Archive for July 14th, 2009

NEW YORK: Former General Motors CEO Rick Wagoner will receive 8.5 million over the next five years — a reduction of about 12 million in his retirement package, according to a filing with the Securities and Exchange Commission Tuesday evening.The filing was made by Motors Liquidation Co. (GMGMQ), the company that holds the unwanted assets and liabilities the automaker left behind when General Motors emerged from bankruptcy Friday.The filing shows that Wagoner will get about 1.7 million a year for the next five years, and after that he will receive about 74,000 a year for the rest of his life.The filing said that Wagoner agreed to the reduction in benefits. The deal takes effect Aug. 1. GM declined to comment on the filing.The company’s previous filing on the subject in March estimated that the value of Wagoner’s retirement package was about 20 million. Those estimates did not include Wagoner’s stock holdings in the automaker. All GM shareholders had their investments wiped out by the bankruptcy filing.Wagoner had just over 200,000 shares of GM’s stock, and options for 4.3 million additional shares, according to recent filings. It is not known if he sold any of those shares after he departed the company and the value of those shares plunged in the two months before the bankruptcy filing.His annual pension payments were reduced 10% to 74,000. The cut is in line with the pension reductions imposed on other salaried GM retirees.Wagoner, 56, had been CEO of the company since 2000, and had worked at GM since 1977, joining the automaker soon after graduating from Harvard’s business school. Wagoner’s departure was announced March 29. The next day, President Obama pledged additional help to keep GM in business, but Wagoner’s exit was one of the conditions of that aid.0:00
/1:21New GM’s management changesThe Treasury Department gave or pledged 50 billion in help to GM. The company, which filed for bankruptcy protection on June 1, is now 60.8% owned by U.S. taxpayers.
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Source:CNN

NEW YORK: There may be reasons to tax the rich more, as a lot of people in Washington are talking about doing. But to raise taxes on them, and only them, to pay for the country’s most ambitious proposals like health care reform, is a problem, experts say.If nothing else, it makes for some bad math.”We don’t have enough rich people. We could tax the wealthy to extraordinary levels. But we cannot afford everything we want,” said Ken Kies, a former director of the Joint Committee on Taxation and currently a tax lobbyist for businesses including insurers.Yet, rich households are the focus of several revenue generating proposals to help pay for health care reform and other endeavors.Income surtax: Key committees in the House on Tuesday released a proposal that would impose an income surtax on high-income families — an additional tax on income over a certain threshold. The surtax applied in full would range from 1% to 2% for couples making between 350,000 and 500,000. It would range from 1.5% to 3% for couples making between 500,000 and 1 million. And it would be 5.4% for families making more than 1 million.Millionaire’s tax: The Senate is said to be considering a “millionaire’s tax” of 5% levied on single filers making more than 500,000 and joint filers making more than 1 million.Deduction limit: President Obama has proposed limiting the value of itemized deductions for high-income taxpayers. One idea under consideration in the Senate is to limit the mortgage interest deduction for the wealthy, although that idea is almost certain to face strong pushback from those with ties to the real estate industry, said Jaret Seiberg, the financial services policy analyst of the Washington Research Group, a unit of Concept Capital.Expanded Medicare tax: Senate leaders are also considering applying the 1.45% Medicare tax paid by individuals to capital gains and dividends, and possibly also on income from properties and partnerships. Currently, the Medicare tax is only levied on earned income, such as wages.Health care isn’t the only big-ticket item driving the push to raise rates on the rich.Obama has said he wants to make the tax system fairer and raise revenue by letting many of the 2001 and 2003 Bush tax cuts expire for high-income taxpayers.He also wants to help pay for Social Security reform by subjecting more income to the Social Security tax. Currently, individuals’ half of the payroll tax is 6.2% on the first 106,800 of wages. Under a proposal from Obama, people would also then pay between 1% to 2% on income over 250,000.Finally, Obama has directed his tax reform panel to recommend ways to raise revenue but not increase taxes for families making less than 250,000. That suggests those at higher levels are fair game.The problem with taxing only the richSome of the big ideas kicking around Washington these days may have merit and may be worth pursuing.But they’re not going to be enough if the goals are to enact new initiatives like health reform without adding to the deficit, and without taxing any family making less than 250,000, experts say.”There’s an argument for making the tax system more progressive,” said Len Burman, director of the Tax Policy Center. “[But] people are going to have to pay tax or come to terms with smaller government. Right now there’s enormous pressure for the government to do more and more.”And by not letting the Bush tax cuts expire for families making less than 250,000, the administration is forfeiting an estimated 2.1 trillion in revenue over 10 years.Meanwhile, the federal debt held by the public is scheduled to rise from 41% of gross domestic product to 82% by 2019 under the president’s proposed budget, according to the Congressional Budget Office. That already assumes the majority of Bush tax cuts expire for upper-income taxpayers.At the same time, tax burdens across all income groups have been fairly low historically speaking. Although they pay the lion’s share of income tax dollars collected, high-income taxpayers benefited disproportionately from the Bush tax cuts. But those same tax cuts also increased the ranks of those who end up owing no income tax – the majority of whom are not high income. The Tax Policy Center now estimates that after taking the tax breaks for which they’re eligible, 47% of tax-filing households will have no federal income tax liability this year.Evasion is another concern tax policy experts raise when rates are hiked too high or too frequently. If high income taxpayers feel their tax burden too burdensome, they are more likely to seek out legitimate tax shelters. But also the higher rates go, Kies said, “the more it creates an atmosphere for cheating.”

