consumer products, are in the dark about the suspected chemical, 2-methylnaphthalene. The Food and Drug Administration has no scientific data on its impact on human health. The Environmental Protection Agency also lacks basic health and safety data for 2-methylnaphthalene -- even though the EPA has been seeking that information from the chemical industry for 16 years.
The cereal recall hints at a larger issue: huge gaps in the government's knowledge about chemicals in everyday consumer products, from furniture to clothing to children's products. Under current laws, the government has little or no information about the health risks posed by most of the 80,000 chemicals on the U.S. market today.
(As product recalls pile up, consumers risk getting lost)
"It is really troubling that you've got this form of naphthalene that's produced in millions of pounds a year and we don't have some of the basic information about how toxic it is," said Erik Olson, an expert at the Pew Charitable Trusts, which is advocating an overhaul of U.S. chemical laws. "In so many cases, government agencies are missing data they need on even widely used chemicals about whether they pose a health risk."
The information gap is hardly new. When the Toxic Substances Control Act was passed in 1976, it exempted from regulation about 62,000 chemicals that were in commercial use -- including 2-methylnaphthalene. In addition, chemicals developed since the law's passage do not have to be tested for safety. Instead, companies are asked to volunteer information on the health effects of their compounds, and the government can decide whether additional tests are needed.
In 1994, the EPA invited the chemical industry to submit health and safety data for 2-methylnaphthalene because it was being produced in large quantities, said Mary F. Dominiak of the EPA. Chemical manufacturers have yet to disclose that information, she said.
And they may not even have it. If a manufacturer possesses data showing that a chemical harms health or the environment, it is required to turn over the findings to the EPA. Critics say that creates a disincentive for manufacturers to test their chemicals.
Kellogg responded to a request for comment by referring to the statement it issued with its recall, which said, "While the potential for serious health problems is low, some consumers are sensitive to the uncharacteristic off-flavor and smell and should not eat the recalled products because of possible temporary symptoms including nausea and diarrhea."
Bills pending in Congress would revamp the way the government regulates chemicals, forcing companies to prove that new chemicals are safe before using them and requiring health and safety assessments of existing chemicals, such as 2-methylnaphthalene. The chemical industry has said it agrees the law should be revamped, but it also has expressed concern that new restrictions might hamper innovation and competitiveness.
One federal agency has minimal information about 2-methylnaphthalene -- the Agency for Toxic Substances and Disease Registry, which reviewed the scientific literature on the chemical in 2005. It concluded that nothing is known about its use related to food. "You are not likely to be exposed . . . eating foods or drinking beverages" and risk exposure only "if you live near a hazardous waste site," according to the agency's Web site.
A natural component of crude oil, 2-methylnaphthalene is structurally related to naphthalene, an ingredient in mothballs and toilet-deodorant blocks that is considered a possible human carcinogen by the EPA. Kay Cooksey, a packaging expert at Clemson University, said 2-methylnaphthalene likely ended up in cereal because something went awry in the manufacturing of the foil-lined bags. The foil is attached to the paper bag with an adhesive that is heated, she said. If too much heat is applied or if the composition of the adhesive is incorrect, 2-methylnaphthalene could form, she said.
The chemical "is not supposed to be in food," said Mitchell Cheeseman of the FDA's office of food safety. The agency allows a minute amount of the chemical in food packaging if it is produced as a "contaminant" during the manufacturing process, but it is not supposed to transfer to the food, he said.
Because the FDA does not know anything about the toxicity of 2-methylnaphthalene, the agency set its limit based on what it knows about the toxic effects of similar chemicals, Cheeseman said.
He added that the FDA does not know what caused the Kellogg contamination, how much 2-methylnaphthalene might have migrated into the cereals or if it was the only contaminant. The agency did not perform its own tests on the cereals.
Roberta Wagner of the FDA's Office of Regulatory Affairs said Kellogg destroyed most of the tainted liners before it contacted the agency and announced a recall.
"Basically, Kellogg's investigated the situation before they made the decision to do the recall," Wagner said. "They did their own testing." She said the agency continues to investigate.
The company submitted a copy of its health risk assessment to the FDA, but neither Kellogg nor the agency would release it.
Cheeseman said it is unusual for contaminants to migrate from packaging into foods.
But others are less certain. "In this case, it had an odor and it had a taste, so it was detected," said David Andrews, a senior scientist at the Environmental Working Group, an advocacy organization. "But there are hundreds of other potential impurities that we can't smell and taste, chemicals that we know very little about and the government knows little about."
By Lyndsey Layton
Copyright by The Washington Post
Monday, August 2, 2010
http://www.washingtonpost.com/wp-dyn/content/article/2010/08/01/AR2010080103469.html?hpid=topnews
This summer, when Kellogg recalled 28 million boxes of Froot Loops, Apple Jacks, Corn Pops and Honey Smacks, the company blamed elevated levels of a chemical in the packaging.
Dozens of consumers reported a strange taste and odor, and some complained of nausea and diarrhea. But Kellogg said a team of experts it hired determined that there was "no harmful material" in the products.
Federal regulators, who are charged with ensuring the safety of food and consumer products, are in the dark about the suspected chemical, 2-methylnaphthalene. The Food and Drug Administration has no scientific data on its impact on human health. The Environmental Protection Agency also lacks basic health and safety data for 2-methylnaphthalene -- even though the EPA has been seeking that information from the chemical industry for 16 years.
The cereal recall hints at a larger issue: huge gaps in the government's knowledge about chemicals in everyday consumer products, from furniture to clothing to children's products. Under current laws, the government has little or no information about the health risks posed by most of the 80,000 chemicals on the U.S. market today.
(As product recalls pile up, consumers risk getting lost)
"It is really troubling that you've got this form of naphthalene that's produced in millions of pounds a year and we don't have some of the basic information about how toxic it is," said Erik Olson, an expert at the Pew Charitable Trusts, which is advocating an overhaul of U.S. chemical laws. "In so many cases, government agencies are missing data they need on even widely used chemicals about whether they pose a health risk."
The information gap is hardly new. When the Toxic Substances Control Act was passed in 1976, it exempted from regulation about 62,000 chemicals that were in commercial use -- including 2-methylnaphthalene. In addition, chemicals developed since the law's passage do not have to be tested for safety. Instead, companies are asked to volunteer information on the health effects of their compounds, and the government can decide whether additional tests are needed.
In 1994, the EPA invited the chemical industry to submit health and safety data for 2-methylnaphthalene because it was being produced in large quantities, said Mary F. Dominiak of the EPA. Chemical manufacturers have yet to disclose that information, she said.
And they may not even have it. If a manufacturer possesses data showing that a chemical harms health or the environment, it is required to turn over the findings to the EPA. Critics say that creates a disincentive for manufacturers to test their chemicals.
Kellogg responded to a request for comment by referring to the statement it issued with its recall, which said, "While the potential for serious health problems is low, some consumers are sensitive to the uncharacteristic off-flavor and smell and should not eat the recalled products because of possible temporary symptoms including nausea and diarrhea."
Bills pending in Congress would revamp the way the government regulates chemicals, forcing companies to prove that new chemicals are safe before using them and requiring health and safety assessments of existing chemicals, such as 2-methylnaphthalene. The chemical industry has said it agrees the law should be revamped, but it also has expressed concern that new restrictions might hamper innovation and competitiveness.
One federal agency has minimal information about 2-methylnaphthalene -- the Agency for Toxic Substances and Disease Registry, which reviewed the scientific literature on the chemical in 2005. It concluded that nothing is known about its use related to food. "You are not likely to be exposed . . . eating foods or drinking beverages" and risk exposure only "if you live near a hazardous waste site," according to the agency's Web site.
A natural component of crude oil, 2-methylnaphthalene is structurally related to naphthalene, an ingredient in mothballs and toilet-deodorant blocks that is considered a possible human carcinogen by the EPA. Kay Cooksey, a packaging expert at Clemson University, said 2-methylnaphthalene likely ended up in cereal because something went awry in the manufacturing of the foil-lined bags. The foil is attached to the paper bag with an adhesive that is heated, she said. If too much heat is applied or if the composition of the adhesive is incorrect, 2-methylnaphthalene could form, she said.
The chemical "is not supposed to be in food," said Mitchell Cheeseman of the FDA's office of food safety. The agency allows a minute amount of the chemical in food packaging if it is produced as a "contaminant" during the manufacturing process, but it is not supposed to transfer to the food, he said.
Because the FDA does not know anything about the toxicity of 2-methylnaphthalene, the agency set its limit based on what it knows about the toxic effects of similar chemicals, Cheeseman said.
He added that the FDA does not know what caused the Kellogg contamination, how much 2-methylnaphthalene might have migrated into the cereals or if it was the only contaminant. The agency did not perform its own tests on the cereals.
Roberta Wagner of the FDA's Office of Regulatory Affairs said Kellogg destroyed most of the tainted liners before it contacted the agency and announced a recall.
"Basically, Kellogg's investigated the situation before they made the decision to do the recall," Wagner said. "They did their own testing." She said the agency continues to investigate.
The company submitted a copy of its health risk assessment to the FDA, but neither Kellogg nor the agency would release it.
Cheeseman said it is unusual for contaminants to migrate from packaging into foods.
But others are less certain. "In this case, it had an odor and it had a taste, so it was detected," said David Andrews, a senior scientist at the Environmental Working Group, an advocacy organization. "But there are hundreds of other potential impurities that we can't smell and taste, chemicals that we know very little about and the government knows little about."
Today's Financial News Courtesy of the Financial Times
Today's Financial News Courtesy of the Financial Times
Investors see bright side of China data
By Telis Demos in London
Copyright The Financial Times Limited 2010.
Published: August 2 2010 08:19 | Last updated: August 2 2010 14:42
http://www.ft.com/cms/s/0/cc3d16ae-9dfd-11df-b377-00144feab49a.html
Monday 14.40 BST: Markets saw the bright side of a report that Chinese manufacturing is slowing, and are now accelerating their risk-taking on the back of strong European manufacturing activity and bank earnings.
The FTSE All-World index is up 1.7 per cent, the yen is sinking against riskier currencies and crude oil is seeing a three-month high above $80 a barrel.
China’s government-calculated purchasing managers index was reported on Sunday to have dipped to its lowest level since February 2009, following moves by Beijing to tighten access to credit throughout the economy.
That dip, however, is still consistent with double-digit growth, according to HSBC economists who produce a private index, which also showed a decline. The move was also not unexpected after China said last week its intention was to allow the economy to slow in order to cool inflation.
Growth hopes are seeing European markets rise sharply. The pound and the euro are making new high marks, and the FTSEurofirst 300 index is up 2.1 per cent, exceeding last week’s top mark and reaching a three-month high. Perceptions of credit risks are also falling for the financial sector and sovereign debts.
Two of the biggest banks in Europe, HSBC and BNP Paribas, reported strong earnings on the strength of decreasing losses in retail banking. Eurozone economies also reported their manufacturing PMI figures today, with overall activity thus far increasing marginally more than expected.
Asia was boosted by confidence in growth around the region, even as the rise in PMIs in South Korea and Thailand also slowed. South Korea’s exports rose more than forecast in July, it was reported over the weekend, and India’s PMI index ticked back up to a multi-year high.
All eyes will stay on the US, however, as the question of monetary policy hangs in the balance. Wall Street’s S&P 500 index opened up 1.3 per cent, right at its 200-day moving average. The market has been unable to hold above that level since its May correction.
Fears are that the US economy is running out of steam in spite of loose policy and strong corporate earnings, which have not led to greater investment by industrials in new production. Last Friday it was reported that second-quarter GDP grew at 2.4 per cent, after 3 per cent growth in the first quarter.
Indications of late are that policy will loosen further. Alan Greenspan, former Federal Reserve chairman, said over the weekend that the economy was “very distorted”, heavily relying on a manufacturing rebound, and “on pause” at the moment. Fed-watchers at Nomura said that they expect the Fed to loosen policy at its next meeting on August 10.
☼ Factors to watch. A slew of US economic data will add depth to the picture, with the Institute of Supply Management’s index of industrial activity to be reported later today, and non-farm payrolls on Friday. ☼
• Europe. Stocks were up around the region. The UK’s FTSE 100 index is up 2.1 per cent, Germany’s Dax is up 1.8 per cent and France’s Cac 40 is up 2 per cent. Two megabanks reported profit jumps. BNP Paribas reported a 31 per cent rise in profits over last year, though profits shrank 8 per cent from the previous quarter. HSBC credited a decline in bad loans for a sharp increase in first-half profit over last year. European banks were up 3.1 per cent.
Flashes of production indices from around Europe were mostly showing increases, notably Germany’s, its fastest increase in three months. Investors also seemed to be cheered that Germany’s austerity package was facing political hurdles in the lower house, which could allow Europe’s biggest economy to drive growth faster.
France, however, showed activity falling to an 11-month low, and the UK showed slight easing, though the print still topped forecasts.
• Asia. Shares were up across the board. Hong Kong’s Hang Seng index was the leader, up 1.8 per cent. Mainland China is keeping up, with the Shanghai composite index rising 1.3 per cent. The Nikkei 225 index was up 0.4 per cent, slowed by rumours of a Bank of Japan rate hike but supported by Honda doubling its prior-year earnings and raising its forecast of sales to the US.
Korea’s Kospi 200 index was up 1.3 per cent, and Mumbai’s Sensex was higher by 1.2 per cent following the positive growth news. India’s market has rolled back and forth in recent weeks as a debate on the pace of inflation – too fast, according to the central bank, but just right according to the government – has roiled sentiment.
• Debt. Japanese 10-year bonds are at fresh post-crisis lows, yielding 1.06 per cent, down 1 basis point. Other “haven” bonds are in sell-off mode, however, including the benchmark US Treasury, with yields up 4 basis points at 2.95 per cent. German Bunds are also up 4 basis points, yielding 2.70 per cent.
Spanish sovereign debt is also in demand, down 8 basis points. Spanish bond credit-default swap spreads are tighter, indicating cheaper prices for protection against default. Portuguese and Italian bond spreads are also tighter.
European senior financial debt spreads, to their lowest level since mid-April, according to Markit. However, three-month Euribor futures, an interest rate that measures interbank lending risk, rose 0.2 basis points after falling for the first time since April on Friday.
• Currencies. The asset class was consistent with rising risk appetite, as the Canadian and Australian currencies, powered by commodities exports, have been tightly correlated, suggestive of a risk trade. Both are higher by 0.6 per cent against the US dollar.
The yen dipped from one-year highs reached on Friday following the US’s disappointing GDP growth report. It was 0.3 per cent lower against the US dollar, at Y86.74. It was also down 0.8 per cent against the South African rand and 1 per cent against the New Zealand dollar, key carry trade pairs.
The pound was stronger against the US dollar, up 0.9 per cent at $1.5859, its highest level since February. The euro picked up steam at mid-session, now up 0.4 per cent to $1.3116, a three-month high, after bursting through the $1.31 ceiling and gaining momentum.
• Commodities. US crude oil was is higher by 2.4 per cent, at $80.83 a barrel, its highest level since May. Even gradual Chinese growth is supportive of the market, markets seem to indicate. Fears about US growth have also not seen oil tank as quickly as other risky commodities, with crude off only 8 per cent from its peak of the year.
Gold changed course and is up 0.6 per cent $1,188 an ounce. Bullion has largely been in stasis of late as investors are chased from the precious metal by stabilising outlooks in Europe and potential deflation in the US, but long-term worries about the impact of looser monetary policy on inflation remain. However, it is still off its nominal all-time high at $1,261.
Follow the Global Market Overview on Twitter at @telisdemos.
