Finance Blog number 1

The president of scandal-battered Olympus on Thursday called business partnerships an option for shoring up the gaping hole that the huge investment losses it hid for years have left in its balance sheet.

Olympus Corp. met its deadline to avoid being removed from the Tokyo Stock Exchange by filing correct earnings for the April-September first half and for the past five fiscal years on Wednesday.

The deception at Olympus, dating back to the 1990s, to hide 117.7 billion yen ($1.5 billion) in investment losses came to light when former President and Chief Executive Michael Woodford blew the whistle, questioning expensive acquisitions and exorbitant fees for financial advice.

Woodford, a 51-year-old Briton and a rare foreigner to lead a major Japanese company, was fired in October after confronting Olympus directors. Woodford, in town this week to meet with investors and other stakeholders to attempt a comeback, is demanding that the entire board, including President Shuichi Takayama, resign.

The battle over who will lead the camera and medical equipment maker _ embroiled in one of Japan’s worst corporate scandals _ could come to a head at the next shareholders’ meeting. Takayama said that might be held in March or April.

“Capital adequacy ratio is a big problem, and we are considering how we can overcome it,” he told reporters at a Tokyo hotel. “We are considering various options, including a capital tie-up and operational or sales tie-ups.”

Olympus appointed three outsiders to a new reform committee to beef up governance and present a plan to shareholders. The committee is in addition to an earlier panel announced by Takayama, which is investigating the scandal.

The company’s loss of 32.3 billion yen ($414 million) for the first half of the fiscal year, through September, a reversal from a 3.8 billion yen profit the same period a year earlier, was mainly from the economic downturn and losses from Thai flooding, Takayama said.

Woodford said he was opposed to tie-ups and had better ways to get capital for Olympus to shore up its hobbled balance sheet. He promised not to break it up or seek a partner, which may reduce its independence.

“I am very fearful of the current management working with parties to look for strategic alliances, which would mean in the end the loss of our independence,” he told The Associated Press on Thursday.

“Because of the strong cash flows and profitability of the medical business, we could raise funding from additional sources without losing our sovereignty,” he said at a Tokyo hotel.

Olympus should focus on core businesses _ medicine, microscopes, industrial products and cameras and other consumer products _ and stop acquiring unrelated companies, as it had in recent years, he said.

Woodford said he was talking with investors and many “influential people in the Japanese establishment” to line up support for his return at the top. He declined to give specifics, saying the discussions were “delicate.”

It is still unclear if Woodford will manage a comeback. Some people, such as former board member Koji Miyata, see him as a hero and have begun an online campaign to bring back Woodford.

The scandal has prompted soul-searching in Japan Inc. on living up to global standards in governance.

Some experts say laws need to be updated, corporate boards need more outside members and transparency needs to be strengthened. Ruling and opposition legislators met with Woodford earlier this week to hear his ideas about better corporate practices.

No one has been charged in the scandal. But Olympus management has said several top company men were involved in the scheme and has promised to investigate 70 officials, including former and current executives and auditors, to pursue possible criminal charges.

A third-party panel set up by Olympus, including a former Japanese Supreme Court judge, released the findings of an investigation earlier this month, which said top executives who were “rotten to the core” had orchestrated the accounting cover-up spanning three decades.

The fees for financial advice and overvalued acquisitions were part of an elaborate deception utilizing overseas banks and several funds to keep the massive losses off the company’s books, according to Olympus.

Japanese magazine Facta was first to report the dubious money.

Tsuyoshi Kikukawa, who was behind Woodford’s appointment as chief executive and later his firing, has since resigned as chairman. He is among several executives suspected of knowing about the scheme.

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House Republicans intend to propose a gradual increase in Medicare premiums for wealthy seniors to help cover the cost of renewing Social Security payroll tax cuts and benefits for the long-term unemployed, officials said Wednesday.

The precise details remain to be worked out as the leadership consults with rank-and-file Republicans about the legislation, which has grown significantly in recent days and is expected on the House floor next week.

GOP officials described the plan on condition of anonymity because no final decision has been made.

In addition to the extension of payroll tax cuts and jobless benefits that are at the heart of President Barack Obama’s jobs program, House Republicans plan to include a provision to avert a 27 percent cut in payments to doctors who treat Medicare patients. All three face a Dec. 31 deadline for action.

