Showing posts with label Business. Show all posts
Showing posts with label Business. Show all posts

Sequestration Takes Effect, but Impact Is Not Immediate





WASHINGTON — University officials, city managers, day care providers and others spent Saturday assessing how they would absorb their part of the across-the-board cuts in federal spending that began taking effect over the weekend.




But even as the institutions that depend on federal money nervously took stock, most Americans were largely unaffected by the cuts, at least for now. At Los Angeles International Airport, John Konopka, 45, suffered no delays as he arrived from Atlanta.


“This is just another travel day,” Mr. Konopka said. “I think all of it’s been talked up a bit, way too politically, to make it seem a lot worse than it is. I don’t think it’s going to be the gloom and doom that some people are saying it would be.”


Others were less sanguine. Joel Silver, 63, a retiree from the Bronx, said he feared the cuts would affect the most vulnerable. He said he was angry that President Obama and lawmakers had not prevented what he called “an invented crisis.”


“What’s the point of a Congress?” he asked. “Aren’t they supposed to sit down and talk about things and figure them out? The economy was just recovering and now it’s going to slide back.”


Across the country, the impact of sequestration, as the cuts are known, appeared to be as varied as the thousands of federal programs, big and small, that now have shrunken pots of money from which to draw.


In Baltimore, the mayor called for an emergency cabinet meeting to discuss the reductions in federal money and their impact on a city that already has a projected deficit of $750 million over the next decade.


At research universities, administrators sent e-mails to faculty members and students warning that changes were coming. Samuel L. Stanley Jr., the president of Stony Brook University, said the institution would lose $7.6 million in “vital federal funding” for research grants and other programs. The University of California, Berkeley, warned that “as sequestration translates into fewer federal grants, the campus will be forced to hire fewer researchers.”


The Air Force Thunderbirds, the elite team of F-16 pilots who perform flight maneuvers at air shows around the country, announced on their Web site that all of their shows had been canceled starting April 1.


Federal officials began sending letters to governors, informing them of smaller grants. Shaun Donovan, the secretary of housing and urban development, wrote to Gov. John R. Kasich of Ohio, “You can expect reductions totaling approximately $35 million.”


In a 70-page report to Congress accompanying the sequestration order and detailing the reductions — agency by agency and program by program — Jeffrey D. Zients, Mr. Obama’s budget director, called them “deeply destructive to national security, domestic investments and core government functions.”


Among the $85 billion in cuts for the fiscal year ending Sept. 30: $3 million less for Pacific coastal salmon recovery; $148 million less for the patent office; a $1 million cut in support by the Defense Department for international sporting competitions; $289 million less for the Centers for Disease Control and Prevention; a $1 million cut in the Interior Department’s helium fund; and $16 million less for the Sept. 11 victim compensation fund.


But even as the reductions became official, the result of a stalemate between Mr. Obama and Congressional Republicans over increasing taxes, some of the immediate impact was difficult to see.


The process of trimming government budgets is slow and cumbersome, involving notifications to unions about temporary furloughs, reductions in overtime pay and cuts in grant financing to state and local programs. Less federal money will, over time, mean fewer government contracts with private companies. Reduced overtime pay for airport security checkpoint officers will make lines longer, eventually.


And so as the first weekend began for the new, slimmer government, little of that was evident yet.


At Kennedy International Airport in New York, travelers who arrived extra early were greeted by short lines, not the drastic delays that federal transportation officials have said could emerge as security officers are furloughed to save money.


“The check-in was fine, at least for now. I’m surprised,” said Chris Achilefu, 45, who arrived at the airport four hours before his flight to Lagos, Nigeria. Normally Mr. Achilefu, an automotive exporter who lives in Upper Darby, Pa., would arrive two hours early, but he said he was concerned about lines.


“I was listening to what the president said yesterday, that it won’t kick in right away,” he said. “Hopefully the two parties will come together, hopefully they will resolve it before another month.”


At the main San Ysidro port of entry between Mexico and San Diego, traffic moved smoothly late Friday night, just hours after the sequestration began, and border lines had only a few dozen vehicles in each lane.


Vendors who line the street where cars sometimes idle for hours waiting to enter the United States perked up when they heard about the cuts.


“That’s good for business,” said Emilio Gomez, an employee at a stand selling rugs, china figurines and soda. “When people are waiting, they get bored and they buy more stuff.”


In his weekly address on Saturday, Mr. Obama acknowledged that not everyone would be affected equally. “While not everyone will feel the pain of these cuts right away, the pain will be real,” he said. “Many middle-class families will have their lives disrupted in a significant way.”


In the Republican response to Mr. Obama’s address, Representative Cathy McMorris Rodgers of Washington also called the cuts “devastating,” but said that Republicans in the House would not yield on taxes. “Spending is the problem, which means cutting spending is the solution,” she said. “It’s that simple.”


Reporting was contributed by Robbie Brown from Atlanta; Will Carless from San Ysidro, Calif.; Ian Lovett from Los Angeles; and Marc Santora and Ravi Somaiya from New York.



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Hasbro Expands Transformers Brand Into New Media


Marcus Yam for The New York Times


Ryan Yzquierdo, who has been a Transformers fan since he was 7, is introducing his daughter to the franchise.







To Hasbro, no one is too young or too old to play with a Transformers robot, watch a Transformers television show or play a Transformers video game.




The toy maker started the Transformers franchise with a Japanese partner in 1984. The concept — robots disguised as everyday objects — was originally aimed at 5-year-old boys. But as those boys have grown up and had children and even grandchildren, Hasbro has expanded the brand into other media and added new toy lines to appeal to everyone from toddlers to adults.


Take Rescue Bots, for example.


The main Transformers brand contains mature themes, with big robots battling for control of the planet. To engage children ages 3 to 7, Hasbro introduced Rescue Bots in 2011, featuring toy robots as first responders.


“The goal there is to take what you have and bring an age-relevant message, which is to get away from the battle and the fighting and focus on the heroic nature of Transformers,” said Jay Duke, global vice president for the Transformers brand at Hasbro.


That was enough to convince Ryan Yzquierdo, who has been a Transformers fan since he was 7, that Rescue Bots were a good way to introduce Transformers to his 3-year-old daughter.


“Each toy focused on a different motor skill, which was a big selling point for me and my wife,” said Mr. Yzquierdo, who started a Web site, Seibertron.com, devoted to Transformers in 2000.


When buying toys and games for their children, parents often look to favorites from their own childhood. Their nostalgia for beloved toys from their past helps create a bonding experience with their little ones.


Toy makers have long tried to build enduring brands that can be passed down to the next generation. Those intellectual properties are cheaper to develop because the toy companies do not have to pay a licensing fee to an outside partner. They also bring in added revenue through licensing fees paid by other companies, like makers of apparel and school accessories.


In Transformers, Hasbro has one of the most valuable brands among toy makers. In 2011, the year the third Transformers movie was released, Hasbro recorded $960 million in sales from products related to Transformers and Beyblade, a spinning top game, according to the company’s latest annual earnings report.


When it was developed in 1984, Transformers consisted of a toy line and an animated television series.


But in 2007, Hasbro began a new strategy to build the brand into a worldwide franchise that now includes live-action movies, video games, publishing and even theme park rides.


“There are not a lot of brands like that in the world that have that strong emotional resonance across generations,” said John A. Frascotti, global chief marketing officer at Hasbro.


For older boys, Hasbro has extended the brand into mobile apps, video games and comic books. For adults, the company has licensed an annual Transformers convention called BotCon and organizes events at conventions like Comic-Con International in San Diego.


But the growth of the Transformers franchise has had its pitfalls, too. When there is not a Transformers movie rumbling through theaters, the toy line stumbles. Hasbro reported net income of $130.3 million for the fourth quarter of 2012, a 6.3 percent decline from the previous year. Sales in its boys business fell 23 percent in the quarter from the same period in 2011, the year the last Transformers movie came out.


Analysts say it is important for Hasbro to keep the Transformers brand fresh in non-movie years.


“Hasbro focuses on these big, home-run movies. When they don’t have one, they get punished for it,” said Jaime M. Katz, an analyst at Morningstar.


Investors expect sales in the boys category to decline this year as well, but to rebound in 2014 when the next Transformers movie is released, said Felicia R. Hendrix, a Barclays analyst. “The real problem around this is that their boys’ line seems to be very movie-driven,” Ms. Hendrix said, adding that Hasbro should try to make the brand more evergreen.


