CI Financial sells Blackmont to Macquarie for $93.3-million Read more: http://www.financialpost.com/story.html?id=2145765#ixzz0VHSAflNh The New Fina

Australia's Macquarie Group said Monday it has agreed to buy investment dealer Blackmont Capital Inc. from CI Financial Corp. for $93.3-million in cash.

CI said it will be keeping Blackmont's capital markets division, which produces independent financial research.

"Macquarie will provide an excellent home with strong support for Blackmont's retail advisors, and foster the continued growth of their practices," Bill Holland, CI chief executive, said in a release.

CI expects to close by the end of the year.

Macquarie will be rebranded "Macquarie Private Wealth" and added to its Banking and Financial Services Group. Bruce Kagan, Blackmont chief executive, will continue to run the company while Macquarie director Earl Evans will become president, Macquarie said in a release.

"This transaction will enable us to deliver more to our people and clients. Macquarie brings to Blackmont a strong balance sheet, a commitment to growth, broad equity research and access to new products and proprietary deal flow," Mr. Kagan said in a release from Macquarie.

The sale to Macquarie had been rumoured in recent weeks, with the selling price estimated at between $105-million and $140-million.

CI had originally acquired Blackmont as part of its deal for Rockwater Capital in early 2007 for $251-million.

What to do with extra PAC money?

Something wasn’t sitting right with former Rep. Jim McCrery after he finished a telephone interview on the donations made to former colleagues while he sits out a mandatory yearlong ban on lobbying them directly.

Sure, he had kept his campaign committee open for business — which he insists help his firm, Capitol Counsel — but he spent most of his leadership political action committee's money before he left and turned over the reins to fellow Louisiana Republican Charles Boustany.

He wanted that known. He dialed back.

"I just wanted to get a little bit of credit for doing something the right way," he said. "Rather than take it with me and dole it out as see fit, I thought it best to turn it over to a sitting member of Congress." McCrery's perspective raises a question with no easy answer: What do you do with a leadership PAC when you're no longer in office?

Is it better to keep the money and parcel it out to former candidates and colleagues? Or is it better to hand over a large sum of money to a single friend? If it isn't spent to influence Congress or help friends, should it be used for travel or other creature comforts? Or should you close out the PAC by making charitable contributions?

In McCrery's case and that of former Rep. Dave Hobson (R-Ohio), the answer was to bequeath the PAC to a home-state colleague.

Hobson inherited his Pioneer PAC from close a friend, former Rep. John Kasich (R-Ohio). Hobson then willed it to Kasich's successor in the House, Rep. Patrick Tiberi (R-Ohio).

It's a legal maneuver but one that could potentially result in the transfer of huge sums of money from an outgoing lawmaker to a sitting member he or she might try to influence in the future.

To illustrate: Former Rep. Tom Reynolds, a New York Republican who is still under the one-year lobbying ban, has nearly $550,000 in his Together for Our Majority PAC. He's free to will that entire amount to a former colleague, although he’s given no indication that he intends to do so.

Reynolds did not respond to an e-mailed request from POLITICO for comment.

When McCrery left, there was less than $10,000 in his PAC’s coffers, leaving Boustany enough to pay salaries while he rebuilt the war chest.

"In effect, the money was zeroed out," Boustany says. "I inherited the infrastructure."

Will UK go bust after the elections?

Sir Howard Davis made some very refreshing comments at recent HSBC clients gathering in London. It is clear that the public do not understand the scale of the crisis which was caused by a collapse of the giant pyramid scheme. The demands of those who are still at work, from postal workers to university professors, make it clear that the current crisis appears as something unreal. And, ironically, it is.

The government have no idea of the size of liquidity hole they are trying to plug. It may still be some hundreds of billions, if not trillions, of pounds. On top of that they keep on spending money to sustain artificially the lifestyle the UK cannot afford any longer (if it ever afforded at all). This puts the country in even more debt. As the government does not want to lose the next elections (or to lose them by the least possible margin), they keep the public in delusion of affluence like someone who got unemployed and is draining his credit cards to their limits.

The Conservatives, seeing the public mood and appetite for continued high lifestyle, are too afraid of telling the harsh truth: that the UK is already in a very deep debt hole and tightening of the belt has to start now. They do not want to be accused of scaremongering by the Labour, which may well result in scuppering their elections chances of near-certain (at the moment) victory.

It is this rather unholy alliance of interests of both sides of political spectrum: the Labour's and the Conservatives' that contributes not only to irresponsible but economically irrational behaviour. We try to live financially as nothing has happened. After the publication of the recent economic figures, the time till the next elections increasingly looks like the last dance on the Titanic. The reality check will come after the elections. Doesn't matter who wins: there is a pretty good risk that the UK will be bust by then.

We seem to believe that what happened to Albania in 1996 – 1997, Argentina in 1999 – 2002 and is happening in Zimbabwe now will never happen to us. That all these can happen to others. Well, it may already have started happening…

FACTBOX: German parties' plans on financial policy

BERLIN (Reuters) - German Chancellor Angela Merkel's conservatives sealed a coalition deal with the Free Democrats (FDP) on Saturday after marathon talks.

Below is what they agreed on finance policy, according to a draft coalition agreement and party officials.

TAX RELIEF

* From 2010, the parties will implement 14 billion euros ($21.01 billion) in tax relief agreed by the outgoing government. Additional corporate and inheritance tax reforms, and changes to child allowances will take the total tax relief for 2010 to an estimated 21 billion euros.

* From 2011, they plan income tax relief worth a total of 24 billion euros annually, with low- and medium-income households and families with children set to benefit most.

* Under the corporate tax reform taking effect from 2010, rules governing the deduction of interest rate payments from taxable profits will be made more attractive. Writing off losses against tax will become easier.

* Inheritance tax rules are to be simplified from 2010 with the aim of helping family owned businesses.

* Also from 2010, child benefit will be increased by 20 euros to 184 euros ($276) per month and the child tax allowance will rise to 7,008 euros from 6,024 euros now.

* Merkel has ruled out tax increases but left open the possibility that social security contributions might rise, saying the government will review the situation in 2011.

BUDGET DEFICIT

* The parties say in the draft coalition accord: "We stand for a solid budget and finance policy," adding that compliance with the European Union Stability Pact is a priority for them.

* They aim to boost economic growth to generate revenues to tackle Germany's swollen budget deficit, and say they will review all state spending.

* The parties say the state should reduce its stakes in banks and other companies as soon as possible and work must now begin on exit strategies.

FINANCIAL MARKET SUPERVISION

* The parties agree German banks will have to meet tougher capital requirements and that supervisory powers for financial markets, until now split between Germany's Bundesbank and watchdog Bafin, will be concentrated at the central bank.

* They will work "vehemently" to avoid financial market inflation risks.

* The parties back the development of a European rating agency.

* In future, no financial product, market institution or financial market may go unregulated or supervised, they say.

In New York City, Obama presses for proposal financial industry overhaul

Obama presses for financial industry overhaul

NEW YORK — President Barack Obama is asking the financial industry to support his push for changes he says would help prevent another economic crisis and would be good for the country in the long run.

Obama made his plea Tuesday night a Democratic Party fundraiser in New York City, speaking to donors who paid $30,000-per-couple to hear him just two weeks before the Nov. 3 elections.

Obama defended administration efforts to bail out the financial industry, calling it unpopular but the right thing to do.

Now, he says the right thing for the industry to do would be to support the changes he has proposed, including creating a federal agency to protect consumers.

Banks still a good place to keep emergency funds

The month of October began with the Federal Deposit Insurance Corporation (FDIC) taking control of the assets of Warren Bank and turning them over to Huntington Bank. On a national level, the FDIC has taken control of nearly 100 banks, year to date.

If the current rate continues, that number will easily exceed 100 by the end of the year. Fortunately, the takeovers are virtually seamless to the depositors, provided that their account balances are under the maximum FDIC limits.

It's important to the nation's stability that we have a dependable and reliable banking system. Just a year ago, many experts thought that the entire banking system was about to collapse. Although several banks continue to have financial problems, it appears that the banking industry has sidestepped a potential freefall.

As a financial advisor, I believe everyone should have adequate liquid cash reserves, and a bank is an appropriate place to keep them. I have recently received a number of faxes and e-mails, all asking the same underlying questions. "Why are the interest rates at the bank so low?" And "Isn't there a better place to put our money?"

Certainly there are investment vehicles with higher interest rates. For example, a little due diligence will uncover a number of equities with yields in the 8 percent to 10 percent range. Depending on your circumstances and risk tolerance, some of your money probably should be in equities.

But let me issue a word of caution. Only bank and credit union deposits have an underlying guarantee beyond the institution itself. Other investments may or may not have better rates, but in all likelihood they are not as secure because they simply lack the extra layer of the FDIC guarantee. There are many reasons why interest rates are so low. One contributing factor is the fee that banks are required to pay for the FDIC protection. Not long ago, a typical bank would contribute 12 to 14 cents into the system for every $100 worth of deposits. Today, that number is closer to 16 cents. Additionally, to shore up the program that's taken over nearly 100 banks this year, the FDIC has come up with a special assessment for banks.

Simply stated, they are asking member banks to prepay three years worth of assessments. I have little doubt that the added expense of the increased fees and the special assessment are significant reasons why bank interest rates are so low.

On top of that, the collapse of the real estate market has left many banks scrambling to stay afloat. As more and more homeowners default on their mortgages, the banks not only stop collecting money, they are suddenly becoming homeowners.

