Ratings Firms Misread Signs of Greek Woes

In a stern pronouncement, Moody’s Investors Service this week warned of rising prospects for multiple defaults by countries in the euro zone and credit rating downgrades of nations across Europe if leaders should fail to resolve the spreading debt crisis.
When it comes to Greece,Canada goose critics say Moody’s should have been tougher a lot earlier.

Until two years ago, the ratings agency took a relatively lax approach to growing signs of troubles in Greece,Canada goose parka epicenter of the current crisis, even as the country plowed ahead with a borrowing binge that jeopardized its fiscal condition.

Moody’s held off dropping its strong A rating of Greece’s bonds despite growing political turmoil and economic woes through 2009. Investor fears over Greece’s short-term financing needs were “misplaced,”Canada goose outlet Moody’s said in a report in early December 2009. Twenty days later, after a review, the agency downgraded the nation’s debt, the last of the major ratings agencies to do so.

After that, the ratings of the debt-ridden country went into a virtual free fall,Canada goose expedition parka and within six months Moody’s assessed its debt as much riskier for investors, giving it junk status.

“If you look at the fact that this is going to be a country that is going to default on its debt, and two years before it was still single A, that is a very, very precipitous fall,” conceded Pierre Cailleteau,Canada goose trillium parka Moody’s head of sovereign debt ratings until he left in spring 2010. He rated Moody’s performance as mediocre, but added that it could have been worse.

That rapid deterioration underscores how, critics say, the credit ratings agencies that judged Greece’s debt as investment grade for most of the last decade missed or badly misread signs of trouble. Moody’s held its rating steady even after Greece in 2004 admitted lying about its deficits to join the countries using the euro in 2001. Now, the ratings agencies are under fire from European regulators about whether their recent downgrades of Italy and Spain worsened an already tenuous situation.

Moody’s offers a rare look inside the sometimes fierce debates over Greece’s deep problems, at how the prevailing belief that Europe would not let Greece default on its obligations drowned out opponents, and how in hindsight the agency could get it so wrong.

Moody’s lapses before last year helped embolden Greece to heap on billions in sovereign debt and encouraged investors to invest more heavily in its debt. Now some of those buyers face 50 percent losses on the bonds — loans that carried the agencies’ stamp of approval but that Greece can no longer afford to pay off. Had the rating agencies been more skeptical of euro zone countries’ borrowing beyond their means, critics say, that might have slowed the debt carousel for Greece and others.

The higher credit ratings made it “easier to raise debt” than to raise taxes or make other unpopular and painful economic adjustments, said Barbara Ridpath, head of Standard & Poor’s ratings activities in Europe between 2004 and 2008.

“The credit rating agencies failed in their job,” said Wolf Klinz, a European Parliament member from Germany and author of a critical 2010 report on ratings agencies. “They held on artificially too long to their original rating. They should have started earlier.”

The agencies have defended their performance, noting that investors were much more optimistic than the agencies were, with bond markets assigning interest rates to Greek debt at levels that were just slightly above what Germany was paying.

“The market was scarcely differentiating between any of the 16 sovereign members of the euro zone,” said David Beers, the head of Standard & Poor’s global ratings business, during a British parliamentary hearing last summer. “We differentiated these opinions from the outset. The market ignored those opinions for many years.”

In an e-mailed statement, a spokesman for Moody’s agreed, saying the market’s perception of the safety of Greek bonds was equivalent to an AAA rating, “while Moody’s rating was considerably lower.”

The current crisis was years in the making. It was born of Greek leaders who misled the European Union with false economic statistics to gain entry to the euro; of European policy makers who turned a blind eye to Greece’s deceptions; of banking regulators who deemed sovereign debt virtually risk-free; and of banks and other investors who, hungering for profits, joined in the groupthink that the euro zone would never let a member default.

Latest Tablet Challenger: Barnes and Noble’s New Nook

Barnes and Noble unveiled its new Nook Monday morning, a 7-inch, $249 device. Building on its previous success, Barnes and Noble hopes the tablet can become Amazon’s Fire and Apple’s iPad’s worst nightmare.Moncler Giubbotti Outwardly, the design has remains unchanged The back is still made of a comfortable-feeling grey rubber. It has a center button that acts like Apple’s controls. But inside the machine received a refurbishment that enables faster web viewing, a greater capacity for video, and native apps. Tods

The Back-Seat Driver in Your Dashboard

Remember when Mom or Dad would nag you about wasting gas by driving too fast? Now your car can do it for them.
Technology designed to coach you toward a more efficient style of driving is showing in many new cars. Options run the gamut from simple displays of fuel consumption, to interactive video games, to a gas pedal that actually pushes back when you stomp it.