In addition, GOP leaders eager to attract votes for the measure are likely to include conservative-backed provisions to speed the construction of a controversial oil pipeline from Canada to Texas and block a proposed Environmental Protection Agency rule restricting toxic emissions from industrial boilers.

Across the Capitol, Democrats set the stage for a second politically charged vote in the Senate later in the week on their proposed surtax on million-dollar earners to help pay for the renewal of the tax cuts and unemployment benefits.

Senate Republicans blocked an earlier bill along the same lines, and the Democrats’ decision to call for a second showdown comes as they seek to brand GOP lawmakers as protectors of the rich at the expense of the middle class.

The move is “nothing more than another bill that’s been designed to fail, so Democrats can have another week of fun and games on the Senate floor while tens of millions of working Americans go another week wondering whether they’re going to see a smaller paycheck at the end of the year,” said Senate Republican leader Mitch McConnell of Kentucky.

Republicans oppose higher taxes, and GOP aides in the House pointed out that the proposed higher Medicare premiums for the wealthy would fall on some of the same individuals whom Democrats want to tax.

Senate Republicans included higher premiums in their own alternative measure last week. It would have required seniors earning more than $750,000 to pay more for Medicare Part B, which covers doctor visits and other costs apart from the expense of hospitalization.

According to Medicare’s website, monthly Part B premiums will be $99.90 in 2012 for beneficiaries with individual income of $85,000 or less. The cost rises gradually, reaching $319.70 for anyone whose income exceeds $214,000.

The dispute over taxes is one of several that must be settled before legislation can reach Obama’s desk, and Democrats sought to put the onus on Republicans.

Republicans have said in recent days that to cover the cost of doctor fees under Medicare, they intend to cut funds from the year-old health care bill that is the president’s signature domestic achievement.

Sen. Max Baucus, D-Mont., who is chairman of the Senate Finance Committee, dismissed that approach during the day as “not a good idea. That’s going to cause more problems than it solves,” he said, and urged Republicans to concentrate on drafting legislation that can clear both houses.

Speaker John Boehner, R-Ohio, and other GOP leaders must contend not only with Senate Democrats, but also with disgruntled lawmakers inside their own party who are reluctant to extend a payroll tax cut that they claim has failed to produce any jobs. The proposal to take a piece out of the president’s health care bill is likely to be an attractive addition to these Republicans, as is the renewal of current reimbursement rates for doctors who treat Medicare patients.

Officials said the emerging House bill is also likely to extend several features of Medicare that would otherwise revert to lower payments for some hospitals as well as for ambulances in rural areas, some mental health services and therapy services from non-hospital providers.

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ST. LOUIS

British police are investigating whether computers belonging to former government minister Peter Hain were hacked by the tabloid News of the World while he was the official responsible for Northern Ireland, Hain’s office said Wednesday.

It said in a statement that Hain had met with police officers “regarding an investigation into the alleged hacking of his official and personal computers during his time as Secretary of State for Northern Ireland.”

Hain was Northern Ireland secretary between 2005 and 2007 and would have had access to classified intelligence information.

Police are investigating phone hacking by the Rupert Murdoch-owned newspaper have set up a parallel probe into whether computers also were targeted.

Murdoch’s News International said it was “co-operating fully with the police” on all investigations.

Earlier Wednesday, Alastair Campbell, Tony Blair’s former spin doctor, told a media ethics inquiry set up in the wake of the hacking scandal that a minority of journalists had turned the country’s press “putrid” and tarnished the whole industry. Campbell said journalists such as those who hacked phones for the News of the World tabloid had “besmirched the name” of almost every other reporter in the country.

“A very, very small number of people have completely changed the newspaper industry,” said Campbell, who is credited with running a sophisticated _ and manipulative _ media operation when he worked for the then-prime minister at 10 Downing Street between 1997 and 2003.

“We have a press that has just become frankly putrid in many of its elements,” Campbell said, criticizing the “inhumane treatment” meted out to celebrities and ordinary people alike by newspapers in relentless pursuit of exclusives.

Campbell was giving evidence to Judge Brian Leveson’s inquiry, which was established to examine media ethics and practices and recommend changes to Britain’s system of media self-regulation.

Prime Minister David Cameron set up the inquiry in response to the scandal that began with the exposure of illegal eavesdropping by the News of the World.

Murdoch shut down the tabloid in July after evidence emerged that it had accessed the mobile phone voice mails of celebrities, politicians and even crime victims in its search for scoops.