Toward that end, the company showed previews of two new Transformers toy lines, Beast Hunters and Construct-Bots, last month at the annual Toy Fair in New York. The Beast Hunters theme, which features robots that morph into predatory animals, will encompass several areas, including television, toys and licensing, while Construct-Bots will allow boys to build their own Transformers.


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DealBook: Breuer Reflects on Prosecutions That Were, and Weren’t

After spending four years under the microscope as he led investigations of some of the world’s biggest banks, Lanny A. Breuer hasn’t lost his swagger.

The 54-year-old prosecutor, with a Rolodex as thick as his Queens dialect, will leave the Justice Department on Friday, emboldened after mounting recent cases against banking giants. But Mr. Breuer, the department’s criminal division chief, also leaves somewhat bruised, having taken criticism for not throwing Wall Street executives behind bars after the financial crisis.

In short, it has been grueling.

“I think he’s handled the pressure very well,” said former Attorney General Michael B. Mukasey, who is now a defense lawyer at Debevoise & Plimpton and has gone up against Mr. Breuer in corporate bribery cases.

For his part, Mr. Breuer highlights his unit’s crackdown on money laundering; the prosecution of Allen Stanford, who was sentenced to 110 years in prison for a Ponzi scheme; and the criminal cases against BP for the Gulf of Mexico oil spill.

Mr. Breuer won perhaps his biggest victory when a Japanese subsidiary of UBS pleaded guilty to manipulating the London interbank offered rate, or Libor. It was the first unit of a big global bank to plead guilty in two decades.

But the Occupy Wall Street crowd, among others, has been critical. When the Justice Department stopped short of indicting HSBC on money laundering charges, choosing instead to press a record fine against the bank, it prompted a tirade in Rolling Stone magazine. A recent “Frontline” documentary featuring Mr. Breuer took aim at his decision not to charge banks that sold toxic mortgage securities before the crisis.

In a recent interview, Mr. Breuer reflected on his crisis cases, his days defending President Bill Clinton from impeachment and his upbringing as the son of Holocaust survivors who settled in Elmhurst, Queens.

The following are edited excerpts from the interview:

When you joined the Justice Department, the nation was reeling and people wanted Wall Street to pay. Back then, didn’t you expect to mount charges against bank executives?

I understand and share the public’s outrage about the financial crisis. Of course we want to make these cases. I can tell you that I assigned the top, most talented lawyers to investigate them, and I know that U.S. attorneys’ offices across the country assigned aggressive prosecutors to these cases as well. I assigned people from my fraud section and my own front office to look at them. And I approached these cases exactly the same way I approached BP, the same way I approached Libor, the same way I approach every case. If there had been a case to make, we would have brought it. I would have wanted nothing more, but it doesn’t work that way.

You agreed to go on “60 Minutes” and “Frontline” to discuss the lack of crisis cases. Why open yourself to such scrutiny?

People have been asking legitimate questions about what happened in the wake of the financial crisis, and they deserve answers. Someone had to go on television to explain the Justice Department’s point of view, and it was appropriate that, as head of the criminal division, I would do it.

But federal prosecutors in New York and elsewhere also played big roles in the crisis cases. Why you?

As you point out, the U.S. attorneys don’t report to me, but someone had to tell the public how hard prosecutors across the department have been investigating these cases. I was willing to talk about these issues, to continue to talk about them in the face of criticism, and I’m still willing to talk about them.

Given that you’ve taken a beating on crisis cases, what is your legacy here?

The criminal division is now at the center of criminal law enforcement, both in prosecutions and policy. I don’t think that was ever the case before.

And now you’re leaving. You must feel relieved.

I have very mixed emotions. I’ve loved this job so very much, and I’m incredibly proud of what we’ve accomplished over the last four years. But I’m a big believer in change, and I think the timing is about right to move on.

What’s next?

I’m probably going to take a few months off. I’m also going to start talking to law firms and the like and make a decision about where I’m going to go.

The interviews are just a formality, right? The legal world assumes you’re heading back to Covington & Burling.

I love Covington. But I’m going to look at Covington; I’ll look at other firms. It’s certainly not a formality.

For years, you’ve moved in and out of government service, like many prosecutors. Does the revolving door compromise objectivity?

For me, it’s been a pretty effortless transition. I think it’s made me a better public servant, but I think it’s also made me a better private lawyer.

You’ve had no shortage of interesting clients: Roger Clemens, President Clinton, Sandy Berger. What was the most fascinating assignment?

There’s nothing like representing the president of the United States. Representing people like that in general can be gratifying, because you’re getting people often who are incredibly proud of their careers, and you’re dealing with them at their most vulnerable time.

What gear did you assemble from your ex-Yankee client?

Balls, posters — we’ve got a lot of Clemens memorabilia. You need to recognize, I was a lifelong Mets fan.

You were raised in Queens.

My dad was an intellectual. He had been a writer in Vienna before the Anschluss. During my childhood, he was one of the editors of Aufbau, which was a German-Jewish newspaper in New York. In our house there was opera always blaring. It was a very sort of ethnically rich, warm home.

So why did you pursue the law?

I was the mediator in a lot of family issues, even at a young age.

How did your family react to your decision to become a junior district attorney in Manhattan after a pricey education at Columbia?

My parents just never made any money at all. I called up my mother to break the news that her son was not going to a law firm: “Mom, you’ve just got to remember that Cy Vance Jr. — who, of course, is now the D.A. — he’s in the D.A.’s office. And Dan Rather Jr., he’s in the D.A.’s office. And Andrew Cuomo, the son of the governor, he’s in the D.A.’s office.” There was a long pause. And my mother said: “Them? They should go to the D.A.’s office. You? You should go to a firm.”

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Advertising: Paper Finds a Fit in a Wi-Fi Society





AN effort by a giant paper maker to promote the value of using paper is turning to everyday situations after spending more than two years at the office.




The switch in subject matter began last week, when the Domtar Corporation and its agency, the Charlotte, N.C., office of Eric Mower & Associates, added four video clips-cum-commercials to a campaign that carries the theme “Paper because.” The humorous videos are billed as entries in a series of “Really, Really Short Films” that started with the introduction of the campaign, aimed at so-called thought leaders in fields like business and education, in September 2010.


The first batch of videos, as well as the second, released in December 2011, offered wacky vignettes in a workplace where a crusade to go “paperless” was carried to extremes. For instance, in one video, titled “Black Market,” an office worker begs her colleague for “more of that stuff you got me last week,” which turns out to be 20 sheets of paper. The new videos, by contrast, take place in locations like homes and restaurants.


The videos are in addition to other elements of the “Paper because” campaign, which include, of course, print advertisements. Those ads make “Paper because” points like “A lot of places worth going to don’t get a signal, and hopefully never will.”


Estimates are that Domtar has spent more than $10 million on the campaign.


The new videos are indicative of how marketers and agencies approach long-running campaigns. How long should ads continue as they are? When ought changes come? Ads may run past the point they are effective, but they may be replaced before consumers have absorbed the pitch because those who were involved in making them have had their fill.


“When you work on a project, sometimes you’re tired of it before it goes out,” said Kathy Wholley, director for advertising and communications at the Domtar operations center in Fort Mill, S.C.


It is important to remember that “this campaign is still reaching people for the first time,” she added, noting messages on Twitter that say something like this: “ ‘Look what I just found. This video is hilarious.’ ”


Still, taking a fresh look at a continuing campaign makes sense, Ms. Wholley said, as in this instance, when a thought emerged about how “there are times and places” outside the office world “where paper is appropriate and useful.”


In one new video, “Anniversary,” a couple is seated in a restaurant. The wife gives a card to her husband, who, it turns out, sent her an e-card she did not receive. At the end, the scene fades to black and the husband’s plaintive voice is heard as the wife leaves: “Honey? Where are you going? Did you check your spam filter? Did you?”


Another commercial, “Waiter,” takes place at a restaurant table being waited on by a waiter without pad, pen or pencil. “I got it,” he insists, referring to the customers’ orders, which he recites back twice — wrong each time.


A third commercial, “Bridal Shower,” takes place in the home of a bride-to-be who receives an ugly vase as a gift. She is glum until she learns the gift-giver included the receipt. The video ends with these words: “Paper can make any gift, the perfect gift.”


A fourth commercial, “Tech Support,” brings to life a Catch-22 for the 21st century. A man is at home, talking to a woman in a call center about a router he bought.


“I’m having trouble connecting to the Internet,” says the man, who is upset there is no manual. The woman replies, somewhat bored, “You have to download the PDF from the Web site.”