Bernanke faces US growth mysteries
By Robin Harding in Washington
Copyright The Financial Times Limited 2010
Published: August 1 2010 17:57 | Last updated: August 1 2010 17:57
http://www.ft.com/cms/s/0/4768a892-9d8c-11df-a37c-00144feab49a.html
If Ben Bernanke, Federal Reserve chairman, expected the release of second-quarter growth data to clear up the “unusually uncertain” outlook for the US economy, then he will have been sorely disappointed.
On the surface, the numbers were easy to interpret. Growth over the previous quarter at an annualised rate fell from 3.7 per cent in the first three months of this year to 2.4 per cent in the second. That fits with many other signs that the recovery is slowing down.
The details, however, hide a series of economic mysteries – about how fast the economy can grow, how weak it actually is, and what US consumers have been up to for the past few years – that policymakers will have to solve.
The most interesting numbers in the release were not about the second quarter at all – they were revisions for 2007, 2008 and 2009. These showed that the recession was even deeper than previously thought. Output in 2009 was 1 per cent below the previous estimate.
“The recession was un usually long and unusually severe and has proved unusually resistant to unusual amounts of stimulus,” says Neil Soss, chief economist at Credit Suisse in New York.
There are two ways to read the revisions. One is that the economy is even further from using its full capacity than previously believed – an argument for more easing by the Fed. The other is that the economy’s capacity to grow is less than thought.
Paul Ashworth, senior US economist at Capital Economics, says he leans towards the latter explanation because inflation numbers remain the same. Less growth for the same inflation suggests a lower potential to grow.
US state deficits
Explore the US state fiscal crisis and examine each state’s 2011 budget gap and credit ratings
Another question is quite how weak the economy actually is. Purchases by US consumers and businesses grew a lot faster in the second quarter than in the first – up by 4.1 per cent from 1.3 per cent – it is just that many of them came from abroad.
Companies also added less to their inventories, which lowers growth but not final demand in the economy.
Some of the imports seem to have been businesses buying IT kit, an idea borne out by strong results from the technology sector and logistics companies such as FedEx. Technology investment should be good for future growth.
On the other hand, the 0.7 percentage points that real estate investment added to second-quarter growth look odd because most surveys say residential and commercial markets are still weak. The extent of the past revisions is a reminder to be cautious about all second-quarter numbers: they may yet be heavily revised.
A final area of mystery is the consumer. Consumption in 2007, 2008 and 2009 was revised down but consumer incomes were revised up as statisticians found more dividend income. The result is that savings rates are much higher than previously thought: 5.9 per cent in 2009 instead of 4.2 per cent.
Consumers who are saving more may be better able to increase their spending in future and boost the recovery. It also suggests the economy has moved further towards relying on investment rather than consumption as a source of growth, although net exports are still lagging behind.
One challenge of economic mysteries is that the clues keep changing in this way. The people who have to find the solution are Mr Bernanke and his colleagues at the Fed.
Mr Bernanke will deliver a speech today that might give some hint to his thinking but much depends on non-farm payroll figures, which are due on Friday before a federal open market committee rate-setting meeting next week. If private job creation is well below 100,000 for the third month in a row, it will be strong evidence that growth continues to stagnate.
Some members of the FOMC have trimmed their own growth forecasts since the last meeting in June and the committee is likely to reflect the weaker data by changing its statement on the economy.
There is also likely to be some formal discussion of the tools available if the Fed does decide to ease further. But drastic changes to policy, such as restarting asset purchases, are still unlikely unless the economy suffers another shock.
Contributions to Q2 growth
Imports have dragged down growth in the US (change in percentage points)
• Consumption +1.15
• Investment +2.09
• Inventories +1.05
• Exports +1.22
• Imports -4.00
• Gov spending +0.88
Source: Bureau of Economic Analysis
Mortgage investors scale back
By Aline Vanduyn in New York
Copyright The Financial Times Limited 2010
Published: August 1 2010 18:16 | Last updated: August 1 2010 18:16
http://www.ft.com/cms/s/0/7456c7f6-9d8e-11df-a37c-00144feab49a.html
Mortgage investors have been scaling back positions on fears that the US government might again intervene in the home loans market.
Investors sitting on tens of billions of dollars of paper profits in mortgage trades have called it quits after notching up returns this year of about 6 per cent.
There has been speculation among investors that the government might decide to offer homeowners a way to refinance mortgages and replace them with cheaper loans.
The value of mortgage bonds is particularly sensitive to when homeowners repay the mortgages.
There have been no comments or specific suggestions from Washington about such a programme, but it has been discussed in the past as one potential policy response to the economic downturn.
“Even if there is a very small chance of a refinancing programme happening, some investors have taken profits because they have made so much money in high-coupon mortgage bonds this year,” said Ajay Rajadhyaksha, head of US fixed income strategy at Barclays Capital.
US homeowners can refinance their mortgages as long as they can get a cheaper one.
But even though mortgage rates are at a record low, refinancing has not recovered, in spite of a small pick up last year.
This reflects the stricter standards many mortgage lenders are applying when considering new applications, as well as the fact that the drop in house prices across the US has left some homeowners with mortgages which are worth more than their houses.
A government programme aimed at making it easier to replace mortgages with cheaper ones could reduce monthly home loan bills and boost consumer spending, an important driver of US economic activity.
The US Treasury is planning a conference this month to discuss the mortgage market, including reform of state-backed mortgage financiers Fannie Mae and Freddie Mac, which are now financing nearly all new mortgages.
“The mortgage summit planned later this month has begun to attract a lot of attention among mortgage investors and has led to growing speculation of a massive [refinancing] wave,” said Steven Ricchiuto at Mizuho.
He said the interest paid on the average loan included in mortgage-backed debt was about 5.6 per cent.
A rise in mortgage refinancing activity would particularly hurt the value of the $700bn-worth of so-called “high-coupon” mortgage bonds. Many are trading above 100 cents in the dollar, meaning they cost above par value.
If the mortgages are refinanced, the bonds backed by the mortgages are repaid at par, meaning that investors would lose any amount above that.
High prices will fix what politicians cannot
By Trevor Houser
Copyright The Financial Times Limited 2010
Published: August 1 2010 20:19 | Last updated: August 1 2010 20:19
http://www.ft.com/cms/s/0/d0cc7bbc-9d97-11df-a37c-00144feab49a.html
The Gulf of Mexico oil spill was bad enough for BP to change its chief executive. It was not bad enough for the US to change its energy policy. Last month Barack Obama, US president, used the spill to call for a new push on clean energy. But weak follow-through, a divided Democratic caucus and a unified Republican opposition saw meaningful US energy legislation shelved last week. Now, the reality of a high oil price may be about to change America’s petroleum habits, even if policymakers cannot.
It seems as if we have been here before. Mr Obama’s post-BP address is strikingly similar to a speech given by President Jimmy Carter in the late 1970s, attempting in vain to use the last oil crisis to change US energy policy. Mr Obama acknowledged the parallels, but promised a different outcome. But while Washington’s resolve faltered again, the industry’s economics are not following the old script.
Ultimately, it was this drop in prices, rather than poor speechmaking, that hobbled Mr Carter’s attempts to reduce America’s oil consumption. US clean-energy research might have hit record levels between 1979 and 1981, but as oil prices fell, funding for clean-energy innovation fell in step. By the late 1990s, spending on clean-energy research was down by more than 75 per cent from its peak. The spectre of the 1980s oil price crash seemed to inhibit investment, even when oil prices rose again in 2003.
The difference today is that oil prices are unlikely to fall. Demand for oil is driven by economic growth. Today that means emerging economies, and China in particular. The developed world has seen oil use drop by 7 per cent since 2007, but demand in the developing world is up 10 per cent. Chinese demand has doubled during the past decade. As a result, oil has stayed expensive, in spite of the worst economic downturn since the Great Depression.
There is also little hope that new supply will bring much relief. Opec countries control an increasing share of global reserves and are not inclined to increase production just to give consumers a break. With most new onshore resources in politically unstable countries, the International Energy Agency predicts that over the next two decades the lion’s share of new non-Opec production will occur offshore, much of it in deep water. The real lesson of the Gulf spill is that drilling the deep Macondo well reflected the reality that there are few cheap and easy options elsewhere.
The only silver lining on a painful future for consumers is that expensive oil is just what is needed finally to kick-start the petroleum detox. The fact that high oil prices survived the crisis excises the ghosts of the 1980s, and gives entrepreneurs and investors confidence to support cleaner vehicles and develop alternative fuels. Nearly all of the world’s largest vehicle manufacturers now plan plug-in hybrid or fully electric vehicles within two years, with General Motors rolling out the Chevy Volt last week. At $20 per barrel, powering the Volt with electricity costs more than filling a comparable car with gasoline. But at $80, Volt drivers save enough on fuel to offset the vehicle’s high price. Faced with expensive oil, the chemicals industry is turning to natural gas, increasingly abundant thanks to the shale gas boom, and venture capitalists are betting on advanced biofuels.
Make no mistake, clean-energy deployment driven by a tight oil market will be slower, more limited, and less pleasant in the absence of good policy from Washington. And as oil accounts for only a quarter of global greenhouse gas emissions, high prices will do little to address climate change compared with the cap and trade proposals Congress put on hold. But today’s oil markets make public investment in clean-energy research and development, just now returning to 1970s levels, more palatable – and a change in America’s relationship with petroleum seems possible at last.
The writer is a fellow at the Peterson Institute for International Economics
German strength drives eurozone recovery
ByRalph Atkins in Frankfurt
Copyright The Financial Times Limited 2010
Published: August 2 2010 11:57 | Last updated: August 2 2010 14:33
http://www.ft.com/cms/s/0/7523f106-9e1d-11df-b377-00144feab49a.html
The eurozone’s industrial recovery shows scant signs of slowing but is relying almost entirely on Germany to drive growth, according to a closely watched survey.
The July eurozone manufacturing purchasing managers’ index was on Monday revised slightly higher, confirming that the sector had entered the second half of the year on a strong note. The sharpest improvement was in Germany, however, with growth prospects remaining weak elsewhere and the French index dropping to its lowest level for ten months.
The results highlight the eurozone’s dependence on Germany’s industrial export-led recovery, which continues to gather steam. The VDMA German engineering association reported separately that orders placed with its members in June had been 62 per cent higher than a year before.
The year-on-year rise in German orders reflected the weakness of business in mid-2009. But Hannes Hesse, the VDMA’s director, said the data underscored the “dynamism” of the sector. Particularly encouraging, he said,was a 67 per cent increase in domestic orders, that pointed to a revival in internal demand.
In recent months worries have mounted about the sustainability of Germany’s recovery amid a gloomier global outlook.
Growth data due for release next week are expected to show that Germany’s gross domestic product expanded rapidly in the second quarter – perhaps by 1.5 per cent or more compared with the previous three months. That makes a eurozone slowdown inevitable in coming months, but the latest purchasing managers’ indices suggest it might not be as pronounced as initially feared.
“With final data even stronger than the surprisingly buoyant ‘flash’ [or preliminary] estimates, there has been no loss of momentum from the second quarter,” said Chris Williamson, chief economist at Markit, which produces the survey.
However, he went on: “This is clearly a very uneven recovery … Only in Germany, the Netherlands and Austria are manufacturers taking on staff in significant numbers.” Job losses were accelerating in France, Mr Williamson added.
The eurozone manufacturing purchasing managers’ index rose from 55.6 in June to 56.7 last month – the highest for three months. With a figure above 50 indicating an expansion in activity, it showed the 10th consecutive month of growth. The initial “flash” estimate for July had been 56.5.
Germany’s index jumped markedly from 58.4 in June to 61.2, also the highest for three months and signalling the second-sharpest improvement in operating conditions since the series began in April 1996. Italy also reported an improvement, with its index rising from 54.3 to 54.4. But the recent improvements in Spain have been more modest, although its index rose from from 51.2 to 51.6. For France, the index dropped from 54.8 to 53.9.
Geely completes purchase of Volvo for $1.5bn
By John Reed in London
Copyright The Financial Times Limited 2010
Published: August 2 2010 11:45 | Last updated: August 2 2010 11:45
http://www.ft.com/cms/s/0/b25238b6-9e1e-11df-b377-00144feab49a.html
Ford Motor said it had completed the sale of Volvo Cars, its Swedish marque, to Chinese carmaking group Geely for $1.5bn.
The deal, agreed in March, marks the US company’s last disposal of an overseas car brand, and the biggest overseas acquisition yet by a Chinese automaker. Li Shufu, Geely’s chairman, said the signing marked “a historic day for Geely, which is extremely proud to have acquired Volvo Cars”.
Ford said that Zhejiang Geely Holding Group had on Monday paid $1.3bn in cash and issued a $200m note to complete the sale – a lower amount than the $1.8bn the US carmaker said it planned to raise from the deal when it was agreed in March.
However, Ford said that a “true-up” of purchase price adjustments later this year “is expected to result in additional proceeds to Ford”. Geely said that the closing price reflected adjustments in areas such as pension obligations and working capital.
The US carmaker paid $6.45bn for Volvo in 1999 when it was split from the truckmaking group of the same name. Ford sold its UK Aston Martin brand to Kuwaiti-led investors in 2007, and Jaguar and Land Rover to India’s Tata Motors in 2008.
Geely said that Stefan Jacoby, formerly chief executive of Volkswagen of America, would become Volvo’s new chief executive on August 19, replacing Stephen Odell, who will now become chief executive of Ford’s European arm.
Mr Li will become Volvo’s new chairman. His board’s members will include Hans-Olov Olsson, a former president and chief executive of Volvo Cars, and Håkan Samuelsson, formerly chief executive of MAN, the truck group.
Volvo will retain its headquarters in Gothenburg and manufacturing presence in Sweden and Belgium, but Geely said its new management “will have the autonomy to execute on its business plan under the strategic direction of the board”.
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Geely said in March when the deal was agreed that it planned to nearly double Volvo’s sales to 600,000 in five years, largely by building market share in China, where it is currently has only a small presence.
The deal’s closing followed more than a year of talks, and was marked at a signing ceremony in London attended by Mr Li and Lewis Booth, Ford’s chief financial officer.
Ford will continue to supply Volvo with engines and parts for defined periods, but is selling 100 per cent of the carmaker to Geely.
Alan Mulally, Ford chief executive, said in a statement that the sale would allow the company to sharpen its focus on the Ford brand around the world.
“Volvo is an excellent brand with a strong product line, and it has returned to profits after a successful restructuring,” Mr Mulally said. “We are confident Volvo has a solid future under Geely’s ownership.”
HSBC profit hits $11.1bn as bad debts fall
By Sharlene Goff
Copyright The Financial Times Limited 2010
Published: August 2 2010 10:56 | Last updated: August 2 2010 10:56
http://www.ft.com/cms/s/0/f0639d5c-9e19-11df-b377-00144feab49a.html
Pre-tax profit more than doubled at HSBC in the first six months of the year as bad debts fell to the lowest level since the start of the financial crisis and its investment banking division revealed a surprisingly resilient performance.
Group pre-tax profit rose to $11.1bn from $5.02bn a year ago. HSBC was profitable in every region except the US, where it posted a loss of around $80m.
Douglas Flint, finance director, said on Monday the profit growth had been driven by the bank’s retail and commercial businesses, which made a profit of about $4.3bn in the first half compared with around $1.2bn a year ago.
The personal financial services business returned to profit for the first time in two years, driven by a better performance in the US. While the North American business still made a loss, this was sharply lower than a year ago. HSBC said the division, which had been ravaged by losses on subprime loans, was boosted by a marked fall in loan impairments and a recovery in its core businesses. HSBC also sold its $4.3bn US car loan portfolio.
Across the bank, loan impairment charges fell to $7.5bn in the first six months, the lowest level since the financial crisis began. A year ago, impairments were almost $14bn.
