Finance topics

So many times when the big credit-rating companies have embarrassed themselves, the world has sighed and chalked it up to a business model that by design invites corruption and incompetence. Perhaps never before have the public’s expectations for the industry been lower.

The fundamental flaw is that the major rating companies, led by Moody’s Investors Service and Standard & Poor’s, typically are paid by the issuers of the securities they rate, or by other deeply interested parties, such as Wall Street underwriters. Too often the raters seem to be the last to know that a company they dubbed investment grade was going broke, or that a mortgage bond once deemed AAA was about to default. The public sees these things and naturally draws a link between what the raters say and how they are compensated.

Although the government can’t make the credit raters more capable, it can make them more transparent. Here’s a good place to begin: Start requiring disclosures of how much the raters’ clients pay them for their services.

Consider some of the boilerplate in Moody’s reports on MF Global Holdings Ltd., whose credit ratings were the subject of a congressional hearing last week. Moody’s Oct. 27 report — in which it downgraded MF Global to junk, only four days before the futures broker filed for bankruptcy — said most issuers of debt securities pay “fees ranging from $1,500 to approximately $2,500,000″ for “appraisal and rating services.”

It’s anyone’s guess whether the fees MF Global paid to Moody’s fell within or outside this range. The companies know how much money changed hands. They’re just not telling us.

The disclosures in Standard & Poor’s reports are just as useless. The company’s Oct. 26 report on MF Global said “S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors.” Coincidence or not, S&P maintained an investment-grade mark on MF Global until the day it failed.

There’s no such secrecy about the fees other types of opinion vendors charge their clients. For more than a decade, U.S. public companies have been required to disclose the annual fees they pay their outside auditors. Similarly, when companies hire stock promoters or other firms to publish research reports profiling their shares, federal securities laws require disclosures in the reports showing who paid for them, as well as the amount and form of compensation.

The auditor-fee disclosures have been useful. Fannie Mae’s proxy statement for 2003, for instance, showed the housing financier paid KPMG $2.7 million to audit its books that year.

The fee was so tiny, for a company with $1 trillion of assets, that it served as a red flag for investors, signaling that KPMG’s audit quality couldn’t have been all that robust. The next year Fannie Mae had a huge accounting scandal.

At the other extreme, in its first annual report as a public company, Blackstone Group LP said it paid its auditor, Deloitte & Touche, total fees of $159.1 million for 2007, mostly for nonaudit work. The fees were so huge — Blackstone’s total assets were $13.2 billion at the time — it would be reasonable for investors to wonder what influence they might have had on Deloitte’s judgment.

The parallels for credit-rating companies are obvious. Like auditors and stock promoters, they’re paid to express opinions to investors. Whatever their fees are, the public should be told. The credit raters would have us believe there’s nothing wrong with collecting cash from the same customers whose securities they grade, and that this doesn’t cloud their independence or objectivity. If that’s true, they should have no problem with us knowing the actual dollar amounts.

Unfortunately this isn’t the path the government has chosen. The Dodd-Frank Act, passed in 2010, included 19 pages of new provisions governing how credit-rating companies operate.

Numerous federal banking and securities laws were amended to remove statutory references to credit ratings, for instance, so that regulators would reduce their reliance on them. Dodd-Frank didn’t mandate disclosure of the raters’ fees, however.

A rule proposed last year by the Securities and Exchange Commission would require companies such as Moody’s and S&P to disclose in a form accompanying each credit rating whether the grade was paid for by the issuer, underwriter or sponsor of the security being rated — or if it was purchased by someone else, such as an investor. The rating company would also have to disclose if the purchaser had paid it for any other services, such as consulting or advisory work.

Most important, though, no dollar amounts would have to be divulged.

This is a mistake. A big reason that the public doesn’t trust credit ratings is because of the money that changes hands.

What matters most, obviously, is how much. It makes little difference whether the amounts are disclosed by the rating company or by the issuer of the securities as part of its own disclosures, as long as it’s made public somewhere.

The most dubious penny-stock promoters have to disclose what they get paid for their opinions. Credit raters can at least be held to the same standards.

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ST. LOUIS • The money to renovate the Edward Jones Dome could come partly from higher fees for tickets and parking.

Those are among the possible sources of public funding listed in a financial plan the St. Louis Convention and Visitors Commission has sent to the Rams. The plan is meant to explain how to pay for $124 million in renovations to the Dome.

It lists a ticket surcharge and the creation of a new parking district, with a vehicle surcharge, as options. The plan also lists bond refinancing, tax credits and tapping the reserves of the Dome’s owner as other options.