Source:CNN

NEW YORK: Intel Corp. said Tuesday that its second-quarter sales fell compared to the same quarter a year ago, but that business is picking up fast. Even as revenue declined from last year, sales figures were better than what analysts had expected. Profits for the quarter were stung by a one-time fine from the European Commission.Sales fell 1.4 billion to 8.02 billion from 9.47 billion in the second quarter of 2008. Analysts were looking for revenue of 7.28 billion, according to a consensus estimate of analysts polled by Thomson Reuters.Shares rose 34 cents to close at 16.83 during regular session trade on Tuesday, but surged as much as 7% in after-hours trading. In May, European regulators charged Intel with a record fine of 1.45 billion for violating antitrust laws by unfairly paying computer makers to delay or even cancel products that contained chips made by AMD. Intel disagrees with the ruling. Intel’s primary rival, Advanced Micro Devices (AMD, Fortune 500), will report on its second quarter in one week. Taking into account the one-time charge, the Santa Clara, Calif.-based company’s net income was 1 billion, or 18 cents per share, for the three months ended June 30, compared with net income of 1.6 billion, or 28 cents per share, for the same quarter one year ago.A consensus estimate of analysts polled by Reuters had forecast a profit of 8 cents per share. Without adjusting for the one-time charge from European regulators, Intel posted a loss of 398 million, or 7 cents per share. “Intel’s second-quarter results reflect improving conditions in the PC market segment with our strongest first- to second-quarter growth since 1988 and a clear expectation for a seasonally stronger second half,” Paul Otellini, Intel president and CEO, said in a statement. Intel (INTC, Fortune 500) is something of a bellwether for the tech sector because investors view its results as a forward-looking indicator of spending on personal computers and servers. Intel makes the chips that power PC, and when manufacturers anticipate more consumer demand, they increase their purchasing with Intel.Consumers and businesses have been looking to get the extra mile out of their computers — and put off buying a new one — as they try to save money in the recession. Sluggish PC sales have stung Intel, and investors are waiting to see whether a rebound in PC sales will be enough to revive Intel. 0:00
/3:01Google bets on cloud computingIntel and Advanced Micro Devices have the market cornered for the chips that go into standard personal computers, while Samsung and Texas Instruments (TXN, Fortune 500) have most of the market share for mobile-phone processors. At the end of June, however, Intel started working its way into the cell phone business by announcing a deal with the number-one cell phone maker, Nokia (NOK). At the time of the announcement, Nokia and Intel would not provide any product details other than saying that they would collaborate to developer a new line of “mobile computing devices.”Intel is the first of three major technology companies to report its second-quarter financial performance this week: Google (GOOG, Fortune 500) and IBM (IBM, Fortune 500) are both set to report on Thursday after the bell.