Auto makers view these features as lures for younger, cash-conscious and tech-savvy buyers. They might also help car makers meet coming federal fuel-efficiency standards. Research indicates these electric noodges can make a significant dent in fuel consumption, if drivers actually follow the advice the systems give them.

Car makers are treading carefully. They want to engage their customers in the effort to conserve oil, but they don't want to irritate them and don't want to compromise safety by making eco-driving displays too distracting. Most of these technologies can be ignored or turned off if drivers choose.
Hyundai Motor Co.'s sporty new 2012 Veloster three-door coupe has a fuel-economy game programmed into the screen that also displays the car's location, onboard entertainment and telecommunications. The "Blue Max" program measures the car's fuel economy every 10 minutes and displays a score. Drivers can share their score with other Veloster owners using the car's Blue Link wireless link.
Fuel economy is important to the Veloster's young, target buyers, says Hyundai Motor America's senior manager for product planning, Brandon Ramirez. "Gen Y is into gaming," he says, which is why they chose a videogame format. Although the car just came out, Veloster owners are already comparing their scores in an online forum.

It wouldn't be the first time drivers have turned trimming fuel use into a game: Some owners of hybrids and other cars compete with themselves and each other by "hypermiling," using various techniques to cut gasoline usage.

Ford Motor Co. uses images of a plant that grows as drivers motor more efficiently in its Fusion Hybrid model. And Toyota's Prius and Camry hybrids offer detailed, displays of real-time fuel economy.

Auto makers are experimenting with these features in part because future federal fuel-economy regulations could give them valuable credits under the Corporate Average Fuel Economy, or CAFE, rules for installing them. And researchers have found that gentle nagging by coaching systems works.
Researchers at the University of California, Riverside have been experimenting with ways to give drivers instantaneous feedback on their driving efficiency for about five years. UC Riverside researchers equipped the cars of about 20 people with devices that gave them information about their real-time miles per gallon. Seeing that information led to savings ranging from 5% to 15%, researchers say.

Now, the researchers are embarking on a larger, three-year study, funded with $1.2 million from the Department of Energy. It's aimed at finding how much drivers can save if they have detailed information on the most fuel-efficient route to a destination—based on traffic and road conditions—coupled with coaching technology giving drivers instantaneous performance feedback.

Savings "could go up to 30% under ideal scenarios," says Kanok Boriboonsomsin, one of the researchers on the project. It's a worthy goal, as boosting a car's mpg by 30% through hardware changes—lighter materials, new transmissions, or tiny engines—can be expensive.

Still, the word "ideal" is important: Ideal conditions for driving in a fuel-saving manner aren't easy to find or sustain.

I took a spin in one of the UC Riverside's test vehicles—a heavily modified Nissan Altima bristling with computers and antennae. Accelerating out of the parking lot, my real-time mpg sank well below the roughly 20-mpg target for city driving on the screen.

Things improved coasting downhill, but when I accelerated up the on-ramp to merge with traffic, my real-time fuel economy dipped below 10 mpg.

Michael Todd, a UC Riverside researcher who chaperoned my drive, says mashing the accelerator to get on a freeway can overwhelm the car's exhaust-scrubbing systems. So, not only is the car burning a lot of fuel, but it's adding a bigger-than-average load to air pollution.

The message from the UC Riverside data is that relatively small changes in behavior can produce fairly substantial reductions in fuel consumption.

The overall problem, Mr. Todd says, is that "most people aren't taught how to conserve fuel" when they learn to drive.

3 charged in deadly Avondale home invasion

A trio faces murder charges in connection with a deadly Northwest Side home invasion that left a 15-year-old boy dead and his mother seriously wounded, authorities said today.

The daylight home invasion happened at around 8:40 a.m. Tuesday in the 3400 block ofNorth Lawndale Avenue in the city's Avondale neighborhood, according to Chicago police.

The suspects, Sean Williams, 33, Davonta Williams, 17, and Jennifer M. Vojinovic, 27, were each charged with single counts of first-degree murder, attempted first-degree murder, armed robbery, home invasion, and three counts of unlawful restraint, police said.

All three were arrested by alert Albany Park District officers, who spotted the vehicle matching the plate information provided by a witness, police said. Authorities also recovered 9mm and .25-caliber handguns.

Police believe that both male suspects shot Andre Vasquez, 16, along with his Krystal Hethcoat, 33, while Vojinovic acted as the getaway driver.

According to relatives of the victims, Vasquez, a Schurz High School sophomore, and his 14-year-old sister were preparing to leave for school and one of them had just opened the apartment's front door when two males barged in.