The man is incredulous. “So you want me to get on the Internet to download a PDF from your Web site so I can get on the Internet?” he asks.


The first two video series were “focused on office situations,” said Patrick Short, partner and creative director at Mower in Charlotte, because “a lot of sales” for Domtar are made “with office paper.” For the next iteration, “we thought to open it up and take it out of that environment,” he added, using “ideas and concepts coming from personal experiences.”


“I’ve been in restaurants where the waiter” who refused to write down the orders “comes back three times,” Mr. Short said, and he was once frustrated when “I bought something from Apple and there was no manual with it.”


Mr. Short, an art director, works on the campaign with Ruben Lopez, an associate creative director at Mower who is a copywriter. Whereas the first videos were “a little bit over the top,” Mr. Short said, the new videos are “more like ‘Seinfeld’ moments,” making them more “relatable” to viewers.


At the coming South by Southwest Music and Media Conference in Austin, Tex., Mr. Short said, Domtar and Mower will offer attendees “a ‘paper hot spot’ instead of a Wi-Fi hot spot.”


The new videos appear as ads on the Web sites of publications like National Geographic and The New York Times. The new videos, and their predecessors, can also be watched on the Web site of the campaign, paperbecause.com; the Domtar corporate Web site, Domtar.com; the Domtar fan page on Facebook; and the campaign’s channel on YouTube, youtube.com/paperbecause.


As for gibes about a campaign that uses video to promote the merits of paper, Ms. Wholley said: “We actually think it gives us a little more credibility. It shows we don’t have our heads in the sand.”


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DealBook: Nominee for S.E.C. Tries to Allay Skepticism

Mary Jo White’s path to the Securities and Exchange Commission has reached a crucial juncture: the Congressional charm campaign.

Lawmakers are scrutinizing Ms. White ahead of her Senate confirmation hearing, raising questions about the former prosecutor’s lack of regulatory experience and the challenge of policing Wall Street firms she recently defended in private practice. But Ms. White is seeking to quell concerns about potential conflicts of interest.

She recently scheduled meetings with Senate Banking Committee members, who must clear her nomination, and answered a 20-page boilerplate questionnaire detailing her qualifications, according to a copy provided to The New York Times. The document sheds new light on her list of Wall Street clients, including little-known work performed for HSBC’s former chief executive. It also describes her ties to New York Democratic causes and laurels she earned both as a defense lawyer and federal prosecutor.

The questionnaire, created by the banking committee, focused significant attention on her movement through the revolving door between government service and private practice, a concern that has loomed since President Obama nominated Ms. White in January.

“As a government official, I believe I have an established track record and the reputation of being tough, but fair,” she said in the document.

Ms. White also offered a previously undisclosed concession, vowing “as far as can be foreseen,” never to return to Debevoise & Plimpton, where she had built a lucrative legal practice. To avert potential conflicts stemming from her work on behalf of Wall Street giants, Ms. White had already agreed to recuse herself for one year from most matters that involve former clients.

While Ms. White’s nomination is expected to sail through the committee before receiving full Senate approval, four Congressional officials who spoke anonymously warned that some Democrats have lingering reservations.

The Democrats note that her husband, John W. White, is co-chairman of the corporate governance practice at Cravath, Swaine & Moore, where he represents many of the companies that the S.E.C. regulates. They also question whether Ms. White’s recusals, even if well-intentioned, could cripple her ability to run the agency.

In a meeting on Tuesday with Senator Sherrod Brown, Democrat of Ohio, Ms. White did little to alleviate the fears.

“Senator Brown respects Ms. White’s credentials and experience, but is concerned with Washington’s long-held bias toward Wall Street,” his spokeswoman, Meghan Dubyak, said in a statement. “He pushed Ms. White,” to explain “whether her previous employment or her spouse’s current employment could cause her to recuse herself from key business facing the S.E.C.” The agency has already fallen behind in writing dozens of new rules for Wall Street.

Ms. White’s supporters counter that, before the White House announced the appointment, the Office of Government Ethics vetted her disclosures. The nonpartisan officials concluded that, even with her recusals, Ms. White could effectively run the agency.

Her supporters also trumpet her long tenure as a tenacious prosecutor. During stints as a federal prosecutor in Brooklyn and as the first woman United States attorney in Manhattan, she helped oversee the prosecution of the crime figure John Gotti and directed the case against those responsible for the 1993 World Trade Center bombing. The cases won her praise from several lawmakers.

Ms. White still has time to win over remaining skeptics. Her confirmation hearing is not expected until the week of March 11, Congressional officials briefed on the matter said.

Until then, Ms. White is blitzing through the halls of Congress, a routine practice for nominees. She began her charm offensive at the top of the banking committee’s roster, visiting this month with the Democratic chairman, Senator Tim Johnson, of South Dakota. A Congressional official briefed on the matter said Ms. White performed well at the gathering, and no major issues arose.

In the next round of meetings, she will face off with a more liberal arm of the committee known to scrutinize nominees. After meeting Mr. Brown, Ms. White is scheduled to see Senator Jeff Merkley, Democrat of Oregon. She also will meet Elizabeth Warren, the Massachusetts Democrat who is an outspoken critic of Wall Street, Ms. Warren’s office confirmed on Tuesday.

Even if Ms. White fails to satisfy lawmakers’ concerns, the meetings are an important step in clearing the way for her appointment.

“Senators will have a chance to size Mary Jo up, and I believe will come away with a great sense of comfort that she’s a candidate of true quality,” said Harvey Pitt, who passed through the confirmation process in 2001 to lead the S.E.C.

He noted that additional disclosures could bolster her candidacy. “I do think she will need to provide a level of comfort to the committee that she is aware of the issue, has a definitive plan for navigating through the potential conflict issues, and will be completely open about when she has a potential recusal issue, and how she has handled it,” he said.

Ms. White, a political independent, assured lawmakers in her questionnaire that she was “completely independent of political or personal influences.” She did disclose, however, $13,000 in campaign donations to Democratic candidates. She also served on the campaign committee of a Democrat who had run for New York attorney general.

Her ties to Debevoise — and its clients — are more significant; she represented JPMorgan Chase, UBS and Michael Geoghegan, the former head of HSBC.

Ms. White, 65, said this month said that she would retire from Debevoise after taking over the S.E.C. and would forgo the firm’s typical retirement perks: office space and a free BlackBerry. She also will sever financial ties to the firm during her term at the S.E.C., taking an upfront lump-sum retirement payment rather than collecting a monthly installment of $42,500.

Her husband has also offered concessions. He agreed to convert his partnership at Cravath, Swaine & Moore from equity to nonequity status and promised not to “communicate directly” with the S.E.C. about rule-making. Ms. White will not participate in a matter with a direct effect on his compensation.

In line with a standard move for federal appointees, Ms. White further agreed to recuse herself for one year from voting on enforcement cases involving Debevoise clients. There are limitations to the policy, though, in case it is “in the public interest” and a “reasonable” person would not object.

Some lawmakers dismiss questions about her potential conflicts, but still question her mastery of regulatory minutiae. While Ms. White is a skilled litigator, she lacks experience in financial rule-writing, unlike a predecessor, Mary Schapiro, a lifelong regulator who ran the S.E.C. for nearly four years.

In her questionnaire, Ms. White highlighted her role as a director of the Nasdaq exchange and other experiences that she said gave her “a firm grounding” in securities laws.

She also, inadvertently, drew a connection to Ms. Schapiro. Like Ms. Schapiro, Ms. White is an animal lover, currently serving as a board member of the American Society for the Prevention of Cruelty to Animals.

She agreed to step down from the board once she is sworn in at the S.E.C.

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DealBook: Confirmation Hearing for Mary Jo White Said to Be Scheduled for March

Mary Jo White appears poised to face a Senate confirmation hearing next month, a crucial step for the former federal prosecutor on her path to becoming the top Wall Street regulator.

Ms. White, whose nomination to lead the Securities and Exchange Commission has lingered for over a month, plans to testify in March before the Senate Banking Committee, three Congressional officials briefed on the matter said on Monday. The committee has not set a firm date for the confirmation hearing, the officials said, though lawmakers have tentatively scheduled her to appear the week of March 11.

At the hearing, one official said, Ms. White will most likely join Richard Cordray, who is line to become director of the Consumer Financial Protection Bureau. In January, when the White House nominated Ms. White to the S.E.C. spot, it reappointed Mr. Cordray to a position he has held for the last year under a temporary recess appointment.