The one-page financial plan, however, is short on specifics and does not list how much money each source of public funding would generate. It lists only the total they would bring in: $59.5 million.

The lack of specificity is highlighted by one of the listed sources: “Other City, County and State money as may be provided.”

And at least one of the listed items — refinancing of bonds issued by the Regional Convention and Sports Complex Authority to build the Dome — is not currently allowed, according to the authority’s website.

The CVC, which manages the Dome for the authority, wants the Rams to pay for $64.5 million of the renovation costs.

The CVC released the document late Thursday after a public records request from the Post-Dispatch. The CVC released its renovation plan on Wednesday but declined to release the financial document, and St. Louis and St. Louis County officials also initially declined to discuss funding details.

Officials said they did not list specifics or dollar amounts because the document was not meant to be a detailed financial analysis. The idea was simply to show the Rams that there are a variety of public funding options available, they said.

“All of them might be used or some of them might be used,” said Mike Jones, a senior policy adviser to St. Louis County Executive Charlie A. Dooley. “It’s all going to depend on what improvements end up being made.”

No decisions have been made on what area would make up the parking district, what the charges would be, and whether they would be levied only on game days or year-round. Also, no decisions have been made on how much a ticket surcharge would be. The city already charges a 5 percent amusement tax on Rams tickets.

Jeff Rainford, St. Louis Mayor Francis Slay’s chief of staff, pledged that proposals to levy new fees or taxes would go before city voters — if those proposals go beyond what is generated as part of the “game day experience.”

“People who don’t go to Rams games or take part in the NFL experience don’t have to worry about being nicked for this without a vote of the people,” he said short term personal loan. “They will not pay any more for this facility without a public discussion and a public vote.”

Rainford also said a referendum would be needed if the city were to eliminate the 5 percent amusement tax or redirect the revenue to help pay for construction costs.

Dooley’s office has similarly pledged to give voters final say on some issues.

“Anything related to increasing a current tax or creating a new revenue source (in the county) would need to be voted on by the people,” Jones said.

The Dome, which opened in 1995, was largely financed with $256 million in revenue bonds, and the repayment of that 30-year debt will be $720 million. Every year, Missouri spends $12 million to pay off the debt, and St. Louis and St. Louis County each pay $6 million annually.

Highlights of the Dome renovation plan include adding large window panels and a 96-foot-wide video screen and scoreboard; building a three-story pavilion connected to the Dome via a bridge over Broadway; and replacing four luxury suites and 1,800 regular seats with 1,500 club seats.

The CVC is required to come up with a plan that, by March 2014, would make the Dome a “first-tier” facility. The Rams have until March 1 to accept or reject the CVC plan, and until May 1 to make a counteroffer.

“Until we know exactly how much we need, there’s no point in going through a financial analysis,” Kathleen “Kitty” Ratcliffe, the CVC’s president, said in explaining the lack of funding specifics.

The one-page financial plan, however, lists estimated costs for the proposed renovations. The biggest cost, $24.5 million, would be for improvements to entrances, bathrooms and common areas, followed by $21.5 million for changes to box suites and concourses.

Many of the proposed improvements would increase revenue at the Dome, but the Rams — not the CVC — likely would reap the biggest rewards from those upgrades. That could be why the CVC wasn’t shy in asking the team to front 52 percent of the bill.

Under the terms of the lease, for example, the Rams keep all ticket receipts, so the team will benefit most from the addition of pricier club seats.

The improvement plan would upgrade concession areas and increase food and beverage sales outside of the Dome. The lease gives the team all net revenue from concessions sold on game days.

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Turnout was low as Egyptians voted on Sunday for the upper house of parliament, in elections that are the latest step in the country’s planned transition from military to civilian rule.

Few voters showed up to cast their ballots at polling stations in Cairo, one of 13 provinces where the first stage of elections for the largely advisory Shura Council are taking place. A second stage will take place on Feb. 14-15.

“We now feel we have a role in shaping the country’s future,” said Mohammed el-Hawari, a professor at Cairo’s Ain Shams University and one of those who did vote.

The Shura Council is composed of 270 members. Only two-thirds are elected while the rest are appointed.

Islamists dominated elections for the People’s Assembly, the more powerful of the two houses of parliament, in voting that ran from Nov. 28 through January. Turnout was heavy in these elections, which were the first since the Jan. 25-Feb. 11, 2011, mass uprising that ousted Hosni Mubarak.

One secular party, the Free Egyptians, had announced that it was boycotting Shura Council elections to protest what it described as violations of Egypt’s election laws by Islamist parties during the People’s Assembly vote.

