Germany says further steps needed before banks tap ESM

Sat Sep 15, 2012 12:48pm EDT

NICOSIA (Reuters) – Handing bank oversight to the European Central Bank is not in itself sufficient to allow the euro zone’s rescue fund to directly assist banks, Germany’s Finance Minister said, warning he expected no such deal on supervision in 2012.

Wolfgang Schaeuble made the comments after talks between EU finance ministers on Saturday exposed deep divisions about a proposed banking union. That may disappoint investors who had been pinning hopes on a pledge by euro zone leaders to agree sweeping new powers for the ECB in 2012.

This in turn had been expected to unlock the possibility of direct aid to banks from the euro zone’s rescue fund, the European Stability Mechanism (ESM), for countries such as Spain or Ireland.

“We have the declaration of the heads of governments of the euro zone that European banking supervision is a necessary but not sufficient prerequisite,” Schaeuble told reporters after the ministers’ meeting in Cyprus. “The rules of the ESM remain.”

He said any country that is home to troubled banks would still need to apply for an adjustment program through the ESM.

The remarks contrasted with those of French Finance Minister Pierre Moscovici, who called for quick action and underlined the commitment by euro zone leaders to reach a deal this year.

“There are many questions on all of its aspects: the calendar for implementation, the scope of supervision, the role of the European Central Bank, the mechanism for supervision,” Moscovici told reporters.

“These differences do not appear insurmountable at all to me. I am convinced that we will get there before the end of 2012: both because it’s our duty and we have the possibility to do so,” he said.

France’s economic growth has ground to a halt since late last year and its banks have investments in struggling countries such as Greece.

Talks among EU finance ministers laid bare deep divisions not only among euro zone countries but also with many neighboring states, worried that the ECB’s power could impinge on their banks.

Schaeuble reiterated his criticism of elements of the proposal, cautioning against expectations that a deal could be reached by the end of the year.

“I don’t see that there can be direct recapitalization through the European Stability Mechanism already by January 1,” he said.

Germany, which is keen to retain primary oversight for its regional savings and cooperative banks, had questioned whether the ECB should get the authority to supervise all 6,000 banks in the euro zone, arguing that it would overstretch the bank.

Officials in Berlin say it would be better to proceed more slowly with the reforms to ensure a water-tight system.

Sweden underscored the depth of the division. “There is a large number of countries that are very worried,” said Finance Minister Anders Borg, saying Poland, the Czech Republic and the Nordic countries shared his concerns.

“There are very few countries outside (the euro) that think this is a balanced solution.”


Establishing a common framework for dealing with problem banks would mark a departure from the previously haphazard approach taken by the euro zone’s 17 members that has frustrated investors and helped drive up borrowing costs for weaker states.

A banking union foresees three steps: the ECB getting the power to monitor all euro zone banks and others in the wider EU that agree to the oversight; the establishment of a fund to close troubled banks; and a fully fledged scheme to protect citizens’ deposits across the euro zone.

Given that day-to-day supervision of banks would remain the task of national regulators, some officials suspect that Berlin’s real concern is that a banking union would see it paying the costs of propping up lenders in weak countries.

Joerg Asmussen, a member of the ECB’s Executive Board that forms the nucleus of its policymaking, earlier warned that a banking union could not work without a fund paid for by industry to cover the cost of closing banks and a deposit protection scheme.

Experts from think tank Bruegel delivered a similar message to ministers on Friday.

The close ties between governments and the banks they supervised and on whom they also relied to buy their debt, has dragged both ever deeper into crisis.

A banking union would break this link by making the policing of banks supranational and establishing central schemes paid into collectively to cover the costs of closing failed lenders.

For the plan to work, however, it will require countries to surrender a degree of sovereignty over banking supervision, which has long been a national responsibility.

But even those who stay outside the framework can be affected. Hungary, many of whose banks are owned by banks in the euro zone and who would in future be supervised by the ECB, is worried they will lose control of their lenders.

(Additional reporting by Annika Breidthardt and Daniel Flynn; Editing by Jan Strupczewski)

Greek opposition leader hardens anti-bailout stance

Sat Sep 15, 2012 3:14pm EDT

ATHENS (Reuters) – Greek opposition leader Alexis Tsipras hardened his line against the country’s international bailout on Saturday, vowing to fight an austerity round that Athens is negotiating with its lenders.