The bottom line is that, even though rates are low, it's important to have emergency funds in the bank. Over the past year, many investors took some serious losses on their investments, even as their housing values plummeted.

Such downturns illustrate why it is so important to have adequate cash reserves. And it's vital that those reserves are in a safe place. You do not want to, nor should you take risks with your safe money. Interest rates may be at historical lows, but it's good to know that if your bank gets into trouble, you won't lose your emergency money.

Financial shares slip after bank earnings

BOSTON (MarketWatch) -- U.S. financial stocks fell on Thursday but closed off their lows following a late day rally in the broader market.

Major financilal stocks ended were mired in the red as quarterly earnings reports from Goldman Sachs Group Inc. and Citigroup Inc. didn't live up to investors' lofty expectations.

Goldman /quotes/comstock/13*!gs/quotes/nls/gs (GS 186.25, +0.75, +0.40%) slipped after the company said its third-quarter earnings topped analyst forecasts, but investors may have been hoping for an even better showing after J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 46.12, +0.14, +0.30%) reported a blowout quarter earlier this week.

Goldman posted quarterly profit of more than $3 billion. See full story.
/quotes/comstock/13*!xlf/quotes/nls/xlf XLF 15.33, +0.04, +0.26%

Meanwhile, Citi /quotes/comstock/13*!c/quotes/nls/c (C 4.58, +0.04, +0.88%) shares fell 5% and were the biggest decliner among the financial stocks in the S&P 500 after the troubled banking giant said its per-share loss narrowed, but it continued to book huge credit losses in the tough economic climate. See complete article.

An exchange-traded fund tracking financial stocks, Financial Select Sector SPDR Fund /quotes/comstock/13*!xlf/quotes/nls/xlf (XLF 15.33, +0.04, +0.26%) , slipped more than 1.2% in afternoon trade. The ETF jumped over 3% on Wednesday after J.P. Morgan's quarterly results easily surpassed Wall Street estimates.

Elsewhere on the earnings front, Charles Schwab Corp. /quotes/comstock/15*!schw/quotes/nls/schw (SCHW 18.32, -0.21, -1.13%) said its third-quarter net income slipped by about a third from the year-ago period. The online broker's stock fell about 5%. Read more.

In other news, shares of Capital One Financial Corp. /quotes/comstock/13*!cof/quotes/nls/cof (COF 37.36, +0.08, +0.22%) were losing ground after the credit-card firm said delinquencies and charge-offs rose in September with more borrowers in financial straits.

Shares of Invesco Ltd. /quotes/comstock/13*!ivz/quotes/nls/ivz (IVZ 23.80, +0.68, +2.94%) closed off 3.6% Thursday after Pali Research downgraded the asset manager's shares to neutral from buy. Analyst Douglas Sipkin in a research note said the stock, which closed at $23.97 on Wednesday, was essentially at his target price of $24.

"We think that for shares to move materially higher in the short term, an acquisition is becoming crucial. One transaction in particular, [Morgan Stanley's] Van Kampen, has been discussed as a target," he wrote.

Additionally, Sipkin noted Invesco's asset growth in the third quarter lagged peers. "Invesco is still one of the best-positioned managers for the long-term, just at current levels we think it is fairly valued for now," the analyst said.

CIT Group Inc. /quotes/comstock/13*!cit/quotes/nls/cit (CIT 1.19, -0.02, -1.65%) was among the few financial stocks moving strongly to the upside Thursday. The lender, which is trying to stave off bankruptcy, is in negotiations with some bondholders to amend the terms of its $28 billion debt exchange, Bloomberg reported Thursday.

Separately, Reuters reported CIT is moving closer to finalizing the terms of a new loan that would give the company $3 billion to $6.5 billion. The terms of the loan, which is being arranged by Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC 17.23, +0.07, +0.41%) , could be finalized as soon as this week, Reuters said.

Financial Press Perennially Surprised by “Placement Agents”

The financial pages this morning are filled with the disclosure by Calpers that money-management firms seeking business from the big California pension fund paid $50 million to a firm run by a former Calpers director acting a middleman, or “placement agent.”

The fear is that big firms—in this case, Leon Black’s Apollo Management LP is named—may have been involved in another pay-to-play scandal.

Here’s the Journal this morning:

These so-called placement agents came under scrutiny in March, when New York Attorney General Andrew Cuomo announced two arrests. In that case, a connected middleman allegedly received kickbacks for helping investment firms gain access to billions of dollars of New York pension money.

Actually, these so-called placement agents came under scrutiny ten years ago. Here’s the Journal from 1999:

The Connecticut state treasurer has moved to unwind or cancel $561.5 million in investments made by her predecessor and will seek “reparations” from investment firms ultimately implicated in a widening corruption scandal.

Denise L. Nappier, the current treasurer, said in a statement that her office also plans to force investment-services firms to disclose fees paid to consultants or placement agents who placed past state pension-fund investments. The state will also require fees to be disclosed as a condition of future business with the state, she said.

The announcement comes four days after Ms. Nappier’s predecessor, Paul J. Silvester, pleaded guilty in federal court in Hartford, Conn., to steering state pension funds in return for kickbacks and other favors, often through placement agents and go-betweens. (1)

In the earlier case, the big named firms seeking and getting Connecticut business included the Carlyle Group, which included George H.W. Bush among its senior advisers, and then Wall Street stalwart PaineWebber, the Bear Stearns of its day, now part of UBS.

I remember all this because I’m the one who wrote that. Charlie Gasparino and I mustered a decent follow-up (2), but that’s as far as it went. Too bad.

In the earlier case, Carlyle’s placement agent was a man named Wayne Berman, founder of something called Park Strategies with one Alfonse D’Amato, then a former Senator and busy Mr. Fix-It. The Connecticut scandal forced Berman to resign as a top fund-raiser for George W. Bush’s presidential campaign.

In the current case, the go-between is knee-deep in California Republican circles:

Mr. [Al] Villalobos’s connections in the state of California go back decades. He worked as a consultant to California Gov. Ronald Reagan and later helped raise money for California Gov. Pete Wilson, who named Mr. Villalobos to the State Personnel Board. That board, which administers the state’s civil-service system, picked him as its representative on the Calpers board in 1993.

This isn’t about corrupt Republicans. Nor is this one of those plus ca change posts. I’ll leave those lofty musings to James Grant.

It is to say that business news outlets had better gear up their investigative capacity or be condemned forever to play catch-up on the same thing over and over again.

1. “Connecticut Treasurer Moves to Unwind Or Cancel Investments Made by Silvester”
The Wall Street Journal
29 September 1999

2. “Heard On The Street: Federal Probe Targets PaineWebber’s Pension Funds”
13 October 1999

To fix financial system, protect consumers first

THE NEW Consumer Financial Protection Agency proposed by the Obama administration is needed to correct obvious flaws in the financial system and to prevent a repeat of last year’s economic collapse. Predatory marketing of subprime mortgages was a root cause of the current recession. Those toxic loans were bundled in opaque mortgage-backed securities that went hurtling through the global financial system, destroying enormous sums of investor wealth and nearly paralyzing credit markets. Nothing could be more clearly in the national interest than to avoid a recurrence of that financial pathology.

The proposal for a consumer-protection agency is slated for a vote today in Representative Barney Frank’s House Financial Services Committee. The new agency would safeguard investors and the larger economic system as well. Under new rules whose enforcement the agency would supervise, consumers eligible for conventional mortgages would not be steered instead into deceptively packaged subprime mortgages. Banks would be prevented from suddenly jacking up credit card fees and hiding rate increases in pages of fine print. And financial institutions would be pushed to describe their products as clearly, comprehensibly, and concisely as possible.

In their lobbying campaign against the new rules, the big banks and the Chamber of Commerce assert that local merchants may be prevented from providing traditional forms of credit to customers. But the legislation now wending its way through Frank’s committee would apply only to financial institutions, not local merchants. Frank is properly trying to work with community banks and credit unions in drafting legislation that does not impede their ability to do business.

But Frank cannot waver on one point: To prevent the megabanks from getting around any new rules, the legislation must preserve the ability of the states to impose consumer-finance protections of their own. State attorneys general usually do a good job defending the consumer’s interest, while international financial giants have a history of getting their way with the feds.

Now is the time to build fortifications against the next financial bust. And as the country has just learned, protection of investors begins with protection for home buyers and other consumers.

Away from the financial bust, tech stocks boomed

SEATTLE — Intel Corp. and other technology stocks helped lead the way as markets climbed out of the trough they fell into in March — even as the recession kept many big corporations and consumers sitting on their wallets instead of spending on computers and other high-tech products.

Wary investors could find much to like about technology companies, including solid profits — if slower growth than in the past — and cash-laden balance sheets. Unlike in the last bust, technology companies were not to blame for the economic turmoil.

"Technology looks relatively safe," said Ryan Jacob, portfolio manager for the Jacob Internet Fund, which owns stakes in such companies as Apple Inc., Google Inc. and Yahoo Inc.

While the Dow Jones Industrial Average has risen 53 percent — crossing back over the 10,000 mark Wednesday — and the S&P 500 has improved 61 percent since March 9, the tech-heavy Nasdaq has jumped an even sharper 71 percent. Financial stocks have rebounded more, but they had farther to go after being beaten down in the market meltdown.

Intel's shares have improved 70 percent since March, in part because the chip maker was able to extend its dominance into the popular "netbook" category of small computers. Investors like how Intel's chips keep getting more powerful yet cheaper to make. An upbeat outlook from Intel on Tuesday was one of the developments that helped lift the Dow past 10,000.