The secularists say that that Islamists made heavy use of religious slogans and campaigned too close to polling stations. Islamist spokesmen have denied using slogans inappropriately, and said that all groups campaigned too close to the stations.

Secular and liberal alliances, including youth parties which led the anti-Mubarak uprising, have performed poorly in elections.

Once the Shura Council elections are complete, according to Egypt’s transition plan, the parliament is tasked to select a 100-member panel to draft the country’s new constitution. The ruling military council which took power after Mubarak’s ouster is then scheduled to transfer power to an elected civilian president by the end of June.

The army generals have been accused of mismanaging the transitional period, of not carrying through sweeping reforms, and of keeping Mubarak’s regime intact.

The voting comes a few days after hundreds of thousands of Egyptians poured into the streets to mark the first anniversary of their uprising and to press the military council to step down.

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Greece’s prime minister says his debt-crippled country faces a disorderly default in March if it fails to secure a continued flow of international rescue loans.

Prime Minister Lucas Papademos says decisions made in the next few weeks, ahead of a new visit by international debt inspectors, will determine whether Greece will remain in the 17-nation eurozone or revert to its pre-2002 currency, the drachma.

According to a transcript from his office, Papademos told union leaders and employer representatives Wednesday that Greece’s international creditors have called for a re-examination of labor costs to boost lagging competitiveness and fight high unemployment.

He warned that, unless significant reforms are made, Greece will not receive its next installment of rescue funds.

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Asian stocks markets were mostly lower Wednesday, with trading thinned by year-end holidays and mixed economic news out of the U.S.

Hong Kong’s Hang Seng index fell 0.4 percent to 18,556.53. South Korea’s Kospi lost 0.9 percent to 1,825.94 and Australia’s S&P ASX 200 lost 0.9 percent to 4,103.90. Benchmarks in mainland China and the Philippines were also lower.

Bucking the trend was Japan’s Nikkei 225 index, which rose 0.1 percent to 8,449.54. While Japan’s industrial output dropped last month, government forecasters expect manufacturing and production to rebound this month and next.

Industrial output dropped a seasonally adjusted 2.6 percent in November, the government said. It was the first decline in two months paydayloan.

Trading, falling between the Christmas holiday and New Year’s, was generally light.

On Wall Street on Tuesday, the Dow Jones lost less than 0.1 percent to close at 12,291.35. The S&P 500 was up marginally to 1,265.43. The Nasdaq composite rose 0.3 percent to 2,625.20.

Consumer confidence surged to an eight-month high, but home prices fell in 19 of the 20 cities tracked by the Standard & Poor’s/Case-Shiller index. That report dampened investors’ enthusiasm about a jump in consumer confidence to the highest level since April.

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The lone holdout juror who prevented a Utah company from getting as much as $1.2 billion from one-time rival Microsoft Corp. for alleged antitrust violations says he’s at peace with his decision.

Corbyn Alvey, a 21-year-old security guard from Magna, told KSL-TV ( http://bit.ly/ubPwcB) that he didn’t think there was enough evidence presented during the two-month trial in U.S. District Court in Salt Lake City to support the claims of Provo-based Novell Inc.

Novell sued Microsoft in 2004, claiming the software giant duped it into developing the once-popular WordPerfect writing program for Windows 95 only to pull the plug so Microsoft could gain market share with its own product. Novell says it was later forced to sell WordPerfect for a $1.2 billion loss.

“I walk away feeling honestly myself, and I can’t speak for the other jurors, that I made the right decision even if it resulted in a hung jury,” Alvey said Saturday. “There were so many inferences that needed to be drawn that I felt that it was unfair to Microsoft to go out on a limb and say, `yes.’”

Alvey described the three days of jury deliberations as stressful. The 11 other jurors sided with Novell.

“Obviously, I wanted to convince them to agree with me and they wanted to convince me to agree with them,” he told KSL.

Bill Gates testified last month that he had no idea his decision to drop a tool for outside developers would sidetrack Novell payday loan lenders. Gates said he was acting to protect Windows 95 and future versions from crashing.

Novell argued that Gates ordered Microsoft engineers to reject WordPerfect as a Windows 95 word processing application because he feared it was too good.

Alvey said the jury agreed on the technical aspects of the case but disagreed on what Novell could have accomplished “but for” Gates’ decision.

“There was a lot of speculation in this `but for’ world,” he said.

As for Gates’ testimony, Alvey said, “The man was a little sarcastic at times. If anything, it provided a little break from the monotonous questions and answers … I think from his testimony, what I heard, and what I saw in the emails, Bill Gates was a man who took every threat extremely seriously.”

Jury foreman Carl Banks said he tried hard to get a verdict.