HSBC said it had increased lending in the UK and was “very much open for business”. However, it hit out at an idea mooted by the government to force more banks to sign up to lending targets.
“Targets are difficult to formulate,” said Mr Flint.
As well as a strong retail performance, Mr Flint said the investment banking division had the “second best ever half-year results”. Profits from the global banking and markets (GBM) business were $5.6bn, down around 13 per cent from an exceptional first half last year but still robust compared with the sharp falls suffered by rival banks.
Mr Flint cautioned, however, that momentum in this business would be likely to stall in the second half of the year.
“We expect slightly reduced appetite and volumes in the second half,” he said.
HSBC had allocated “just over 20 per cent” of revenue at GBM for pay and bonuses.
Stripping out effects of currency movements and the valuation of the bank’s own debt, pre-tax profit rose by $2.2bn to $9.6bn.
Total sales were flat at $40bn. HSBC declared dividends totalling $2.8bn – 16 cents a share – payable from earnings per share of 38 cents.
Shares in HSBC rose 3.3 per cent to 667.6p in early London trading.
BNP boosted by retail banking strength
By Ben Hall in Paris
Copyright The Financial Times Limited 2010.
Published: August 2 2010 08:56 | Last updated: August 2 2010 11:49
http://www.ft.com/cms/s/0/a783682c-9e02-11df-b377-00144feab49a.html
BNP Paribas, France’s largest bank, reported a 31 per cent increase in net profit in the second quarter as provisions for bad loans fell to the lowest level for two years.
The bank easily beat analysts’ estimates when it said its net profit rose to €2.11bn ($2.76bn) in the second quarter. A continued recovery in its retail banking operations offset lower profits in its investment banking division, which was held back by three months of severe market volatility, a sharp contraction in primary markets anbd widening credit spreads.
Pre-tax profit from corporate and investment banking operations fell by 7.3 per cent on the second quarter of 2009, described by the bank as an “exceptional” period.
Last year’s merger with Fortis of Belgium accounted for a 11.8 per cent increase in revenues at €11.17bn. The bank said it was on course to achieve cost-savings worth €900m a year by 2012 following the merger.
Shares in BNP Paribas, the biggest bank in the eurozone by deposits, rose by as much as 4.7 per cent inmorning Paris trading. The stock has have rallied since regulators said the bank had comfortably passed EU stress tests and following indications last week that the authorities would soften proposed new capital requirements.
Baudouin Prot, chief executive, said BNP Paribas was “extremely well capitalised” and had experience a marked fall in its cost of financing since the test results were published.
Continuous profits had enabled it to lifts it tier one capital ratio – a key measure of balance sheet strength – from 7.4 per cent at the end of 2006 to 10.6 per cent at the end of June 2010, Mr Prot said. The equity tier one ratio rose from 5.6 per cent to 8.4 per cent over the same period.
Provisions for bad loans in the second quarter fell by 53.9 per cent on the same period in 2009 to €1.08bn, a 19 per cent decrease on the first three months of 2010.
The bank reversed €118m of previous write-downs in its corporate and investment banking division, saying it had seen “no new significant doubtful loans” during the quarter.
BNP Paribas said the cost of provisions for bad loans had fallen to its lowest level since the second quarter of 2008. The fall in the cost of risk was particularly marked at BancWest, its Californian retail unit, and in some of its eastern European operations, notably in Ukraine.
BancWest posted a pre-tax operating profit of €153m following a €62m loss in the second quarter of 2009.
However, the cost of bad loans at BNL Banca Commerciale in Italy inched up to €205m in the second quarter.
Mr Prot insisted that there would be a “stabilisation or moderate increase” in bad loans provisions at the bank’s Italian operations.
He also played down the anticipated effect of government austerity measures in France and elsewhere in Europe on its retail banking operations, saying the boost to confidence from a gradual return to budgetary discipline would offset a fiscal tightening.
Move to halt BP drilling off Libya
By Guy Dinmore and Eleonora de Sabata in Rome
Copyright The Financial Times Limited 2010
Published: August 1 2010 17:43 | Last updated: August 1 2010 23:09
http://www.ft.com/cms/s/0/b8b3d062-9d87-11df-a37c-00144feab49a.html
Plans by BP to start drilling for oil and gas off Libya within weeks have prompted growing calls for a moratorium on deepwater operations while Mediterranean states assess the environmental impact in light of the Gulf of Mexico disaster.
Stefania Prestigiacomo, Italy’s environment minister, has become the first senior official within the European Union to suggest that a moratorium might be appropriate while the Mediterranean’s 21 littoral states find a “common voice”.
Plans for deepwater drilling in the confined waters of the Mediterranean “give rise to serious concern”, she told the Financial Times in written comments.
Referring to a proposal by Günther Oettinger, the EU’s energy commissioner, for a moratorium within EU waters, she added: “A moratorium could be a right approach for potentially dangerous drilling . . . to give Europe time to define a new and specific strategy for the Mediterranean especially in light of the risk exposed by the Deepwater Horizon spill.”
BP confirmed on Sunday night that it had a rig in place preparing for deepwater drilliing in Libya’s Gulf of Sirte, but that no firm date had been set for the start of drilling. The company said last week that it would begin drilling the first of five wells in the area “within weeks”. The well is to be about 200 metres deeper than the Macondo well drilled by the Deepwater Horizon rig which exploded on April 20, killing 11 workers and causing the most serious environmental disaster in US waters.
Environmental groups as well as local Italian politicians and Italy’s opposition Democratic party have also called for a suspension of deepwater drilling in the Mediterranean. Libya’s Gulf of Sirte lies some 500km from Italian and Maltese territory.
BP shrugged off calls for a moratorium. “There isn’t one suggested,” a BP spokesman told the FT. “And who is the authority for the ‘Med’?” he asked.
BP’s comments reflect the lack of an institutional mechanism co-ordinating Mediterranean-wide policies while individual states – including Italy – have recently approved a considerable number of oil and gas exploration projects of their own, some in deep waters.
Franco Frattini, Italy’s foreign minister, last week suggested that BP’s activities in the Gulf of Sirte be referred to the Union for the Mediterranean. But the proposed community of EU and littoral states has had a difficult birth, first stalled by internal EU rivalries and then complicated by tensions between Israel and its Arab neighbours.
There are questions over whether Mediterranean states are equipped to deal with an oil spill of that magnitude.
The Malta-based UN agency charged with co-ordinating responses to maritime pollution in the Mediterranean says Libya does not yet have a national contingency plan for oil spill response but is working on one.
Data provided by the Libyan authorities to Rempec – the Regional Marine Pollution Emergency Response Centre – says they have the equipment to tackle a big spill.
But senior Italian officials in the environmental protection sector, who asked not to be named, insisted that other Mediterranean states lacked the capacity to deal with a spill on the scale of the Gulf of Mexico disaster. Italian budget cuts had undermined what had once been one of Europe’s most advanced response systems, they said. Rempec points out that even with a massive response only 10 per cent of oil spilt in disasters is recovered.
Environmentalists are concerned about the impact of a possible spill on the Mediterranean’s diverse sea life.
BP said its preparations for drilling in Libyan waters were “extensive, rigorous and detailed” and said it would not start any operation before it was fully confident it would be safe and efficient. BP said its spill contingency plan was based on “the standard industry three-tier model for preparedness”.
● A key two-step procedure to seal BP’s Macondo well could begin on Monday, the top US oil-spill official said on Sunday, Reuters reports from Houston.
“That could start as early as Monday night” or perhaps early on Tuesday, said Thad Allen, a retired Coast Guard admiral, referring to the “static kill” procedure to pump heavy mud and cement into the top of the well.
The well has been temporarily sealed for more than two weeks. But the “bottom kill,” which will pump mud and cement through a relief well into the bottom of the well’s reservoir, will seal it once and for all, said Mr Allen.
UAE to suspend BlackBerry services
By Andrew England in Abu Dhabi
Copyright The Financial Times Limited 2010
Published: August 1 2010 09:56 | Last updated: August 1 2010 18:34
http://www.ft.com/cms/s/0/38a8da8e-9d41-11df-a37c-00144feab49a.html
The United Arab Emirates is to suspend BlackBerry mobile communication services from October because, it said, they operate outside its laws and raise national security concerns.
Saudi Arabia appeared to be following suit, with an official at Saudi Telecom, a state-controlled company, saying the kingdom was banning BlackBerry messenger services.
The security-conscious Gulf states will be the first countries to take such actions but the announcements come after India raised similar concerns about Research in Motion’s network in recent weeks. Canada-based RIM is the company behind the BlackBerry brand.
BlackBerry services, such as e-mail and instant messaging, use internal encrypted networks that are difficult for governments to monitor. It is the only data services provider operating in the UAE that exports its data offshore and denies authorities access to its systems.
The UAE’s regulator said its decision was based on the fact that “certain BlackBerry services allow users to act without any legal accountability, causing judicial, social and national security concerns for the UAE”.
The UAE’s suspension will begin on October 11 and will also apply to roaming BlackBerry devices. The ban in Saudi Arabia, the Arab Gulf’s most populous nation and the Arab world’s biggest economy, was due to begin this month. The UAE government, which relies heavily on high-tech surveillance measures as key elements of its security infrastructure, said it had had discussions with RIM about its concerns but no progress was made.
Abdulrahman Mazi, a board member at Saudi Telecom, told the Al Arabiya satellite channel that he hoped the moves would pressure RIM into taking steps to “provide the information when needed”.
“UAE took a bolder step than Saudi Arabia whereas Saudi Arabia is only banning one, the messenger,” he said.
Last month, the Indian government renewed a threat to ban BlackBerry services unless RIM gave it access to data transferred by its secured messaging system. This was resolved last week after the head of internal security in India said RIM agreed to address concerns over the possible use of its data services by terrorists.
The UAE move will frustrate the 500,000 or so BlackBerry users in the emirate, which is the region’s business and tourism hub, and put scrutiny on the country’s control of information.
The telecoms market in the UAE is dominated by Etisalat, a state-controlled company, and its only rival is Du, which is majority owned by government entities.
But Mohammed al-Ghanim, director-general of the Telecommunications Regulatory Authority, dismissed suggestions that the regulator’s decision had anything to do with censorship.
“It is about regulatory compliance and we are not asking for RIM to do anything that is not apparently being done in developed nations or so-called open countries around the world,” he said.
RIM could not be reached for comment.
Additional reporting by James Fontanella-Khan in Mumbai
Investors see bright side of China data
By Telis Demos in London
Copyright The Financial Times Limited 2010.
Published: August 2 2010 08:19 | Last updated: August 2 2010 14:42
http://www.ft.com/cms/s/0/cc3d16ae-9dfd-11df-b377-00144feab49a.html
Monday 14.40 BST: Markets saw the bright side of a report that Chinese manufacturing is slowing, and are now accelerating their risk-taking on the back of strong European manufacturing activity and bank earnings.
The FTSE All-World index is up 1.7 per cent, the yen is sinking against riskier currencies and crude oil is seeing a three-month high above $80 a barrel.
China’s government-calculated purchasing managers index was reported on Sunday to have dipped to its lowest level since February 2009, following moves by Beijing to tighten access to credit throughout the economy.
That dip, however, is still consistent with double-digit growth, according to HSBC economists who produce a private index, which also showed a decline. The move was also not unexpected after China said last week its intention was to allow the economy to slow in order to cool inflation.
Growth hopes are seeing European markets rise sharply. The pound and the euro are making new high marks, and the FTSEurofirst 300 index is up 2.1 per cent, exceeding last week’s top mark and reaching a three-month high. Perceptions of credit risks are also falling for the financial sector and sovereign debts.
Two of the biggest banks in Europe, HSBC and BNP Paribas, reported strong earnings on the strength of decreasing losses in retail banking. Eurozone economies also reported their manufacturing PMI figures today, with overall activity thus far increasing marginally more than expected.
Asia was boosted by confidence in growth around the region, even as the rise in PMIs in South Korea and Thailand also slowed. South Korea’s exports rose more than forecast in July, it was reported over the weekend, and India’s PMI index ticked back up to a multi-year high.
All eyes will stay on the US, however, as the question of monetary policy hangs in the balance. Wall Street’s S&P 500 index opened up 1.3 per cent, right at its 200-day moving average. The market has been unable to hold above that level since its May correction.
Fears are that the US economy is running out of steam in spite of loose policy and strong corporate earnings, which have not led to greater investment by industrials in new production. Last Friday it was reported that second-quarter GDP grew at 2.4 per cent, after 3 per cent growth in the first quarter.
Indications of late are that policy will loosen further. Alan Greenspan, former Federal Reserve chairman, said over the weekend that the economy was “very distorted”, heavily relying on a manufacturing rebound, and “on pause” at the moment. Fed-watchers at Nomura said that they expect the Fed to loosen policy at its next meeting on August 10.
☼ Factors to watch. A slew of US economic data will add depth to the picture, with the Institute of Supply Management’s index of industrial activity to be reported later today, and non-farm payrolls on Friday. ☼
• Europe. Stocks were up around the region. The UK’s FTSE 100 index is up 2.1 per cent, Germany’s Dax is up 1.8 per cent and France’s Cac 40 is up 2 per cent. Two megabanks reported profit jumps. BNP Paribas reported a 31 per cent rise in profits over last year, though profits shrank 8 per cent from the previous quarter. HSBC credited a decline in bad loans for a sharp increase in first-half profit over last year. European banks were up 3.1 per cent.
Flashes of production indices from around Europe were mostly showing increases, notably Germany’s, its fastest increase in three months. Investors also seemed to be cheered that Germany’s austerity package was facing political hurdles in the lower house, which could allow Europe’s biggest economy to drive growth faster.
France, however, showed activity falling to an 11-month low, and the UK showed slight easing, though the print still topped forecasts.
• Asia. Shares were up across the board. Hong Kong’s Hang Seng index was the leader, up 1.8 per cent. Mainland China is keeping up, with the Shanghai composite index rising 1.3 per cent. The Nikkei 225 index was up 0.4 per cent, slowed by rumours of a Bank of Japan rate hike but supported by Honda doubling its prior-year earnings and raising its forecast of sales to the US.
Korea’s Kospi 200 index was up 1.3 per cent, and Mumbai’s Sensex was higher by 1.2 per cent following the positive growth news. India’s market has rolled back and forth in recent weeks as a debate on the pace of inflation – too fast, according to the central bank, but just right according to the government – has roiled sentiment.
• Debt. Japanese 10-year bonds are at fresh post-crisis lows, yielding 1.06 per cent, down 1 basis point. Other “haven” bonds are in sell-off mode, however, including the benchmark US Treasury, with yields up 4 basis points at 2.95 per cent. German Bunds are also up 4 basis points, yielding 2.70 per cent.
Spanish sovereign debt is also in demand, down 8 basis points. Spanish bond credit-default swap spreads are tighter, indicating cheaper prices for protection against default. Portuguese and Italian bond spreads are also tighter.
European senior financial debt spreads, to their lowest level since mid-April, according to Markit. However, three-month Euribor futures, an interest rate that measures interbank lending risk, rose 0.2 basis points after falling for the first time since April on Friday.
• Currencies. The asset class was consistent with rising risk appetite, as the Canadian and Australian currencies, powered by commodities exports, have been tightly correlated, suggestive of a risk trade. Both are higher by 0.6 per cent against the US dollar.
The yen dipped from one-year highs reached on Friday following the US’s disappointing GDP growth report. It was 0.3 per cent lower against the US dollar, at Y86.74. It was also down 0.8 per cent against the South African rand and 1 per cent against the New Zealand dollar, key carry trade pairs.