The 38-year-old leftist said he would mobilize his lawmakers and supporters against the measures to prevent them from causing irreparable harm to Greece’s economy, after more than two years of austerity measures that have slashed wages by a third.

“The time to stop the catastrophe is now,” Tsipras said in a speech in the northern city of Thessaloniki. “These measures must not pass. They will deliver the final blow to the people.”

Capitalizing on popular frustration with past cuts, Tsipras’s Syriza party surged from the political fringes to become the second-biggest party in a June election, losing narrowly to conservative Prime Minister Antonis Samaras who now heads a fragile three-party coalition.

Athens is currently negotiating with inspectors from the European Union and International Monetary Fund over new cuts that will further erode household incomes after five consecutive years of recession and unemployment of almost 25 percent.

Exasperated by its poor reform performance so far, lenders are pushing Greece to agree and pass the measures soon if it wants to qualify for further rescue payments and avoid a chaotic bankruptcy that could force it to abandon the euro.

Violent demonstrations against past austerity measures contributed to the fall of a Socialist government which negotiated Greece’s first bailout in May 2010. Greece’s biggest labor unions have called a 24-hour strike against the planned measures for September 26.

The only way for Greece to cope with its spiraling debt was to repudiate a large part of it, Tsipras said: “That’s the only credible and viable way to way to get out of recession.”

He said Greece must work with other indebted European countries and he brushed aside concerns it risked getting kicked out of the euro.

“Nobody in the euro zone has a political motive to force a country to leave,” Tsipras said. “Germany definitely has no such motive”.

The Greek government dismissed Tsipras’s promises to repudiate debt and reverse all wage and pension cuts made over the past two years.

“The only thing he didn’t clarify is in which currency he will honor his pledges,” said government spokesman Simos Kedikoglou.

“At Syriza they’re making dreams of printing drachmas.”

(Reporting by Harry Papachristou; editing by Andrew Roche)

Citibank disputes it hid Dewey’s financial woes from ex-partners

Sat Sep 15, 2012 12:24am EDT

(Reuters) – Citibank C.UL is fighting claims the bank “fraudulently induced” former Dewey LeBouef partners into signing up for a loan program that financed their capital in the failed law firm, despite knowing of Dewey’s dire financial situation.

Former Dewey partner Steven Otillar made the claims in New York federal court last month in response to a Citibank lawsuit against him for defaulting on a $209,000 loan that financed his capital in the now defunct firm.

Citibank sued Otillar, who is now a partner at Akin Gump Strauss Hauer Feld, in May for defaulting on the loan.

Otillar filed an opposing motion, after Citibank asked a judge to grant summary judgment, claiming Citibank had a duty to disclose its alleged knowledge of Dewey’s true financial condition to Otillar and other partners who received loans from Citibank.

But Citibank fired back in a motion filed Wednesday, saying Otillar had failed to provide any factual basis for his claims that Citibank hid Dewey’s financial condition from the partners.

“Otillar offers only his speculation that because Citibank was Dewey’s longtime lender, it must have had information that was unknown and unavailable to Otillar,” Citibank said in its motion.

Citibank argued that, even if the bank had knowledge of the firm’s true financial condition, it had no fiduciary duty to disclose confidential information it had obtained from Dewey to Otillar.

The bank said it was incumbent upon Otillar to look into the financial stability of Dewey upon joining the firm in 2011.

“Having failed to ensure that the firm’s finances were in order, Otillar cannot now be heard to complain that he was defrauded by Citibank for failing to disclose the firm’s allegedly deteriorating financial condition,” the bank said.

Otillar’s lawyer, Helen Davis Chaitman, said in an email Friday she was “confident that Citibank’s internal documents will prove our contentions.”

Michael Luskin, a lawyer for Citibank, did not immediately respond to a request for comment. Neither did Otillar or a Citibank spokeswoman. A representative for Dewey’s estate did not immediately return a request for comment.

Dewey once employed more than 1,000 lawyers in 26 offices worldwide, but in May it became the largest U.S. law firm to file for bankruptcy. Its demise has largely been attributed to compensation guarantees the firm made to a significant portion of its partners.