“It was a tough case. It was long and it was hard and it was grueling,” he said. “We gave it our best shot.”

Novell attorneys have said they would seek to retry the case with a new jury. Microsoft said it would file a motion asking the judge to dismiss Novell’s complaint for good and avoid a second trial.

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There was no “Mission Accomplished” banner. No victory parade down the center of this capital scarred by nearly nine years of war. No crowds of cheering Iraqis grateful for liberation from Saddam Hussein.

It took the U.S. military just 45 minutes Thursday to declare an end to its war in Iraq with a businesslike closing ceremony behind concrete blast walls in a fortified compound at Baghdad International Airport. The flag used by U.S. forces in Iraq was lowered and boxed up. On the chairs _ nearly empty of Iraqis _ were tags that listed not only the name of the assigned VIP, but the bunker to rush to in case of an attack.

With that, and brief words from top U.S. officials who flew in under tight security, the U.S. drew the curtain on a war that killed 4,487 Americans, by the Pentagon’s count, and more than 100,000 Iraqis.

The conflict also left another 32,000 Americans and far more Iraqis wounded, drained more than $800 billion from the U.S. treasury and diverted resources from Afghanistan, where the Taliban and al-Qaida rebounded after their defeat in the 2001 invasion.

“To be sure the cost was high _ in blood and treasure of the United States and also the Iraqi people,” Defense Secretary Leon Panetta told the roughly 200 troops and others in attendance. “Those lives have not been lost in vain. They gave birth to an independent, free and sovereign Iraq.”

Many Iraqis, who saw their country devastated through years of fighting, disputed that.

“With this withdrawal, the Americans are leaving behind a destroyed country,” said Mariam Khazim, a member of the Shiite Muslim sect that has dominated politics since the end of Saddam’s Sunni-led regime.

“The Americans did not leave modern schools or big factories behind them,” said Khazim, whose father was killed when a mortar shell struck his home in Sadr City. “Instead, they left thousands of widows and orphans. The Americans did not leave a free people and country behind them. In fact, they left a ruined country and a divided nation.”

The low-key ceremony stood in sharp contrast to the start of the war, which began before dawn on March 20, 2003, with a “shock and awe” airstrike in southern Baghdad where Saddam was believed to be hiding. U.S. and allied ground forces then stormed across the featureless Kuwaiti desert, accompanied by reporters, photographers and television crews embedded with the troops.

Now, the final few thousand U.S. troops will head out in orderly caravans and tightly scheduled flights, leaving behind a nation free of Saddam’s tyranny but fractured by violence and fearful of the future. Bombings and gun battles still occur almost daily. Experts are concerned about the Iraqi security forces’ ability to defend the nation against foreign threats.

U.S.-Iraqi ties are no doubt closer than they were during much of Saddam’s rule but are still short of what Washington once envisioned. Iranian influence is on the rise. One of the few positive developments from the American viewpoint _ a democratic toehold _ is far from secure.

“You will leave with great pride _ lasting pride,” Panetta told the troops seated in front of a small domed building in the airport complex. “Secure in knowing that your sacrifice has helped the Iraqi people to begin a new chapter in history.”

Many Iraqis, however, are uncertain how that chapter will unfold. Their relief at the end of Saddam, who was hanged on Dec. 30, 2006, was tempered by a long and vicious war that was launched to find nonexistent weapons of mass destruction and plunged the nation into a bloodbath between rival Muslim sects.

An insurgency that rose up within months of the April 2003 fall of Baghdad scuttled reconstruction plans and forced the Americans to keep up to 170,000 troops in Iraq years after Saddam was captured.

Iraq nowadays is far quieter than at the height of the war, but with an uneasy peace achieved through intimidation and bloodshed. The number of Iraqi neighborhoods in which members of the two Muslim sects live side by side and intermarry has dwindled.

The forced segregation, fueled by extremists from both communities, has fundamentally changed the character of the country. And it raises questions about whether the Iraqis can heal the wounds of the sectarian massacres after the Americans leave.

Some Baghdad neighborhoods, such as Hurriyah, are still guarded by thick blast walls and security checkpoints. Widespread corruption, bureaucratic hurdles and electricity shortages continue to stifle Iraq’s economy.

It was hard to find an Iraqi on Thursday who did not celebrate the exit of what they called American occupiers, neither invited nor welcome in a proud country whose capital, Baghdad, was once among the world’s great centers of culture and learning.

Some said that while grateful for U.S. help ousting Saddam, the war went on too long. A majority of Americans would agree, according to opinion polls, though many initially supported the war as a just extension of the fight against terrorism after the 9/11 attacks.