Campbell said police had told him details about his working life were included in the notes of private investigator Glenn Mulcaire, who worked for the News of the World and was jailed in 2007 for phone hacking.

In a written witness statement, Campbell said he suspected the phone of Blair’s wife, Cherie, had been hacked _ although he acknowledged he had no proof.

He said stories about her “often involved details of where Cherie was going, the kind of thing routinely discussed on phones when planning visits, private as well as public.”

He said phone hacking could explain how the Daily Mirror learned that Cherie Blair was pregnant in 1999.

“As I recall it, at the time only a tiny number of people in Downing Street knew that she was pregnant,” Campbell said. “I have heard all sorts of stories as to how the information got out, but none of them strike me as credible.”

Campbell told the inquiry he had accused Cherie Blair’s adviser Carole Caplin of tipping off the press about Cherie Blair’s whereabouts. Caplin has since been told by police her phone may have been hacked.

Campbell said he had apologized to Caplin for blaming her.

More than a dozen current and former News of the World journalists and editors have been arrested, and two top London police officers and several senior Murdoch executives have resigned over the still-unfolding hacking scandal.

Police said they had made a new arrest, a 31-year-old woman detained in northern England on Wednesday. Her name was not disclosed, although media including Sky News _ which is 39 percent owned by Murdoch’s News Corp. _ identified her as a former News of the World reporter.

The only people charged with crimes so far are Mulcaire and former News of the World reporter Clive Goodman, who were jailed in 2007 for hacking into the voicemails of royal aides.

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A pair of triple button Ugg boots for just $209 at a U.S. online retailer looks like a better deal than the $285 price tag on Ugg

Asian stock markets edged higher Thursday as speculation that China might ease its monetary policy soothed fears that the German economy _ Europe’s strongest _ may be succumbing to the continent’s debt crisis.

Benchmark oil hovered above $96 per barrel while the dollar fell against the euro and the yen.

Hong Kong’s Hang Seng posted a 0.5 percent gain at 17,944.72. South Korea’s Kospi rose 0.4 percent to 1,790.29 and Australia’s S&P/ASX 200 gained marginally to 4,052.30. Benchmarks in Singapore and Taiwan also rose.

Japan’s Nikkei 225, reopening after a one-day public holiday, fell 1.3 percent to 8,208.47. Shares in India, Malaysia and Indonesia also fell.

Speculation that China’s central bank was aiming to ease its tight monetary policy helped spur a wave of buying in Hong Kong, analysts said. But the official Xinhua News Agency said Thursday the move _ lowering reserve requirements for six rural banks in eastern Zhejiang _ was administrative rather a policy shift. The banks’ reserve requirements had been raised a year earlier after they failed to lend enough to farming businesses.

There have been signs that China’s campaign of interest rate hikes and credit controls to tame stubbornly high inflation has been working, giving it leeway to ease monetary policy as the world economy stumbles.

“The positive catalyst today is the expectation that the China tightening cycle might loosen,” said Jackson Wong, vice president at Tanrich Securities in Hong Kong.

The chatter helped push up Chinese banking shares. Hong Kong-listed Agricultural Bank of China Ltd. jumped 3.3 percent and Industrial & Commercial Bank of China, the country’s biggest commercial lender, rose 1.9 percent.

Global markets were spooked Wednesday by the poor results at an auction of German debt, which met with only 60 percent demand. Germany’s Financial Agency blamed “the extraordinarily nervous market environment payday loans.”

The weak buying suggests that Europe’s crisis might be infecting strong nations that are crucial to keeping the euro currency afloat. Germany bears much of the burden of bailing out weaker neighbors such as Greece and Portugal.

Analysts at Credit Agricole CIB said the European debt crisis remains “the major concern for the markets” and that the German debt auction signals the spread of “the contagion to hard core economies” in the region.

Borrowing costs for Italy and Spain rose from levels that already were considered dangerously high. Europe lacks the resources to bail out those countries, its third- and fourth-biggest economies.

In the U.S., the government released a mixed batch of economic reports. Slightly more people applied for unemployment benefits last week, a sign that layoffs continue.

Consumer spending was sluggish but incomes rose a bit more than expected. Orders for long-lasting manufactured products fell for a second month and business investment dropped off.

The Dow fell 2.1 percent to close at 11,257.55. The Standard & Poor’s 500 index fell 2.2 percent to 1,161.79. The Nasdaq fell 2.4 percent to 2,460.08.

