The Irish Independent reports that senior Fine Gael TDs were last night shocked and dismayed at George Lee's resignation, admitting it was "damaging" to the party and represented a "significant setback".
His departure came only days after FG leader Enda Kenny is understood to have offered Mr Lee a specially-created portfolio of "economic development". Privately, some TDs described Mr Lee's decision as "pathetic", "drastic" and a sign of a "major ego". The party's communications spokesman, Simon Coveney, claimed the resignation would be "damaging to Fine Gael" and a "significant setback" as it bids to attract new candidates and votes. "I don't care what the spin doctors in Fine Gael say. This is damaging to Fine Gael," he said. "This is a significant setback. It's not a mortal wound by any stretch of the imagination but it is a setback. There's no point in trying to spin it any other way."
The Cork South Central TD said Mr Lee had the ability and talent to be on any party's frontbench.
Lesson
"It's not about pecking orders in parties. You pick the best team that's available to you and you put them on the front bench. Enda obviously had his reasons and I've never spoken to him about his decision-making regarding the frontbench but I do trust Enda's judgment and it's been by and large very good," he said. Frontbencher Olivia Mitchell, who shared a constituency with the journalist-turned-politician, said she was "gobsmacked" when told about Mr Lee's decision.
"I think it was kind of a shock to him the kind of life it was ... I think he probably missed the immediate impact of the 20-second soundbite on TV, that it's not the same when you're in politics. It's a hard slog," she said. "The daily life of a TD is not the same as the glamour of a TV career."
The party's enterprise spokesman, Leo Varadkar, said it was a "sad day for Fine Gael and a sad day for Irish politics" because Mr Lee could have had a great future in the Dail. "But he was offered a frontbench position and he didn't take it. He chaired a policy committee which never sat and he never called a meeting of it. He wanted to be consulted on economic policy but never produced a single paper or single document so I think it's a sad day for all of us," Mr Varadkar said.
Dublin South East TD Lucinda Creighton also said the decision was "bad news" for Fine Gael and Irish politics. "He wasn't handled particularly well and he wasn't managed particularly well. Hopefully there's a lesson for us in Fine Gael. You can't just throw people in at the deep end and let them sink or swim. You have to help and guide them," she said.
But she insisted Enda Kenny should not be judged on this one event, having attracted many new people to the party.
"There are issues and we have to address them in the party and what the role is for the leadership.
"And by that I don't just mean Enda Kenny but the people around him as well.
"Their job is to make sure we have a cohesive party and that everyone has a role," she said. The party's transport spokesman, Fergus O'Dowd, said Mr Lee would be a "big loss" and his decision had come as a "major shock".
The Irish Independent also reports a retired couple who claim they lost more than €470,000 because of allegedly negligent advice about an investment bond from Bloxham Stockbrokers have brought a legal action against the firm.
The action by Desmond and Maura Ellison, of Annaglog House, Ardee, Co Louth, is the fifth raised in the Commercial Court against Bloxham over the same Dresdner bond.
The couple claim Bloxham wrote to them in early 2005 suggesting a number of options for reinvesting maturing funds and that a Dresdner bond was sold to them "as a low-risk product with no identified possibility of capital loss".
They claim Bloxham specifically represented to them that the bond was suitable for their needs as a retired couple and, on that basis, they invested around €485,000. It later emerged the investment was not what they thought and they had lost some €470,450 as a result, it is claimed.
The court was previously told Bloxham's is suing Morgan Stanley in the UK, alleging breach of contract on the bond but that claim is limited to €42.75 for every €100 invested in the bond.
Call option
It is alleged a "call option" exercisable by Morgan Stanley compromised the integrity of the Dresdner bond as a secure investment vehicle, and a "mandatory redemption event" exercised by Morgan Stanley had the net result that bondholders would only recover 3pc of their investment.
In an affidavit, Mr Ellison said they delayed bringing proceedings against Bloxham because of that firm's case against Morgan Stanley.
However, they had now initiated this court action after learning other investors, including the main insurance body for solicitors, the Solicitors Mutual Defence Fund, had taken proceedings over the same bond.
The proceedings, brought against a number of people who were allegedly partners in Bloxham at the relevant time and against FBD Securities Ltd, were admitted to the Commercial Court yesterday by Mr Justice Peter Kelly.
The Irish Times reports that the Taoiseach has defended his claim that the National Asset Management Agency (Nama) will increase the supply of credit into the economy despite the International Monetary Fund (IMF) saying it would not lead to any significant increase.
“People should contemplate what level of credit accessibility we’d have in this economy without Nama,” he said.