The Senate last year declined to confirm him in the face of Republican and Wall Street opposition to the newly created consumer bureau. Republicans are likely to voice similar skepticism at the hearing next month.

While some officials have quietly expressed concerns about Ms. White’s role as a Wall Street defense lawyer, her nomination is not expected to face major complications. An S.E.C. spokesman did not immediately respond to a request for comment.

Over the last couple of weeks, Ms. White has received multiple briefings from agency staff members about new securities rules and the structure of the stock market, the official said. The briefings will in part prepare her for the confirmation hearing, which is expected to cover a broad scope of topics.

While Ms. White is a skilled litigator, she lacks experience in financial rule-writing and regulatory minutiae, a potential stumbling block for her nomination. Lawmakers also expect to raise questions about her movements through the revolving door that bridges government service and private practice. Some Democrats, a person briefed on the matter said, will question whether she is cozy with Wall Street.

In private practice, Ms. White defended some of Wall Street’s biggest names, including Kenneth D. Lewis, a former chief of Bank of America. As the head of litigation at Debevoise & Plimpton, she also represented JPMorgan Chase and the board of Morgan Stanley. Her husband, John W. White, is co-chairman of the corporate governance practice at Cravath, Swaine & Moore, where he represents many of the companies that the S.E.C. regulates.

(Ms. White has agreed to recuse herself from many matters that involve former clients, while her husband has agreed to convert his partnership at Cravath from equity to nonequity status.)

Despite some reservations, she is expected to receive broad support on Capitol Hill. When President Obama nominated her last month, Senator Charles E. Schumer of New York was one of several Democrats to praise her prosecutorial prowess, calling her “tough as nails” during stints as a federal prosecutor in Brooklyn and as the first female United States attorney in Manhattan.

While she handled some white-collar and securities cases, her specialty was terrorism and organized crime. As a federal prosecutor in New York City for more than a decade, she helped oversee the prosecution of the crime figure John Gotti and directed the case against those responsible for the 1993 World Trade Center bombing. She also supervised the original investigation into Osama bin Laden and Al Qaeda.

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DealBook: J. Crew Chief and American Express Invest in Warby Parker

Warby Parker, the hip purveyor of retro-style glasses, has solidified ties with two of its most prominent fans.

Now the three-year-old start-up can count Millard S. Drexler, the chief executive of J. Crew, and American Express as participants in its latest round of financing, which closed last month at $41.5 million.

The two join an already expansive group of investors that includes General Catalyst Partners, Spark Capital, Tiger Global Management, Thrive Capital and Menlo Ventures.

The presence of Mr. Drexler and American Express highlights the growing popularity of Warby Parker, whose founders created the online glasses seller in their spare time at the Wharton School of the University of Pennsylvania and quickly struggled to meet consumer demand.

Company executives first closed the round last September at $37.5 million, but left some room and time for select investors to come in as well.

“We’ve tried to be very deliberate in getting people with specific expertise,” Neil Blumenthal, one of Warby Parker’s founders, said in an interview. “Nobody knows retail like Mickey. And within financial services, nobody knows a brand more prominent than American Express.”

Mr. Blumenthal and another founder, David Gilboa, declined to comment on the valuation that the round is based on. But they said that their investors consider the retailer a lifestyle brand, which commands a higher value than an e-commerce company.

Since its founding, Warby Parker has shown significant potential in its business: selling prescription glasses and now sunglasses almost exclusively online at relatively low costs. The company has emphasized customer service by allowing prospective buyers to try on several frames before buying, and using Facebook and Twitter as ways to keep in touch with customers.

Its growth over the last three years has been largely through word of mouth, with the company having run its first television ads this year.

The company has drawn the attention of investors who hope it is less an e-commerce platform and more a brand poised to become the next Tory Burch. Such has been the demand that Silicon Valley venture capitalists regularly flew to New York to beg the founders for breakfast — and then a chance to invest.

“They treat clients like relationships,” Joel Cutler, a founder of General Catalyst, said of Warby Parker’s management. “They’re very much oriented toward telling people about a lifestyle they want to associate with.”

Among those believers is Mr. Drexler, whose successes at Gap and then J. Crew have elevated him to a wise man of retail. He began having regular lunches with Warby Parker’s founders to chat about their retail ideas.

By the time the company began raising its series B round of financing, company executives wanted stronger ties with Mr. Drexler, their informal coach.

“He was excited about some of the exciting retail stuff we were doing,” Mr. Blumenthal said. “When it was time to raise money, we wanted to get him formally involved.”

American Express has been a supporter for some time as well. The firm’s vice chairman, Edward Gilligan, invited Warby Parker executives to speak to employees early in the start-up’s life. The financial services titan also is sponsoring Warby Parker’s “Class Trip,” a cross-country promotional tour aboard a lavishly furnished yellow school bus.

While Warby Parker is collaborating with American Express on its Sync program, which offers rebates to Twitter users, there are no similar plans yet to work with J. Crew on retail partnerships, Mr. Blumenthal said. The emphasis remains on selling directly to consumers.

But the company is looking to raise its profile even more. It has been working with the Standard line of hotels on programs like artists-in-residence and a seaplane ferry from downtown Manhattan to the Hamptons.

It is also in talks with Google on providing stylish options for the tech giant’s computerized glasses product, according to people briefed on the matter.

“We really feel like we’re in an inflection point,” Mr. Gilboa of Warby Parker said. “We feel like we have a really solid foundation for the brand.”

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Major Banks Aid in Payday Loans Banned by States


Major banks have quickly become behind-the-scenes allies of Internet-based payday lenders that offer short-term loans with interest rates sometimes exceeding 500 percent.


With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or far-flung locales like Belize, Malta and the West Indies to more easily evade statewide caps on interest rates.


While the banks, which include giants like JPMorgan Chase, Bank of America and Wells Fargo, do not make the loans, they are a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers’ bank accounts, even in states where the loans are banned entirely. In some cases, the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals.


“Without the assistance of the banks in processing and sending electronic funds, these lenders simply couldn’t operate,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, which works with community groups in New York.


The banking industry says it is simply serving customers who have authorized the lenders to withdraw money from their accounts. “The industry is not in a position to monitor customer accounts to see where their payments are going,” said Virginia O’Neill, senior counsel with the American Bankers Association.


But state and federal officials are taking aim at the banks’ role at a time when authorities are increasing their efforts to clamp down on payday lending and its practice of providing quick money to borrowers who need cash.


The Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are examining banks’ roles in the online loans, according to several people with direct knowledge of the matter. Benjamin M. Lawsky, who heads New York State’s Department of Financial Services, is investigating how banks enable the online lenders to skirt New York law and make loans to residents of the state, where interest rates are capped at 25 percent.


For the banks, it can be a lucrative partnership. At first blush, processing automatic withdrawals hardly seems like a source of profit. But many customers are already on shaky financial footing. The withdrawals often set off a cascade of fees from problems like overdrafts. Roughly 27 percent of payday loan borrowers say that the loans caused them to overdraw their accounts, according to a report released this month by the Pew Charitable Trusts. That fee income is coveted, given that financial regulations limiting fees on debit and credit cards have cost banks billions of dollars.


Some state and federal authorities say the banks’ role in enabling the lenders has frustrated government efforts to shield people from predatory loans — an issue that gained urgency after reckless mortgage lending helped precipitate the 2008 financial crisis.


Lawmakers, led by Senator Jeff Merkley, Democrat of Oregon, introduced a bill in July aimed at reining in the lenders, in part, by forcing them to abide by the laws of the state where the borrower lives, rather than where the lender is. The legislation, pending in Congress, would also allow borrowers to cancel automatic withdrawals more easily. “Technology has taken a lot of these scams online, and it’s time to crack down,” Mr. Merkley said in a statement when the bill was introduced.


While the loans are simple to obtain — some online lenders promise approval in minutes with no credit check — they are tough to get rid of. Customers who want to repay their loan in full typically must contact the online lender at least three days before the next withdrawal. Otherwise, the lender automatically renews the loans at least monthly and withdraws only the interest owed. Under federal law, customers are allowed to stop authorized withdrawals from their account. Still, some borrowers say their banks do not heed requests to stop the loans.


Ivy Brodsky, 37, thought she had figured out a way to stop six payday lenders from taking money from her account when she visited her Chase branch in Brighton Beach in Brooklyn in March to close it. But Chase kept the account open and between April and May, the six Internet lenders tried to withdraw money from Ms. Brodsky’s account 55 times, according to bank records reviewed by The New York Times. Chase charged her $1,523 in fees — a combination of 44 insufficient fund fees, extended overdraft fees and service fees.