NEW YORK (Fortune) — The Goldman Sachs gravy train is back on track. The New York-based securities firm posted a 3.4 billion second-quarter profit Tuesday. The firm is clearly bouncing back from the fall market meltdown that prompted government officials to prop up Goldman and its rivals with taxpayer dollars. The first-half rebound should bode well for Goldman’s (GS, Fortune 500) 29,400 workers when bonus season rolls around. The average Goldman worker could end up taking home between 12 and 15 times the typical American family’s income. In the first half of 2009, Goldman reported compensation expenses — reflecting the cost of salaries, benefits and severance payouts, as well as estimated year-end bonus payments — of 11.4 billion. That’s up from 8.5 billion in the first half of 2008 and 11 billion in the first half of 2007. Were the firm to set aside bonuses at the same rate in the second half, the compensation pool would hit a record 22.8 billion — and the average Goldman worker would stand to make 773,000 for 2009, more than doubling their 2008 take. That would eclipse the 662,000 Goldman spent on its average worker in 2007, according to the firm’s regulatory filings. Median household income was 50,233 in 2007, according to the most recent Census Bureau data. Some fans of the firm don’t believe Goldman’s payout record is ready to fall just yet. Guy Moszkowski, an analyst at Bank of America/Merrill Lynch who rates the stock buy, estimated last week that Goldman’s compensation costs would rise 64% in 2009 to 17.9 billion — or 609,000 per employee. While the firm tends to set aside about half of revenue for compensation expenses in the first three quarters of a given year, it often accrues proportionally less in the fourth quarter, when bonus decisions are made. In recent years Goldman has paid out between 42% and 49% of full-year revenue as compensation, according to Merrill data. Compensation expense has been greater in the first half in each of the past three years.Even if Goldman doesn’t set a record this year, the outsize pay numbers could make it the target of more populist anger at a time when the economy is sputtering. Goldman has come under scrutiny over the past year for its connections — numerous former execs serve in government — and for the windfall it received in the bailout of AIG. 0:00
/4:22Goldman: Golden egg of Wall St.Even so, some investors question the urge to make Goldman’s soaring paychecks into a Capitol Hill sideshow.David Merkel, chief economist at broker-dealer Finacorp Securities, notes that unlike failed rivals such as Merrill Lynch, Lehman Brothers and Bear Stearns, Goldman raised capital when it was able to, held abundant cash in reserve and shed much of its real estate risk before the markets crashed in 2007. That’s not to say Goldman’s connections — former Treasury Secretary Henry Paulson was previously CEO — didn’t come in handy.The firm took 10 billion in Troubled Asset Relief Program funds, which it has since repaid, and has borrowed tens of billions more under a government-guaranteed debt program. The firm also received billions of taxpayer dollars in last fall’s rescue of mega-insurer American International Group (AIG, Fortune 500). Now, with much of its competition on Wall Street having vanished, the firm is left to take in “monopoly-type profits,” Merkel said — perhaps another unanticipated consequence of the government’s rush last fall to head off financial catastrophe.”Look, I hate the corporate welfare,” said Merkel. “But at least Goldman did play all its cards right.”

CHICAGO (Reuters) — US Airways Group Tuesday said it would reduce airport staffing by 600 jobs this fall because of weak demand for business travel and declining revenue.In a note to employees, the company’s Chief Operating Officer Robert Isom said the cuts would occur in various of its airport-based operations. Isom said previous efforts to reduce US Airways’ work force were possible through attrition.”In today’s economy, however, this is no longer the case with attrition hovering in the low single digits,” Isom said. “So, we find ourselves with more employees than our operation requires.”The US airline industry has been severely battered by the economic recession that has eroded travel budgets. Carriers undertook sweeping downsizing last year and some airlines continue to shrink in 2009.Shares of US Airways (LCC, Fortune 500) were down 1.42% at 2.08 on the New York Stock Exchange.