“It’s not just sufficient in itself obviously for credit flow, it’s certainly an important and necessary part of restructuring our banking system, of that there’s no doubt, in terms of improving as a location for funding of banking operations,” said Mr Cowen.
Mr Cowen has previously said that the Government’s objective in restructuring the banks through Nama was to “generate more access to credit for Irish business at this critical time”. Last September, the Minister for Finance expressed a similar view, saying it would lead to more lending for business and households.
Yesterday The Irish Times reported that the IMF told Minister for Finance Brian Lenihan last April that Nama would not lead to a significant increase in lending by the banks.
Responding to questions about the story at Engineers Ireland headquarters in Dublin, where he was launching Engineers Week 2010, Mr Cowen said Nama would make Ireland a better location for the funding of banking operations.
“This morning there was some people talking about what happened 10 months ago at a meeting,” he said.
Nama is “absolutely vital and necessary” to improving Ireland’s banking system, he said.
In his address launching Engineers Week, Mr Cowen expressed concern at Irish children’s performance in mathematics and science, saying he did not want to see Ireland relying on “imported talent” for engineers in future.
Mr Cowen said he was committed to finding ways to improve mathematical attainment.
“One area of particular concern to me is the performance of Irish children in maths and science. While Ireland’s performance in mathematics is average in an OECD context, I do not believe that is enough,” he said.
“Enhancing the mathematical ability of our population is a challenge faced by most developed countries. I do not want Ireland to have to rely on imported talent to become our engineers of the future.”
Mr Cowen said an encouraging development was that the number of people accepting third-level places on engineering courses in this academic year was up over 20 per cent on the previous intake.
Meanwhile, according to an internal Department of Finance memo, the IMF noted last April that bad loans would not just occur in commercial property and development but across mortgages, loans to small and medium-sized businesses and credit cards.
The IMF accepted the view that house repossessions were “not as common in Ireland as in other countries” but still expressed concern that there would be a rise in “past due” or problem loans.
It agreed with AIB’s observation that “banks all over Europe were rowing back on lending”.
The Irish Times also reports that the euro remained near eight-month lows versus the dollar on world currency markets yesterday, as investors continued to fret about debt problems in Greece, Portugal and Spain.
The single currency fell to $1.3583 on Friday and recovered a little to $1.3683 yesterday as sentiment toward the euro soured because of increasing concern over the fiscal difficulties in Greece and its consequences for the future of the euro zone.
It also emerged yesterday that traders and hedge funds have bet nearly $8 billion against the euro, amassing the biggest ever short position in the single currency. Such traders will now stand to benefit financially if the euro zone debt crisis is not contained.
Figures from the Chicago Mercantile Exchange, which are often used as a proxy of hedge fund activity, showed investors had increased their positions against the euro to record levels in the week ending on February 2nd.
It suggests investors are losing confidence in the single currency’s ability to withstand any contagion from Greece’s budget problems to other European countries.
Persistent concerns about sovereign risk left financial markets struggling to find a clear direction yesterday as a weekend meeting of G7 finance ministers did little to reassure investors.
Tensions were further ratcheted up by a warning from a Greek public sector union of further possible strikes following recent austerity measures unveiled by the government.
“It seems that the market won’t rest until we get what is increasingly likely to be a European Union bailout for the peripheral nations,” said Jim Reid, strategist at Deutsche Bank.
But he warned: “If the situation in Europe receives a large sticking plaster, then this may be the catalyst for speculators to start looking elsewhere for weak targets. The UK and US would be candidates, even if we still think such an event in the US is probably more likely to be beyond 2010.”
Thomas Stolper, economist at Goldman Sachs, said: “Behind this intense focus on Greece obviously is the long-standing unresolved issue of how to enforce fiscal discipline in a currency union of sovereign states.”
Speculation that Greece’s financial woes will spread have roiled markets, triggering the biggest slump in European stocks in 11 months last week and an increase in the cost of insuring against losses on European corporate bonds.
Trading on the Iseq index of Irish shares was reported to be “volatile” by Dublin dealers yesterday, although a recovery in US stocks in the afternoon helped the index close in positive territory.
In a move reminiscent of Minister for Finance Brian Lenihan’s attempts during 2009 to restore international confidence in the Irish economy, the Spanish government has hit back at its critics, arguing that it is being unfairly treated by foreign investors and the media.
José Blanco, Spain’s public works minister, hit out at “financial speculators” for attacking the euro and criticised “apocalyptic commentaries” about Spain’s finances
The Irish Examiner reports that Dublin has become a significantly more attractive location for multinational companies in light of the cost of occupying office buildings in the capital falling by just under 30% over the last 12 months.