For Subrina Baptiste, 33, an educational assistant in Brooklyn, the overdraft fees levied by Chase cannibalized her child support income. She said she applied for a $400 loan from Loanshoponline.com and a $700 loan from Advancemetoday.com in 2011. The loans, with annual interest rates of 730 percent and 584 percent respectively, skirt New York law.


Ms. Baptiste said she asked Chase to revoke the automatic withdrawals in October 2011, but was told that she had to ask the lenders instead. In one month, her bank records show, the lenders tried to take money from her account at least six times. Chase charged her $812 in fees and deducted over $600 from her child-support payments to cover them.


“I don’t understand why my own bank just wouldn’t listen to me,” Ms. Baptiste said, adding that Chase ultimately closed her account last January, three months after she asked.


A spokeswoman for Bank of America said the bank always honored requests to stop automatic withdrawals. Wells Fargo declined to comment. Kristin Lemkau, a spokeswoman for Chase, said: “We are working with the customers to resolve these cases.” Online lenders say they work to abide by state laws.


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Fed Officials Debate Bank’s Losses Once Economy Mends





The Federal Reserve’s plans for the eventual wind-down of its economic stimulus campaign could provoke a political reaction that will make it more difficult to control inflation, a current Fed official and a former Fed governor said Friday.







Peter Newcomb/Reuters

James Bullard, president of the St. Louis Fed, sees political fallout from coming losses.







Pat Greenhouse/The Boston Globe

Eric Rosengren, head of the Boston Fed, noted 400,000 jobs would be added this year.






Kevin Lamarque/Reuters

Jerome Powell, a Fed governor, said the bank would resist any pressure from Congress.






When the economy grows stronger, the Fed plans to sell some of its vast holdings of Treasury and mortgage-backed securities. The Fed also plans to pay banks to leave some money on deposit with it to limit the pace of new lending.


And that could prove an awkward combination. The Fed faces the possibility of large losses as it sells off securities, which could force the central bank to suspend annual payments to the Treasury Department for the first time since the 1930s, even as it would be increasing the amounts paid to the banking industry for its cash holdings at the Fed to control inflation.


“That sounds like a recipe for political problems,” said James Bullard, president of the Federal Reserve Bank of St. Louis. He described the predicament as one reason the Fed might consider limiting its plans for additional asset purchases.


But Eric S. Rosengren, president of the Federal Reserve Bank of Boston, said that concerns about potential losses needed to be weighed against the benefits of asset purchases. The Fed holds almost $3 trillion in Treasuries and mortgage bonds, and it is adding about $85 billion a month in an effort to cut unemployment.


Mr. Rosengren, a leading advocate of the purchases, said Boston Fed research showed asset purchases this year could help create about 400,000 new jobs.


“That’s what the Federal Reserve should really be caring about, what’s happening with the dual mandate with and without” the asset purchases, Mr. Rosengren said. “When I think about the costs, I have to weigh that against the benefits,” he said at the US Monetary Policy Forum in New York on Friday.


By law, the Fed sends most of its profits to the Treasury, and in recent years those profits have soared as the Fed has collected interest on its investments. Last year, the central bank contributed $89 billion to the public coffers — essentially refunding a significant portion of the federal government’s annual borrowing costs.


The purpose of the investment portfolio is to hold down borrowing costs for businesses and consumers. As the economy revives, the Fed has said it will begin selling some of those holdings. But it faces potential losses on those sales because interest rates would be rising. Security prices, which move inversely to rates, would be falling, and the government would be issuing new debt at the higher rates, making the low-yield bonds that the Fed holds less valuable.


Estimating the potential losses requires a wide range of assumptions on Fed policy, economic growth and interest rates. A Fed analysis published last month, which assumed that interest rates rose to 3.8 percent later this decade, estimated that the central bank might record losses of $40 billion and suspend contributions to the Treasury for four years beginning in 2017. If rates rose by another percentage point, however, the analysis estimated that losses would triple. An independent analysis published on Friday foresaw losses of around $20 billion and a suspension of payments for only three years.


The Fed can afford to lose money because it can simply print more. It would record a liability, and pay down the debt as profits rebounded.


But there are signs that the Fed’s political opponents would seize on any losses as evidence of economic malpractice. And such that criticism could come at a vulnerable moment: central banks are never popular when they are raising interest rates.


Representative Jim Jordan, an Ohio Republican, cited the potential losses in an open letter this week to the Fed chief, Ben S. Bernanke, requesting more information on what he called “the potentially devastating consequences from any unwind.”


Jerome H. Powell, a Fed governor, insisted Friday that the central bank would not allow its course to be influenced by such political pressure.


“We’re independent for a reason,” he said. “Congress has given us a job to do.”


Some supporters of current Fed policy also argue that an economic revival would inoculate the central bank against criticism, in part because the government’s coffers would be filling even without the Fed’s contributions.


But Frederic S. Mishkin, a Columbia economist and one of the authors of the independent analysis of the Fed’s potential losses, said that was wishful thinking.


“Politicians have very short memories,” said Professor Mishkin, a former Fed governor. “They’re going to focus very much on the fact that the Fed is no longer pulling its weight in terms of producing remittances for the federal government.”


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Media Decoder: CNBC Buys ‘Nightly Business Report’ From Atalaya

“Nightly Business Report,” the pioneer public television series that has struggled in recent years, is getting a new, deep-pocketed commercial owner, the 24-hour business cable channel CNBC, a unit of Comcast’s NBCUniversal.

CNBC announced on Thursday that it would buy the rights to the show, available in 96 percent of television homes in the United States, from the investment firm Atalaya Capital Management for an undisclosed price. CNBC will begin producing “Nightly Business Report” from its New Jersey headquarters on March 4. The program now originates in Miami, with bureaus in New York and Washington.

The format will remain the same. Tyler Mathisen of CNBC will anchor with Susie Gharib, the current co-anchor, who is under contract through 2013. The co-anchor Tom Hudson and the remaining staff of 18 will leave.

In a telephone interview, Rick Schneider, president of the Miami public station WPBT, where the show is based, called the new owners “a good thing for the program and for the public television system.” Not only will the show survive, but “it will likely be enhanced,” he said. “ ‘N.B.R.’ has always lacked having a major news-gathering organization behind it.”

The purchase is the show’s third change of hands in less than three years. In August 2010, Mykalai Kontilai, an entrepreneur and former mixed martial arts manager, bought it from WPBT, which founded the show in 1979 before the era of 24-hour cable business news. Atalaya Capital Management, Mr. Kontilai’s backer, took over in November 2011, after few of Mr. Kontilai’s ambitious expansion plans were achieved.

In a telephone interview, Nikhil Deogun, CNBC’s senior vice president and editor in chief for business news, said the show’s audience “has very little duplication, as best we can tell” with the CNBC audience. He said it would provide additional opportunities for CNBC journalists.

PBS withdrew its financial support of “Nightly Business Report” in 2011 and stopped distributing it. American Public Television now distributes the show to 180 stations and will continue to do so.

Ratings have drifted lower and the show’s sole financial underwriter, Franklin Templeton Investments, withdrew in August, leading to layoffs and the closing of the Chicago bureau.

In a memorandum to the staff on Thursday, Mr. Schneider wrote, “It has been clear for months, even years, that the existing business model for ‘N.B.R.’ was unsustainable as national production underwriting dried up.”

Mr. Deogun said CNBC would seek new underwriters, adding that NBCUniversal “has a great sales team.”

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Hacking Victims Edge Into Light


Steve Ruark for The New York Times


Alan Paller of the SANS Institute said recently hacked companies were seeking safety in numbers.







SAN FRANCISCO — Hackers have hit thousands of American corporations in the last few years, but few companies ever publicly admit it. Most treat online attacks as a dirty secret best kept from customers, shareholders and competitors, lest the disclosure sink their stock price and tarnish them as hapless.




Rarely have companies broken that silence, usually when the attack is reported by someone else. But in the last few weeks more companies have stepped forward. Twitter, Facebook and Apple have all announced that they were attacked by sophisticated cybercriminals. The New York Times revealed its experience with hackers in a front-page article last month.


The admissions reflect the new way some companies are calculating the risks and benefits of going public. While companies once feared shareholder lawsuits and the ire of the Chinese government, some can’t help but notice that those that make the disclosures are lauded, as Google was, for their bravery. Some fear the embarrassment of being unable to fend off hackers who may still be in high school.