Apple's shares have been even stronger. The stock has more than doubled since Wall Street hit its low point this year on March 9.

Investors were relieved to see CEO Steve Jobs return from medical leave, but they've also been stoked about Apple's push into the mobile market with the iPhone. Apple's cell phone market share is still tiny, leaving it plenty of room to grow in a market that is bigger than personal computers. The iPhone also is priced competitively, unlike Apple's premium-priced Mac computers.

Even as the sagging economy tamped down advertising budgets, Google's ad sales remained healthy, although they improved at the slowest pace in the company's 11-year history. Management also impressed investors with financial discipline as it laid off a few hundred workers and took away some employee perks to boost profits. Google's stock has improved 84 percent since March to about $534 per share, though that is still well below the record of $747 reached in 2007.

Retail companies were hurt badly by the downturn, but Web retailer Amazon.com Inc. fared decently, with shares rising 60 percent since March. People may have been shopping less elsewhere, but they flocked to Amazon for deals, pushing the company's revenue higher in both the first and second quarters of the year.

Among the tech companies that make up the Dow Jones industrials, Microsoft Corp. has been one standout. It is sitting on $30 billion in cash, and is in position to reap significant benefits once companies and shoppers start buying computers again. Microsoft shares have increased 74 percent since March.

Another Dow component, Hewlett-Packard Co., has won points with investors because of CEO Mark Hurd's cost-cutting and his expansion beyond HP's core markets of PCs and printer ink, where profits are under pressure from low-cost competitors. In response, HP is becoming a bigger player in the more profitable businesses of computer networking and technology services. Hewlett-Packard shares have gained 88 percent since March.

Tech's impressive returns should continue through the fourth quarter, which is the strongest time of year for tech companies, said Robert Stimpson, a portfolio manager for Kansas City, Mo.-based Oak Associates. The fourth quarter is typically lucrative because of holiday shopping by consumers and because corporations hold off on some tech purchases until the end of the year, when they have optimal insight about what still fits in their budgets.

While information-technology companies outperformed, telecommunications services has been one of the weakest sectors this year.

The sector has long-term challenges. Phone companies are losing landlines at a rapid pace. Nearly everyone already has a cell phone, so further growth in wireless can't be counted on. Also, competition is reducing monthly service fees.

But some of the underperformance in telecom stocks can be attributed to other factors. Carriers with relatively steady income, such as Dow components AT&T Inc. and Verizon Communications Inc., weren't dragged down as much as companies in other sectors by the 2008 meltdown. As a result, these stocks have has less of a rebound to make this year. AT&T shares have risen 23 percent since March 9, while Verizon's stock has gained just 14 percent.

Roth rules to ease in 2010, but decision shouldn't be automatic

Since its creation more than a decade ago, the Roth IRA has been one of the best tax breaks around, but it's been closed off to higher-earning taxpayers.

That will change next year.

Starting in 2010, the rules governing the conversion of a traditional IRA into a Roth IRA will allow anyone – regardless of income – to switch their existing retirement savings account.

The change in 2010 "has the potential to be a fairly big deal," said Rande Spiegelman, vice president of financial planning at the Charles Schwab Center for Financial Research.

Depending on your financial circumstances, converting your traditional IRA to a Roth IRA might be a smart move, but consumers should do their homework first.

"Look before you leap," Spiegelman said. "Just because you can do it doesn't necessarily mean you should."

The benefits of a Roth IRA are substantial. Here's why:

• Contributions to a Roth aren't tax-deductible, but earnings can be withdrawn tax-free if you're at least 59 ½ years old and have had the Roth for at least five years.

• There's no mandatory distribution age as there is with a traditional IRA, which means if you don't need the money, you can leave it in the Roth to continue growing.

In a traditional IRA, contributions are tax-deductible and taxes are paid when earnings are withdrawn. Withdrawals can begin at age 59 ½ and are mandatory by age 70 ½ because Uncle Sam wants the income taxes due him.

Despite the benefits, the decision to convert your IRA shouldn't be automatic.

As a general rule, tax planners advise against paying a tax today that you can defer until a later date. But there are always exceptions, and converting to a Roth IRA now may well be one of them.

When you move from a traditional IRA to a Roth IRA, you pay income tax on the amount converted.

But for 2010 only, you can spread the income over two years.

So if you converted a $100,000 traditional IRA in 2010, you could report $50,000 in ordinary income in 2011 and $50,000 in 2012.

"The tax hit is real and it's permanent," Spiegelman said.

If you're considering converting your IRA, here's a checklist to go through before deciding:

Your tax bracket

Try to determine what tax bracket you'll be in when you retire, and whether it will be higher or lower than your current bracket.

"The people that Roth conversions are the best deal for are those who can pay the conversion taxes out of non-IRA assets, have at least 10 years to let the money grow before using it and will be in the same or higher tax bracket in retirement," said Jean Keener, a financial planner at Keener Financial Planning in Keller.

On the other hand, "if you think you'll be in a lower income tax bracket, the taxes you pay today could end up being higher than the taxes you'd pay when you're ready to make withdrawals," Spiegelman said.

So in that situation, it might not benefit you to convert your IRA. "It wouldn't make sense to pay at a higher rate today if you can wait and pay less tax," Spiegelman said.

What's more, the taxes you pay now would reduce the amount of money available to you to grow.

If the amount you convert would bump you into a higher tax bracket, consider converting only the amount that allows you to stay within the same tax bracket.

Paying the tax

Make sure you know where you'll get the funds to pay the conversion tax.

"If you take money out of the IRA to pay the conversion taxes, it can be costly," said Ken Kilday, a certified financial planner and wealth manager at USAA. "You compound it in the wrong direction."

Plus, if you're under 59 ½ and tap your IRA, you'll also be hit with a 10 percent penalty.

"You're amplifying the taxes vs. amplifying the tax-free growth," Kilday said.

Your timetable

James Smith, certified public accountant, says to ask yourself: "How many years from today until I start to get the money out?

"The more years I have, the more years there are for that money to build up even more money, which may overcome the tax difference," said Smith, managing partner at Smith, Jackson, Boyer & Bovard PLLC in Dallas.

Your heirs

Are you planning to leave money for your heirs?

Because there aren't mandatory distribution requirements with a Roth IRA, your beneficiaries can inherit the account tax-free, although estate and inheritance taxes still apply.

"If you're going to leave IRA assets to your children, it's the difference between leaving their children a house with a mortgage and a home without a mortgage," Kilday said. That's because you will have already paid the tax on the account.

The decision on whether to convert your IRA shouldn't be made until you've crunched all the numbers. And it shouldn't be done in a vacuum.

"Make sure you have the conversation in the context of everything else," Kilday said.

Then, Kilday said, ask yourself one final question: "How does it fit into my overall plan?"

What Is CPA Marketing?

Cost Per Action marketing is one of the simplest methods for beginner Internet marketers to begin making money online. For years, this type of affiliate marketing has been an industry secret of the insider “big players. It was never really a secret, but while most people in Internet marketing had their hands busy promoting Clickbank products, the big kahunas were playing on a whole different level.

Cost Per Action, sometimes referred to as “CPA,” is a type of Internet marketing that requires consumers to complete specific actions ” this usually entails filling out a form and requesting a free product sample, signing up for a free trial. In some cases, it involves asking the consumer to try a new product or service by making a small purchase.

What it means is that you, as offer promoter, get paid for the “actions” taken by the traffic you steer to advertisers. As a basic example, let’s say a company wants to test the consumer feedback on a new product line that they are introducing. They create an offer where they agree to pay $1.50 for each person who submits their e-mail address and zip code ” your job is simply to direct traffic to that site and then collect $1.50 for each person who opts in.

This is a fairly standard promotion type. Others might pay as much as $37 for an optin (though if the payout is higher, the offer might require much more information from the customer or ask for a small upfront payment.

In essence you, as a CPA marketer, are really a traffic broker: You buy traffic on one end, send it to an offer page and get paid based on how well it converts. Sounds so simple, doesn’t it? It can be easy, but it generally isn’t.

Because it is so profitable, CPA marketing is extremely competitive, and for a beginner, it can be intimidating to start trying to compete with super-affiliates making $100k a day and even more, or even with the more common affiliates who are making $500 to $1,000 a day running CPA campaigns. When you try to get started, you’re going to be up against all of that competition, and it can be very challenging. The truth is, a lot of beginners simply get frustrated and give up when they figure out that CPA marketing can be difficult and expensive. Like any new thing, it’s best if you check out the most effective way of doing it, before you dive in head first.

The audited financial statements and annual reports were used to analyse NBS

I am pleased to see some new names surfacing in the discussion of topical issues. It suggests that there may yet be persons out there prepared to engage seriously in these issues even if sometimes without a sufficient knowledge or understanding of the facts. I therefore consider it useful to address some of the more salient matters raised by Mr Salim Khan in his letter in the Stabroek News of October 6, 2009 ‘Assessments from critics of NBS are counterproductive.’

1. Mr Khan claims I have a peeve about the NBS, having served as a director of the Society. I grant him an unchallenged right to psychoanalyse my writings and personality.

2. Mr Khan recommended that the facts be checked, although there is no evidence that he himself did so. Not only do I always use the audited financial statements and annual reports of the Society for my periodic analysis but before the most recent Business Page, I wrote the Society’s Director Secretary for a copy of the half-year 2009 financials. He is yet to acknowledge my request. Would Mr Khan please help?

3. With NBS being the only Building Society in the country, Mr Khan may wish to tell readers which industry in which country he is referring to in claiming that “NBS’s financial position is as sound as any in the industry.”