The pound was stronger against the US dollar, up 0.9 per cent at $1.5859, its highest level since February. The euro picked up steam at mid-session, now up 0.4 per cent to $1.3116, a three-month high, after bursting through the $1.31 ceiling and gaining momentum.
• Commodities. US crude oil was is higher by 2.4 per cent, at $80.83 a barrel, its highest level since May. Even gradual Chinese growth is supportive of the market, markets seem to indicate. Fears about US growth have also not seen oil tank as quickly as other risky commodities, with crude off only 8 per cent from its peak of the year.
Gold changed course and is up 0.6 per cent $1,188 an ounce. Bullion has largely been in stasis of late as investors are chased from the precious metal by stabilising outlooks in Europe and potential deflation in the US, but long-term worries about the impact of looser monetary policy on inflation remain. However, it is still off its nominal all-time high at $1,261.
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Bernanke faces US growth mysteries
By Robin Harding in Washington
Copyright The Financial Times Limited 2010
Published: August 1 2010 17:57 | Last updated: August 1 2010 17:57
http://www.ft.com/cms/s/0/4768a892-9d8c-11df-a37c-00144feab49a.html
If Ben Bernanke, Federal Reserve chairman, expected the release of second-quarter growth data to clear up the “unusually uncertain” outlook for the US economy, then he will have been sorely disappointed.
On the surface, the numbers were easy to interpret. Growth over the previous quarter at an annualised rate fell from 3.7 per cent in the first three months of this year to 2.4 per cent in the second. That fits with many other signs that the recovery is slowing down.
The details, however, hide a series of economic mysteries – about how fast the economy can grow, how weak it actually is, and what US consumers have been up to for the past few years – that policymakers will have to solve.
The most interesting numbers in the release were not about the second quarter at all – they were revisions for 2007, 2008 and 2009. These showed that the recession was even deeper than previously thought. Output in 2009 was 1 per cent below the previous estimate.
“The recession was un usually long and unusually severe and has proved unusually resistant to unusual amounts of stimulus,” says Neil Soss, chief economist at Credit Suisse in New York.
There are two ways to read the revisions. One is that the economy is even further from using its full capacity than previously believed – an argument for more easing by the Fed. The other is that the economy’s capacity to grow is less than thought.
Paul Ashworth, senior US economist at Capital Economics, says he leans towards the latter explanation because inflation numbers remain the same. Less growth for the same inflation suggests a lower potential to grow.
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Another question is quite how weak the economy actually is. Purchases by US consumers and businesses grew a lot faster in the second quarter than in the first – up by 4.1 per cent from 1.3 per cent – it is just that many of them came from abroad.
Companies also added less to their inventories, which lowers growth but not final demand in the economy.
Some of the imports seem to have been businesses buying IT kit, an idea borne out by strong results from the technology sector and logistics companies such as FedEx. Technology investment should be good for future growth.
On the other hand, the 0.7 percentage points that real estate investment added to second-quarter growth look odd because most surveys say residential and commercial markets are still weak. The extent of the past revisions is a reminder to be cautious about all second-quarter numbers: they may yet be heavily revised.
A final area of mystery is the consumer. Consumption in 2007, 2008 and 2009 was revised down but consumer incomes were revised up as statisticians found more dividend income. The result is that savings rates are much higher than previously thought: 5.9 per cent in 2009 instead of 4.2 per cent.
Consumers who are saving more may be better able to increase their spending in future and boost the recovery. It also suggests the economy has moved further towards relying on investment rather than consumption as a source of growth, although net exports are still lagging behind.
One challenge of economic mysteries is that the clues keep changing in this way. The people who have to find the solution are Mr Bernanke and his colleagues at the Fed.
Mr Bernanke will deliver a speech today that might give some hint to his thinking but much depends on non-farm payroll figures, which are due on Friday before a federal open market committee rate-setting meeting next week. If private job creation is well below 100,000 for the third month in a row, it will be strong evidence that growth continues to stagnate.
Some members of the FOMC have trimmed their own growth forecasts since the last meeting in June and the committee is likely to reflect the weaker data by changing its statement on the economy.
There is also likely to be some formal discussion of the tools available if the Fed does decide to ease further. But drastic changes to policy, such as restarting asset purchases, are still unlikely unless the economy suffers another shock.
Contributions to Q2 growth
Imports have dragged down growth in the US (change in percentage points)
• Consumption +1.15
• Investment +2.09
• Inventories +1.05
• Exports +1.22
• Imports -4.00
• Gov spending +0.88
Source: Bureau of Economic Analysis
Mortgage investors scale back
By Aline Vanduyn in New York
Copyright The Financial Times Limited 2010
Published: August 1 2010 18:16 | Last updated: August 1 2010 18:16
http://www.ft.com/cms/s/0/7456c7f6-9d8e-11df-a37c-00144feab49a.html
Mortgage investors have been scaling back positions on fears that the US government might again intervene in the home loans market.
Investors sitting on tens of billions of dollars of paper profits in mortgage trades have called it quits after notching up returns this year of about 6 per cent.
There has been speculation among investors that the government might decide to offer homeowners a way to refinance mortgages and replace them with cheaper loans.
The value of mortgage bonds is particularly sensitive to when homeowners repay the mortgages.
There have been no comments or specific suggestions from Washington about such a programme, but it has been discussed in the past as one potential policy response to the economic downturn.
“Even if there is a very small chance of a refinancing programme happening, some investors have taken profits because they have made so much money in high-coupon mortgage bonds this year,” said Ajay Rajadhyaksha, head of US fixed income strategy at Barclays Capital.
US homeowners can refinance their mortgages as long as they can get a cheaper one.
But even though mortgage rates are at a record low, refinancing has not recovered, in spite of a small pick up last year.
This reflects the stricter standards many mortgage lenders are applying when considering new applications, as well as the fact that the drop in house prices across the US has left some homeowners with mortgages which are worth more than their houses.
A government programme aimed at making it easier to replace mortgages with cheaper ones could reduce monthly home loan bills and boost consumer spending, an important driver of US economic activity.
The US Treasury is planning a conference this month to discuss the mortgage market, including reform of state-backed mortgage financiers Fannie Mae and Freddie Mac, which are now financing nearly all new mortgages.
“The mortgage summit planned later this month has begun to attract a lot of attention among mortgage investors and has led to growing speculation of a massive [refinancing] wave,” said Steven Ricchiuto at Mizuho.
He said the interest paid on the average loan included in mortgage-backed debt was about 5.6 per cent.
A rise in mortgage refinancing activity would particularly hurt the value of the $700bn-worth of so-called “high-coupon” mortgage bonds. Many are trading above 100 cents in the dollar, meaning they cost above par value.
If the mortgages are refinanced, the bonds backed by the mortgages are repaid at par, meaning that investors would lose any amount above that.
High prices will fix what politicians cannot
By Trevor Houser
Copyright The Financial Times Limited 2010
Published: August 1 2010 20:19 | Last updated: August 1 2010 20:19
http://www.ft.com/cms/s/0/d0cc7bbc-9d97-11df-a37c-00144feab49a.html
The Gulf of Mexico oil spill was bad enough for BP to change its chief executive. It was not bad enough for the US to change its energy policy. Last month Barack Obama, US president, used the spill to call for a new push on clean energy. But weak follow-through, a divided Democratic caucus and a unified Republican opposition saw meaningful US energy legislation shelved last week. Now, the reality of a high oil price may be about to change America’s petroleum habits, even if policymakers cannot.
It seems as if we have been here before. Mr Obama’s post-BP address is strikingly similar to a speech given by President Jimmy Carter in the late 1970s, attempting in vain to use the last oil crisis to change US energy policy. Mr Obama acknowledged the parallels, but promised a different outcome. But while Washington’s resolve faltered again, the industry’s economics are not following the old script.
Ultimately, it was this drop in prices, rather than poor speechmaking, that hobbled Mr Carter’s attempts to reduce America’s oil consumption. US clean-energy research might have hit record levels between 1979 and 1981, but as oil prices fell, funding for clean-energy innovation fell in step. By the late 1990s, spending on clean-energy research was down by more than 75 per cent from its peak. The spectre of the 1980s oil price crash seemed to inhibit investment, even when oil prices rose again in 2003.
The difference today is that oil prices are unlikely to fall. Demand for oil is driven by economic growth. Today that means emerging economies, and China in particular. The developed world has seen oil use drop by 7 per cent since 2007, but demand in the developing world is up 10 per cent. Chinese demand has doubled during the past decade. As a result, oil has stayed expensive, in spite of the worst economic downturn since the Great Depression.
There is also little hope that new supply will bring much relief. Opec countries control an increasing share of global reserves and are not inclined to increase production just to give consumers a break. With most new onshore resources in politically unstable countries, the International Energy Agency predicts that over the next two decades the lion’s share of new non-Opec production will occur offshore, much of it in deep water. The real lesson of the Gulf spill is that drilling the deep Macondo well reflected the reality that there are few cheap and easy options elsewhere.
The only silver lining on a painful future for consumers is that expensive oil is just what is needed finally to kick-start the petroleum detox. The fact that high oil prices survived the crisis excises the ghosts of the 1980s, and gives entrepreneurs and investors confidence to support cleaner vehicles and develop alternative fuels. Nearly all of the world’s largest vehicle manufacturers now plan plug-in hybrid or fully electric vehicles within two years, with General Motors rolling out the Chevy Volt last week. At $20 per barrel, powering the Volt with electricity costs more than filling a comparable car with gasoline. But at $80, Volt drivers save enough on fuel to offset the vehicle’s high price. Faced with expensive oil, the chemicals industry is turning to natural gas, increasingly abundant thanks to the shale gas boom, and venture capitalists are betting on advanced biofuels.
Make no mistake, clean-energy deployment driven by a tight oil market will be slower, more limited, and less pleasant in the absence of good policy from Washington. And as oil accounts for only a quarter of global greenhouse gas emissions, high prices will do little to address climate change compared with the cap and trade proposals Congress put on hold. But today’s oil markets make public investment in clean-energy research and development, just now returning to 1970s levels, more palatable – and a change in America’s relationship with petroleum seems possible at last.
The writer is a fellow at the Peterson Institute for International Economics
German strength drives eurozone recovery
ByRalph Atkins in Frankfurt
Copyright The Financial Times Limited 2010
Published: August 2 2010 11:57 | Last updated: August 2 2010 14:33
http://www.ft.com/cms/s/0/7523f106-9e1d-11df-b377-00144feab49a.html
The eurozone’s industrial recovery shows scant signs of slowing but is relying almost entirely on Germany to drive growth, according to a closely watched survey.
The July eurozone manufacturing purchasing managers’ index was on Monday revised slightly higher, confirming that the sector had entered the second half of the year on a strong note. The sharpest improvement was in Germany, however, with growth prospects remaining weak elsewhere and the French index dropping to its lowest level for ten months.
The results highlight the eurozone’s dependence on Germany’s industrial export-led recovery, which continues to gather steam. The VDMA German engineering association reported separately that orders placed with its members in June had been 62 per cent higher than a year before.
The year-on-year rise in German orders reflected the weakness of business in mid-2009. But Hannes Hesse, the VDMA’s director, said the data underscored the “dynamism” of the sector. Particularly encouraging, he said,was a 67 per cent increase in domestic orders, that pointed to a revival in internal demand.
In recent months worries have mounted about the sustainability of Germany’s recovery amid a gloomier global outlook.
Growth data due for release next week are expected to show that Germany’s gross domestic product expanded rapidly in the second quarter – perhaps by 1.5 per cent or more compared with the previous three months. That makes a eurozone slowdown inevitable in coming months, but the latest purchasing managers’ indices suggest it might not be as pronounced as initially feared.
“With final data even stronger than the surprisingly buoyant ‘flash’ [or preliminary] estimates, there has been no loss of momentum from the second quarter,” said Chris Williamson, chief economist at Markit, which produces the survey.
However, he went on: “This is clearly a very uneven recovery … Only in Germany, the Netherlands and Austria are manufacturers taking on staff in significant numbers.” Job losses were accelerating in France, Mr Williamson added.
The eurozone manufacturing purchasing managers’ index rose from 55.6 in June to 56.7 last month – the highest for three months. With a figure above 50 indicating an expansion in activity, it showed the 10th consecutive month of growth. The initial “flash” estimate for July had been 56.5.
Germany’s index jumped markedly from 58.4 in June to 61.2, also the highest for three months and signalling the second-sharpest improvement in operating conditions since the series began in April 1996. Italy also reported an improvement, with its index rising from 54.3 to 54.4. But the recent improvements in Spain have been more modest, although its index rose from from 51.2 to 51.6. For France, the index dropped from 54.8 to 53.9.
Geely completes purchase of Volvo for $1.5bn
By John Reed in London
Copyright The Financial Times Limited 2010
Published: August 2 2010 11:45 | Last updated: August 2 2010 11:45
http://www.ft.com/cms/s/0/b25238b6-9e1e-11df-b377-00144feab49a.html
Ford Motor said it had completed the sale of Volvo Cars, its Swedish marque, to Chinese carmaking group Geely for $1.5bn.
The deal, agreed in March, marks the US company’s last disposal of an overseas car brand, and the biggest overseas acquisition yet by a Chinese automaker. Li Shufu, Geely’s chairman, said the signing marked “a historic day for Geely, which is extremely proud to have acquired Volvo Cars”.
Ford said that Zhejiang Geely Holding Group had on Monday paid $1.3bn in cash and issued a $200m note to complete the sale – a lower amount than the $1.8bn the US carmaker said it planned to raise from the deal when it was agreed in March.
However, Ford said that a “true-up” of purchase price adjustments later this year “is expected to result in additional proceeds to Ford”. Geely said that the closing price reflected adjustments in areas such as pension obligations and working capital.
The US carmaker paid $6.45bn for Volvo in 1999 when it was split from the truckmaking group of the same name. Ford sold its UK Aston Martin brand to Kuwaiti-led investors in 2007, and Jaguar and Land Rover to India’s Tata Motors in 2008.
Geely said that Stefan Jacoby, formerly chief executive of Volkswagen of America, would become Volvo’s new chief executive on August 19, replacing Stephen Odell, who will now become chief executive of Ford’s European arm.
Mr Li will become Volvo’s new chairman. His board’s members will include Hans-Olov Olsson, a former president and chief executive of Volvo Cars, and Håkan Samuelsson, formerly chief executive of MAN, the truck group.
Volvo will retain its headquarters in Gothenburg and manufacturing presence in Sweden and Belgium, but Geely said its new management “will have the autonomy to execute on its business plan under the strategic direction of the board”.
Carmakers after the crisis
FT In depth: Carmakers still face tough markets and unprecedented pressures
Geely said in March when the deal was agreed that it planned to nearly double Volvo’s sales to 600,000 in five years, largely by building market share in China, where it is currently has only a small presence.
The deal’s closing followed more than a year of talks, and was marked at a signing ceremony in London attended by Mr Li and Lewis Booth, Ford’s chief financial officer.
Ford will continue to supply Volvo with engines and parts for defined periods, but is selling 100 per cent of the carmaker to Geely.
Alan Mulally, Ford chief executive, said in a statement that the sale would allow the company to sharpen its focus on the Ford brand around the world.
“Volvo is an excellent brand with a strong product line, and it has returned to profits after a successful restructuring,” Mr Mulally said. “We are confident Volvo has a solid future under Geely’s ownership.”
HSBC profit hits $11.1bn as bad debts fall
By Sharlene Goff
Copyright The Financial Times Limited 2010
Published: August 2 2010 10:56 | Last updated: August 2 2010 10:56
http://www.ft.com/cms/s/0/f0639d5c-9e19-11df-b377-00144feab49a.html
Pre-tax profit more than doubled at HSBC in the first six months of the year as bad debts fell to the lowest level since the start of the financial crisis and its investment banking division revealed a surprisingly resilient performance.