U.S. markets will be closed on Thursday for the Thanksgiving holiday and will have shortened hours on Friday.

Benchmark crude for January delivery was up 4 cents at $96.21 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.84 to settle at $96.17 in New York on Wednesday.

In currency trading, the euro rose to $1.3379 from $1.3326 late Wednesday in New York. The dollar dropped to 77.07 yen from 77.35 yen.

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Students clashed with police across Italy in protests against budget cuts, while transport strikes idled buses and trains Thursday, as Italian Premier Mario Monti prepared to unveil his anti-crisis strategy ahead of a confidence vote in his day-old government.

Police in riot gear scuffled with students in Milan, where they planned to march to Bocconi University, which forms Italy’s business elite. Monti, an economist and former European Union competition comissioner, is Bocconi’s president.

Monti formed his government Wednesday, shunning politicians and turning to fellow professors, bankers and other business figures to fill key cabinet posts. His administration is tasked with restoring confidence in the country’s financial future and avoiding a worsening in the eurozone’s debt crisis.

But his choice of unelected experts to lead the government and the prospect of tough reforms have fueled unrest among some Italians.

“The government of the banks,” read one placard held by a youth marching in the protest in Milan.

In Palermo, Sicily, demonstrators hurled eggs and smoke bombs at a bank, and protesters threw rocks at police who battled back with pepper sprays, the Italian news agency ANSA said. One protester was injured in the head in Palermo, where police charged demonstrators who were trying to occupy another bank, it said.

In Rome, hundreds of students gathered outside Sapienza University, while others assembled near the main train station. They planned to march to the Senate, where Monti was scheduled to speak ahead of an evening confidence vote on the new government.

Monti’s cabinet took the place of the center-right government led for 3 1/2 years by media mogul Silvio Berlusconi, stepped down last week, the victim of markets punishing Italy for its escalating public debt and stubbornly stagnant economy.

As Berlusconi’s squabbling coalition argued for months over how to attack the crisis, Italian unions and industrialists pressed for measures to encourage job creation and revive the economy.

Parliament gave final approval Saturday to a package that will reform pensions, slash state spending and open up the economy guaranteed cash advance. Hours later, Berlusconi resigned, paving the way for Italy’s president to ask Monti, a former European Union competition commissioner, to form a government that could tackle the crisis.

But many Italians are expecting to swallow harsher medicine, including a possible return of home property taxes which Berlusconi abolished, a special tax on wealth, and a faster increase in the retirement age.

Antonio Romano, who was distributing leaflets to protesters, said the government’s strategy was to “make the workers and retired people pay for the crisis, not those who provoked the crisis, I mean big business, bankers.”

“Income for all, debt for none,” read the spray-painted letters on a white sheet affixed to a fence in Palermo. University and high school students, as well as young people unable to find full-time jobs joined the protest.

In Rome, marcher Titti Mazzacane said she was skeptical about the new government. While Monti chose “decent and competent people,” the government … “is a little bit too free-market liberal. I am a bit scared,” said the 53-year-old elementary school teacher.

A transit strike of several hours idled the subway system and many buses in Rome. A similar walkout in Milan to press for better work contracts was also called.

State railways said a 24-hour nationwide train strike, which was called by one small union affected only 5 percent of the train rains. Train workers have been pushing for better work rules.

Alitalia warned that a four-hour strike, from noon to 4 p.m. (1100 GMT-1500 GMT) in the air travel sector could cause flight delays, and said it was reducing the number of flights as a precaution during the four-hour window. It noted that the walkout mainly involved air traffic controllers and airport workers and not Alitalia personnel.

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Asian stock markets were mostly higher Friday following signs of progress in debt plagued Europe _ a successful bond sale in Italy and the naming of a new leader in Greece.

Hong Kong’s Hang Seng gained 0.4 percent to 19,035.94 and South Korea’s Kopsi added 1.2 percent to 1,835.34. Australia’s S&P/ASX 200 rose 0.2 percent at 4,251.70. Benchmarks in Singapore, Taiwan and New Zealand also rose.

After opening higher, Japan’s Nikkei 225 index slipped 0.1 percent to 8,492.36,

Investors were calmed after Greece _ which is struggling to pull back from the brink of bankruptcy _ named Lucas Papademos, a respected economist, as its new prime minister on Thursday.

An additional sign of stability came after Italy was able to borrow $6.8 billion at lower interest rates than analysts expected. On Wednesday, the rise in Italy’s 10-year bond yield to well over 7 percent stoked panic in financial markets that the country was heading toward a Greece-style debt crisis.