Otillar is believed to be the only former Dewey partner to be sued for defaulting on his loan, although it could not be determined why he may have been singled out.

It is now up to a judge to decide whether Otillar’s case can proceed to trial.

The case is Citibank, N.A. v. Otillar et al, No. 12-cv-05092.

(Reporting By Casey Sullivan; Editing by Noeleen Walder and Paul Tait)

Warren Buffett says cancer radiation treatment completed

Sat Sep 15, 2012 11:34am EDT

(Reuters) – Berkshire Hathaway Inc Chief Executive Warren Buffett has said he has completed final radiation treatment for prostate cancer, the Omaha World-Herald newspaper reported on Saturday.

Buffett, the world’s third-richest person, told executives from newspapers he has acquired in recent months on Friday: “It’s a great day for me. Today I had my 44th and last day of radiation.”

Buffett, 82, disclosed in April he was diagnosed with Stage 1 prostate cancer. At the time, he said his case “is not remotely life-threatening or even debilitating in any meaningful way.”

Buffett, widely considered the most successful investor of the last century, started daily radiation treatments at the Nebraska Medical Center in mid-July. He said the treatment would hinder his travels for about two months.

Buffett joked with executives about planning to live to be the oldest man alive, the Buffett-owned World-Herald said.

Berkshire Hathaway is a conglomerate that employs more than 270,000 people in more than 70 businesses around the world.

Buffett told investors in late February that Berkshire had identified his successor. He declined to say who it was and admitted that even the chosen one did not know.

(Reporting by Ian Simpson; Editing by Doina Chiacu)

JPMorgan faces money laundering probe: source

Sat Sep 15, 2012 3:24pm EDT

(Reuters) – JPMorgan Chase Co’s compliance with U.S. anti-money laundering laws is being reviewed by a banking regulator, a source said, making the largest U.S. bank the latest target of a wide investigation of how banks prevent transactions involving drug money and sanctioned countries.

The Office of the Comptroller of the Currency, an independent branch within the Treasury Department, is examining JPMorgan’s systems that are designed to monitor and filter such transactions, said the source, who is familiar with the situation.

The exact scope of the inquiry and the size of potential liabilities for the bank could not be learned.

JPMorgan spokesman Joseph Evangelisti declined to comment on Saturday.

In its quarterly filing with the U.S. Securities and Exchange Commission last month, JPMorgan said it expected heightened scrutiny by regulators of its compliance with new and existing regulations, including anti-money laundering laws.

The latest investigation comes in the midst of stepped-up efforts by regulators to crack down on money laundering, including transfers of drug money through bank networks and funds from countries facing international sanctions such as Iran.

The problem also has become a focus area for the Department of Justice, which wants to ramp up the number of criminal cases it brings under the Bank Secrecy Act, a law that requires financial institutions and their employees to take steps to prevent money laundering.

U.S. regulators also are potentially examining illicit transactions tied to Venezuela, the source said.

Earlier this summer, British bank HSBC Holdings Plc set aside $700 million to cover investigations that could result in one of the biggest ever settlements or fines. A U.S. Senate report criticized a “pervasively polluted” culture at the bank. The Senate panel examined transactions tied to Mexico, Iran, the Cayman Islands and Saudi Arabia.

Last month, New York’s banking regulator reached a $340 million settlement with British bank Standard Chartered Plc after the regulator investigated transactions tied to Iran.

There have also been smaller cases in which the comptroller’s office targeted weaknesses in how banks clear checks potentially tied to shadowy money transactions through a process called remote-deposit capture.

In April, the OCC identified a number of anti-money laundering deficiencies at Citigroup Inc. The inquiry investigated a monitoring gap at the bank tied to Citigroup’s remote deposit capture business.

At the time, Citigroup said it had fixed the deficiencies or was in the process of doing so.

The New York Times earlier reported the news of the JPMorgan investigation.

(Additional reporting by Theopolis Waters in Chicago, Editing by Paritosh Bansal)

5 Tips to Resolve Conflict (Before it Gets Out of Control)

Avoiding a conflict won’t get you anywhere. Here’s what you need to do to nip it in the bud.