A new international survey from property company, DTZ Sherry FitzGerald shows that Dublin has gone from being the 20th most costly place to set up an office in 2008 to the 33rd most expensive location as of the end of last year.
The improvement puts the capital on a par with leading European cities such as Amsterdam, Rome and Stockholm for foreign direct investment hub choices.
The west end of London, central Tokyo and Washington DC were listed as the three most expensive locations to set up offices, according to the latest report.
"Ireland was very uncompetitive internationally at the height of the Celtic Tiger. However, property costs have fallen faster here than in many competing countries and Dublin is now more closely aligned with cities such as Copenhagen and Brussels, rather than Munich and Zurich, which remain significantly more expensive," said Peter Waller, director of corporate services at DTZ Sherry FitzGerald.
However, Mr Waller warned that although falling occupancy costs are a key factor when it comes to any city attracting international business investment, Dublin still has some weighty cost issues to manage if it is to seriously enhance its standing as a potential foreign hub for multinational companies.
"Most business costs have declined over the last 12 months. However, some services – and business rates in particular – remain very significant outgoings for occupiers. While business rates didn’t increase in Dublin for 2010 they remain at a level that is unsustainable if Dublin is to maximise its competitiveness to multinational companies. The corporate sector cannot afford the current levels of contribution to local authorities in Dublin," he added.
Indeed, the IBEC-affiliated Retail Ireland representative body has called on local authorities around the country to grant retailers a 10% rebate on their commercial rates bill.
The Financial Times reports that Toyota was set on Tuesday to announce a recall of its latest-model Prius petrol-electric hybrid in Japan, and possibly elsewhere, to fix a problem with the software that controls its brakes.
Akio Toyoda, chief executive, was scheduled to appear at a news conference in Tokyo at 3:30pm Japan time. On Friday Mr Toyoda apologised to customers for the recall of more than 8m other Toyota vehicles since November to fix faulty accelerators and floor mats.
US safety regulators have launched a probe into brake problems on the 2010 Prius, the third generation of the world’s best-selling hybrid car. Toyota has sold about 300,000 of the vehicles worldwide since it started sales in Japan in May.
The Sai and Lexus HS250h hybrids use a similar braking system as the Prius, and Toyota said it has stopped shipments at its Toyota Kyushu unit while it conducts checks to determine whether a recall or fix would be necessary.
The US National Highway Traffic Safety Administration said last week that it had received 124 complaints about the car, including four relating to crashes. Japanese authorities have directed Toyota to begin an internal investigation after receiving 77 complaints to the end of last year.
Drivers have complained of feeling a momentary loss of braking power when the car switches from “regenerative” braking – during which the forward momentum created by stopping recharges the battery – to standard hydraulic braking. The problem appears to occur when the car’s anti-lock braking system is engaged on bumpy, wet or icy roads.
Toyota engineers reprogrammed the ABS software to eliminate the problem last month and implemented the fix at factory level. A recall would apply to cars on the road that did not receive that upgrade.
It remained unclear whether Toyota would recall Priuses worldwide or only in Japan. The company has been considering offering the software fix as a voluntary “customer service” measure – a step short of a formal recall – in other markets.
The FT also reports that traders and hedge funds have bet nearly $8bn (€5.9bn) against the euro, amassing the biggest ever short position in the single currency on fears of a eurozone debt crisis.
Figures from the Chicago Mercantile Exchange, which are often used as a proxy of hedge fund activity, showed investors had increased their positions against the euro to record levels in the week to February 2.
The build-up in net short positions represents more than 40,000 contracts traded against the euro, equivalent to $7.6bn. It suggests investors are losing confidence in the single currency’s ability to withstand any contagion from Greece’s budget problems to other European countries.
Amid growing nervousness in financial markets over whether countries including Spain and Portugal can repair their public finances, Madrid on Monday launched a PR offensive to try to assuage investors’ fears.
Elena Salgado, Spanish finance minister, and José Manuel Campa, her deputy, flew to London to meet bondholders.
They sought to allay doubts about Spain’s creditworthiness by repeating promises to cut its budget deficit to 3 per cent of gross domestic product by 2013 from 11.4 per cent last year. “We’ll make the adjustment that’s necessary,” Mr Campa said. But their disclosure that the treasury planned to raise a net €76.8bn through debt issuance this year unsettled markets further. The projected sum to be raised was lower than the €116.7bn of 2009 but higher than many investors had expected.