Source:CNN

NEW YORK (Fortune) — Texas oil magnate T. Boone Pickens may have postponed his plans to build the world’s largest wind farm in Texas, but he’s come closer to accomplishing another goal: Pickens visited the nation’s capitol last week to help Senate Majority Leader Harry Reid (D-Nev.), Senator Orrin Hatch (R-Utah), and Senator Robert Menendez (D-N.J.) introduce a bipartisan bill designed to bring natural gas vehicles to the mainstream American market. Pickens’s Washington, D.C., trip marked the conclusion of his “Pickens Plan” — a much-discussed yearlong crusade to end America’s dependence on foreign oil. Now convinced that natural gas’s low price makes it more viable than expensive wind technology, Pickens stopped by Fortune’s offices to reflect on his 60 million campaign to promote alternative sources of energy. The takeaway message: Natural gas must replace petroleum. “It’s cleaner, it’s cheaper, it’s ours, and it’s abundant,” Pickens told Fortune staffers. “And boy, you can’t beat that.”Excerpts follow:On Washington’s failures…”Washington did not understand the problem [with relying on foreign oil], and they don’t understand energy. They don’t understand what it’s doing to the country, they don’t understand the addiction. It just kind of goes along because of one thing: For forty years you had no leadership and you had cheap oil. So what’d you do? You keep using more and more oil….”When we kicked off [the Pickens Plan] this time last year, you had 4.11 gasoline, which helped the kick-off. And you were importing 68% of the oil in this country. If you’re going to pay 140 a barrel, it’s going to cost you 700 billion…. Now, fortunately, that 140 didn’t hold up, and the price dropped. But it’s still the greatest transfer of wealth from one group to another group.”On how natural gas will become the future…”[Natural gas is] 50% cleaner than diesel and gasoline. So you’re getting all kinds of pluses with the natural gas. What are the minuses? The infrastructure isn’t quite there. But it will get there. Don’t worry about it. The government doesn’t have to put any infrastructure in. If the cars are still there, people will build stations to fuel the cars.0:00
/2:58Pickens: Wind farm will come”The [natural gas vehicle] technology is there. It’s in place. It works. There’s 10 million vehicles in the world today on natural gas, and 142,000 of them are in the United States. What the fuel is is a bridge to [newer alternative energy technologies]. It’s what you have. It’s not forever.”On why natural gas must become the future…”This is going to have to happen because it’s a security issue for the country. I mean, you’re buying oil from your enemy. With people around the world, our credibility isn’t worth a hoot because of that reason. They cannot understand why we’re funding both sides of the war.”On how the world views America…”[An Irish colleague told me,] ‘You are the biggest importer of oil of any country in the world…. Out of 85 million barrels a day, the United States uses 21 million. They’re using 25% of all the oil produced in the world every day with 4% of the population. How do you justify that?’ I said, ‘I don’t. I don’t even try to justify it.’”And I said, ‘How do you think the rest of the world sees us?’ And he said, ‘I can tell you how we feel about it. We think you’re stupid to buy your oil from the enemy.’”See, I don’t understand why the other side of this equation doesn’t pin it on us, America, and say, ‘Hey, you’re using 25% of the world’s oil with 4% of the population. You’re the problem. Just cut yours down in line with the rest of the world, and hell, we’ll have all the oil anybody could ever want.’”On Iraq…”We got nothing out of Iraq. We’ve lost 4,000 people and spent 2 trillion, and we have goddamn nothing. Okay, well, we can get a call on the oil [at the market price]. And I took that to the White House last April, a year ago, when Bush was there, and I said, ‘Don’t leave office without getting a call on the Iraqi oil.’”Bush said, ‘They’ll accuse me of doing the Iraq war [for oil].’ And I said, ‘Hey, that was a long time ago. Since then we’ve lost 4,000 people and spent 2 trillion. We’re entitled to it now.’”On what we can learn from Iran…”Iranians have already switched everything to natural gas. Why? Because they have an abundance of natural gas. It’s cheaper, it’s cleaner, and it’s theirs. We have the same dynamics going for us, and we’re sitting here not doing it. You keep saying, ‘Well if it’s so good, why aren’t we doing it?’ And I’m saying we haven’t had the leadership to promote it.”On a gas tax…”They all ask me in Washington, ‘How do you feel about a gas tax?’ I said, ‘I can stand it a lot easier than you can — I’m not running for reelection.’ Sure, go ahead and put a gas tax on….”You sell [natural gas] on the patriotic angle, and say we can get it cleaner, we can get it for the same price, and it’s ours. Hell, you’re creating jobs. Every time you do it you’re creating jobs. Right now, when you buy foreign oil, your money’s gone. You [do] see it again: It comes right back in and buys your assets.”On why American energy, no matter what…”The way I look at it, everything that’s made here is good. Because it creates jobs and pays taxes, and it gets [us away] from foreign oil. So everything I can do here helps the country….”I’ve had the coal guys come to me and say, ‘Hey, don’t knock our product.’ And I say, ‘Look, I’m for anything that’s American.’ Would I rather have natural gas power than coal power? Yeah, because it’s much cleaner than coal. But at the same time, you can’t. That’s not realistic to shut down all your coal power. You can’t do that.”On changing the social climate in America…”This is all about a move, a tipping point, where everyone says we’ve got to get off foreign oil. We need to get on our own resources. And then it’s 20 minutes before Sunday School class — when everybody’s drinking coffee and talking about how to straighten the world out — and somebody says, ‘I notice you’re still driving a car using foreign gasoline.’ … You’re going to feel embarrassed. At some point you will be challenged, ‘Why are you continuing to use foreign oil?’”On where we go from here…”You need to conserve; you have to conserve. We could be much better than we are. I can’t even believe SUVs…. If we were into wind, then in ten years we’d be so much more efficient, we’d know more about it, we’d do a better job. And solar, too. People say that solar will never work. It won’t work with that attitude, I’ll tell you that.”You gotta realize where we are and what we’re doing to ourselves. We have actually set up a trap, we crawled in the trap, and we’re real close to closing the door on the trap. And we cannot do that when we have resources here that can replace what’s gotten us into the problem.”