4. Can Mr Khan explain what he means in his letter by a “simplistic portfolio of loans” and whether he thinks that the board was wrong to support the members’ motion at the 69th AGM for a Board Loans Sub-Committee?

5. Is Mr Khan aware that commercial banks are subject to two rules on provisioning against doubtful loans – IAS 39 and Bank of Guyana Supervision Guideline 5, the latter of which does not apply to NBS?

6. If Mr Khan would care to read my reviews of the commercial banks’ annual reports posted at chrisram.net, he would immediately realise that their interest spread is a criticism that I invariably make. Having said that, I wonder if Mr Khan knows the following:

a. That unlike the regulated financial and banking businesses, the NBS does not maintain a non-interest bearing statutory deposit with the Bank of Guyana. If they did, it would easily mean on the basis of NBS’s 2008 financial statements setting aside more than $3 billion dollars as non-income earning assets. By not doing so, NBS can earn, at the average rate of interest it earned on mortgages in 2008, income of $275 million not available to the commercial banks.

b. That the NBS is exempt from corporation taxes and consequently for every $100 net income earned by the Society, the commercial banks paying corporation tax at the rate of 45% would have to earn $180.

c. For those commercial banks approved for lending for low income housing, the ceiling is $3 million per loan while in the case of the NBS it is $12 million.

d. That the NBS pays no property tax which on its 2008 net asset position would amount to approximately $40 million annually.

e. That legislatively, NBS with its emphasis on mortgages and prescribed limits, is precluded from the risks of commercial lending faced by the commercial banks.

7. When stacked up against those realities, it is surprising that the NBS does not report higher surpluses than it currently does.

The reason in my view is the result of the inefficiencies of the monopolistic privileges enjoyed by the NBS under statute, politicised, ineffective and self-serving governance and a board and management that lack the range of skills that a modern financial institution needs in a competitive environment.

8. Mr Khan is the only person I know who speaks as a keen observer but who considers directing business to the competition a virtue. As far as I am aware, the only business the NBS ever directed to competing lending institutions was for temporary, bridge financing during the period when the security for loans was being perfected.

Thereafter, the NBS would grant the loan including such amount as to liquidate the bridge-financing.

I trust that I have clarified and addressed Mr Khan’s issues and look forward to his extending me reciprocal courtesies. I trust too that others, including the directors of the NBS, who make similarly uninformed comments and claims, would be guided accordingly.

Yours faithfully,
Christopher Ram

Why “Vendrification” Will Never Happen in NYC

t feels like the fervor over street vendors has reached a peak this year, but it didn’t happen overnight. It started more as a slow trickle years ago. Two German brothers selling sausages on 54th Street. A former chef from the Russian Tea Room doing an upscale version of lamb over rice. A couple of SoCal exports selling carne asada in Soho. Street food has slowly been getting a lot better in NYC. And as the newer carts have gotten better, people have started to become more interested in what was being sold on the street. It’s reflected in the media coverage, and the increasing popularity of the Vendy Awards- the annual event put on the Street Vendor Project to reward the hard working food vendors of New York City. Even vendors who had been there for years, like those at the Red Hook Ball Fields were being “discovered” for the first time.

But it wasn’t until 2 years ago that the real explosion started. Kim Ima’s Treats Truck was the first I can remember, followed pretty quickly by the Wafels and Dinges Truck and the Dessert Truck. When these lavishly painted trucks, with cute logos, and internet savvy chefs hit the scene it seemed like something clicked. The coverage of these new trucks was out of control, not just from the food blogs (guilty as charged) but from the traditional media as well. The stories wrote themselves, and the trucks didn’t even have to pay PR companies to make it happen.

Combine that with the proliferation of twitter, the well publicized success of trucks in other cities (like Kogi BBQ in LA), and the recession, and it’s no surprise that every chef and restauranteur in the country has at least thought about opening a food truck. And, as you know, plenty of them have succeeded. So much so that two weeks ago Blackbook Mag coined a new term for this invasion of upscale food trucks: vendrification.

The word is genius, and there is no question that these new “hipster” trucks are taking over the country. From the West Coast (in LA, San Fran, and Portland), to Austin, Philadelphia, and of course here in New York City. Turning street vending, an occupation that many people still consider to be dirty and sketchy, into a hip, “clean”, well marketed, business that will in theory attract a far larger clientele than your tourist driven hot dog carts and Mister Softee trucks, or immigrant driven taco trucks and halal stands.

And even though right now it seems like the forces of capitalism could easily take hold, and allow for this new wave of carts and trucks to replace their less flashy old school counterparts, I don’t think it will ever happen on a massive scale. Gentrification is one thing, and it’s not hard to understand why Midtown has been taken over by countless branches of Chipotle and Pret a Manger. But the economics of street food are different, and I think there are certain factors that will insure that it will remain the inexpensive, immigrant run trade that it has always been.

First and foremost, you can’t make real money from street food vending in New York City from a single cart. I wrote about this a few weeks ago, and it’s something that a lot of the new vendors are starting to realize. You are incredibly limited in the time you can actually sell, the locations you can park in, and the volume you can do from a mobile kitchen. When you factor in the cost of a commercial kitchen, monthly parking charge at the commissary, and the unavoidable tickets that all street vendors get, the numbers just don’t add up. Once you get in the trenches, that “no rent” “low cost” start up business that seemed so lucrative in your business plan, doesn’t really amount to much in the way of a profit. Or at least not enough to profit to make it worth the time you have to put it. So the natural inclination… mulitple carts!

Sadly, multiple carts are not a viable option. One of the main engines of gentrification is the economics of scale, and it is no different in street vending. The more locations you have for a business, the better your profit margins. And nowhere is that more true than Manhattan. It costs the same amount of money to bring supplies to a single Manhattan restaurant as it does to bring supplies to ten. So if you own multiple locations, your costs are spread out- making it easier for each individual location to be profitable. And since there are more of them, the burden of profit on each location is far less. The small business owner needs to make enough money from his one business to support his entire family. Own 10 restaurants and the profit burden on each individual one is far less.

The same is true for street carts… but it’s hard enough “finding” a permit for one street cart, let alone an army of them. With only 3000 permits available, and an annual waiting list for new permits that takes years to climb, it is virtually impossible to obtain a permit legally. Every one of the new carts or trucks that you have seen hit the streets in NYC over the past two years has either purchased their permit illegally on the black market, or went around the law by finding a person who already had a permit and making them an “employee” or part owner of their business. Either way, cart expansion is not as easy as signing a lease. And as the economics of street vending become more clear to entrepreneurs (whose end goal is to make money) I think many will be deterred. In fact, ask many of the new school street vendors for advice about opening a cart or truck- and most of them will say the same thing. Don’t do it.

So if new trucks aren’t making money, how do the old school vendors make money? The answer is two fold. First, they sell a low cost, high volume product, that is guaranteed a certain amount of business. There is a reason why street food is made mostly of hot dogs, street meat, and drinks. The profit margins are great, and it’s easy to do the kind of volume necessary to turn a profit. If you base your business model on providing a better product than what is available on the streets now, chances are your profit margins are going to be lower and you will be more limited in the volume you can produce.

But more than that, the old school vendors themselves are willing to work crazy hours to make far less money than most entrepreneurs would be willing to make.

That’s not to say there isn’t money to be made from opening a truck. Many new school vendors are using the notoriety they’ve gained from their cart to make money outside of the food they sell on the street. Private corporate events are huge, where some trucks can make more in an hour than in an entire week of selling food on the street. Catering is also very lucrative, and what better way to advertise your catering business than selling food out of a truck right outside the giant office buildings that order catering. Carts and trucks are even appearing in commercials for VISA (the Treats Truck) and T-Mobile. But if you need the most direct proof that opening a truck is not as easy as opening a permanent location- look at how many mobile businesses have gone the traditional route since becoming famous as street vendors. The Vendy Award winning Calexico cart opened a restaurant in Red Hook this year, Dessert Truck has abandoned their truck for a store in the Lower East Side, and Lev from the Cupcake Stop Truck has said a number of times that opening permanent cupcake shops is an option he is very interested in.

Vendrification could be a possibility if businesses start to use carts and trucks as a loss leader to gain notoriety. The La Cense Burger Truck doesn’t need to be profitable. It’s a moving billboard for a giant online steak and beef distributor, and has gotten that company tons of publicity. If big businesses see street vending as a cheap way to get free PR, I could see them using deep pockets to force out many of the traditional food vendors. Luckily I think we are savvy consumers, and as more and more generic companies turn to street vending for PR the less effective it will become. The Taco Bell Truck or White Castle Burger mobile seems super exciting now. But if Midtown became filled with these carts and trucks, there could easily be a backlash. And, do you think if sombody opened a truck selling cupcakes today it would get as much publicity as the Cupcake Stop Truck got when they hit the scene?

The other way it works as a business model is if businesses already have a brick and mortar store that they are paying rent for. Rickshaw Dumpling already has a kitchen in their restaurant, so trucks represent a cheaper way for them to franchise. Daisy May’s BBQ Cart is in the same boat. Extra sales, but far less overhead because they are already paying rent for the restaurant on 11th Ave

But even that is not foolproof. And even if more restaurants start doing this, I think there is one final obstacle to keep vendrification from becoming widespread in New York City. Let’s say new school vendors find ways to be profitable. Let’s say somebody discovers the secret to selling fancy, “high end” food and drinks or desserts, or anything from the streets. If it was easy to get a permit, and became very profitable to do this- every business in New York would want in on the action. Every restaurant would want a cart. Every bakery would go mobile. Every coffee shop would be on wheels. And the people paying all that rent for their storefronts would be turned into automatic suckers. I don’t think it could ever happen, because for most businesses the economics of running a street cart aren’t there. But even if they were. Even if there was some magic equation, the city would then step in and prevent it.