Group pre-tax profit rose to $11.1bn from $5.02bn a year ago. HSBC was profitable in every region except the US, where it posted a loss of around $80m.
Douglas Flint, finance director, said on Monday the profit growth had been driven by the bank’s retail and commercial businesses, which made a profit of about $4.3bn in the first half compared with around $1.2bn a year ago.
The personal financial services business returned to profit for the first time in two years, driven by a better performance in the US. While the North American business still made a loss, this was sharply lower than a year ago. HSBC said the division, which had been ravaged by losses on subprime loans, was boosted by a marked fall in loan impairments and a recovery in its core businesses. HSBC also sold its $4.3bn US car loan portfolio.
Across the bank, loan impairment charges fell to $7.5bn in the first six months, the lowest level since the financial crisis began. A year ago, impairments were almost $14bn.
HSBC said it had increased lending in the UK and was “very much open for business”. However, it hit out at an idea mooted by the government to force more banks to sign up to lending targets.
“Targets are difficult to formulate,” said Mr Flint.
As well as a strong retail performance, Mr Flint said the investment banking division had the “second best ever half-year results”. Profits from the global banking and markets (GBM) business were $5.6bn, down around 13 per cent from an exceptional first half last year but still robust compared with the sharp falls suffered by rival banks.
Mr Flint cautioned, however, that momentum in this business would be likely to stall in the second half of the year.
“We expect slightly reduced appetite and volumes in the second half,” he said.
HSBC had allocated “just over 20 per cent” of revenue at GBM for pay and bonuses.
Stripping out effects of currency movements and the valuation of the bank’s own debt, pre-tax profit rose by $2.2bn to $9.6bn.
Total sales were flat at $40bn. HSBC declared dividends totalling $2.8bn – 16 cents a share – payable from earnings per share of 38 cents.
Shares in HSBC rose 3.3 per cent to 667.6p in early London trading.
BNP boosted by retail banking strength
By Ben Hall in Paris
Copyright The Financial Times Limited 2010.
Published: August 2 2010 08:56 | Last updated: August 2 2010 11:49
http://www.ft.com/cms/s/0/a783682c-9e02-11df-b377-00144feab49a.html
BNP Paribas, France’s largest bank, reported a 31 per cent increase in net profit in the second quarter as provisions for bad loans fell to the lowest level for two years.
The bank easily beat analysts’ estimates when it said its net profit rose to €2.11bn ($2.76bn) in the second quarter. A continued recovery in its retail banking operations offset lower profits in its investment banking division, which was held back by three months of severe market volatility, a sharp contraction in primary markets anbd widening credit spreads.
Pre-tax profit from corporate and investment banking operations fell by 7.3 per cent on the second quarter of 2009, described by the bank as an “exceptional” period.
Last year’s merger with Fortis of Belgium accounted for a 11.8 per cent increase in revenues at €11.17bn. The bank said it was on course to achieve cost-savings worth €900m a year by 2012 following the merger.
Shares in BNP Paribas, the biggest bank in the eurozone by deposits, rose by as much as 4.7 per cent inmorning Paris trading. The stock has have rallied since regulators said the bank had comfortably passed EU stress tests and following indications last week that the authorities would soften proposed new capital requirements.
Baudouin Prot, chief executive, said BNP Paribas was “extremely well capitalised” and had experience a marked fall in its cost of financing since the test results were published.
Continuous profits had enabled it to lifts it tier one capital ratio – a key measure of balance sheet strength – from 7.4 per cent at the end of 2006 to 10.6 per cent at the end of June 2010, Mr Prot said. The equity tier one ratio rose from 5.6 per cent to 8.4 per cent over the same period.
Provisions for bad loans in the second quarter fell by 53.9 per cent on the same period in 2009 to €1.08bn, a 19 per cent decrease on the first three months of 2010.
The bank reversed €118m of previous write-downs in its corporate and investment banking division, saying it had seen “no new significant doubtful loans” during the quarter.
BNP Paribas said the cost of provisions for bad loans had fallen to its lowest level since the second quarter of 2008. The fall in the cost of risk was particularly marked at BancWest, its Californian retail unit, and in some of its eastern European operations, notably in Ukraine.
BancWest posted a pre-tax operating profit of €153m following a €62m loss in the second quarter of 2009.
However, the cost of bad loans at BNL Banca Commerciale in Italy inched up to €205m in the second quarter.
Mr Prot insisted that there would be a “stabilisation or moderate increase” in bad loans provisions at the bank’s Italian operations.
He also played down the anticipated effect of government austerity measures in France and elsewhere in Europe on its retail banking operations, saying the boost to confidence from a gradual return to budgetary discipline would offset a fiscal tightening.
Move to halt BP drilling off Libya
By Guy Dinmore and Eleonora de Sabata in Rome
Copyright The Financial Times Limited 2010
Published: August 1 2010 17:43 | Last updated: August 1 2010 23:09
http://www.ft.com/cms/s/0/b8b3d062-9d87-11df-a37c-00144feab49a.html
Plans by BP to start drilling for oil and gas off Libya within weeks have prompted growing calls for a moratorium on deepwater operations while Mediterranean states assess the environmental impact in light of the Gulf of Mexico disaster.
Stefania Prestigiacomo, Italy’s environment minister, has become the first senior official within the European Union to suggest that a moratorium might be appropriate while the Mediterranean’s 21 littoral states find a “common voice”.
Plans for deepwater drilling in the confined waters of the Mediterranean “give rise to serious concern”, she told the Financial Times in written comments.
Referring to a proposal by Günther Oettinger, the EU’s energy commissioner, for a moratorium within EU waters, she added: “A moratorium could be a right approach for potentially dangerous drilling . . . to give Europe time to define a new and specific strategy for the Mediterranean especially in light of the risk exposed by the Deepwater Horizon spill.”
BP confirmed on Sunday night that it had a rig in place preparing for deepwater drilliing in Libya’s Gulf of Sirte, but that no firm date had been set for the start of drilling. The company said last week that it would begin drilling the first of five wells in the area “within weeks”. The well is to be about 200 metres deeper than the Macondo well drilled by the Deepwater Horizon rig which exploded on April 20, killing 11 workers and causing the most serious environmental disaster in US waters.
Environmental groups as well as local Italian politicians and Italy’s opposition Democratic party have also called for a suspension of deepwater drilling in the Mediterranean. Libya’s Gulf of Sirte lies some 500km from Italian and Maltese territory.
BP shrugged off calls for a moratorium. “There isn’t one suggested,” a BP spokesman told the FT. “And who is the authority for the ‘Med’?” he asked.
BP’s comments reflect the lack of an institutional mechanism co-ordinating Mediterranean-wide policies while individual states – including Italy – have recently approved a considerable number of oil and gas exploration projects of their own, some in deep waters.
Franco Frattini, Italy’s foreign minister, last week suggested that BP’s activities in the Gulf of Sirte be referred to the Union for the Mediterranean. But the proposed community of EU and littoral states has had a difficult birth, first stalled by internal EU rivalries and then complicated by tensions between Israel and its Arab neighbours.
There are questions over whether Mediterranean states are equipped to deal with an oil spill of that magnitude.
The Malta-based UN agency charged with co-ordinating responses to maritime pollution in the Mediterranean says Libya does not yet have a national contingency plan for oil spill response but is working on one.
Data provided by the Libyan authorities to Rempec – the Regional Marine Pollution Emergency Response Centre – says they have the equipment to tackle a big spill.
But senior Italian officials in the environmental protection sector, who asked not to be named, insisted that other Mediterranean states lacked the capacity to deal with a spill on the scale of the Gulf of Mexico disaster. Italian budget cuts had undermined what had once been one of Europe’s most advanced response systems, they said. Rempec points out that even with a massive response only 10 per cent of oil spilt in disasters is recovered.
Environmentalists are concerned about the impact of a possible spill on the Mediterranean’s diverse sea life.
BP said its preparations for drilling in Libyan waters were “extensive, rigorous and detailed” and said it would not start any operation before it was fully confident it would be safe and efficient. BP said its spill contingency plan was based on “the standard industry three-tier model for preparedness”.
● A key two-step procedure to seal BP’s Macondo well could begin on Monday, the top US oil-spill official said on Sunday, Reuters reports from Houston.
“That could start as early as Monday night” or perhaps early on Tuesday, said Thad Allen, a retired Coast Guard admiral, referring to the “static kill” procedure to pump heavy mud and cement into the top of the well.
The well has been temporarily sealed for more than two weeks. But the “bottom kill,” which will pump mud and cement through a relief well into the bottom of the well’s reservoir, will seal it once and for all, said Mr Allen.
UAE to suspend BlackBerry services
By Andrew England in Abu Dhabi
Copyright The Financial Times Limited 2010
Published: August 1 2010 09:56 | Last updated: August 1 2010 18:34
http://www.ft.com/cms/s/0/38a8da8e-9d41-11df-a37c-00144feab49a.html
The United Arab Emirates is to suspend BlackBerry mobile communication services from October because, it said, they operate outside its laws and raise national security concerns.
Saudi Arabia appeared to be following suit, with an official at Saudi Telecom, a state-controlled company, saying the kingdom was banning BlackBerry messenger services.
The security-conscious Gulf states will be the first countries to take such actions but the announcements come after India raised similar concerns about Research in Motion’s network in recent weeks. Canada-based RIM is the company behind the BlackBerry brand.
BlackBerry services, such as e-mail and instant messaging, use internal encrypted networks that are difficult for governments to monitor. It is the only data services provider operating in the UAE that exports its data offshore and denies authorities access to its systems.
The UAE’s regulator said its decision was based on the fact that “certain BlackBerry services allow users to act without any legal accountability, causing judicial, social and national security concerns for the UAE”.
The UAE’s suspension will begin on October 11 and will also apply to roaming BlackBerry devices. The ban in Saudi Arabia, the Arab Gulf’s most populous nation and the Arab world’s biggest economy, was due to begin this month. The UAE government, which relies heavily on high-tech surveillance measures as key elements of its security infrastructure, said it had had discussions with RIM about its concerns but no progress was made.
Abdulrahman Mazi, a board member at Saudi Telecom, told the Al Arabiya satellite channel that he hoped the moves would pressure RIM into taking steps to “provide the information when needed”.
“UAE took a bolder step than Saudi Arabia whereas Saudi Arabia is only banning one, the messenger,” he said.
Last month, the Indian government renewed a threat to ban BlackBerry services unless RIM gave it access to data transferred by its secured messaging system. This was resolved last week after the head of internal security in India said RIM agreed to address concerns over the possible use of its data services by terrorists.
The UAE move will frustrate the 500,000 or so BlackBerry users in the emirate, which is the region’s business and tourism hub, and put scrutiny on the country’s control of information.
The telecoms market in the UAE is dominated by Etisalat, a state-controlled company, and its only rival is Du, which is majority owned by government entities.
But Mohammed al-Ghanim, director-general of the Telecommunications Regulatory Authority, dismissed suggestions that the regulator’s decision had anything to do with censorship.
“It is about regulatory compliance and we are not asking for RIM to do anything that is not apparently being done in developed nations or so-called open countries around the world,” he said.
RIM could not be reached for comment.
Additional reporting by James Fontanella-Khan in Mumbai
Media Companies Try Getting Social With Tumblr/Bing and Google in a Race for Search Features
Media Companies Try Getting Social With Tumblr
By JENNA WORTHAM
Copyright by The New York Times
Published: August 1, 2010
http://www.nytimes.com/2010/08/02/technology/02tumblr.html?th&emc=th
By now, plenty of traditional media companies have hopped on the social media bandwagon, pumping out news updates on Facebook and Twitter.
But do those companies have the time and resources to work yet another Web outlet into their daily routine?
Mark Coatney certainly hopes so. Mr. Coatney, a 43-year-old journalist, is the latest hire at Tumblr, a fast-growing blogging service based in New York that says it has 6.6 million users.
Until last month, Mr. Coatney was a senior editor at Newsweek, where as a side project he headed up the magazine’s social efforts on Twitter and Facebook. Last year he decided to add Tumblr to his repertoire.
“I saw it as an opportunity to talk to our audience in a new way,” he said. On Twitter, he said, “the main feedback comes mostly from retweeting,” or retransmitting an interesting message. On Tumblr, “the tone is a lot more conversational.”
Mr. Coatney quickly cultivated a following on Tumblr for his thought-provoking, quick-witted posts. Often they included commentary that was funny and bordering on acerbic — something he was able to get away with largely because “no one at Newsweek really knew what I was doing,” he said.
The credibility he established among Tumblr users, and the fact that Newsweek was one of the first big publishers to sign on, cemented Tumblr’s decision to hire him, company executives said.
Over the last few months, other media outlets have caught wind of Tumblr, which is free to use. The newest recruits include The Atlantic, Rolling Stone, BlackBook Media Corporation, National Public Radio, The Paris Review, The Huffington Post, Life magazine and The New York Times.
But many of those outlets have done little more than set up a placeholder page. In his new job as a “media evangelist,” Mr. Coatney’s role, and in some ways his challenge, is to help them figure out what to do next.
Mr. Coatney describes Tumblr as “a space in between Twitter and Facebook.” The site allows users to upload images, videos, audio clips and quotes to their pages, in addition to bursts of text.
As on Twitter, users can follow other users, whose posts appear in a chronological stream on a central home page known as the dashboard. Users can indicate that they like an item by clicking on a red heart next to it or “reblogging” it.
One of the big differences between Tumblr and Twitter is that Tumblr does not display how many followers a user has, said David Karp, Tumblr’s 24-year-old founder and chief executive.
“Who is following you isn’t that important,” he said. “It’s not about getting to the 10,000-follower count. It’s less about broadcasting to an audience and more about communicating with a community.”
Moreover, he said, the site was designed with creative expression in mind.
“People are creating identities and personalities that Facebook and Twitter are not designed to allow you to do,” he said.
Since Tumblr is currying favor among a young crowd, it could prove valuable for traditional companies and media outlets that are trying to build a relationship with that audience. And those companies are no doubt aiming to win points by being early adopters of a site that is on the rise.
Tumblr is still dwarfed by Facebook and Twitter, which each have hundreds of millions of users and can be significant sources of traffic for online publishers.
Mr. Coatney estimated that posting links and notes to the Newsweek Twitter feed and Facebook page sent roughly 200,000 to 300,000 readers to Newsweek’s Web site each day. By comparison, Tumblr sent closer to 1,000.
But Tumblr is growing quickly. It says it is adding 25,000 new accounts daily, and each month it serves up 1.5 billion page views.
Items posted on Tumblr can also ripple out to far-flung corners of the Web.
When The New Yorker posted the Escher-inspired oil-spill-themed cover for its July 5 issue on its Tumblr page, it drew many links from other sites.
Alexa Cassanos, director of public relations for The New Yorker, which began using the service in late May, said the cover resonated in unlikely places, like the news aggregator Reddit.
Ms. Cassanos said Tumblr afforded The New Yorker an opportunity to showcase some material that might otherwise get lost online.
“We can highlight graphic content like photo essays or slide shows to an audience that may not read the magazine,” she said. “You just couldn’t do that, visually, on Twitter or Facebook.”
Unlike Twitter, where it is not uncommon for publishers to simply set up accounts that automatically publish links to their articles and blog posts, Tumblr requires publishers to add more commentary and interaction if they want to win favor with its community.
Mr. Coatney acknowledged that this might not be an easy sell, particularly when the payoff was not immediately obvious.
“It’s a huge leap of faith for many of them,” he said. “Monetizing that relationship is still a difficult hurdle because you may not be getting new readers at that particular moment, even if you are engaging with them.”