I’m sure you spend a lot of time dealing with conflicts between employees at your company.  Sometimes I think I should have gotten a masters in psychology, rather than a law degree.  Those who earned an MBA anticipating a career as an entrepreneur probably never fathomed the time and energy that would go into managing the varied personalities on a team.

Over the years, I’ve tried different methods to resolve conflicts between employees, including acting as an arbiter, staying out of the situation completely, or even taking one side.  But, along the way, I realized that what holds people back in business is the same thing that holds them back in personal relationships: We’re all afraid to talk.

We seem to do everything we can to avoid conflict and the person we’re conflicted with.  What results? Unresolved issues, misperceptions about another person’s intentions, escalated negativity, and an overall lack of progress.  So my simple solution when you are engaged in a conflict or managing the conflict between others: Talk.

Here are five techniques to make sure a conversation happens as soon as possible.

Realize everyone’s good intentions.

Regardless of the issue and how you deal with it, I believe that most people are coming from a position of sincerity and true belief.  They’re not trying to cause trouble.  They simply believe in their position.

Resist the urge to solve the problem.

It’s easy to want to take sides to move a decision along.  Take the time to listen to the complaints.  I tell my folks not to bring me an issue with another employee until they tell me they have already talked to that person and tried to work it out independently.

Encourage in-person conversations.

The only way to resolve an issue permanently is through a real, open conversation, ideally face to face.  No email, no social media, no texting.  Whether live or over the phone, you need a scenario in which you can listen for voice tone, or watch for body language.

If you have to, take a side.

If two people have already talked and still have yet to resolve the conflict (which, in my experience, happens rarely), offer to help resolve the situation by getting everyone to the table at the same time.  Give both sides a chance to be heard, and only then make your decision.

Evangelize your philosophy about conflict.

People love to hear themselves talk about others and be “in the know” about co-workers’ complaints.  It is a natural response and emotion, but it’s also a colossal waste of time. Make sure your message and methodology for dealing with conflict–if you have a problem with someone, stop, think, talk, and resolve–cascades to all levels of the organization.

Who Took the Disruption Out of TechCrunch Disrupt?

The much-hyped start-up competition is supposed to feature dangerously innovative companies. So why does the winner look like a me-too entry?

TechCrunch Disrupt 2012

For some years, TechCrunch has put on its Disrupt conference during which start-ups compete for fame, glory, and some money. Earlier this week, YourMechanic–a Y Combinator alum–was crowned the winning “disruptor” out of 30 entries.

But does the start-up really live up to the mission of being disruptive? Not quite.

A Familiar Idea

YourMechanic is a marketplace where “a selection of contracted, certified mechanics, and transparent pricing” meet consumers who need work done on their cars. Having a mechanic make house (or side-of-the-road) calls and including parts companies in the loop is a nice twist, but folks, that’s all it is. YourMechanic founder Art Agrawal even told the Disrupt judges that mechanics already market themselves through Craigslist.

And this isn’t a first for a car repair marketplace. In January came word (via TechCrunch) that BodyShopBids received $1 million in funding. That company lets consumers receive bids on body shop work from providers that the site has checked out in advance. The work isn’t done at the customer’s premises, but the concepts are similar.

Furthermore, the idea of online marketplaces to match buyers and sellers is well over a decade old. YourMechanic isn’t a disruptor; it’s an adapter, which is fine. But the event is called TechCrunch Disrupt, not TechCrunch We-Kind-of-Did-What-They-Did-But-in-a-New-Market.

Where Have All the Disruptors Gone?

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    That’s another way of saying that novelty is bleeding out of start-ups. Look at what YourMechanic beat out for the prize: second-place Lit Motors that has designed an electric motorcycle that cannot tip over. Ironically, one of the judges, Yahoo CEO Marissa Mayer, has received some criticism about seemingly trying to replicate a lot of Google’s culture in the company she now leads.

    There’s nothing inherently wrong in telling entrepreneurs to look at business models that work and apply them to new markets. And if you’re running a contest for the safest business model, it would be different.