One of the many ironies of the war is that Saddam had not tolerated al-Qaida, which planned and carried out the attacks. With Saddam gone and the country in chaos, al-Qaida in Iraq became the terror movement’s largest and most dangerous franchise, attracting fighters from North Africa to Asia for a war that lingers on through suicide bombings and assassinations, albeit at a lower intensity.

The ceremony at Baghdad’s airport also featured remarks from Army Gen. Martin Dempsey, the chairman of the Joint Chiefs of Staff who served two tours in Iraq, and Gen. Lloyd Austin, the top U.S. commander in Iraq.

Austin led the massive logistical challenge of shuttering hundreds of bases and combat outposts, and methodically moving more than 50,000 U.S. troops and their equipment out of Iraq over the last year _ while still conducting training, security assistance and counterterrorism battles.

As of Thursday, there were two U.S. bases and about 4,000 U.S. troops in Iraq _ a dramatic drop from the roughly 500 military installations during the surge ordered by President George W. Bush in 2007. All U.S. troops are slated to be out by the end of the year.

President Barack Obama had no comment on Thursday’s ceremony but told soldiers at Fort Bragg in North Carolina this week that the “war in Iraq will soon belong to history, and your service belongs to the ages.”

Despite Obama’s earlier contention that all American troops would be home for Christmas, at least 4,000 forces will remain in Kuwait for some months. The troops could be used as a quick reaction force if needed.

The U.S. will leave behind thousands of diplomats and security contractors.

“We will have to be working closely with the Iraqis to ensure the security of our civilians,” Secretary of State Hillary Clinton said in a statement.

Still, the disappearance of uniformed troops marked a defining moment in Iraq’s history.

“It is a great achievement for the Iraqi people,” said Hayder al-Abadi, a Shiite lawmaker in Prime Minister Nouri al-Maliki’s coalition. “Iraqi politicians have made their way and have made the independence and sovereignty a reality here. The Americans have committed a lot of mistakes in Iraq and they failed to protect the country.”

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Joe Reagan, president of Greater Louisville Inc., has been hired as the new president and CEO of St. Louis’ lead economic development organization.

The Regional Chamber and Growth Association announced Monday that it has hired Reagan to replace Dick Fleming, who is set to step down at year’s end. The 48-year-old Indiana native has run Louisville’s largest economic development group since 2005.

“Joe brings to the RCGA a strong professional background in successful chamber management, regional economic development, public policy development and implementation,” said Ameren Corp. CEO Tom Voss, who chairs the RCGA board. “His career accomplishments and integrity have earned him the respect of both business and governmental leaders in the greater Louisville region and throughout the nation overall.”

Reagan’s name emerged as a finalist last week, with rumors that business leaders in Louisville were raising funds to try and keep him. He was reportedly one of two finalists - the other being Rhonda Hamm-Niebruegge, director of Lambert-St. Louis International Airport.

In announcing Reagan’s hiring, RCGA pointed to a list of accomplishments in Louisville that may translate to St. Louis. Among them: Helping a two-state, 26-county region work together around economic development; boosting focus on educational attainment, entrepreneurship and industry clusters; and spearheading efforts to modernize a Ford plant to keep auto industry jobs in the region.

“Joe Reagan is, without question, one of the top chamber and economic development executives in the country,” said Danny Ludeman, ceo of Wells Fargo Advisors and RCGA’s chairman-elect.

A conversation about the role of RCGA has heated up in recent weeks, as both St. Louis Mayor Francis Slay and a study conducted for the St. Louis County Economic Council have called for significant changes to its mission and business model. But RCGA leadership have said they plan to maintain the group’s focus as both a chamber of commerce and economic development agency.

RCGA said it considered nearly 200 people during its nine-month search. Reagan is set to start Feb. 1.

“I appreciate the opportunity to serve an organization that believes that results-oriented collaboration among business, civic and elected leaders is critical in driving economic development and improving quality of life in the St. Louis bi-state region,” he said.

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A French official says France may propose joint bonds among the eurozone’s strongest economies as part of a package of measures to save the shared currency, despite German resistance.

The official said Tuesday that discussions over joint bonds by top-rated triple A eurozone economies is under discussion as the French government prepares for an EU summit next week.

Proponents say the proceeds of the so-called elite bonds could be used to help the eurozone’s weaker countries deal with their debts, in return for strict conditions being imposed on their budgets.

The official spoke on condition of anonymity because the sensitive, closed-door talks are still under way.

German Finance Minister Wolfgang Schaeuble dismissed reports of joint bonds Monday, saying they were “completely made up.”

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