Think about how much of the economy in this city is built around real estate. The more businesses that bypass that system, by parking their restaurant or cafe on the “rent free” streets of NYC, the more likely it is the government will step in and just eliminate street vending altogether. Right now, businesses and government have begrudgingly accepted the existence of hot dog vendors and street meat vendors because these are immigrant vendors, making such a small amount of money, selling such a cheap product, it’s not worth going after them on a massive scale. It that little bit of money, turned into anything significant, the business owners in Midtown would want their share.

Of course this is only true in New York City. In a city like Portland, OR, the carts are like actual businesses. And they pay rent to landlords who own the lots where they park. They are a legitimate part of the real estate market, and for that reason have been allowed to proliferate in a way that is helpful to the overall Portland economy- not harmful.

The fact that street vending is not a profitable enterprise is precisely why it’s allowed to exist. Gentrification happens because it makes more money for the business community as a whole. Landlords are happy, because these big chains can pay the exorbitant rents that small businesses can’t afford. It’s an improvement to the system financially. We get crappier food, but everybody makes more money. Vendrification would have the opposite effect on one of the main engines of the New York City economy. And for that reason alone, it will never fully happen.

Constitutional Financial Innovation

I had a number of interesting conversations over the weekend about housing derivatives. People have reminded me that are plenty of derivatives that trade without being able to purchase the underlying, an obvious one being weather derivatives. Provided there is enough liquidity, people can hedge (or synthetically hedge) within the futures market itself. But the issue then changes to whether or not we can get enough liquidity – and I don’t see enough people wanting to get on the other side of the housing market at any time to get liquidity going.

And I had no idea Shiller has revived his Microshares see-saw idea to try and sell these derivatives. It’s based on the same terrible leveraged ETF design as his crude oil ETF, the one that imploded last year in a display the Wall Street Journal called “This fizzle, after a year-and-a-half run, is one of the highest-profile embarrassments for the growing ETF industry over the past year. Turns out the funds, the brainchild of famed Yale economist Robert Shiller, were too smart for their own good.” (The WSJ piece is a good overview.) Good luck with this the second time around; nice 1.25% expense ratio on the fund (can you call it a fund if you hold leveraged T-bills instead of the underlying?).

Constitutional Financial Innovation

I’m going to read one level into Shiller’s argument and note that, at the end of the day, he’s concerned that average Americans need better tools to manage the risks of their incomes and investments. I think Reihan Salam and other smart neoliberals has flirted with this idea of derivatives designed for the middle-class to help them deal with risk management in a post-Risk-Shift world. The idea that consumers could buy put options on themselves – options that are more valuable the worse things get, that can provide a floor under which losses could not go – to help them manage the downside risks they face in volatile assets and increasingly uncertain labor markets, would be a huge innovation if we could pull it off. But in the same way that nobody would naturally want to insure the housing market, I can’t see enough people wanting to insure the middle class to get instruments like this to start.

Here’s something that should make conservatives happy. The best, and I mean the best, put option contract for consumers ever conceived, is written right into The Constitution: “To establish…uniform Laws on the subject of Bankruptcies throughout the United States.” Yes, viewing bankruptcy as a financial engineer does, as a put option on assets and volatility for consumers, handles all of this risk management in a way that is cleaner and more efficient than any derivatives market foreseeable in the future.

Bankruptcy As a Put Option

Shiller is worried that we don’t have a way for a household to write a put options on its assets. For a simple example, let’s say a household has a house worth $500k (assets), and a debt worth $400k (liabilities), and there’s a very high probability that it can make the payments on those liabilities.

People like Shiller wants you to be able to pay a small fee so that if the asset is suddenly worth $300K you get $100K in value – the put option is presumably written at the level of liabilities. He also wants you to be able to hedge income, so that if the probability of you being able to make the payments decreases – long unemployment spells, health problems, etc. – you can get a payout that would reduce the liability to the point where the house can manage them.

Notice that if the household goes bankrupt, because assets are less than liabilities, liabilities are marked down accordingly, directly as if a put option has been exercised. In an ideal bankruptcy, it would be marked down that $100K in the example above, or marked down to the point were payments have decreased so they are manageable.

Taboo Talk

I know it is taboo to talk about it this way, since bankruptcies are nasty zero-sum games evil people do but put options are wonderful gee-whiz innovations that are in no way zero-sum, but I honestly don’t see a net difference between a household declaring bankruptcy and a household collecting money on a put options it has written on itself. You are being charged for credit risk by the people who lend to you; you are already paying the fee for having this put option.

If anything, bankruptcy handles the moral hazard problem better with these “insurance” like contracts and it is held by the debt lender, so the cost of the option (how much extra you are charged to compensate for credit risk) can be individualized in a way a commodity market couldn’t handle. Sure lawyers collect a fee for pushing people into bankruptcies, but I have a hard time believing it’s any worse than a 1.25% expense ratio the derivative sellers are getting. And key is that it is only exercised if the household can’t manage the liability payments – someone has to pay me, zero-sum, if my house declines in value even if I can make the original payments on liabilities with this hypothetical put option. Someone only has to ‘pay me’ in bankruptcy if I can’t manage the payments – in this case, I hold this risk longer as long as it is optimal for me to do so.

I need to flesh this out more, and I’m interested in the minute differences between the two in equilibrium. But the last time I checked, we are currently trying to dismantle this financial innovation as it is part of the neoliberal vision of governance to dismantle and then privatize the social safety net, regardless of whether or not a functioning market is in place and how well the social safety net provided. If anything we should be expanding this – mortgage cramdowns would have been the financial innovation needed to survive the foreclosures and raw neighborhood destruction that is going to characterize 2010.

The Global Economy Makes a Critical Transition

Statement by Secretary Timothy F. Geithner at the International Monetary and Financial Committee (IMFC) Meeting
On behalf of the United States and our delegation, I'd like to thank Turkey and the people of Istanbul for hosting this year's Annual Meetings. We meet as the global economy makes a critical transition away from crisis and toward recovery. Less than one year ago, with the global economy facing serious and unprecedented challenges, countries put in place significant and extraordinary measures to stabilize financial markets and support the global economy.

The United States has been a leader throughout this period, with the Administration enacting a sizeable stimulus plan; restoring confidence in the financial system and the flow of credit to consumers and households through the Financial Stability Plan; and helping marshal resources for emerging markets and developing countries through President Obama's call for large scale resources to backstop the global financial system.

Conditions have improved considerably. Stresses in financial markets have declined, confidence has improved, international trade is recovering, and economic growth has resumed in most countries and globally. While global growth is forecast to accelerate in 2010, output gaps will persist, unemployment may rise further, and downside risks remain.

For this reason, Leaders in Pittsburgh agreed to sustain their strong policy responses and not prematurely withdraw fiscal, monetary and financial sector support measures until durable, private sector-led growth is firmly achieved. When the time is right, credible exit strategies will be prepared to begin gradually withdrawing public sector support in a way that is cooperative and coordinated but does not jeopardize the recovery.

In Pittsburgh, G-20 Leaders reached an historic agreement to put the G-20 at the center of their efforts to work together to build a durable economic recovery while avoiding the fragilities and excesses of the past that led to the crisis.

They pledged to adopt the policies needed to lay the foundations for a healthy global economy by creating a Framework for Strong, Sustainable, and Balanced Growth; by building a robust system of financial supervision and regulation; and by modernizing the international financial institutions to take on the challenges of the 21st century. As IMF Governors, we have an important responsibility to work collaboratively to advance the reform agenda to support a durable recovery and head off future crises.

Forging a Framework for Strong, Sustainable, and Balanced Growth

The crisis revealed critical weaknesses in the pattern of global growth, in which some countries consumed well beyond their incomes and others relied heavily on exports to generate growth and, in the process, accumulated vast amounts of foreign exchange reserves. This pattern of demand growth and global capital flows was excessively unbalanced and ultimately unsustainable.

To manage the transition to a more balanced and sustainable pattern of global demand, Leaders have created a new framework for economic cooperation, the "Framework for Strong, Sustainable, and Balanced Growth", in which G-20 Finance Ministers and Central Bank Governors will work together, through mutual assessment, to help ensure that our individual policies are collectively consistent and more balanced, within a forward-looking framework.

We are committed to seeing this cooperative process of mutual assessment work so as to help prevent unsustainable trajectories of debt, credit, leverage, demand, and reserve accumulation becoming forces of destabilization in the future. We look to the IMF to play a key role in assisting the assessment of G-20 economic and financial policies and in providing its view on the likely balance and sustainability of the global economy. We expect that the IMF will report regularly to the G-20, in addition to the IMFC.

Strengthening Financial Sector Supervision and Regulation

Perhaps most dramatically, the crisis revealed gaps in our regulatory system that allowed the build-up of excess leverage and risk within and alongside the banking system. In the United States, we are working to implement reforms designed to protect consumers and investors and create a more stable, more resilient financial system.

In Pittsburgh, G-20 Leaders advanced an ambitious agenda to create a seamless web of financial regulation and supervision - addressing the deficiencies in our financial regulatory framework that contributed to the virulence and global spread of the financial crisis. Strengthening firms' capital must be at the core of this effort.