Source:CNN

NEW YORK: Big businesses are battling to take home chunks of the government’s billion-dollar stimulus pie and AT&T is among the leaders on the telecom front.That comes as little surprise, given its size and resources. AT&T (T, Fortune 500) is by far the nation’s largest telecom company, racking up 124 billion in sales last year. That’s nearly double the revenue logged by its closest competitor, Verizon (VZ, Fortune 500).AT&T also has a huge client base, which includes some of the largest federal and local government contracts. The company has been using that base as a springboard to search out more projects, especially as the consumer side of its business slumps in the recession.”Every conversation we have with federal agencies is about stimulus dollars and how we can help,” said Don Herring, senior vice president of AT&T Government Solutions. The process. AT&T has vast resources and is not afraid to use them. “We have full teams, assigned to every agency in the federal government, who try to better understand the nuances of every agency’s mission and what they need,” said Herring. “On a weekly basis, we’ll say, ‘Here’s another idea about how you may want to do something.’”Requests are coming from clients as well.”Customers have been asking us how we can help them meet their technology and infrastructure modernization goals for stimulus,” said Sherry Charles, AT&T’s vice president of Wholesale and GEM Solutions. “It helps that we have longstanding relations with our customers.”0:00
/2:30Stimulus stumbleThe company said the process is identical to how it goes about hunting for other government contracts, which AT&T said is a roughly a 65 billion business for tech firms annually. Sometimes agencies give projects a direct go-ahead, but more often they request formal proposals so projects can be opened up for broader bidding. So far, the stimulus process has been slow going, Herring said, with only some of the basic infrastructure funding trickling out. AT&T’s first stimulus-related contract came about through a prior relationship with a client: 419,000 to upgrade circuits in several Social Security Administration offices across the country. It’s small relative to the 14.3 billion in stimulus funds already awarded to companies. But Herring noted that the vast majority of stimulus projects (more than 250 billion worth) have yet to be funded, and when the money begins to flow faster, AT&T will be well-positioned to be a part of bigger contracts.Charles said the company is a good candidate help hospitals integrate electronic health records, which is being funded with 20 billion of stimulus money. AT&T has already signed a contract with the state of Tennessee to custom build a virtual private network for e-health information exchange, she added.AT&T is also working hard to get involved with broadband services in rural America, smart grid wiring, and other health IT programs.”It’s still way to early to tell how AT&T will do, but they’re going to compete,” said Warren Suss, founder of Suss consulting, a federal IT and networking consultancy firm. “The battle is on, and it is still to be determined who’s going to come out on top.”Size matters. The company said its mammoth size gives it a leg up on some of its competitors, as AT&T is one of a very small handful of companies that offer practically every telecom service, including wireless, broadband, telephone and networking solutions.”Agencies want one place to go, with one network and one carrier,” said Herring.Analysts say big firms like AT&T are more likely to get stimulus funds than smaller competitors, as they have the resources to quickly act on a wide array projects and have the infrastructure to bid on a large number of contracts.”AT&T has positioned itself well as an aggressive competitor for stimulus,” said Suss. “This isn’t an inexpensive game — it takes a lot of resources to go after these big federal deals.”Experience counts. AT&T has been working on government projects for years, and at one time, it was the only game in town. AT&T was a monopoly until the mid 1980s. In fact, it wasn’t until 1989 that the government opened up its first telecom contract to a company other than AT&T, when 40% of the government’s communications contracts were awarded to rival Sprint (S, Fortune 500), giving “just” 60% to AT&T.AT&T struggled through the 1990s. And when those big federal telecom contracts were up for renewal 10 years ago, the company was completely left out for the first time ever. But since then, AT&T has clawed its way back to the lucrative federal sphere, gaining scores of federal networking contracts with 20 different agencies when they were again up for renewal in 2006. “AT&T’s star is rising,” said Suss. “It has won many of the major battles … and has been very aggressive with pricing.”
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Source:CNN