For publishers, services like Tumblr reflect a broader shift in their relationship with their audience, said James E. Katz, a professor of communications at Rutgers University.
“Going back 20 years, publications like Rolling Stone didn’t interact with readers except for letters to the editor,” Mr. Katz said. “One of the realizations that cultural leaders and publishers have had is that there is a lot of expertise, wisdom and ideas in their readership.”
The ability to respond online turns readers into co-creators, he said, which can give them a sense of ownership.
“That is an extremely valuable commodity for publishers these days, even if it does not yet translate to revenue,” Mr. Katz said.
For Tumblr, which is fleshing out its business model and recently raised a $5 million round of venture financing from Spark Capital and Union Square Ventures, the interest from media outlets is something of a feather in its cap.
“There is certainly some validation in it,” said John Maloney, president of Tumblr. “They’ve decided that this is the next social media platform they want to adopt, and that certainly can translate into a catalyst for us.”
Bing and Google in a Race for Search Features
By CLAIRE CAIN MILLER and ASHLEE VANCE
Copyright by tHe New York Times
Published: August 1, 2010
http://www.nytimes.com/2010/08/02/technology/02google.html?th&emc=th
Edwin Perello discovered that Bing, the Microsoft search engine, could find addresses in his rural Indiana town when Google could not. Laura Michelson, an administrative assistant in San Francisco, was lured by Bing’s flight fare tracker. Paul Callan, a photography buff in Chicago, fell for Bing’s vivid background images.
Like most Americans, they still use Google as their main search tool. But more often, they find themselves navigating to Microsoft’s year-old Bing for certain tasks, and sometimes they stay a while.
“I was a Google user before, but the more I used Bing the more I liked it,” Mr. Callan said. “It’s more like muscle memory takes me to Google.”
Bing still handles a small slice of Web searches in the United States, 12.7 percent in June, compared with Google’s 62.6 percent, as measured by comScore, the Web analytics firm. But Bing’s share has been growing, as has Yahoo’s, while Google’s has been shrinking.
And while no one argues that Google’s dominance is in immediate jeopardy, Google is watching Microsoft closely, mimicking some of Bing’s innovations — like its travel search engine, its ability to tie more tools to social networking sites and its image search — or buying start-ups to help it do so in the future.
Google has even taken on some of Bing’s distinctive look, like giving people the option of a Bing-like colorful background, and the placement of navigation tools on the left-hand side of the page.
The result is a renaissance in search, resulting in more sophisticated tools for consumers who want richer answers to complex questions than the standard litany of blue links.
The competition is a remarkable and surprising twist: Microsoft, knocked around for so long as a bumbling laggard, has given the innovative upstart Google a kick in the pants. As the search engines introduce feature after competing feature, some analysts say they have set off an arms race, with the companies poised to spend whatever it takes to win the second phase of Web search.
“There is a cold war going on,” said Sandeep Aggarwal, senior Internet and software analyst at Caris & Company, who watches both companies. “Clearly, you can see how Bing’s competition is forcing Google to try and catch up in some places.”
Google officials agree there is more competition, but say they are not simply reacting to the younger search engine.
Google’s new features have not been in response to Bing, said Marissa Mayer, the company’s vice president for search products and user experience. “A lot of these things have been in the works for a long time,” she said. “Left-hand navigation we worked on for almost two years. We wanted to make sure we had it exactly right.”
Microsoft’s gains are far from staggering. Its share of searches has grown to 12.7 percent, from 8 percent, since Bing was introduced in May 2009, and Yahoo, which has a search deal with Microsoft, still handles a larger share of searches than Bing. And in the newest search frontier, mobile devices, Google has even more market share than on the Web at large.
Still, Bing’s gains have impressed analysts, who have watched Google fend off repeated assaults on its lucrative search and ad business, which accounts for some 95 percent of its revenue.
Building a more comprehensive, faster and more accurate search engine than Google is a daunting challenge, and a long list of big companies and start-ups have failed in their attempts. Microsoft endured plenty of ribbing as it spent years building and then scrapping search systems meant to help it compete against Google. But it kept experimenting until it found a way.
Microsoft has spent billions of dollars building the computing centers needed to power search and advertising systems and acquiring start-ups with niche expertise. In addition, it has thrown money at consumers, through cash-back programs on purchases, and at partners willing to promote Bing ahead of Google. Over the last year, Microsoft’s online services division lost $2.36 billion on revenue of $2.2 billion.
With Bing, Microsoft has tried to attract people like Mr. Callan by excelling at answering frequently asked questions, like those related to travel, health, shopping, entertainment and local businesses. For example, Bing has flight search and prediction tools that reveal price fluctuations for certain routes, and advises customers whether to buy or wait. Bing Health uses data from sources like the Mayo Clinic and Healthwise.
The hope is that “somebody would come back just for that and then, down the line, they would do other types of searches, too,” said Danny Sullivan, a longtime industry analyst and editor in chief of the blog Search Engine Land.
People do not always want to click on links and dig through pages to hunt out information, so when Bing started in May 2009, it pulled relevant information and stuck it on the top and left-hand side of the results pages. Search “Angelina Jolie,” for instance, and see a slide show and a list of her movies on top and related links on the side.
We said, ‘Let’s change the entire way we lay out pages,’ ” said Yusuf Mehdi, a senior vice president for Microsoft’s online audiences business. “We will not be shackled by blue links.”
Google, meanwhile, has quietly introduced its own new features that have in several instances looked a lot like Bing’s.
For example, in May, it too added the left-hand navigation tools — though Ms. Mayer of Google pointed out that many of the tools had already been available, just not easily visible from the search page.
“Certainly there’s been increased competition in the space,” Ms. Mayer said of Bing. “When there’s more competition, everyone’s search gets better, that serves the users a lot better.”
Bing’s travel tool uses technology from Farecast, which Microsoft bought in early 2008. In July, Google announced plans to acquire ITA Software for $700 million; ITA makes the same comparison shopping software for flights that Bing’s Farecast uses.
Then there is the look of the main search pages for each site. Microsoft has argued that the vivid images ever-present behind the Bing search box have helped its appeal; young people and women have shown a particular fondness for Bing. In June, Google offered people the option to have a colorful background image like the Golden Gate Bridge on its main search page rather than the stark, white page that helped make Google famous.
Google has also played catch-up to Microsoft in offering ways to search for and digest more images in one go, and has trailed in adding some tie-ins to social networking sites.
“Google’s new innovations have come at a slower pace,” Mr. Aggarwal said. “There was no one challenging Google until Microsoft decided it was a business they would not give up.”
Still, Mr. Sullivan and other analysts also say Google has been making many significant but subtle behind-the-scenes changes that make it better at responding to obscure and complex queries. Google made 500 tweaks to its secret search algorithm last year and introduced personalized search, which customizes results based on what users frequently click on.
Google executives often chide Microsoft that it overengineers software like Office and bombards people with needless features. But now Google has swapped its clean, simple approach to search in favor of a feature war with Microsoft.
“Google seems to do things because Bing has done something,” Mr. Sullivan said. “It’s a kind of knee-jerk thing — we have to do this product now because we don’t want people to think we’re weak.”
By JENNA WORTHAM
Copyright by The New York Times
Published: August 1, 2010
http://www.nytimes.com/2010/08/02/technology/02tumblr.html?th&emc=th
By now, plenty of traditional media companies have hopped on the social media bandwagon, pumping out news updates on Facebook and Twitter.
But do those companies have the time and resources to work yet another Web outlet into their daily routine?
Mark Coatney certainly hopes so. Mr. Coatney, a 43-year-old journalist, is the latest hire at Tumblr, a fast-growing blogging service based in New York that says it has 6.6 million users.
Until last month, Mr. Coatney was a senior editor at Newsweek, where as a side project he headed up the magazine’s social efforts on Twitter and Facebook. Last year he decided to add Tumblr to his repertoire.
“I saw it as an opportunity to talk to our audience in a new way,” he said. On Twitter, he said, “the main feedback comes mostly from retweeting,” or retransmitting an interesting message. On Tumblr, “the tone is a lot more conversational.”
Mr. Coatney quickly cultivated a following on Tumblr for his thought-provoking, quick-witted posts. Often they included commentary that was funny and bordering on acerbic — something he was able to get away with largely because “no one at Newsweek really knew what I was doing,” he said.
The credibility he established among Tumblr users, and the fact that Newsweek was one of the first big publishers to sign on, cemented Tumblr’s decision to hire him, company executives said.
Over the last few months, other media outlets have caught wind of Tumblr, which is free to use. The newest recruits include The Atlantic, Rolling Stone, BlackBook Media Corporation, National Public Radio, The Paris Review, The Huffington Post, Life magazine and The New York Times.
But many of those outlets have done little more than set up a placeholder page. In his new job as a “media evangelist,” Mr. Coatney’s role, and in some ways his challenge, is to help them figure out what to do next.
Mr. Coatney describes Tumblr as “a space in between Twitter and Facebook.” The site allows users to upload images, videos, audio clips and quotes to their pages, in addition to bursts of text.
As on Twitter, users can follow other users, whose posts appear in a chronological stream on a central home page known as the dashboard. Users can indicate that they like an item by clicking on a red heart next to it or “reblogging” it.
One of the big differences between Tumblr and Twitter is that Tumblr does not display how many followers a user has, said David Karp, Tumblr’s 24-year-old founder and chief executive.
“Who is following you isn’t that important,” he said. “It’s not about getting to the 10,000-follower count. It’s less about broadcasting to an audience and more about communicating with a community.”
Moreover, he said, the site was designed with creative expression in mind.
“People are creating identities and personalities that Facebook and Twitter are not designed to allow you to do,” he said.
Since Tumblr is currying favor among a young crowd, it could prove valuable for traditional companies and media outlets that are trying to build a relationship with that audience. And those companies are no doubt aiming to win points by being early adopters of a site that is on the rise.
Tumblr is still dwarfed by Facebook and Twitter, which each have hundreds of millions of users and can be significant sources of traffic for online publishers.
Mr. Coatney estimated that posting links and notes to the Newsweek Twitter feed and Facebook page sent roughly 200,000 to 300,000 readers to Newsweek’s Web site each day. By comparison, Tumblr sent closer to 1,000.
But Tumblr is growing quickly. It says it is adding 25,000 new accounts daily, and each month it serves up 1.5 billion page views.
Items posted on Tumblr can also ripple out to far-flung corners of the Web.
When The New Yorker posted the Escher-inspired oil-spill-themed cover for its July 5 issue on its Tumblr page, it drew many links from other sites.
Alexa Cassanos, director of public relations for The New Yorker, which began using the service in late May, said the cover resonated in unlikely places, like the news aggregator Reddit.
Ms. Cassanos said Tumblr afforded The New Yorker an opportunity to showcase some material that might otherwise get lost online.
“We can highlight graphic content like photo essays or slide shows to an audience that may not read the magazine,” she said. “You just couldn’t do that, visually, on Twitter or Facebook.”
Unlike Twitter, where it is not uncommon for publishers to simply set up accounts that automatically publish links to their articles and blog posts, Tumblr requires publishers to add more commentary and interaction if they want to win favor with its community.
Mr. Coatney acknowledged that this might not be an easy sell, particularly when the payoff was not immediately obvious.
“It’s a huge leap of faith for many of them,” he said. “Monetizing that relationship is still a difficult hurdle because you may not be getting new readers at that particular moment, even if you are engaging with them.”
For publishers, services like Tumblr reflect a broader shift in their relationship with their audience, said James E. Katz, a professor of communications at Rutgers University.
“Going back 20 years, publications like Rolling Stone didn’t interact with readers except for letters to the editor,” Mr. Katz said. “One of the realizations that cultural leaders and publishers have had is that there is a lot of expertise, wisdom and ideas in their readership.”
The ability to respond online turns readers into co-creators, he said, which can give them a sense of ownership.
“That is an extremely valuable commodity for publishers these days, even if it does not yet translate to revenue,” Mr. Katz said.
For Tumblr, which is fleshing out its business model and recently raised a $5 million round of venture financing from Spark Capital and Union Square Ventures, the interest from media outlets is something of a feather in its cap.
“There is certainly some validation in it,” said John Maloney, president of Tumblr. “They’ve decided that this is the next social media platform they want to adopt, and that certainly can translate into a catalyst for us.”
Bing and Google in a Race for Search Features
By CLAIRE CAIN MILLER and ASHLEE VANCE
Copyright by tHe New York Times
Published: August 1, 2010
http://www.nytimes.com/2010/08/02/technology/02google.html?th&emc=th
Edwin Perello discovered that Bing, the Microsoft search engine, could find addresses in his rural Indiana town when Google could not. Laura Michelson, an administrative assistant in San Francisco, was lured by Bing’s flight fare tracker. Paul Callan, a photography buff in Chicago, fell for Bing’s vivid background images.
Like most Americans, they still use Google as their main search tool. But more often, they find themselves navigating to Microsoft’s year-old Bing for certain tasks, and sometimes they stay a while.
“I was a Google user before, but the more I used Bing the more I liked it,” Mr. Callan said. “It’s more like muscle memory takes me to Google.”
Bing still handles a small slice of Web searches in the United States, 12.7 percent in June, compared with Google’s 62.6 percent, as measured by comScore, the Web analytics firm. But Bing’s share has been growing, as has Yahoo’s, while Google’s has been shrinking.
And while no one argues that Google’s dominance is in immediate jeopardy, Google is watching Microsoft closely, mimicking some of Bing’s innovations — like its travel search engine, its ability to tie more tools to social networking sites and its image search — or buying start-ups to help it do so in the future.
Google has even taken on some of Bing’s distinctive look, like giving people the option of a Bing-like colorful background, and the placement of navigation tools on the left-hand side of the page.
The result is a renaissance in search, resulting in more sophisticated tools for consumers who want richer answers to complex questions than the standard litany of blue links.
The competition is a remarkable and surprising twist: Microsoft, knocked around for so long as a bumbling laggard, has given the innovative upstart Google a kick in the pants. As the search engines introduce feature after competing feature, some analysts say they have set off an arms race, with the companies poised to spend whatever it takes to win the second phase of Web search.
“There is a cold war going on,” said Sandeep Aggarwal, senior Internet and software analyst at Caris & Company, who watches both companies. “Clearly, you can see how Bing’s competition is forcing Google to try and catch up in some places.”
Google officials agree there is more competition, but say they are not simply reacting to the younger search engine.
Google’s new features have not been in response to Bing, said Marissa Mayer, the company’s vice president for search products and user experience. “A lot of these things have been in the works for a long time,” she said. “Left-hand navigation we worked on for almost two years. We wanted to make sure we had it exactly right.”
Microsoft’s gains are far from staggering. Its share of searches has grown to 12.7 percent, from 8 percent, since Bing was introduced in May 2009, and Yahoo, which has a search deal with Microsoft, still handles a larger share of searches than Bing. And in the newest search frontier, mobile devices, Google has even more market share than on the Web at large.
Still, Bing’s gains have impressed analysts, who have watched Google fend off repeated assaults on its lucrative search and ad business, which accounts for some 95 percent of its revenue.
Building a more comprehensive, faster and more accurate search engine than Google is a daunting challenge, and a long list of big companies and start-ups have failed in their attempts. Microsoft endured plenty of ribbing as it spent years building and then scrapping search systems meant to help it compete against Google. But it kept experimenting until it found a way.
Microsoft has spent billions of dollars building the computing centers needed to power search and advertising systems and acquiring start-ups with niche expertise. In addition, it has thrown money at consumers, through cash-back programs on purchases, and at partners willing to promote Bing ahead of Google. Over the last year, Microsoft’s online services division lost $2.36 billion on revenue of $2.2 billion.