The United States is committed to specific deadlines for implementation of more and higher quality capital, stronger liquidity, a simple leverage ratio to constrain excess risk-taking and building buffers that firms can draw down in periods of stress.

Compensation reform is also critical, and the United States has shown leadership in this area by already taking a number of actions to reform compensation practices to support financial stability. Since the April G-20 meeting, we have put in place tough new restrictions for firms receiving public assistance, including restrictions on bonuses and golden parachutes and a requirement that boards of directors review the relationship between compensation and risk; appointed a Special Master for Executive Compensation, empowered to review compensation structures for the top 100 employees at firms receiving exceptional assistance; and proposed legislation, already passed by the House, that will require all public companies to permit shareholders to cast an annual "say on pay" vote and make their compensation committees independent in fact, not just in name.

The U.S. has also moved to strengthen the transparency and the functioning of the over-the-counter derivatives market, and is working to develop tools to effectively resolve large failed financial institutions.

As we in the United States strengthen our system, we urge other nations to take steps to strengthen their own systems and ensure that the global financial system is safer and more stable. The United States is undergoing an IMF Financial Sector Assessment Program, reflecting our commitment to accept the obligations and responsibilities of being an IMF member.

The IMF's work, through annual surveillance, the FSAP, Global Financial Stability Reports, new early warning exercises, and intensified cooperation with the expanded Financial Stability Board (FSB), is making an important contribution to strengthening financial systems around the world. IMF-FSB collaboration is essential to a stronger, more resilient global financial system.

*Modernizing the IMF*

"Enhanced Resources"

The IMF's actions since the crisis began have stabilized markets and boosted confidence, winning broad support and underscoring the Fund's central role in crisis response. A critical component of the response was ensuring the IMF has adequate resources to address the needs of members hard hit by the global crisis. To this end, countries delivered on commitments to renew and expand the IMF's New Arrangements to Borrow (NAB) by over $500 billion to backstop the IMF. Dynamic emerging economies contributed a critical share to an expanded NAB, and the U.S. moved quickly to pass legislation enabling our $100 billion contribution. The IMF's action to supplement members' reserves and boost global liquidity through an allocation of Special Drawing Rights (SDRs) also demonstrated the international community's willingness to take bold steps in support of a global recovery.

We welcome IMF approval of a package of extraordinary measures to sharply increase the resources available to low*-*income countries. Resources from the planned sale of IMF gold and other internal sources will more than double the Fund's medium*-*term concessional lending capacity and frontload these resources over the next two years. In addition, the new Standby Credit Facility will fill a longstanding gap in the concessional facilities architecture, by providing maturing low-income countries with an instrument specifically designed for intermittent Fund engagement. These welcome and ambitious measures will allow the IMF to help meet the needs of the poorest countries through the crisis and beyond.

"Mandate"

Resources are only part of the equation. The tools available to the IMF, and the institution's capacity to identify potential vulnerabilities and appropriate policy responses, are equally important to restoring and maintaining confidence.

The Fund recently enhanced its lending toolkit to provide countries with contingent finance to guard against sudden stops. The newly created Flexible Credit Line (FCL) is proving to be an effective crisis prevention instrument for the strongest performing emerging market countries. Both the FCL and the High Access Precautionary Arrangement (HAPA) have helped restore confidence in countries that have used them during the current crisis. We continue to support the Fund's efforts to strengthen its capacity to help its members cope with financial volatility, reducing the economic disruption from sudden swings in capital flows and the perceived need for excessive reserve accumulation.

The IMF's role in the newly announced "Framework" highlights the importance of candid surveillance assessments, especially when individual country policies have systemic implications. The crisis underscored the importance of strengthening financial sector surveillance, including linkages between the financial sector and the real economy. Effective exchange rate surveillance for all members remains at the core of the IMF's duties. The Fund should complement its unique role on exchange rate surveillance with stepped-up engagement in making the international system less prone to crisis. Moreover, greater transparency is critical to underpin the credibility and effectiveness of IMF surveillance. Since the crisis has taught us that no nation is immune, we call upon all IMF members to allow the publication of their annual Article IV reviews.

"Governance Reform"

A more representative, responsive and accountable governance structure is essential to strengthening the IMF's legitimacy, ensuring that it remains at the center of an evolving international monetary and financial system. Agreement in Pittsburgh to reform the global architecture to meet the needs of the 21st century was a watershed event. In addition to designating the G-20 as the premier forum for international economic cooperation, G-20 Leaders committed to a shift in IMF quota share to dynamic emerging market and developing countries of at least 5% from over-represented to under-represented countries. Attention must now shift to implementing this agreement, and we call on the IMF to facilitate this process by providing scenarios of how the quota shift could be implemented in the very near-term.

Reform of the Executive Board remains an essential component to modernizing the IMF's governance structure to better reflect the 21st century global economy. The United States has called for reducing the size of the Board while preserving the existing number of emerging market and developing country chairs. Further, the past six months have plainly demonstrated the benefits of securing stronger Ministerial engagement in setting strategic policies and priorities of the International Financial Institutions. To sustain this level of Ministerial engagement, we must find a way to enhance the effectiveness and efficiency of the IMFC. I look forward to discussion of concrete proposals to achieve greater involvement of the Fund's Governors in providing strategic direction to the IMF.

Global Cooperation to Combat Illicit Finance

We strongly support the cooperation among the Financial Action Task Force, the IMF, the World Bank, the FSB and the Global Forum to strengthen compliance with international standards. For example, global cooperation to address cross-border tax evasion has led to more tax information exchange agreements being signed in the last ten months than had been signed in the prior ten years. We continue to emphasize the importance of global efforts to combat money laundering, terrorist financing, financing of proliferation of weapons of mass destruction, and other forms of illicit finance.

We underscore our concerns over illicit finance emanating from Iran and the severe deficiencies in its regulatory regime. We emphasize FATF statements calling upon the international community to implement countermeasures to protect the international financial system from money laundering and terror financing risks emanating from Iran, and we urge all nations to respond appropriately. We further urge all nations to implement the financial provisions of UNSCR 1803 by exercising enhanced vigilance over the activities of their financial institutions with Iranian financial institutions - including branches and subsidiaries abroad - and particularly with respect to Bank Saderat and Bank Melli.

Hana Financial Says It May Sell New Shares; Stock Declines

Oct. 5 (Bloomberg) -- Prudential Financial Inc., the second-biggest U.S. life insurer, said it’s studying whether to sell its brokerage and fund management businesses in South Korea.

The company is exploring options including a possible sale of either or both Prudential Investment & Securities Co. and Prudential Asset Management Co., Newark, New Jersey-based Prudential said in a statement today.

Prudential, which acquired the Seoul-based, securities and asset management units in 2004 from state-run Korea Deposit Insurance Corp., is seeking to exit part of its business in the nation after the government allowed banks and securities firms to engage in each other’s businesses, leading to an increase in competition.

The law is forcing industry participants to “make a choice for survival in Korea, which is one of the most dynamic markets,” said Woo Jae Ryong, head of the Wealth Management Research Institute at Tong Yang Securities Co. in Seoul. “They should become a big player or target a niche market as a small player.”

The insurer bought 80 percent of Prudential Investment for 355.5 billion won ($303 million) in February 2004. The remaining 20 percent was purchased in January 2008 for an unspecified amount, according to July 1 regulatory filings in South Korea.

Prudential said on Sept. 22 it’s looking for acquisitions in Japan and reiterated it may fund deals with debt or equity issues. Vice Chairman Mark Grier said on Sept. 22 the company would be conservative in funding acquisitions.

Profit

Prudential reported second-quarter net income of $163 million, its best profit in a year, as the stock market rebound let the insurer reduce the amount of money it set aside to protect savers from asset declines.

Prudential Investment, formerly known as Hyundai Investment & Securities Co., had an 11 billion won net loss in the year ended March 31, compared with a 101.9 billion won profit the previous year.

Prudential owns 99.8 percent of the Korean asset management company, which used to be one of the nation’s top three asset managers. Prudential Asset Management now manages 7.4 trillion won of assets, the 15th largest as of Sept. 30, according to Asset Management Association of Korea’s Web site.

The asset management company had 6.77 billion won of net income in the year ended March, according to a financial regulator’s statement on June 2.

The 10 biggest of 63 fund managers in Korea control 65 percent of the nation’s industry, according to a Financial Supervisory Service’s statement on June 1.

Prudential’s life insurance business in South Korea won’t be affected, the statement said today.

Advisory firms must work together

The investment advisory profession is facing a number of serious policy issues that could dramatically alter the manner in which it is regulated and transform the high ethical standards that have been a hallmark of the profession for decades.

Financial services reform [has been high on Congress'] priority list in the wake of the seismic changes wrought by the subprime debacle. Other developments, notably the Bernard Madoff scandal involving a $65 billion Ponzi scheme, have created a perfect-storm environment for consideration of unprecedented changes to the manner in which investment advisers are regulated.

Possibilities that were nearly unthinkable a short time ago are now open for active discussion and potential action. In congressional hearings examining the Madoff scandal, [Securities and Exchange Commission] officials have spoken openly about the need to “harmonize” investment adviser and broker-dealer laws and regulations and suggested the creation of a self-regulatory organization for investment advisers.

In January, the Senate Banking Committee convened a hearing to confirm Mary Schapiro as SEC chairman. Ms. Schapiro, the former chief executive of [the Financial Industry Regulatory Authority Inc.], lamented that “far fewer resources are available for inspection and oversight” of investment advisers than for broker-dealers.