LONDON/HOUSTON (Reuters) — Exxon Mobil Corp will invest 600 million over the next five to six years on trying to developing biofuel from algae, even though the oil major has said renewables will be only a small part of global energy supply.Exxon (XOM, Fortune 500), placing its largest financial bet on renewable fuels, is forming a research and development alliance with Synthetic Genomics Inc, a privately held company that focuses on gene-based research, the company said Tuesday.The project, which would cost billions to fully develop, is in its initial stages, so commercially viable biofuel made from algae would be many years away, Exxon told reporters on a conference call.”We need to be realistic,” said Emil Jacobs, vice president of research at Exxon. “This is not going to be easy, and there are no guarantees of success.”Spending on the algae fuels project will require only a fraction of Exxon’s annual capital budget of 25 billion to 30 billion, but it will be the world’s largest biofuels development project of its kind, said Craig Venter, genome pioneer and founder of Synthetic Genomics.Exxon’s algae research will not likely silence critics who have argued that the oil major needs to sharpen its focus on renewable and cleaner-burning fuels, but it is a step in the right direction, said Fred Burke, president of Johnston Lemon Asset Management.”I think it’s terrific,” Burke said. “It indicates to me that they are reaching out and trying some alternative ideas when frankly I didn’t have the idea that they were doing that before.”Even though renewable energy sources are forecast to show rapid growth, crude oil, gas and coal will meet nearly 80% of global energy needs through 2030, Exxon said in its latest energy outlook.Building in CaliforniaAs one of its first steps, the Exxon and Synthetic Genomics plan to build a research facility in San Diego, the companies said.Other companies, including Europe’s largest oil company by market value, Royal Dutch Shell Plc (RDS.A), are also researching the possibility of generating motor fuel from algae, but all parties agree a commercial solution is years off.0:00
/3:47Heating homes with woodExxon said it reviewed the viability of all other types of biofuels and determined the algae project was best after considering factors including environmental performance and economies, Jacobs told reporters.Biofuel from algae would have a key advantage over existing biofuels in that it would not compete with food crops for land, thereby meeting energy needs without pushing up food costs.To make biofuel from algae, sunlight and a large source of carbon dioxide would be needed. Exxon said it could source its carbon dioxide for the research product from power plants, natural production or refineries.In the past, Exxon has been skeptical about green energy such as wind, biofuels and solar power and has supported research that questioned the scientific basis of man-made climate change.The company also fended off proposals that it invest in renewable fuels at an investors’ meeting in May.Shares of Exxon rose 25 cents, or less than one percent, to 65.95 in afternoon trading on the New York Stock Exchange.