But as hacking revelations become more common, the threat of looking foolish fades and more companies are seizing the opportunity to take the leap in a crowd.


“There is a ‘hide in the noise’ effect right now,” said Alan Paller, director of research at the SANS Institute, a nonprofit security research and education organization. “This is a particularly good time to get out the fact that you got hacked, because if you are one of many, it discounts the starkness of the announcement.”


In 2010, when Google alerted some users of Gmail — political activists, mostly — that it appeared Chinese hackers were trying to read their mail, such disclosures were a rarity. In its announcement, Google said that it was one of many — two dozen — companies that had been targeted by the same group. Google said it was making the announcement, in part, to encourage other companies to open up about the problem.


But of that group, only Intel and Adobe Systems reluctantly stepped forward, and neither provided much detail.


Twitter admitted that it had been hacked this month. Facebook and Apple followed suit two weeks later. Within hours after The Times published its account, The Wall Street Journal chimed in with a report that it, too, had been attacked by what it believed to be Chinese hackers. The Washington Post followed.


Not everyone took advantage of the cover. Bloomberg, for example, has repeatedly denied that its systems were also breached by Chinese hackers, despite several sources that confirmed that its computers were infected with malware.


Computer security experts estimate that more than a thousand companies have been attacked recently. In 2011, security researchers at McAfee unearthed a vast online espionage campaign, called Operation Shady Rat, that found more than 70 organizations had been hit over a five-year period, many in the United States.


“I am convinced that every company in every conceivable industry with significant size and valuable intellectual property and trade secrets has been compromised (or will be shortly) with the great majority of the victims rarely discovering the intrusion or its impact,” Dmitri Alperovitch, then McAfee’s vice president for threat research, wrote in his findings.


“In fact,” said Mr. Alperovitch, now the chief technology officer at Crowdstrike, a security start-up, “I divide the entire set of Fortune Global 2000 firms into two categories: those that know they’ve been compromised and those that don’t yet know.”


Of that group, there are still few admissions. A majority of companies that have at one time or another been the subject of news reports of online attacks refuse to confirm them. The list includes the International Olympic Committee, Exxon Mobil, Baker Hughes, Royal Dutch Shell, BP, ConocoPhillips, Chesapeake Energy, the British energy giant BG Group, the steel maker ArcelorMittal and Coca-Cola.


David E. Sanger contributed reporting from Washington.



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A Digital Shift on Health Data Swells Profits


Jeff Swensen for The New York Times


Dr. Vivek Reddy, a neurologist at the University of Pittsburgh Medical Center, also works on its digital records effort.







It was a tantalizing pitch: come get a piece of a $19 billion government “giveaway.”




The approach came in 2009, in a presentation to doctors by Allscripts Healthcare Solutions of Chicago, a well-connected player in the lucrative business of digital medical records. That February, after years of behind-the-scenes lobbying by Allscripts and others, legislation to promote the use of electronic records was signed into law as part of President Obama’s economic stimulus bill. The rewards, Allscripts suggested, were at hand.


But today, as doctors and hospitals struggle to make new records systems work, the clear winners are big companies like Allscripts that lobbied for that legislation and pushed aside smaller competitors.


While proponents say new record-keeping technologies will one day reduce costs and improve care, profits and sales are soaring now across the records industry. At Allscripts, annual sales have more than doubled from $548 million in 2009 to an estimated $1.44 billion last year, partly reflecting daring acquisitions made on the bet that the legislation would be a boon for the industry. At the Cerner Corporation of Kansas City, Mo., sales rose 60 percent during that period. With money pouring in, top executives are enjoying Wall Street-style paydays.


None of that would have happened without the health records legislation that was included in the 2009 economic stimulus bill — and the lobbying that helped produce it. Along the way, the records industry made hundreds of thousands of dollars of political contributions to both Democrats and Republicans. In some cases, the ties went deeper. Glen E. Tullman, until recently the chief executive of Allscripts, was health technology adviser to the 2008 Obama campaign. As C.E.O. of Allscripts, he visited the White House no fewer than seven times after President Obama took office in 2009, according to White House records.


Mr. Tullman, who left Allscripts late last year after a boardroom power struggle, characterized his activities in Washington as an attempt to educate lawmakers and the administration.


“We really haven’t done any lobbying,” Mr. Tullman said in an interview. “I think it’s very common with every administration that when they want to talk about the automotive industry, they convene automotive executives, and when they want to talk about the Internet, they convene Internet executives.”


Between 2008 and 2012, a time of intense lobbying in the area around the passage of the legislation and how the rules for government incentives would be shaped, Mr. Tullman personally made $225,000 in political contributions. While tens of thousands of those dollars went to the Democratic Senatorial Campaign Committee, money was also being sprinkled toward Senator Max Baucus, the Democratic senator from Montana who is chairman of the Senate Finance Committee, and Jay D. Rockefeller, the Democrat from West Virginia who heads the Commerce Committee. Mr. Tullman said his recent personal contributions to various politicians had largely been driven by his interest in supporting President Obama and in seeing his re-election.


Cerner’s lobbying dollars doubled to nearly $400,000 between 2006 and last year, according to the Center for Responsive Politics. While its political action committee contributed a little to some Democrats in 2008, including Senator Baucus, its contributions last year went almost entirely to Republicans, with a large amount going to the Mitt Romney campaign.


Current and former industry executives say that big digital records companies like Cerner, Allscripts and Epic Systems of Verona, Wis., have reaped enormous rewards because of the legislation they pushed for. “Nothing that these companies did in my eyes was spectacular,” said John Gomez, the former head of technology at Allscripts. “They grew as a result of government incentives.”


Executives at smaller records companies say the legislation cemented the established companies’ leading positions in the field, making it difficult for others to break into the business and innovate. Until the 2009 legislation, growth at the leading records firms was steady; since then, it has been explosive. Annual sales growth at Cerner, for instance, has doubled to 20 percent from 10 percent.


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DealBook: Prosecutors, Shifting Strategy, Build New Wall Street Cases

Criticized for letting Wall Street off the hook after the financial crisis, the Justice Department is building a new model for prosecuting big banks.

In a recent round of actions that shook the financial industry, the government pushed for guilty pleas, rather than just the usual fines and reforms. Prosecutors now aim to apply the approach broadly to financial fraud cases, according to officials involved in the investigations.

Lawyers for several big banks, who spoke on the condition of anonymity, said they were already adjusting their defenses and urging banks to fire employees suspected of wrongdoing in the hope of appeasing authorities.

But critics question whether the new strategy amounts to a symbolic reprimand rather than a sweeping rebuke. So far, the Justice Department has extracted guilty pleas only from remote subsidiaries of big foreign banks, a move that has inflicted reputational damage but little else.

The new strategy first materialized in recent settlements with UBS and the Royal Bank of Scotland, which were accused of manipulating interest rates to bolster profit. As part of a broader deal, the banks’ Japanese subsidiaries pleaded guilty to felony wire fraud.

The settlements present a significant shift. Authorities have long avoided guilty pleas over fears they will destroy the banks and imperil the broader economy. By going after a subsidiary, prosecutors shield the parent company from losing its license, but still send a warning to the financial industry.

The Justice Department plans to continue the campaign as it pursues guilty pleas from other bank subsidiaries suspected of reporting false interest rates, according to the prosecutors and the lawyers who requested anonymity to discuss the cases. Authorities are scrutinizing Citigroup, whose Japanese unit is suspected of rate manipulation, and prosecutors recently accused one former trader there of colluding with other banks in a vast rate-rigging conspiracy.

Prosecutors want the rate-rigging investigation to serve as a template for other financial fraud cases. Two officials, who spoke on condition of anonymity, described a plan to eventually wring an admission of guilt from an entire bank.

“This Department of Justice will continue to hold financial institutions that break the law criminally responsible,” Lanny A. Breuer, the departing head of the agency’s criminal division, said in an interview.

The strategy will face significant roadblocks.

For one, banking regulators are likely to sound alarms about the economy. HSBC avoided charges in a money laundering case last year after concerns arose that an indictment could put the bank out of business. In the first interest rate-rigging case, prosecutors briefly considered criminal charges against an arm of Barclays, but they hesitated given the bank’s cooperation and its importance to the financial system, two people close to the case said.

The Justice Department will also face resistance from Wall Street. In meetings with authorities, banks are trying to distinguish their activities from the bad behavior at UBS and Barclays, according to the industry lawyers. One lawyer who represents Deutsche Bank acknowledged that Wall Street was girding for battle over the push for guilty pleas.