    Disruption means turning industries upside down through an innovative approach. It’s providing DVDs and downloaded video like Netflix when everyone else was like a Blockbuster video store chain. It’s Apple introducing the first iPhone. Disruption is companies such as Dropbox and YouSendIt solving problems for people in ways that hadn’t been tried. It’s the time Ray Croc realized that he could take a burger stand and turn it into a fast food empire.

    By all means, if a clone approach works for a company, adapt away. It’s a completely valid form of innovation. But there’s a difference between becoming one part of a crowded field and breaking away to really make the world different.

    4 Years Later: The Lehman Meltdown’s Long Hangover

    Four years after the collapse of Lehman Brothers, American small businesses are still dealing with the fallout. Inc.’s reporters and editors examine what’s changed.

    Lehman Brothers building, New York 2008


    No one thought it could happen. Those who followed Wall Street closely knew, of course, that Treasury Secretary Henry Paulson and Lehman Brothers CEO Dick Fuld had essentially been playing chicken with the bank’s future–or so it seemed. But when neither Bank of America nor Barclays purchased the firm, on September 15, 2008, Lehman was forced into what became the largest U.S. Chapter 11 bankruptcy ever, and the Treasury secretary refused to make a loan to keep the bank afloat.

    That set off the 2008 financial crisis in earnest, leading to the Great Recession.

    Few entrepreneurs, of course, had accounts with Lehman or an investment-banking relationship with the firm. But its collapse still had startling implications for them, affecting everything from their ability to access credit to their luck at hiring software developers.

    Four years later, here’s how the entrepreneurial landscape has changed–all thanks to a big firm that no longer exists.

    Financing has never been cheaper–or more difficult to obtain.

    On the face of it, small-business loans should be a bargain: The Federal Reserve funds rate won’t rise to much more than zero until at least 2014. Plus, interest-rate spreads are narrowing as bank competition heats up.

    The tough part is getting approved for one of those (seemingly) cheap loans. Small-business lending standards have barely eased since ratcheting up in 2008, according to the Fed’s monthly loan officer surveys. The result: Just 30% of small businesses are borrowing, according to the latest report from the National Federation of Independent Business. That’s just one point above the country’s record low. Meanwhile, the Dodd-Frank Act has put in place new capital requirements, meaning banks will likely require even bigger down payments, more collateral, and more stringent personal guarantees. So while the interest rates may be cheap, that loan could cost you in other ways.

    Pessimism permeates the small-business community.

    Economists tell us the Great Recession ended in June 2009. But three years of a recovery that hardly deserves the name have really taken their toll.

    In 2009, the number of business owners who said they expected the economy to improve in the next year was 11% higher than the number who said they thought it would decline, according to the National Federation of Independent Business. In contrast: The NFIB’s most recent poll showed that those who thought the economy was going to get worse before it got better outweighed the optimists by 2%. 

    Figures from the National Small Business Association, another advocacy group, are even less hopeful. In its most recent poll, 40% of its membership said they were not confident in the future of their own business. That’s the highest that figure has been in five years.

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  • A pessimistic view of the economy affects both investment and hiring–two factors that have to rebound for the economy to really gather steam. Historically, small businesses have been the ones to lead the country out of recession. This time around, that’s not happening. Only 15% of the NSBA’s members said they plan to hire someone in the next six months. Instead, it’s multinational corporations, expanding overseas, that are driving job growth. 

    For engineering talent, Wall Street has lost (some of) its sheen. 

    In the years preceding the financial crisis, investment-banking firms scoured the nation’s top colleges for the brightest software engineering grads they could find. Algorithmic trading was booming, and Wall Street could offer entry-level engineers starting salaries of around $100,000, says Hong Quan, a former Wall Street trader who now runs Quantum Startups, a Silicon Valley recruiting firm. Start-ups competing for the same talent could offer equity, but they couldn’t come close to matching salaries. 

    Fast-forward to today’s post-financial meltdown ecosystem. Wall Street salaries still lure some top grads, but many engineers in particular are looking at their job prospects differently. Start-ups no longer seem like such a risky bet after watching financial firms purge thousands of employees.