Source:CNN

NEW YORK (Fortune) — If your favorite book happens to be Seabiscuit, you already know the answer to the following question: What are the three legal forms of online gambling in the United States?The Federal Unlawful Internet Gambling Enforcement Act, passed in 2006, put the kibosh on all kinds of online gambling, with the exception of fantasy sports, online lotteries, and horse/harness racing. It actually wasn’t the betting that was outlawed, but the transfer of money from a bank to an online gambling site. In any event, for online betting houses in the U.S., the party was over — sort of.Online gambling in the United States still goes on — billions of dollars every year — it just happens via offshore outfits and offshore accounts. Strictly speaking, in ain’t legal, but when you have a feeling about a big football game, or you have a poker itch to scratch, well, you’ll find a way to scratch it.Goldman Sachs in a recent research note to investors estimated that online poker and casino games alone could be worth up to 12 billion in the U.S. The white-shoe investment bank also concluded that because of the tax implications alone, the U.S. market is likely to be legalized sooner rather than later.That is exactly what U.K.-based Betfair, one of the world’s largest Internet gambling companies, is betting on. But rather than wait for all forms of gambling to get the green light, it’s making its initial push in the U.S. via horseracing. “We want to bring the Facebook generation to the track,” says Gerard Cunningham, who heads up Betfair’s U.S. operations.0:00
/4:19Andreessen launches fundIn January, privately-held Betfair acquired Los Angeles-based American TV Games Network, an online horse race betting company for 50 million. The price tag was so hefty in large part because TVG has its own television channel that broadcasts horse racing to 72 million households across the United States.Cunningham is currently staffing up in Silicon Valley. The plan is to build a technical team that can combine that television property with a brawnier website, which can stream live horse races to viewers and add all the social media bells and whistles, including Twitter feeds, chat and blogging — to make the horse-racing experience more akin to watching an episode of “Lost” on Hulu.In the United States in 2008 about 14 billion was bet on all forms of horse-racing — 1.5 billion was bet online. Betfair’s TVG handled about 500 million of the online transactions. And while it is currently restricted to so-called parimutuel betting in the U.S. (where the house takes a cut of the overall pool of bets), what it hopes to do, as laws allow, is to bring exchange betting to the U.S.Exchange betting is where Betfair has made its name outside of the U.S., and is what makes Betfair one of the largest pure-play Internet companies in the world. In concept the model is similar to eBay (EBAY, Fortune 500), only instead of providing a marketplace where buyers and sellers are connected, Betfair’s model matches up people on both sides of a bet. That bet can range from a match at Wimbledon to the outcome of a political contest. One person proposes a wager and another person (or group of people) take the other side. Betfair makes its money on a 2% to 5% commission paid by the winner. In the year ending April 2008, that amounted to 396 million in revenue and 69.5 million in profit for Betfair.Like the Goldman Sachs analysis, the Betfair team believes that online gambling will be expanded in the United States, probably on a state by state basis rather than with a sweeping federal law, Cunningham says (hearings on a bill proposed by Massachusetts Congressman Barney Frank that would undo most of the 2006 Unlawful Internet Gambling Enforcement are delayed until at least September).The technical team he is building in Silicon Valley is therefore taking a very modular approach to what its building online so that various components of online gambling can be turned on and off depending on the laws in individual states (or even countries). So that might mean poker and horseracing in one state, and sports betting in another.Right now, Betfair is focused exclusively on horse racing in the United States, because that is what is emphatically legal, Cunningham says. “When other forms of gambling become legal, we’ll be ready,” he says. “Until then, if it’s even a grey area we’re not going to touch it.”
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Source:CNN

WASHINGTON (Reuters) — Senate Banking Committee Chairman Christopher Dodd said Tuesday that making the Federal Reserve a “systemic risk” regulator could put the U.S. central bank’s independence at risk.”I think those who are advocating the Fed’s role in all of this as a systemic risk regulator ought to be prepared to then concede a good chunk of independence of the Federal Reserve,” Dodd told reporters. “I think that poses some serious issues.”"If you give them that kind of authority here there will be demands for far more congressional authority over the Fed,” he said.0:00
/4:59Bank regulatory mazeThe Obama administration has proposed giving the Fed responsibility for supervising large, interconnected firms whose collapse could jeopardize the entire financial system as part of a broad revamping of U.S. financial regulation.Dodd, who will play a big role in crafting regulatory reform legislation, has voiced support for the idea of establishing a council to monitor systemic risks. The Obama plan would set up a council of regulators that would help identify the firms to be regulated by the U.S. central bank.The Fed is facing heightened scrutiny on Capitol Hill for the role it has played in bailing out financial firms.Last week, the Fed’s No. 2 official, Vice Chairman Donald Kohn, told Congress efforts by some lawmakers to open up the central bank’s monetary policy and emergency lending decisions to audits would raise the risk monetary policy decisions would become subject to politics.

Source:CNN