Some lawyers posit that the new approach amounts to a government shakedown, because institutions may plead guilty to dodge an indictment. “I think it’s a step in the wrong direction,” said James R. Copland, the director of the Center for Legal Policy at the Manhattan Institute.

Complicating matters, lawmakers and consumer advocates will continue to complain that banks get off too easily. In the rate manipulation cases, critics have clamored for more potent penalties, seeking convictions against parent companies.

The problems “should provide motivation to prosecutors, regulators and Congress to do more to ensure that this type of behavior is stopped, and that banks and their executives who manipulate markets are held accountable,” said Senator Carl Levin, Democrat of Michigan.

Critics point to the UBS case. Before UBS signed the deal, Japanese authorities assured the bank that a guilty plea would not cost the subsidiary its license, a person involved in the case said. While the case has weighed on the stock price, the subsidiary is operating normally and clients have stayed put, according to people with direct knowledge of the case.

Prosecutors defend their effort, saying it was born from painful experiences over the last decade.

After Arthur Andersen was convicted in 2002, the accounting firm went out of business, taking 28,000 jobs with it. The Supreme Court later overturned the case, prompting the government to alter its approach.

Prosecutors then turned to deferred-prosecution agreements, which suspend charges against corporations in exchange for certain concessions and a promise to behave. But the Justice Department took heat for prosecuting few top bank executives after the financial crisis. A recent “Frontline” documentary portrayed prosecutors as Wall Street apologists.

So the government is seeking a balanced approach, aiming to hold banks accountable without shutting them down. Prosecutors consulted federal policies that required them to weigh action with “collateral consequences” like job losses. Mr. Breuer also collected input from staff, including the head of his fraud unit, Denis J. McInerney, a former defense lawyer who represented Arthur Andersen.

Mr. Breuer eventually deployed a strategy built on guilty pleas for subsidiaries. He imported the model, in part, from his foreign bribery actions and pharmaceutical cases.

“Extracting a guilty plea from a wholly owned subsidiary finally enables the Justice Department to look tough on financial institutions while sparing them from the corporate death penalty,” said Evan T. Barr, a former federal prosecutor who now defends white-collar cases as a partner at Steptoe & Johnson.

As the Arthur Andersen cases fades from memory, some prosecutors say their new approach will lay the groundwork for parent companies to plead guilty.

But first, officials say, they are testing the strategy in the interest rate-rigging case. Authorities suspect that more than a dozen banks falsified reports to influence benchmark interest rates like the London interbank offered rate, or Libor, which underpins the costs for trillions of dollars in financial products like mortgages and credit cards.

Prosecutors focused on Japanese units because e-mail traffic exposed how traders there had routinely manipulated rates to increase profits, officials say. The units also have few ties to American arms of the banks, containing any threat to the economy.

After the Barclays case, authorities shifted to UBS, given the scope of the evidence and the bank’s past brushes with authorities, according to officials. The bank’s Japanese subsidiary was also a hub of rate-rigging activity. “The Justice Department had a clear view on the past of this institution,” said one executive who met with government officials.

Along with paying $1.5 billion in fines, the bank agreed to bolster its controls and have its Japanese unit plead guilty. It was the first big global bank subsidiary to plead guilty in more than two decades.

The Royal Bank of Scotland met a similar fate. The bank’s conduct was less severe than the actions of UBS, but it too had a rogue Japanese subsidiary. The bank announced a $612 million settlement with authorities this month, including a guilty plea in Japan.

Using the settlements as a template, prosecutors are building cases against other banks ensnared in the investigation, people involved in the case said, and guilty pleas are likely. Deutsche Bank is expected to settle with authorities by late 2013, the people said.

Citigroup and JPMorgan Chase, two American banks under scrutiny, pose a thornier challenge. So far, authorities have flexed their newfound muscle with foreign banks.

American regulators may warn that extending the campaign to Citigroup would threaten the company’s stock and prompt an exodus of clients. Japan’s regulators, some feeling upstaged by the recent actions, might raise similar concerns. Citigroup’s lawyers will also push back, people involved in the case said, citing the bank’s cooperation with investigators and emphasizing that wrongdoing never reached upper levels of management. The bank fired the trader recently charged by the Justice Department.

Authorities could counter that Citigroup’s Japanese unit is a repeat offender. It butted heads with Japanese regulators three times over the last decade.

“This is hard-nosed negotiation,” said Samuel W. Buell, a former prosecutor who is now a professor at Duke Law School. “It’s a game of chicken.”

Mark Scott contributed reporting from London and Hiroko Tabuchi from Tokyo.

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The Education Revolution: In China, Families Bet It All on a Child in College


Chang W. Lee/The New York Times


Wu Caoying studied English under her father’s watchful eye in 2006. She is now a sophomore in college. More Photos »







HANJING, China — Wu Yiebing has been going down coal shafts practically every workday of his life, wrestling an electric drill for $500 a month in the choking dust of claustrophobic tunnels, with one goal in mind: paying for his daughter’s education.




His wife, Cao Weiping, toils from dawn to sunset in orchards every day during apple season in May and June. She earns $12 a day tying little plastic bags one at a time around 3,000 young apples on trees, to protect them from insects. The rest of the year she works as a substitute store clerk, earning several dollars a day, all going toward their daughter’s education.


Many families in the West sacrifice to put their children through school, saving for college educations that they hope will lead to a better life. Few efforts can compare with the heavy financial burden that millions of lower-income Chinese parents now endure as they push their children to obtain as much education as possible.


Yet a college degree no longer ensures a well-paying job, because the number of graduates in China has quadrupled in the last decade.


Mr. Wu and Mrs. Cao, who grew up in tiny villages in western China and became migrants in search of better-paying work, have scrimped their entire lives. For nearly two decades, they have lived in a cramped and drafty 200-square-foot house with a thatch roof. They have never owned a car. They do not take vacations — they have never seen the ocean. They have skipped traditional New Year trips to their ancestral village for up to five straight years to save on bus fares and gifts, and for Mr. Wu to earn extra holiday pay in the mines. Despite their frugality, they have essentially no retirement savings.


Thanks to these sacrifices, their daughter, Wu Caoying, is now a 19-year-old college sophomore. She is among the growing millions of Chinese college students who have gone much farther than their parents could have dreamed when they were growing up. For all the hard work of Ms. Wu’s father and mother, however, they aren’t certain it will pay off. Their daughter is ambivalent about staying in school, where the tuition, room and board cost more than half her parents’ combined annual income. A slightly above-average student, she thinks of dropping out, finding a job and earning money.


“Every time my daughter calls home, she says, ‘I don’t want to continue this,’ ” Mrs. Cao said. “And I say, ‘You’ve got to keep studying to take care of us when we get old’, and she says, ‘That’s too much pressure, I don’t want to think about all that responsibility.’ ”


Ms. Wu dreams of working at a big company, but knows that many graduates end up jobless. “I think I may start my own small company,” she says, while acknowledging she doesn’t have the money or experience to run one.


For a rural parent in China, each year of higher education costs six to 15 months’ labor, and it is hard for children from poor families to get scholarships or other government financial support. A year at the average private university in the United States similarly equals almost a year’s income for the average wage earner, while an in-state public university costs about six months’ pay, but financial aid is generally easier to obtain than in China. Moreover, an American family that spends half its income helping a child through college has more spending power with the other half of its income than a rural Chinese family earning less than $5,000 a year.


It isn’t just the cost of college that burdens Chinese parents. They face many fees associated with sending their children to elementary, middle and high schools. Many parents also hire tutors, so their children can score high enough on entrance exams to get into college. American families that invest heavily in their children’s educations can fall back on Medicare, Social Security and other social programs in their old age. Chinese citizens who bet all of their savings on their children’s educations have far fewer options if their offspring are unable to find a job on graduation.


The experiences of Wu Caoying, whose family The New York Times has tracked for seven years, are a window into the expanding educational opportunities and the financial obstacles faced by families all over China.


Her parents’ sacrifices to educate their daughter explain how the country has managed to leap far ahead of the United States in producing college graduates over the last decade, with eight million Chinese now getting degrees annually from universities and community colleges.


But high education costs coincide with slower growth of the Chinese economy and surging unemployment among recent college graduates. Whether young people like Ms. Wu find jobs on graduation that allow them to earn a living, much less support their parents, could test China’s ability to maintain rapid economic growth and preserve political and social stability in the years ahead.