The SEC, which among other roles serves as the regulator for the investment advisory profession, has been heavily criticized for its role in the Madoff scandal and for its alleged failure to regulate firms and practices that contributed to the financial crisis.

How the regulation of investment advisory firms would be affected by reforms would obviously depend upon many devilish details. What is clear is that, in the context of the broad discussion taking place in the policy arena, the odds have in-creased that a fundamental restructuring of securities laws and regulations will occur.

If and when Congress takes action in this important area, it could alter the fundamental fiduciary standard governing the advisory profession while subjecting advisory firms to costly oversight by Finra, the self-regulatory organization for the brokerage industry.

In light of the Madoff scandal, it is abundantly clear that the environment is ripe for legislation and regulations that could dramatically change the current framework governing the investment advisory profession.

DYSFUNCTIONAL GIANT
In terms of sheer numbers, the U.S. investment advisory profession is a giant. The profession consists of more than 11,000 SEC-registered firms that collectively manage more than $40 trillion for nearly 20 million clients. Clients run the full spectrum, from individuals and families who want a financial professional to handle their investments to institutions such as pension funds, state and local governments, corporations, banks, insurance companies, mutual funds, endowments, foundations, and hedge funds.

Simply looking at the vast amount of assets entrusted to investment advisers, it is clear that the performance of the profession is critical to the financial health and future well-being of millions of people.

Despite its size, the investment advisory profession has not done an adequate job of explaining what it is and what it does. Few investors understand the core characteristics of an investment adviser or appreciate the key differences between investment advisers and other financial services providers.

Even “specialists” in the financial media are not well-informed and many tend to characterize large mutual fund or brokerage complexes as “typical” investment adviser shops. Many policymakers, including members of Congress who have responsibility to craft laws governing investment advisers, have little understanding about the basics of the profession.

For these reasons, some might think of the investment advisory profession as a “sleeping giant” that has yet to reach its full potential by engaging in advocacy and educational efforts commensurate with its size.

Perhaps a more fitting description is that of a “dysfunctional” giant. Investment advisory firms come in all shapes and sizes. There is enormous diversity even among investment advisory firms that appear to be similar.

By and large, advisory firms do not conduct business with each other. It should come as no surprise that the advisory profession often is described as “fragmented.” Accordingly, many investment advisers do not feel any particular kinship with each other, despite the fact that the law treats them similarly. This leads to an insular mentality and a lack of solidarity in pursuing a common agenda.

Challenge No. 1: The diversity of firms. The investment advisory profession is characterized by its variety. On one level, the size of advisory firms runs the gamut from very small to very large. Even among firms that are similar in size, there can be huge differences in investment philosophy, clientele, business structure and services.

Here's a simple example that demonstrates the wide gulf that tends to separate investment advisers:

Everyman Wealth Management Co. is an investment advisory firm located in Smalltown, USA. Ernest Everyman, 68, a certified public accountant, founded the firm in 1976 when his accounting clients increasingly began asking for investment advice.

His son, Ernest Jr., is also a CPA and, among other duties, serves as the firm's chief operating officer. The firm employs two others who primarily perform administrative functions. The firm has 190 accounts and manages $140 million in client assets, primarily for individuals. The firm provides financial planning, investment, tax and accounting services.

Global Financial Co. is an investment advisory firm with offices in New York, Los Angeles, London and Hong Kong. The firm is majority-owned by a European bank. The firm concentrates on institutional clients, including public funds, central banks, insurance companies, endowments, foundations and retirement plan sponsors.

The firm offers a variety of investment products, including mutual funds, hedge funds, wrap fee programs and separate accounts. The firm has an affiliated broker-dealer that is used primarily to distribute the firm's mutual funds. The firm has more than 1,500 employees and manages more than $300 billion in client assets.

Everyman and Global illustrate the solidarity challenge confronting the investment advisory profession. They are very different enterprises. Their clients are different. Their investment services are different. Their resources and focus are different.

What, if anything, do Everyman and Global have in common? Are there any compelling reasons that they should work together to achieve shared goals? Do they even have any shared goals? Why should either firm be concerned about achieving solidarity with the other?

Challenge No. 2: The lexicon challenge. At a very basic level, the lack of a broadly accepted and well-understood lexicon contributes to the solidarity challenge facing the investment advisory profession.

Terms used to describe those who provide investment advisory services include the following: investment adviser, asset manager, investment manager, portfolio manager, financial adviser, financial consultant, money manager, wealth manager, investment counsel and financial planner.

The lexicon challenge (and related investor confusion) is further exacerbated by complexities related to various professional designations. While federal laws and regulations do not specify any minimal certification or educational requirements for investment advisers, there is an array of certifications, accreditations and designations that investment professionals can acquire to burnish their credentials.

For example, the chartered financial analyst and certified financial planner designations are well-recognized, established designations that require significant time and effort to attain, including successful completion of certifying examinations.

Challenge No. 3: Alphabet soup. Washington is home to hundreds of trade groups and associations. Like investment advisers, they come in every size and shape. There are high-profile groups like AARP and the National Rifle Association, as well as scores of lesser-known organizations like the National Candle Association, the Popcorn Board and the International Carwash Association. Virtually every industry and interest group has a membership organization that represents its collective interests.

At their core, associations work to advance and promote the interests of their members by serving as the liaison between industry and government. Membership organizations typically perform a wide variety of other services for their constituencies and may be involved in one or more of the following activities: providing information, research and statistical data; education/professional development; developing standards, codes of ethics and certification programs; and providing a forum to discuss common problems and solutions.

A number of groups compete to represent investment advisers, including the following:

• Investment Adviser Association: represents more than 500 SEC-registered investment advisory firms that collectively manage more than $9 trillion in client assets

• Investment Company Institute: represents U.S. investment companies, including mutual funds, closed-end funds, exchange-traded funds, and unit investment trusts.

• Financial Planning Association: represents financial planners, attorneys, accountants, bankers, insurance agents, stockbrokers, investment consultants, money managers and others involved in the financial planning process.

• Securities Industry and Financial Markets Association: represents 650 financial services firms, primarily broker-dealers.

• Managed Funds Association: represents the hedge fund industry and attracts professionals [from] hedge funds, funds of funds and managed-futures funds.

• American Bankers Association: the largest association that represents the banking industry [including] community, regional and money center banks and holding companies, as well as savings associations, trust companies and savings banks.

The confusing conglomeration of organizations representing investment advisers contributes to the general lack of understanding about the advisory profession. If you are a member of Congress, and two different groups (or more) purporting to represent the interests of investment advisers come to you with very different positions, what are you to conclude? What policies are you supposed to support? Whose side are you on? On the other hand, if you are a member of Congress and every SEC-registered investment adviser in your district comes to you with a unified message, it increases the odds that you will appreciate and understand their concerns and positions on key issues.

Challenge No. 4: The GDI Syndrome. As a general proposition, investment advisers are fiercely independent. They are highly intelligent and well-educated GDIs (gosh-darn independents). They tend to be self-reliant and self-supporting. They have worked hard to get where they are. They revel in intensive research and creative thought. Many would be flattered to be referred to as “contrarian.”

By nature, they are tough. The business of making investment decisions for clients is not easy. Investment advisers must deal with a host of complex and ever-changing issues. Unless an investment adviser has a solid understanding of the markets and specific securities, and the acumen and discipline to focus on and follow a consistent investment strategy — not to mention the management skills to operate a business — things can unravel rather quickly.

Independent, tough — and auto- nomous. Investment advisers tend to abhor the herd mentality. Instead, they admire those who really “know their stuff” and who demonstrate originality based on thorough and objective analysis. Many have developed unique approaches to investment research and portfolio management based on rigorous analysis and steady application.

Challenge No. 5: Aversion to publicity. The traditional investment advisory business is based on a high level of discretion and confidentiality. Older generations of investment counselors would not even acknowledge their advisory clients when passing them on the street. Advertisements were eschewed as vulgar. Speaking with reporters was generally avoided if at all possible.

These historical tendencies of the investment advisory profession are somewhat at odds with well-run advocacy and educational initiatives that by definition need to highlight the profession, its attributes, and details of relevant issues. Advocacy results generally are tied to concerted, visible and oftentimes widely publicized activities.

A trade organization can provide “cover” for individuals and firms that would prefer not to be on the front line of particular advocacy debates. The investment advisory profession must come to grips with the reality that public discourse — from dealing with the financial media to meeting with policymakers — is a necessary element of effective advocacy.

Challenge No. 6: Who likes regulation? Sometimes, the issues just aren't that “sexy.” Most advocacy issues are tied directly to legislative and regulatory policies. The reality is that many advisers view legal, regulatory and compliance issues as nothing more than a detraction and distraction from their primary job of serving clients.

Moreover, legal and regulatory issues may be complex and difficult to grasp for senior management not immersed in the day-to-day nuances of compliance. As such, there is a natural tendency on the part of many investment advisory firms to avoid — or at least ignore — nascent legal and regulatory matters and conclude that it's “someone else's job” to try to deal with them.

Let's return to our original questions. Do Everyman Wealth Management Co. and Global Financial Co. have anything in common?

Are there any compelling reasons that Everyman and Global should work together to achieve any shared goals or objectives? Should either firm be concerned about achieving solidarity with each other?

The answers are yes, yes and yes.

Everyman and Global are both “investment advisers” within the meaning of the Investment Advisers Act of 1940. Even though their firms appear to be completely dissimilar, both are in the business of providing investment advisory services to their clients. They are subject to the same SEC registration and disclosure requirements. Both owe a fiduciary duty to their clients.