The intruders bound Vasquez and Hethcoat in the home's basement, while the teen's sister managed to escape.

Police said the intruders bound the mother and son with duct tape while demanding money. The pair ransacked the home before shooting both Vasquez and Hethcoat.

Vasquez, was pronounced dead at Advocate Illinois Masonic Medical Center just hours after he was shot, authorities said. His mother was in serious-to-critical condition at Illinois Masonic as of Tuesday night.

"This is unreal," Tina Quinones, an aunt of Vasquez and his sister told the Tribune. "I don't understand why this would happen. They don't have anything. There was no reason for this."

Police offered no clues on why the home was targeted by the group.

All three suspects are expected to appear before a judge later today.

Julianne Hough stars in 'Footloose' remake: movie review

“Footloose” is a remake of the 1984 musical about a city boy, played by the young Kevin Bacon, who comes to a small southern town and, literally, shakes things up. That earlier movie, which is now rather erroneously being referred to in the promotional material as a “classic,” was studded with soon-to-be Top Ten Hits and had a youth-pandering storyline: Because of a fatal accident that killed five teenagers after a night partying, the town council of a small southern community, led by a fire-breathing preacher, outlaws teen dancing.
This same premise holds for the remake, and it seems more pandering (and dated) than ever. Once again, Ren MacCormack (newcomer Kenny Wormald) is the good-hearted misfit who just wants kids to be able to have fun before they morph into old-fogy adults. Dennis Quaid, in the John Lithgow role, is Rev. Shaw Moore, and he’s actually somewhat of an improvement. Lithgow seemed to actually breathe fire whereas Quaid seems less demented, more down to earth. He’s riven without being bug-eyed.

The preacher’s troubled daughter is played by “Dancing With the Stars” phenomenon Julianne Hough, and it would have been better if her role had showcased more dancing and less acting. Co-writer and director Craig Brewer, working with the original’s screenwriter Dean Pitchford and producing team, can’t seem to work up a filmmaking rhythm. The dancing numbers, which are so tame you wonder what all the heavy-breathing was about, are awkwardly shoehorned into the melodrama. Ren, as in the original, even gets to deliver a speech to the town council citing various passages in the Bible where dance is celebrated. He’s a pretty crafty guy even though the movie makes him out to be as pure as the driven snow. Grade: C (Rated PG-13 for some teen drug and alcohol use, sexual content, violence, and language.)

Want an iPhone 4S? Get in line

Demand for Apple's new iPhone 4S, combined with buyers' hunger for rival devices, could push worldwide smartphone ownership above the 50% mark for the first time ever.

Pre-orders for the phone from carriers AT&T, Sprint and Verizon are as good as sold out; and online orders from the carriers and Apple are backed up, with delivery promised by the end of the month at the latest.

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      REVIEW: Phone 4S carries on the Apple excitement
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      MORE: New iPhone 4S camera sharp

If you want one now, you'll have to shop in person and perhaps stand in line.

The iPhone is far and away the best-selling and most used smartphone, according to Roger Entner, an analyst with Recon Analytics. With the release of the iPhone 4S, which goes on sale in stores at 8 a.m. Friday, smartphones will account for half of all cellphones, up from 43% today, says Entner.

Smartphones typically offer more robust Web browsing, email, data and media streaming abilities.

Apple says more than 1 million iPhone 4S pre-orders came in on the first day of sales. Selected Wal-Mart, Target and Best Buy stores, along with local Apple resellers, will also offer the iPhone.

Pricing begins at $199 (with a two-year contract) for the model with 16 gigabytes of storage. Apple has dropped the price of the predecessor iPhone 4 to $99 (with a contract); the iPhone 3GS is free with a contract.

There are more than 128 million iPhones in use worldwide, according to Apple. The second most popular smartphone is the Samsung Galaxy S, with 10 million phones in use, Entner says.

The iPhone 4S upgrade offers an improved camera, faster processor and a voice-activated personal assistant Siri which can find weather and traffic information, and set meeting times, among other things.

Apple historically has released new iPhones in the summer, but by "waiting until October, it's really increased even more pent-up demand," says Entner. "Lots of consumers were waiting for a new iPhone, and really want it."

Gene Munster, an analyst with Piper Jaffray, predicts sales of between 2 million to 2.5 million phones this weekend, compared to 1.7 million for the iPhone 4 launch in June 2010.

"The product may not sound as exciting as the previous iPhone, but many people are eligible for their upgrade," Munster says. "And they're ready for a new iPhone." Sprint customers are getting their first chance to buy an iPhone.

The launch comes a little more than a week since the passing of Apple co-founder Steve Jobs, which sparked fan tributes at Apple Stores and headquarters in Cupertino, Calif.