Leaving the Village


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Robo-Signing Fraud Case Is Settled





The mortgage servicing company Lender Processing Services agreed to pay $35 million to resolve a federal criminal investigation into foreclosure fraud, the Justice Department said on Friday.


The settlement resolves allegations over the company’s involvement in what the government called a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage documents in property recorders’ offices nationwide from 2003 to 2009. The practice became known as robo-signing.


The accord also follows a guilty plea last November by Lorraine Brown, the former chief executive of the company’s now-closed DocX unit, to a felony charge of conspiracy to commit mail and wire fraud over the scheme.


Prior to DocX’s closure in 2010, Lender Processing Services had handled more than half of the nation’s foreclosures.


The company entered into a two-year non-prosecution agreement that requires it to meet many conditions, including cooperating in federal investigations, and alerting the government to any abuses in mortgage or foreclosure documentation services at the company.


The company said on Friday that it has a $223 million reserve that covers the Justice Department accord and prior settlements.


Foreclosure abuse became notorious in 2010 as borrowers, politicians and regulators accused lenders of pursuing cases that were based on defective or fraudulent documentation.


Many documents were found to have been signed systematically without being read.


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DealBook: Confidence on Upswing, Mergers Make Comeback

The mega-merger is back.

For the corporate takeover business, the last half-decade was a fallow period. Wall Street deal makers and chief executives, brought low by the global financial crisis, lacked the confidence to strike the audacious multibillion-dollar acquisitions that had defined previous market booms.

Cycles, however, turn, and in the opening weeks of 2013, merger activity has suddenly roared back to life. On Thursday, Berkshire Hathaway, the conglomerate run by Warren E. Buffett, said it had teamed up with Brazilian investors to buy the ketchup maker H. J. Heinz for about $23 billion. And American Airlines and US Airways agreed to merge in a deal valued at $11 billion.

Those transactions come a week after a planned $24 billion buyout of the computer company Dell by its founder, Michael S. Dell, and private equity backers. And Liberty Global, the company controlled by the billionaire media magnate John C. Malone, struck a $16 billion deal to buy the British cable business Virgin Media.

“Since the crisis, one by one, the stars came into alignment, and it was only a matter of time before you had a week like we just had,” said James B. Lee Jr., the vice chairman of JPMorgan Chase.

Still, bankers and lawyers remain circumspect, warning that it is still too early to declare a mergers-and-acquisitions boom like those during the junk bond craze of 1989, the dot-com bubble of 1999 and the leveraged buyout bonanza of 2007. They also say that it is important to pay heed to the excesses that developed during these moments of merger mania, which all ended badly.

A confluence of factors has driven the recent deals. Most visibly, the stock market has been on a tear, with the Standard & Poor’s 500-stock index this week briefly hitting its highest levels since November 2007. Higher share prices have buoyed the confidence of chief executives, who now, instead of retrenching, are looking for ways to expand their businesses.

A number of clouds that hovered over the markets last year have also been removed, eliminating the uncertainty that hampered deal making. Mergers and acquisitions activity in 2012 remained tepid as companies took a wait-and-see approach over the outcome of the presidential election and negotiations over the fiscal cliff. The problems in Europe, which began in earnest in 2011, shut down a lot of potential transactions, but the region has since stabilized.

“When we talk to our corporate clients as well as the bankers, we keep hearing them talk about increased confidence,” said John A. Bick, a partner at the law firm Davis Polk & Wardwell, who advised Heinz on its acquisition by Mr. Buffett and his partners.

Mr. Bick said that mega-mergers had a psychological component, meaning that once transactions start happening, chief executives do not want to be left behind. “In the same way that success breeds success, deals breed more deals,” he said.

A central reason for the return of big transactions is the mountain of cash on corporate balance sheets. After the financial crisis, companies hunkered down, laying off employees and cutting costs. As a result, they generated savings. Today, corporations in the S.& P. 500 are sitting on more than $1 trillion in cash. With interest rates near zero, that money is earning very little in bank accounts, so executives are looking to put it to work by acquiring businesses.

The private equity deal-making machine is also revving up again. The world’s largest buyout firms have hundreds of billions of dollars of “dry powder” — money allotted to deals in Wall Street parlance — and they are on the hunt. The proposed leveraged buyout of Dell, led by Mr. Dell and the investment firm Silver Lake Partners, was the largest private equity transaction since July 2007, when the Blackstone Group acquired the hotel chain Hilton Worldwide for $26 billion just as the credit markets were seizing up.

But perhaps the single biggest factor driving the return of corporate takeovers is the banking system’s renewed health. Corporations often rely on bank loans for financing acquisitions, and the ability of private equity firms to strike multibillion-dollar transactions depends on the willingness of banks to lend them money.

For years, banks, saddled by the toxic mortgage assets weighing on their balance sheets, turned off the lending spigot. But with the housing crisis in the rearview mirror and economic conditions slowly improving, banks are again lining up to provide corporate loans at record-low interest rates to finance acquisitions.

The banks, of course, are major beneficiaries of megadeals, earning big fees from both advising on the transactions and lending money to finance them. Mergers and acquisitions in the United States total $158.7 billion so far this year, according to Thomson Reuters data, more than double the amount in the same period last year. JPMorgan, for example, has benefited from the surge, advising on four big deals in recent weeks, including the Dell bid and Comcast’s $16.7 billion offer for the rest of NBCUniversal that it did not already own.

Mr. Buffett, in a television interview last month, declared that the banks had repaired their businesses and no longer posed a threat to the economy. “The capital ratios are huge, the excesses on the asset aside have been largely cleared out,” said Mr. Buffett, whose acquisition of Heinz will be his second-largest acquisition, behind his $35.9 billion purchase of a majority stake in the railroad company Burlington Northern Santa Fe in 2009.

While Wall Street has an air of giddiness over the year’s start, most deal makers temper their comments about the current environment with warnings about undisciplined behavior like overpaying for deals and borrowing too much to pay for them.

Though private equity firms were battered by the financial crisis, they made it through the downturn on relatively solid ground. Many of their megadeals, like Hilton, looked destined for bankruptcy after the markets collapsed, but they have since recovered. The deals have benefited from an improving economy, as well as robust lending markets that allowed companies to push back the large amounts of debt that were to have come due in the next few years.

But there are still plenty of cautionary tales about the consequences of overpriced, overleveraged takeovers. Consider Energy Future Holdings, the biggest private equity deal in history. Struck at the peak of the merger boom in October 2007, the company has suffered from low natural gas prices and too much debt, and could be forced to restructure this year. Its owners, a group led by Kohlberg Kravis Roberts and TPG, are likely to lose billions.

Even Mr. Buffett made a mistake on Energy Future Holdings, having invested $2 billion in the company’s bonds. He admitted to shareholders last year that the investment was a blunder and would most likely be wiped out.

“In tennis parlance,” Mr. Buffett wrote, “this was a major unforced error.”

Michael J. de la Merced contributed reporting.

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Japanese Economy Contracts and Remains in Recession





TOKYO (AP) — Japan’s economy remained mired in recession late last year, shrinking 0.4 percent in annualized terms for the third straight quarter of contraction on feeble demand at home and overseas.


The government reported Thursday that growth for all of 2012 was 1.9 percent, after a 0.6 percent contraction in 2011 and a 4.7 percent increase in 2010 and a 5.5 percent contraction in 2009.


The figures were worse than expected, as many analysts had forecast the economy may have emerged from recession late last year as the Japanese yen weakened against other major currencies, giving a boost to Japanese export manufacturers.


Prime Minister Shinzo Abe, who took office in late December, is championing aggressive spending and monetary stimulus to help get growth back on track. He has lobbied the central bank to set an inflation target of 2 percent, aimed at breaking out of Japan’s long bout of deflation, or falling prices, that he says are inhibiting corporate investment and growth.


But the Bank of Japan was not expected to announce any major new initiatives from a policy meeting on Thursday. The current central bank governor, Masaaki Shirakawa, is due to leave office on March 19, and Mr. Abe is expected to appoint as his successor an expert who favors his more activist approach to monetary policy.


Last year began on an upbeat note with annual growth in the first quarter at 6 percent as strong government spending on reconstruction from the March 2011 tsunami disaster helped spur demand. But the economy contracted in the second quarter and deteriorated further as frictions with China over a territorial dispute hurt exports to one of Japan’s largest overseas markets.


Despite the dismal data for last year, many in Japan expect at least a temporary bump to growth from higher government spending on public works and other programs. An index measuring consumer confidence, released this week, jumped to its highest level since 2007, the biggest increase in a single month.


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