Both are subject to regulations under the Advisers Act, including the compliance program, code of ethics, proxy voting, privacy, custody, insider trading, books and records, and advertising rules. They are subject to examinations by the SEC.

They both have serious risks related to non-compliance. They both face potentially negative consequences if the laws and regulations governing the profession become overly burdensome or are not appropriately tailored to the investment advisory business.

Everyman and Global also can benefit from positive perceptions of their profession — by investors, the media, and policymakers. They both have a critical stake in promoting high ethical standards for their profession. And they both can gain from organized and collective efforts to promote a better understanding of their profession.

In the Money: Year end tax and financial planning tips

You might wonder why I've chosen early October to discuss income tax planning. Fall might not be the most obvious time of year to think about taxes, but this is actually an excellent time to review both this year's tax picture and to begin preparing for 2010. You aren't yet distracted by the holidays, and you still have several weeks to implement any changes that should take place before Dec. 31.

Compare your year-to-date tax payments with last year's tax liability. If your expected total 2009 income or deductions will be significantly different from 2008, calculate whether your current withholding or estimated tax payments will be adequate. Although you might not incur a penalty for under-withholding if you cover at least 100 percent of last year's tax liability, you don't want to be surprised with a big tax bill next April. If your income has dramatically declined, you might be paying too much. Adjust your withholding or estimates accordingly. Everyone loves a big tax refund, but especially in difficult times, you can put that money to better use now.

Time is running out to qualify for the federal First-Time Homebuyer Credit. Taxpayers with income below $75,000 (single) or $150,000 (joint) may receive a credit of up to $8,000 for the purchase of a primary residence, if they have not owned a home within the past three years. The closing date on the transaction must occur prior to Dec. 1, 2009.

You have plenty of time to qualify for the federal energy tax credit. Purchases of certain energy-efficient products and other improvements to your primary residence before Dec. 31, 2010 will qualify for a credit of up to $1,500. Tax credits are more valuable than tax deductions, because credits reduce your income tax liability dollar for dollar.

See www.energystar.gov for more information.

This is typically the time of year when employees have an opportunity to make changes to their company benefit selections, such as how much to contribute to 401(k) plans. If your company retirement plan provides for matching contributions, be sure you are deferring at least enough to receive the full match. Doing anything less means you are throwing away free money. Increasing numbers of plans now include Roth-401(k) provisions, which permit employees to designate some or all of their salary deferrals as after-tax Roth contributions.

Although the portion allocated into the Roth is not tax deferred, future qualifying withdrawals will be completely tax free.

Employees of companies that offer tax free flexible spending accounts must decide whether they wish to set aside a portion of their salary on a pre-tax basis for certain types of medical expenses, and specify the dollar amount to allocate.

If you're already participating in such a plan, now is the time to tally the amount you've utilized so far this year.

This information will not only help you estimate the appropriate amount to contribute for next year, but you'll also know how much you have left to spend before the end of 2009.

Since any balances not used before Dec. 31are forfeited, knowing where you stand today gives you time to arrange or rearrange medical or dental appointments.

Before writing off this year's surplus as an expensive mistake, be sure you've submitted receipts for expenses you've already incurred, such as office visit co-pays and prescription deductibles.

If you still have money left in the account, look for creative but legitimate ways to utilize the balance. Medical spending account funds may be used to purchase items such as eyeglasses, non-prescription medications and first aid supplies.

For a more comprehensive list of allowable and non-permissible expenses, see IRS Publication 502 at www.irs.gov/formspubs or call (800) 829-1040.

Since tax laws are so complex, consult with your tax advisor before making any significant changes to be sure they fit your circumstances.

Don't wait until tax filing time to meet, because some strategies might need to be implemented before the end of the year.

EU Says Bank Losses Could Reach 400 Billion Euros

Oct. 2 (Bloomberg) -- A stress test of the European Union’s biggest banks showed they could withstand an even deeper recession, though with almost 400 billion euros ($581 billion) in losses, according to a report to EU finance chiefs.

Under current EU economic forecasts for 2009 and 2010, the largest banks in the region would maintain an average Tier 1 capital ratio “well above” 9 percent, the officials said yesterday in a statement after meeting in Gothenburg, Sweden. A “more adverse” scenario would boost losses and cut the average ratio to about 8 percent.

The five-month study was ordered by ministers after a similar one in the U.S. European Central Bank President Jean- Claude Trichet emphasized that the potential losses for the region’s 22 largest banks represents an “adverse” scenario and not a base-line case.

“All systemic institutions showed that they were very resilient,” Spanish Economy Minister Elena Salgado told reporters today. “That’s a good result.”

No bank among the 22 included in the test would see its Tier 1 capital ratio fall below 6 percent as a result of the adverse scenario, according to the statement. The minimum Tier 1 capital requirement for banks under the Basel accords is 4 percent.

Earnings Forecasts

“This resilience of the banking system reflects the recent increase in earnings forecasts and, to a large extent, the important support currently provided by the public sector to the banking institutions,” the officials said, referring to capital injections and asset guarantees.

European financial institutions have posted $498 billion in losses since the onset of the credit crunch in mid-2007, less than half the $1.08 trillion in losses reported in the U.S., according to Bloomberg data.

U.S. regulators found earlier this year that 10 financial companies led by Bank of America Corp. needed to raise a total of $74.6 billion of capital, in results made public on May 8. Releasing the findings helped calm investors, U.S. Comptroller of the Currency John Dugan, who oversees national banks, said at the time. The EU didn’t publish the names of the banks it studied.

Trichet and other officials said the methodology used in the report, prepared by the Committee of European Banking Supervisors, differed from that used by U.S. authorities and the International Monetary Fund. The divergence in part reflects different accounting standards, they said.

Global Writedowns

The Washington-based IMF this week cut its projection for global writedowns on loans and investments by 15 percent to $3.4 trillion, citing improvements in credit markets and initial signs of economic growth. The tally was based on a new methodology after criticism of an April estimate of about $4 trillion. Losses on bad assets are projected to increase from July 2009 through next year by $470 billion in the euro area, according to the report.

Bank capital reserves will still have to improve to strengthen the financial system, according to Bundesbank President Axel Weber.

“In the future, not only the quality but also the level of banks’ capital has to increase in order to make them more resilient,” Weber said in Gothenburg.

Stress Testing

The finance chiefs intend to make stress testing routine and possibly annual. “We would like such tests to be published regularly,” French Finance Minister Christine Lagarde told journalists.

The Brussels-based Bruegel research group urged the ministers to set a deadline for member states to withdraw credit guarantees for banks to spur them to raise new capital and write off bad loans.

“Bank recapitalization and restructuring should be completed in all EU countries as a matter of urgency,” the institute said in a report on post-crisis exit strategies. To encourage this, governments should “agree on a timetable and firm deadlines for termination of government guarantees.”

Ministers also discussed EU proposals to centralize financial regulation through the establishment of European banking, systemic and risk monitoring agencies. Swedish Finance Minister Anders Borg said yesterday that finance chiefs hoped to reach a political agreement on supervision by the end of the year.

‘Absolutely Vital’

Ministers also said after talks yesterday that the pace of economic recovery means they probably won’t withdraw emergency stimulus measures before 2011. U.K. Chancellor of the Exchequer Alistair Darling told reporters today it was “absolutely vital” to continue supporting the economy.

“The policy of maintaining support for our economies as we come through recession is absolutely vital,” Darling said. “Whilst there is more confidence now than there was six months ago, it is by no means the case that the job is done.”

The Group of 20, which includes the EU’s Britain, France, Germany and Italy, committed last week to conducting “robust, transparent stress tests as needed” and called on banks to retain a greater portion of current profits to bolster capital.

EU eyes year-end deal on reform of financial supervision

GOTHENBURG, Sweden, Oct. 1 (Xinhua) -- European Union (EU) countries were expected to reach a deal on an overhaul of financial supervision in the 27-nation bloc by the year end, the EU presidency said on Thursday.

It is the EU Presidency's ambition "to have all the (reform) package signed in December," Swedish Finance Minister Anders Borg told reporters after chairing informal talks with his EU counterparts in the Swedish port city of Gothenburg.

Sweden, currently holding the EU rotating presidency till the end of this year, takes financial supervision as a top priority for its six-month agenda.

The European Commission last week adopted an important package of draft legislation to significantly strengthen the supervision of the financial sector in Europe, both on the macro and micro levels.

On the macro level, the legislation will create a new European Systemic Risk Board (ESRB) to detect risks to the financial system as a whole with a critical function to issue early risk warnings to be rapidly acted on.

On the micro level, it will also set up a European System of Financial Supervisors (ESFS), composed of national supervisors and three new European Supervisory Authorities for the banking, securities and insurance and occupational pensions sectors.

The package needs approval from EU governments and the European Parliament to become law. The commission hoped it could come into force in 2010.

It was the first time that EU finance ministers had discussion on the draft legislation.

Borg said EU finance ministers were poised to agree on the micro-level reform later this month, while a deal on the macro-level reform was expected in December.

But Britain had expressed certain reservations concerning the future leadership of ESRB and the power of three new European Supervisory Authorities to override national decisions.

It had been suggested that ESRB should be led by the governor of the European Central Bank (ECB), which is the central bank of eurozone countries. This has drawn concern from EU countries outside the euro zone, including Britain.

Under the commission's proposal, the three new European Supervisory Authorities would have the power to make a final decision if two member states cannot agree with each other. Britain wants that power to be strictly limited.