Traders are also fretting that debt troubles in Italy and Greece could blow up into a massive liquidity crisis and lead to a global financial meltdown payday advance low fees.

In New York on Thursday, the Dow Jones industrial average rose 1 percent to close at 11,893.86. It plunged 389 points Wednesday after Italy’s borrowing rates soared and talks in Greece to name a new prime minister broke down.

Positive economic data from the U.S. also boosted hopes that the world’s No. 1 economy would avoid a double dip recession.

The Labor Department reported early Thursday that the number of people applying for unemployment benefits in the U.S. fell to 390,000 last week _ the fewest since April. The data suggested layoffs are easing and that the economy grew slightly better over the summer than estimated.

The S&P 500 index gained 0.9 percent to 1,239.70. The Nasdaq rose 0.1 percent to 2,625.15.

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Pressure mounted on Greece’s two main political parties on Wednesday to wrap up three days of critical power-sharing talks and name a new prime minister to take over at the helm of an interim government.

Over the past couple of days, attention has focused more on Rome than on Athens amid increasing concerns that Italy’s economy was heading the same way as Greece’s. The fear that Italy is running out of time to get a handle on its debts hit markets in Europe hard Wednesday even though Italy’s Premier Silvio Berlusconi pledged to stand down, echoing a similar decision from Greek Prime Minister George Papandreou.

Greek officials defended the time it was taking for the new unity government to be established. Greece’s big two political parties, the Socialist PASOK party and the conservative New Democracy, are renowned for their opposition to each other and have rarely worked together since the rejection of the monarchy in 1974.

Papandreou was due to hold with Greece’s president at 5:00 p.m. (1500 GMT), a possible indication that a conclusion may have been reached.

Papandreou’s office said the premier spoke by telephone with French President Nicolas Sarkozy Wednesday morning and discussed “the developments in Europe and the eurozone,” as well as the power-sharing negotiations in Athens.

Sarkozy’s office said Papandreou informed the French president “of the imminent (formation) of a new government in Greece supported by the majority and the opposition.”

Former European Central Bank vice president Lucas Papademos had been tipped to become the interim prime minister, but it was unclear whether he remained the favored candidate by Wednesday.

By early afternoon, the conservative opposition was issuing angry statements demanding a swift conclusion to the talks, and blaming the embarassing delay on the current government.

“The solution is in the hands of Mr. Papandreou,” said a statement from the New Democracy party. “No further delay is conceivable. We must finally finish this.”

Earlier, deputy government spokesman Angelos Tolkas had said the new government would be announced later in the day, but gave no indication who the new prime minister would be. Similar comments had been made on Tuesday, too.

“This process is new to the country,” Tolkas told television channel Skai in the morning cash advance companies. “So I think three days was a reasonable time for the consultations to be made and for each side to make the necessary concession.”

On Tuesday, Papandreou’s ministers offered their resignations as part of the process of creating the new government, which is only expected to last until February when early elections are to be held.

The new government will be tasked to secure the country’s new euro130 billion ($179 billion) European rescue package and then get it through parliament. That approval will allow the release of a euro8 billion ($11 billion) loan installment from its existing bailout. Without the funds, Greece will go bankrupt before Christmas, potentially wrecking Europe’s banking system and sending the global economy back into recession.

The political crisis erupted last week, when Papandreou said he would put the new European rescue package to a referendum. Other eurozone nations were horrified by the delay, markets around the world tanked and Greece’s international creditors froze the payment of the next bailout installment.

On Monday, eurozone finance ministers said the heads of the two main parties had to commit in writing to the terms of the country’s bailouts before Athens can receive the next loan installment.

Government officials in Greece say the written agreement requires the signatures of Papandreou, New Democracy leader Antonis Samaras, the Bank of Greece governor, the new coalition prime minister and the new finance minister _ a demand that has prompted an angry response from Greece’s conservatives.

Greece has survived since May 2010 on a euro110 billion ($150 billion) bailout package from its eurozone partners and the International Monetary Fund. The second rescue package involves private bondholders voluntarily agreeing to cancel 50 percent of their Greek debt.

In return for the rescue funds, Greece has endured 20 months of punishing austerity measures. The efforts by Papandreou’s government to keep the country solvent have prompted violent protests, crippling strikes and a sharp decline in living standards for most Greeks.

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