Because the iPhone 4S sports only minor improvements from the iPhone 4, and no hardware upgrade, Munster predicts an all-new iPhone 5 could come much sooner — perhaps by next summer.

"Apple will get the consumer's dollar either way," he says. "Folks who can't wait will buy the iPhone 4S; the ones who can will get the iPhone 5 next year. Either way, Apple gets paid."

Bank Nurtures Asian Roots

By focusing on select customers, East West Bancorp is showing it can grow at a time when many banks are struggling to find a firm footing.

East West, based in Pasadena, Calif., pays close attention to Asia. It seeks Chinese-American clients and attracts U.S. companies that do business in China. It also finances Chinese companies' expansion in the U.S. through trade finance and commercial loans.

East West has "been smart enough to link to demographics in their ancestral homeland," said William Michael Cunningham, the owner of Creative Investment Research Inc., an advisory firm in Washington with a focus on minority banks. "It's better to be an Asian bank in California than a Hispanic bank in Texas," he said, referring to East West's reach into China itself.

The bank's niche focus has helped it expand at a time when demand for loans around the country has been soft. The strategy is paying off at some other lenders as well.

At SVB Financial Group of San Francisco, which specializes on start-ups and venture capital firms, loans rose 34% from a year earlier in the second quarter. Loan growth also has been strong at Encore Bancshares Inc. and Texas Capital Bancshares Inc., two banks specializing on Texas businesses and their owners, and at East West's Asian-American competitor Cathay General Bancorp of Los Angeles.

With $22 billion in assets, East West was among the top 10 business lenders by volume in the second quarter, according to Keefe, Bruyette & Woods Inc. Its second-quarter income from lending—a tough number for banks to increase in an uneasy economy—rose 30% from a year earlier, to $241 million.

East West's interaction with Borrego Solar Systems Inc. is typical. Since last year, the bank has lent the San Diego solar-power-installation company more than $30 million to finance four power-purchase agreements. Borrego Chief Financial Officer Bill Bush said "it's just much easier" to work with East West because the bank has a deposit-and-lending relationship with Borrego's Taiwanese parent, Walsin Lihwa Corp., and extensive knowledge of the solar market.

Five years ago, most of East West's customers were U.S. businesses importing from China. "Today we see more exporting [to China] than we have ever seen," said East West Chairman and Chief Executive Dominic Ng in an interview. "And going forward...I would expect there will be much stronger interest in Chinese companies investing in the U.S."

East West expands in "concentric circles" from its original niche into new markets, said Keefe Bruyette analyst Julianna Balicka. She calls its growth this year "phenomenal."

East West's commercial-loan book grew 35% in the second quarter from a year earlier, and its profit rose 67% to $61 million.

East West is more profitable than the average bank. Its net interest margin, the profit margin in lending, was 4.7% in the second quarter, up 0.04 percentage point from a year earlier. The average margin at banks contracted 0.15 percentage point, to 3.61%, according to the Federal Deposit Insurance Corp.

East West was founded in 1973 as a savings bank for Chinese immigrants to the U.S. After five purchases of failed banks in the past two banking crises and 10 acquisitions altogether since 1999, it has grown to almost 140 branches in six states across the U.S., and three in China.

For all its successes, East West has had its share of setbacks, too. The string of acquisitions left it with real-estate loans that went sour quickly when the financial crisis hit in 2008.

The bank "made mistakes" in its own underwriting, Ng said. "We thought we [had] made safe construction loans" In 2008, East West had a loss of almost $60 million.

But, unlike most other banks, East West raised capital early and sold bad loans fast.

And it bought United Commercial Bank—including its business in China—from the FDIC when the banking subsidiary of UCBH Holdings Inc. failed in 2009.

"That was just a home run," said Fred Cummings, president of Elizabeth Park Capital Management, an East West shareholder. "They eliminated their largest competitor" in "one of the best FDIC deals" any bank has done in the current financial crisis.

The bank's moves have cushioned it some from investor pessimism about financial stocks. East West shares have dropped 23% this year, compared with a 32% decline in the Keefe Bruyette & Woods index of regional bank stocks.

East West's biggest challenge now? "To stay focused," Ng said, "not to deviate, thinking that we can do in Europe what we can do in China."

Any time a bank is increasing loans so much faster than the industry overall, analysts start to worry about how that lending is underwritten. "You wonder how long it's going to last," said Ms. Balicka of Keefe Bruyette. "But East West, for the most part, has a good track record."

At Borrego, the solar company, Mr. Bush said he wants to do more business with East West. "They really distinguished themselves."