    Some Wall Street engineers need no persuasion, for the simple reason that their firms are smaller or gone,” says Bruce Gibney, a partner at the San Francisco-based VC firm Founders Fund. “The most common answer I’ve heard to ‘Why not Goldman Sachs?’ is that engineers believe that Silicon Valley offers both better economic expectations now and, more importantly, the opportunity to work on projects that are significantly more positive sum than finance seems to be overall.”

    That doesn’t necessarily mean that it’s easier to snag top engineering talent anywhere, though. Tech start-ups have become hot–and that’s exactly the problem.

    “Engineers want to work for smart people solving hard problems in an environment they enjoy,” says Michael Morrell, founder of Riviera Partners, a recruiting firm that has found new hires for the likes of Twitter, LinkedIn, Groupon, and Pinterest. And now there are a lot of start-ups that can offer exactly that. Thus, Morrell says, “the talent pool is spread thin across too many companies.” 

    How to Raise Millions of Dollars

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    Web Crash? 5 Things to Do Now

    GoDaddy went down earlier this week, taking many small businesses’ sites with it. Here’s what to do if you’re ever in those shoes.


    If you didn’t experience problems directly, you’ve no doubt heard already that GoDaddy went down on Monday, taking the essential Web presence of many small businesses with it. That’s terrible news for those affected and also for GoDaddy, which will certainly lose customers. But perhaps some good can be wrung from the incident.

    In light of the disruption, it’s a good time for entrepreneurs to get up to speed on what to do if they’re ever in the shoes of GoDaddy users. What’s the right response when your own site goes down? Experts offer these tips.

    Check: Is It Really Down?

    Press Shift + Refresh to make sure you’re not seeing a cached version (hold down Shift while reloading or refreshing the page),” suggests Paul Tero, a server administrator who wrote up his advice for IT teams responding to server crashes for Smashing Magazine. “If the website displays fine, then the problem is probably related to your client’s computer or broadband connection. If it fails, then visit a robust website, such as or If they fail, too, then there is at least an issue with your own broadband connection (or your broadband company’s DNS servers)…. Check the website on your mobile phone or phone a friend. To be doubly sure, ask your friend to check.” 

    Communicate Aggressively 

    “If you have a general email list, take time to craft a simple and brief notice to inform customers, vendors, and necessary third parties of the outage,” suggests YFS Magazine in a post.

    But soothing jittery customers shouldn’t just amount to a single missive. Your response on social media is key, too. “Turn to your Facebook, Twitter, and Pinterest feeds to connect with customers,” recommends the post, “and let them know how to contact and do business with you while your site is down…You might also consider reaching out to established customers over…text message or by phone.”

    Hassle Your Hosting Provider 

    GoDaddy’s problems were in-house and technical, but an outage isn’t always about a calamity at the hosting provider. Call yours right away to get the goods on what’s going on, suggests the blog of server-monitoring services company Alertra.

    “It may be as simple as your hosting has expired and your provider has stopped their service,” advises the post. “A pretty easy one to resolve. It could be that a traffic spike has caused your site to fall down; this is common when a website suddenly receives an unexpected boost to traffic….And of course, it’s possible your hosting company is having technical difficulties themselves. Visit their website or get in touch directly to confirm this suspicion.”

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  • Obviously, also be sure to get an estimate of when the problem should be resolved.

    Push Pause on Online Advertising

    “If you utilize online advertising to drive traffic to your site (i.e., display advertising, pay-per-click advertising, etc.), pause the campaign as soon as possible,” advises YFS. “There’s nothing worse than paying for a campaign that is guaranteed ‘not to deliver’ results.”

    Consider Changing Hosts

    After an outage is a natural time to consider whether it might be time to move your site, especially if the process of resolving the issue ends up being lengthy. “It can be a complicated process,” but it may be worth it, Entrepreneur says, though be warned: “If you elect to migrate to a new domain host, remember, it’s not just your website that has to change. It your Web-based services as well. That means email, transaction servers, sales tools, and analytics systems may have to be updated.”

    Over on Business2Community, Mark Sandall of Cyber World Internet Services offers some questions to ask to evaluate whether a Web host is a good fit for your business:

    • Are they easy to get ahold of?
    • Do they give you the services that you need?
    • Do they educate you on the process of setting up a website?

    Are there any other steps business owners need to take when their site goes down?