With Bing, Microsoft has tried to attract people like Mr. Callan by excelling at answering frequently asked questions, like those related to travel, health, shopping, entertainment and local businesses. For example, Bing has flight search and prediction tools that reveal price fluctuations for certain routes, and advises customers whether to buy or wait. Bing Health uses data from sources like the Mayo Clinic and Healthwise.
The hope is that “somebody would come back just for that and then, down the line, they would do other types of searches, too,” said Danny Sullivan, a longtime industry analyst and editor in chief of the blog Search Engine Land.
People do not always want to click on links and dig through pages to hunt out information, so when Bing started in May 2009, it pulled relevant information and stuck it on the top and left-hand side of the results pages. Search “Angelina Jolie,” for instance, and see a slide show and a list of her movies on top and related links on the side.
We said, ‘Let’s change the entire way we lay out pages,’ ” said Yusuf Mehdi, a senior vice president for Microsoft’s online audiences business. “We will not be shackled by blue links.”
Google, meanwhile, has quietly introduced its own new features that have in several instances looked a lot like Bing’s.
For example, in May, it too added the left-hand navigation tools — though Ms. Mayer of Google pointed out that many of the tools had already been available, just not easily visible from the search page.
“Certainly there’s been increased competition in the space,” Ms. Mayer said of Bing. “When there’s more competition, everyone’s search gets better, that serves the users a lot better.”
Bing’s travel tool uses technology from Farecast, which Microsoft bought in early 2008. In July, Google announced plans to acquire ITA Software for $700 million; ITA makes the same comparison shopping software for flights that Bing’s Farecast uses.
Then there is the look of the main search pages for each site. Microsoft has argued that the vivid images ever-present behind the Bing search box have helped its appeal; young people and women have shown a particular fondness for Bing. In June, Google offered people the option to have a colorful background image like the Golden Gate Bridge on its main search page rather than the stark, white page that helped make Google famous.
Google has also played catch-up to Microsoft in offering ways to search for and digest more images in one go, and has trailed in adding some tie-ins to social networking sites.
“Google’s new innovations have come at a slower pace,” Mr. Aggarwal said. “There was no one challenging Google until Microsoft decided it was a business they would not give up.”
Still, Mr. Sullivan and other analysts also say Google has been making many significant but subtle behind-the-scenes changes that make it better at responding to obscure and complex queries. Google made 500 tweaks to its secret search algorithm last year and introduced personalized search, which customizes results based on what users frequently click on.
Google executives often chide Microsoft that it overengineers software like Office and bombards people with needless features. But now Google has swapped its clean, simple approach to search in favor of a feature war with Microsoft.
“Google seems to do things because Bing has done something,” Mr. Sullivan said. “It’s a kind of knee-jerk thing — we have to do this product now because we don’t want people to think we’re weak.”
In Ethics Battles, a Partywide Threat
In Ethics Battles, a Partywide Threat
By DAVID M. HERSZENHORN and CARL HULSE
Copyright by The New York Times
Published: August 1, 2010
http://www.nytimes.com/2010/08/02/us/politics/02ethics.html?_r=1&th&emc=th
WASHINGTON — By defiantly pushing for full-fledged ethics trials, Representatives Charles B. Rangel and Maxine Waters are raising the prospect of a spectacle focusing on Congressional corruption this fall, just as Democrats are fighting to hold on to their majority in an election already defined by distrust of Washington.
Neither lawmaker, both Democrats, faces electoral jeopardy. Mr. Rangel, who was charged on Thursday by the House ethics committee with 13 violations, including failing to pay taxes on rental income from his Dominican villa, represents a safe district in Harlem. Ms. Waters, who is accused of using her office to help a bank in which her husband owned stock request bailout money, has a similarly secure seat in Los Angeles.
But the tenacity of Mr. Rangel, a 20-term veteran, and Ms. Waters, in her 10th term, in fighting the accusations, puts the interests of these two veteran members of the Congressional Black Caucus at odds with those of their party leaders, particularly the House speaker, Nancy Pelosi, who famously promised to “drain the swamp” and run “the most ethical Congress in history.” The trials threaten to tarnish Democrats as they try to turn the midterm elections into a choice between keeping them in power or returning to Bush-era policies.
The trials would also stand to remind voters that Democrats, who in recent years extended their reach into the traditionally Republican turf of the rural West and South, are still anchored by an urban, liberal base and led by entrenched veteran lawmakers from big cities.
And the cases could feed racial strains both inside the Democratic caucus, where black members are asking why so many investigations seem to be aimed at them, and out among voters, especially in rural and white districts where many conservative Democrats face tight races.
Representative James E. Clyburn, Democrat of South Carolina and the House whip, defended the two lawmakers’ rights to a trial, but said it was inevitable that some political opponents would try to turn the ethics questions into a race issue. “Those Tea Party people that showed up at the health care debate, they will not hesitate for one moment to racialize something,” said Mr. Clyburn, a member of the Congressional Black Caucus. “They did, and they will.”
Full trials would give Mr. Rangel and Ms. Waters the chance to fully answer the charges, Mr. Clyburn said. “There was a lapse this year as it relates to Charlie,” he said. “Even by his own word, he said, ‘I was in fact sloppy.’ ”
Between recent changes in the ethics rules and a contentious political climate, Mr. Clyburn said, lawmakers were vulnerable to allegations that proved baseless or reflected an inadvertent misstep. “Just because these accusations are made, doesn’t actually mean there is anything there that the public ought to be concerned about,” he said.
Mr. Clyburn said there was a lesson to be learned from the case of Shirley Sherrod, the Agriculture Department official who was dismissed after being wrongly accused of racism based on an incomplete video clip. “If you saw what went out initially, you got one impression,” he said. “When you got time to put the whole thing in proper perspective, you got the opposite impression.”
But some Democratic incumbents in swing districts are already moving to distance themselves from the ethical troubles of their colleagues.
Representative Michael Arcuri, a Democrat from upstate New York, has urged Mr. Rangel to resign. “Congressman Rangel should think about stepping down, because this situation is beginning to affect our ability to govern,” he said. An aide noted that months ago, Mr. Arcuri had returned campaign contributions from Mr. Rangel.
Representative John Yarmuth of Kentucky, who was elected president of the Democrats’ 2006 freshman class — known as the “majority makers” because they catapulted the party to power — also said Mr. Rangel should quit.
“If the charges are factually true, and I have no reason to believe that they’re not, then he should leave,” Mr. Yarmuth told The Louisville Courier-Journal.
“I know his lawyers put out a document contesting the truthfulness of all charges,” he said. “But we’ve heard Charlie in the Ways and Means Committee, and he’s addressed these charges. He never denied they happened. He always has an explanation. You can excuse one or two, but not 13.”
President Obama also seemed to be ushering Mr. Rangel out the door when he expressed a hope this weekend that Mr. Rangel, the dean of the New York delegation, be allowed “to end his career with dignity.”
Democratic leaders in Congress and White House officials say they intend to emphasize that the ethics process is functioning well, compared with when Republicans and Democrats had, for years, an unspoken “truce” that protected both parties from investigation and reprimand.
“The ethics process is working,” said the House majority leader, Steny H. Hoyer, Democrat of Maryland. “I think we have taken a lot of steps which have made this a much more transparent Congress. Is it a perfect Congress? No. As long as you have human beings holding your jobs, some are going to mess up. And that’s the way it is.”
Mr. Rangel and Ms. Waters could still agree to accept some form of disciplinary reproach and avoid a trial — an outcome privately encouraged by some party leaders.
Republican leaders, for their part, have kept the debate squarely on corruption.
“Nancy Pelosi said four years ago that it was time to drain the swamp,” the House minority leader, John A. Boehner of Ohio, said on “Fox News Sunday.” “But the fact is she has not kept her promise. The swamp is alive and well.”
Ken Spain, a spokesman for the National Republican Congressional Committee, called the cases against Mr. Rangel and Ms. Waters “symptoms of a larger disease in Washington, which is why the elections in November will serve as a referendum not only on President Obama’s failed policies, but the failed leadership of the Democrat-led Congress.”
But as the party in charge, Democrats have the most to lose. Stuart Rothenberg, a nonpartisan analyst of Congressional races, said the potential ethics trials would come at a terrible time politically for Democrats and would saddle them with another liability headed into an already difficult November.
“It feeds cynicism and plays into people’s conceptions that everybody on Capitol Hill is taking care of themselves and it is a bunch of insiders run amok,” he said. “It feeds the anti-Washington sentiment.”
Unlike Mr. Rangel, who has admitted making mistakes, Ms. Waters adamantly denies the accusations against her, saying she helped a trade association, not just OneUnited, the bank in which her husband owned stock. Ms. Waters says she expects to be fully exonerated.
Mr. Rangel’s more nuanced defense, in which he said some of his actions were common among other lawmakers, could fuel further cynicism about Congress. He is charged with, in part, using his office to solicit donations, including from registered lobbyists whose corporations had business before Congress.
In his defense, Mr. Rangel’s lawyers pointed to the McConnell Center for Political Leadership at the University of Louisville, named for the Senate Republican leader, Mitch McConnell of Kentucky.
The lawyers noted that lawmakers from both parties, including Mr. McConnell and Robert C. Byrd, a Democratic senator from West Virginia who died in June, had raised money from corporate donors for academic centers named after them.
Mr. McConnell, speaking on “Fox News Sunday,” dismissed the comparison. “A totally different situation,” he said. “This is a scholarship program for young people in Kentucky. They benefited from it, not me.” He added, “It’s a pure charitable activity.”
By DAVID M. HERSZENHORN and CARL HULSE
Copyright by The New York Times
Published: August 1, 2010
http://www.nytimes.com/2010/08/02/us/politics/02ethics.html?_r=1&th&emc=th
WASHINGTON — By defiantly pushing for full-fledged ethics trials, Representatives Charles B. Rangel and Maxine Waters are raising the prospect of a spectacle focusing on Congressional corruption this fall, just as Democrats are fighting to hold on to their majority in an election already defined by distrust of Washington.
Neither lawmaker, both Democrats, faces electoral jeopardy. Mr. Rangel, who was charged on Thursday by the House ethics committee with 13 violations, including failing to pay taxes on rental income from his Dominican villa, represents a safe district in Harlem. Ms. Waters, who is accused of using her office to help a bank in which her husband owned stock request bailout money, has a similarly secure seat in Los Angeles.
But the tenacity of Mr. Rangel, a 20-term veteran, and Ms. Waters, in her 10th term, in fighting the accusations, puts the interests of these two veteran members of the Congressional Black Caucus at odds with those of their party leaders, particularly the House speaker, Nancy Pelosi, who famously promised to “drain the swamp” and run “the most ethical Congress in history.” The trials threaten to tarnish Democrats as they try to turn the midterm elections into a choice between keeping them in power or returning to Bush-era policies.
The trials would also stand to remind voters that Democrats, who in recent years extended their reach into the traditionally Republican turf of the rural West and South, are still anchored by an urban, liberal base and led by entrenched veteran lawmakers from big cities.
And the cases could feed racial strains both inside the Democratic caucus, where black members are asking why so many investigations seem to be aimed at them, and out among voters, especially in rural and white districts where many conservative Democrats face tight races.
Representative James E. Clyburn, Democrat of South Carolina and the House whip, defended the two lawmakers’ rights to a trial, but said it was inevitable that some political opponents would try to turn the ethics questions into a race issue. “Those Tea Party people that showed up at the health care debate, they will not hesitate for one moment to racialize something,” said Mr. Clyburn, a member of the Congressional Black Caucus. “They did, and they will.”
Full trials would give Mr. Rangel and Ms. Waters the chance to fully answer the charges, Mr. Clyburn said. “There was a lapse this year as it relates to Charlie,” he said. “Even by his own word, he said, ‘I was in fact sloppy.’ ”
Between recent changes in the ethics rules and a contentious political climate, Mr. Clyburn said, lawmakers were vulnerable to allegations that proved baseless or reflected an inadvertent misstep. “Just because these accusations are made, doesn’t actually mean there is anything there that the public ought to be concerned about,” he said.
Mr. Clyburn said there was a lesson to be learned from the case of Shirley Sherrod, the Agriculture Department official who was dismissed after being wrongly accused of racism based on an incomplete video clip. “If you saw what went out initially, you got one impression,” he said. “When you got time to put the whole thing in proper perspective, you got the opposite impression.”
But some Democratic incumbents in swing districts are already moving to distance themselves from the ethical troubles of their colleagues.
Representative Michael Arcuri, a Democrat from upstate New York, has urged Mr. Rangel to resign. “Congressman Rangel should think about stepping down, because this situation is beginning to affect our ability to govern,” he said. An aide noted that months ago, Mr. Arcuri had returned campaign contributions from Mr. Rangel.
Representative John Yarmuth of Kentucky, who was elected president of the Democrats’ 2006 freshman class — known as the “majority makers” because they catapulted the party to power — also said Mr. Rangel should quit.
“If the charges are factually true, and I have no reason to believe that they’re not, then he should leave,” Mr. Yarmuth told The Louisville Courier-Journal.
“I know his lawyers put out a document contesting the truthfulness of all charges,” he said. “But we’ve heard Charlie in the Ways and Means Committee, and he’s addressed these charges. He never denied they happened. He always has an explanation. You can excuse one or two, but not 13.”
President Obama also seemed to be ushering Mr. Rangel out the door when he expressed a hope this weekend that Mr. Rangel, the dean of the New York delegation, be allowed “to end his career with dignity.”
Democratic leaders in Congress and White House officials say they intend to emphasize that the ethics process is functioning well, compared with when Republicans and Democrats had, for years, an unspoken “truce” that protected both parties from investigation and reprimand.
“The ethics process is working,” said the House majority leader, Steny H. Hoyer, Democrat of Maryland. “I think we have taken a lot of steps which have made this a much more transparent Congress. Is it a perfect Congress? No. As long as you have human beings holding your jobs, some are going to mess up. And that’s the way it is.”
Mr. Rangel and Ms. Waters could still agree to accept some form of disciplinary reproach and avoid a trial — an outcome privately encouraged by some party leaders.
Republican leaders, for their part, have kept the debate squarely on corruption.
“Nancy Pelosi said four years ago that it was time to drain the swamp,” the House minority leader, John A. Boehner of Ohio, said on “Fox News Sunday.” “But the fact is she has not kept her promise. The swamp is alive and well.”
Ken Spain, a spokesman for the National Republican Congressional Committee, called the cases against Mr. Rangel and Ms. Waters “symptoms of a larger disease in Washington, which is why the elections in November will serve as a referendum not only on President Obama’s failed policies, but the failed leadership of the Democrat-led Congress.”
But as the party in charge, Democrats have the most to lose. Stuart Rothenberg, a nonpartisan analyst of Congressional races, said the potential ethics trials would come at a terrible time politically for Democrats and would saddle them with another liability headed into an already difficult November.
“It feeds cynicism and plays into people’s conceptions that everybody on Capitol Hill is taking care of themselves and it is a bunch of insiders run amok,” he said. “It feeds the anti-Washington sentiment.”
Unlike Mr. Rangel, who has admitted making mistakes, Ms. Waters adamantly denies the accusations against her, saying she helped a trade association, not just OneUnited, the bank in which her husband owned stock. Ms. Waters says she expects to be fully exonerated.
Mr. Rangel’s more nuanced defense, in which he said some of his actions were common among other lawmakers, could fuel further cynicism about Congress. He is charged with, in part, using his office to solicit donations, including from registered lobbyists whose corporations had business before Congress.
In his defense, Mr. Rangel’s lawyers pointed to the McConnell Center for Political Leadership at the University of Louisville, named for the Senate Republican leader, Mitch McConnell of Kentucky.
The lawyers noted that lawmakers from both parties, including Mr. McConnell and Robert C. Byrd, a Democratic senator from West Virginia who died in June, had raised money from corporate donors for academic centers named after them.
Mr. McConnell, speaking on “Fox News Sunday,” dismissed the comparison. “A totally different situation,” he said. “This is a scholarship program for young people in Kentucky. They benefited from it, not me.” He added, “It’s a pure charitable activity.”
Sunday, August 1, 2010
5 medical conditions that raise life insurance rates most
5 medical conditions that raise life insurance rates most
By Cameron Huddleston
Copyright © 2010, Tribune Media Services
4:07 p.m. CDT, July 29, 2010
http://www.chicagotribune.com/business/sc-cons-0729-money-tips-5-expensive-m20100729,0,694469.story
When it comes to setting life insurance rates, insurers want to know how healthy you are to determine how much of a risk you'll be to insure. Having a health problem doesn't necessarily mean your rate will be outrageous but you likely will pay higher premiums than your healthy peers. How much more you'll pay depends on your condition.
Insure.com put together this list of the top five most expensive medical conditions when you're buying life insurance. If you have one of these conditions, see Get the Best Rates on Life Insurance for tips so you won't pay more than you have to: tiny.cc/3ix62.
1. Heart disease. This condition will affect life-insurance rates most. Even having a family history of heart disease can force you to pay a higher premium.
2. Diabetes. People with Type 1 diabetes that developed during childhood will have higher rates — and sometimes trouble finding a company that will insure them. People with Type 2 (formerly called adult-onset) diabetes who can manage their condition through medication or diet have lower rates.
3. Cancer. The type you have, the severity and treatment received affect your premiums. For example, an external sun-related lesion may have no impact on your rate. See Getting Life Insurance After Cancer for more information: tiny.cc/bt6yd.
4. Obesity. Because obesity and several other health conditions go hand in hand, insurers take your weight into consideration. Weight ranges to qualify for the best rates vary from company to company.
5. Pulmonary disease. Expect to pay a higher premium for life insurance if you have had lifelong asthma (not seasonal asthma).
By Cameron Huddleston
Copyright © 2010, Tribune Media Services
4:07 p.m. CDT, July 29, 2010
http://www.chicagotribune.com/business/sc-cons-0729-money-tips-5-expensive-m20100729,0,694469.story
When it comes to setting life insurance rates, insurers want to know how healthy you are to determine how much of a risk you'll be to insure. Having a health problem doesn't necessarily mean your rate will be outrageous but you likely will pay higher premiums than your healthy peers. How much more you'll pay depends on your condition.
Insure.com put together this list of the top five most expensive medical conditions when you're buying life insurance. If you have one of these conditions, see Get the Best Rates on Life Insurance for tips so you won't pay more than you have to: tiny.cc/3ix62.
1. Heart disease. This condition will affect life-insurance rates most. Even having a family history of heart disease can force you to pay a higher premium.
2. Diabetes. People with Type 1 diabetes that developed during childhood will have higher rates — and sometimes trouble finding a company that will insure them. People with Type 2 (formerly called adult-onset) diabetes who can manage their condition through medication or diet have lower rates.
3. Cancer. The type you have, the severity and treatment received affect your premiums. For example, an external sun-related lesion may have no impact on your rate. See Getting Life Insurance After Cancer for more information: tiny.cc/bt6yd.
4. Obesity. Because obesity and several other health conditions go hand in hand, insurers take your weight into consideration. Weight ranges to qualify for the best rates vary from company to company.
5. Pulmonary disease. Expect to pay a higher premium for life insurance if you have had lifelong asthma (not seasonal asthma).
Town Elbows Its Way Into Clinton Wedding
Town Elbows Its Way Into Clinton Wedding
By KATHARINE Q. SEELYE and CHRISTINE HAUGHNEY
Copyright by The New York Times
Published: July 31, 2010
http://www.nytimes.com/2010/08/01/nyregion/01chelsea.html?_r=1&th&emc=th
RHINEBECK, N.Y. — Bill and Hillary Clinton have tried to shield their daughter, Chelsea, from the gaze of the public for most of her life.
But on her wedding day on Saturday, even as the Clintons sought to shroud the event in secrecy, residents and onlookers here decided they were going to celebrate along with them, invited or not.
So despite confidentiality agreements, anonymous hotel reservations and a no-fly zone established over the area, this moneyed and normally subdued town turned into a Chelsea theme park, with shop windows filled with tributes to her, including one with a live model in a wedding dress having her makeup done.
A baseball team sent its mascot, dressed up as a raccoon, parading through town with a sign asking Ms. Clinton to marry him. Teenage boys chased after former Secretary of State Madeleine Albright, seeking autographs. Young women passed out slices of pizza with “I do” written in pepperoni.
Caravans of guests sped by reporters who waited forlornly in a pen on the road leading to the wedding site, while, just beyond, a dozen brown milk cows chewed on dinner.
At 7:23 p.m. came an announcement from the family via e-mail: Ms. Clinton was now married to Marc Mezvinsky.
“Today, we watched with great pride and overwhelming emotion as Chelsea and Marc wed in a beautiful ceremony at Astor Courts, surrounded by family and their close friends,” the Clintons said. “We could not have asked for a more perfect day to celebrate the beginning of their life together, and we are so happy to welcome Marc into our family.”
The former president and Mrs. Clinton, the secretary of state, also thanked Rhinebeck for its welcome and good wishes.
Ms. Clinton, 30, wore a strapless gown, beaded at the waist and designed by Vera Wang (who caused a commotion of her own when she showed up in town on Saturday). The mother of the bride wore a plum-colored gown by Oscar de la Renta.
The interfaith ceremony was conducted by Rabbi James Ponet and the Rev. William Shillady. Ms. Clinton is Methodist, and Mr. Mezvinsky is Jewish.
It included elements from both traditions: friends and family reading the Seven Blessings, which are typically recited at traditional Jewish weddings following the vows and exchange of rings.
A friend of the couple read the poem “The Life That I Have” by Leo Marks.
Many of the guests were friends of the bride and groom from college and work; they both attended Stanford University, and Ms. Clinton recently received her master’s degree from Columbia University’s Joseph L. Mailman School of Public Health.
Family flew in, too. The president’s half-brother, Roger Clinton, was spotted in town in a T-shirt and track pants hours before the wedding.
Marie Clinton Bruno, a cousin of the president’s, reminisced about a 10-year-old Chelsea appearing as a bridesmaid at her own wedding, which was held at the Governor’s Mansion in Little Rock, Ark., in 1990. That day, Chelsea wore a pale pink dress with ruffles on the shoulders and tended to the artificial flowers in the bride’s bouquet.
“She was just a wonderful bridesmaid,” Ms. Bruno said. “She’s just as wonderful today as she was back then.”
As she strolled through Rhinebeck, Ms. Bruno spoke approvingly of the location: “It reminds me of the Ozarks in Arkansas, except more chic.”
President Clinton appeared to have followed his daughter’s instructions and lost quite a bit of weight for the ceremony. She had ordered him to lose 15 pounds, but people close to him said he had actually lost more than 20.
While the media and local residents have been buzzing for months about celebrities who were expected here — including Oprah Winfrey, Barbra Streisand, Steven Spielberg and John Major, the former British prime minister — none of those particular bold-faced names were invited.
Still, there was star power: One of the most prominent guests was Vernon Jordan, a longtime confidant of Mr. Clinton’s and a family friend.
But he was not generally recognized by the gawkers here as he strode into a cocktail reception Friday night. One man in the crowd authoritatively identified him as Hamilton Jordan, who was a top aide to former President Jimmy Carter and who died in 2008.
Another man in the crowd declared that Vernon Jordan was actually Warren Buffett.
The media pack surrounded the actors Ted Danson and Mary Steenburgen, who are married, with the force of a sudden summer storm. “We must be the only celebrities in town,” Mr. Danson said. “I’m sorry.”
Linda Ennis, a Clinton fan who drove more than an hour in hopes of glimpsing the former president and possibly the bride, seemed star-struck about Ms. Clinton. Like many here, she said she had watched Ms. Clinton grow up, then compared her grace to that of Jacqueline Kennedy Onassis.
“She’s turned into such a beauty,” Ms. Ennis said.
“It’s royalty,” her friend, Arlene Newman, added. “It’s our royalty.”
Photos released by the Clintons showed the former president looking solemn as he walked his daughter down an aisle created by rows of white chairs against a backdrop of arched windows and columns that evoked the White House. They also showed Ms. Clinton bursting with joy at several moments during the ceremony.
Jim Valli and his band provided music at the reception (the couple’s good friend Tim Blane and his band played at the rehearsal dinner). The reception was catered by the St. Regis Hotel (the rehearsal dinner by Blue Ribbon Restaurants). La Tulipe Desserts made the gluten-free wedding cake.
Mr. Mezvinsky, an investment banker at 3G Capital Management and a son of two former Democratic members of Congress, proposed to Ms. Clinton over Thanksgiving weekend, and the pair released a statement to friends joyfully wishing them a happy Thanksgiving and telling them about their wedding plans. The couple lives in a three-bedroom apartment on Lower Fifth Avenue in New York with views of Madison Square Park and the Flatiron Building; Mr. Mezvinsky bought the apartment in 2008 for $4 million.
Maureen Missner, whose shop, Paper Trail, was believed to be helping to prepare the gift bags, said this wedding felt different from one last year in the area, when the actor Griffin Dunne was married and residents spotted stars like Hugh Jackman.
She said that comparing it to Mr. Dunne’s wedding put these festivities into perspective. “This is not a star-studded wedding,” Ms. Missner said. “This is clearly about the bride and groom.”
Nate Schweber contributed reporting.
By KATHARINE Q. SEELYE and CHRISTINE HAUGHNEY
Copyright by The New York Times
Published: July 31, 2010
http://www.nytimes.com/2010/08/01/nyregion/01chelsea.html?_r=1&th&emc=th
RHINEBECK, N.Y. — Bill and Hillary Clinton have tried to shield their daughter, Chelsea, from the gaze of the public for most of her life.
But on her wedding day on Saturday, even as the Clintons sought to shroud the event in secrecy, residents and onlookers here decided they were going to celebrate along with them, invited or not.
So despite confidentiality agreements, anonymous hotel reservations and a no-fly zone established over the area, this moneyed and normally subdued town turned into a Chelsea theme park, with shop windows filled with tributes to her, including one with a live model in a wedding dress having her makeup done.
A baseball team sent its mascot, dressed up as a raccoon, parading through town with a sign asking Ms. Clinton to marry him. Teenage boys chased after former Secretary of State Madeleine Albright, seeking autographs. Young women passed out slices of pizza with “I do” written in pepperoni.
Caravans of guests sped by reporters who waited forlornly in a pen on the road leading to the wedding site, while, just beyond, a dozen brown milk cows chewed on dinner.
At 7:23 p.m. came an announcement from the family via e-mail: Ms. Clinton was now married to Marc Mezvinsky.
“Today, we watched with great pride and overwhelming emotion as Chelsea and Marc wed in a beautiful ceremony at Astor Courts, surrounded by family and their close friends,” the Clintons said. “We could not have asked for a more perfect day to celebrate the beginning of their life together, and we are so happy to welcome Marc into our family.”
The former president and Mrs. Clinton, the secretary of state, also thanked Rhinebeck for its welcome and good wishes.
Ms. Clinton, 30, wore a strapless gown, beaded at the waist and designed by Vera Wang (who caused a commotion of her own when she showed up in town on Saturday). The mother of the bride wore a plum-colored gown by Oscar de la Renta.
The interfaith ceremony was conducted by Rabbi James Ponet and the Rev. William Shillady. Ms. Clinton is Methodist, and Mr. Mezvinsky is Jewish.
It included elements from both traditions: friends and family reading the Seven Blessings, which are typically recited at traditional Jewish weddings following the vows and exchange of rings.
A friend of the couple read the poem “The Life That I Have” by Leo Marks.
Many of the guests were friends of the bride and groom from college and work; they both attended Stanford University, and Ms. Clinton recently received her master’s degree from Columbia University’s Joseph L. Mailman School of Public Health.
Family flew in, too. The president’s half-brother, Roger Clinton, was spotted in town in a T-shirt and track pants hours before the wedding.
Marie Clinton Bruno, a cousin of the president’s, reminisced about a 10-year-old Chelsea appearing as a bridesmaid at her own wedding, which was held at the Governor’s Mansion in Little Rock, Ark., in 1990. That day, Chelsea wore a pale pink dress with ruffles on the shoulders and tended to the artificial flowers in the bride’s bouquet.
“She was just a wonderful bridesmaid,” Ms. Bruno said. “She’s just as wonderful today as she was back then.”
As she strolled through Rhinebeck, Ms. Bruno spoke approvingly of the location: “It reminds me of the Ozarks in Arkansas, except more chic.”
President Clinton appeared to have followed his daughter’s instructions and lost quite a bit of weight for the ceremony. She had ordered him to lose 15 pounds, but people close to him said he had actually lost more than 20.
While the media and local residents have been buzzing for months about celebrities who were expected here — including Oprah Winfrey, Barbra Streisand, Steven Spielberg and John Major, the former British prime minister — none of those particular bold-faced names were invited.
Still, there was star power: One of the most prominent guests was Vernon Jordan, a longtime confidant of Mr. Clinton’s and a family friend.
But he was not generally recognized by the gawkers here as he strode into a cocktail reception Friday night. One man in the crowd authoritatively identified him as Hamilton Jordan, who was a top aide to former President Jimmy Carter and who died in 2008.
Another man in the crowd declared that Vernon Jordan was actually Warren Buffett.
The media pack surrounded the actors Ted Danson and Mary Steenburgen, who are married, with the force of a sudden summer storm. “We must be the only celebrities in town,” Mr. Danson said. “I’m sorry.”
Linda Ennis, a Clinton fan who drove more than an hour in hopes of glimpsing the former president and possibly the bride, seemed star-struck about Ms. Clinton. Like many here, she said she had watched Ms. Clinton grow up, then compared her grace to that of Jacqueline Kennedy Onassis.
“She’s turned into such a beauty,” Ms. Ennis said.
“It’s royalty,” her friend, Arlene Newman, added. “It’s our royalty.”
Photos released by the Clintons showed the former president looking solemn as he walked his daughter down an aisle created by rows of white chairs against a backdrop of arched windows and columns that evoked the White House. They also showed Ms. Clinton bursting with joy at several moments during the ceremony.
Jim Valli and his band provided music at the reception (the couple’s good friend Tim Blane and his band played at the rehearsal dinner). The reception was catered by the St. Regis Hotel (the rehearsal dinner by Blue Ribbon Restaurants). La Tulipe Desserts made the gluten-free wedding cake.
Mr. Mezvinsky, an investment banker at 3G Capital Management and a son of two former Democratic members of Congress, proposed to Ms. Clinton over Thanksgiving weekend, and the pair released a statement to friends joyfully wishing them a happy Thanksgiving and telling them about their wedding plans. The couple lives in a three-bedroom apartment on Lower Fifth Avenue in New York with views of Madison Square Park and the Flatiron Building; Mr. Mezvinsky bought the apartment in 2008 for $4 million.
Maureen Missner, whose shop, Paper Trail, was believed to be helping to prepare the gift bags, said this wedding felt different from one last year in the area, when the actor Griffin Dunne was married and residents spotted stars like Hugh Jackman.
She said that comparing it to Mr. Dunne’s wedding put these festivities into perspective. “This is not a star-studded wedding,” Ms. Missner said. “This is clearly about the bride and groom.”
Nate Schweber contributed reporting.
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