The news sent yields on Spanish government bonds, which have an inverse relationship with prices, sharply higher. The premium demanded by investors to hold the country’s debt over German bunds rose to 1 percentage point.
The Spanish government is convinced it is being unfairly treated by foreign investors and the media. José Blanco, Spain’s public works minister, hit out at “financial speculators” for attacking the euro and criticised “apocalyptic commentaries” about Spain’s finances.
Appealing for patriotism, Mr Blanco said in a radio interview: “Nothing that is happening in the world, including the editorials of foreign newspapers, is casual or innocent.”
The single currency fell to an eight-month low of $1.3583 on Friday but recovered a little on Monday to $1.3683. Analysts said sentiment towards the euro had soured because of the increasing concern over Greece’s fiscal problems.
Thomas Stolper, economist at Goldman Sachs, said: “ Behind this intense focus on Greece obviously is the long-standing unresolved issue of how to enforce fiscal discipline in a currency union of sovereign states.”
The New York Times reports that when Republicans take President Obama up on his invitation to hash out their differences over health care this month, they will carry with them a fairly well-developed set of ideas intended to make health insurance more widely available and affordable, by emphasizing tax incentives and state innovations, with no new federal mandates and only a modest expansion of the federal safety net.
It is not clear that Republicans and the White House are willing to negotiate seriously with each other, and Mr. Obama has rejected Republican demands that he start from scratch in developing health care legislation.
But Congressional Republicans have laid out principles and alternatives that provide a road map to what a Republican health care bill would look like if they had the power to decide the outcome.
The different approaches will be on display Feb. 25, when lawmakers from both parties are scheduled to go to Blair House, across the street from the White House, for a televised clash of health policy ideas.
The Republicans rely more on the market and less on government. They would not require employers to provide insurance. They oppose the Democrats’ call for a big expansion of Medicaid, which Republicans say would burden states with huge long-term liabilities.
While the Congressional Budget Office has not analyzed all the Republican proposals, it is clear that they would not provide coverage to anything like the number of people — more than 30 million — who would gain insurance under the Democrats’ proposals.
But Republicans say they can make incremental progress without the economic costs they contend the Democratic plans pose to the nation. As one way to encourage competition and drive down costs, Republican members of Congress want to make it easier for insurance companies to sell their policies across state lines, an idea included in a limited form in the Democratic bills.
Republicans would offer federal money as a reward to states that achieve specified reductions in premiums or in the number of people without insurance.
Republicans would provide federal money to states to establish and expand high-risk pools, for people with chronic illnesses who cannot find private insurance at an affordable price.
Republicans also contend that changes in state medical malpractice laws could lower costs and slow the growth of premiums. However, some of these proposals — like federal limits on damages for pain and suffering and punitive damages — are potentially in conflict with the Republicans’ emphasis on federalism and state autonomy.
In contrast to the bills passed by the House and the Senate, which would remake the health care system, Republican leaders favor a more modest approach.
Senator Lamar Alexander of Tennessee, the No. 3 Republican in the Senate, said he and his colleagues were skeptical of “grand legislative policy schemes” and favored “a step-by-step approach” focused on lowering health costs for families and businesses.
“It is arrogant to imagine that 100 senators are wise enough to reform comprehensively a health care system that constitutes 17 percent of the world’s largest economy and affects 300 million Americans of disparate backgrounds and circumstances,” Mr. Alexander said.
The Republican health care agenda can be inferred from bills they have offered in the last few years and from their criticism of Mr. Obama’s proposals and of Democratic bills passed by both houses of Congress last year.
Republicans want to expand the use of health savings accounts, to cover routine expenses for people who enroll in high-deductible health plans. Democrats denounce such accounts as a tax shelter for higher-income people.
Many Republicans want to expand the role of private insurance companies in Medicare. Insurers already manage Medicare’s prescription drug benefit, and Republicans see that as a model.
Republicans agree on the need to slow the explosive growth of Medicare, but say the savings should be used to shore up Medicare, not to help finance a new entitlement program.
Democrats said the Republican proposals would do little to solve the crisis in health care. The proposals are “as skimpy as a hospital gown,” said Representative Lloyd Doggett, Democrat of Texas.
Representative George Miller, Democrat of California, said, “If the Republicans’ health care plan was a plan for a fire department, they would rush into a burning building, and they would rush out and leave everybody behind.”
Like Democrats, Republicans are divided on some questions, including the taxation of employer-provided health benefits.
Some Republicans, like Senator Tom Coburn of Oklahoma and Representative Paul D. Ryan of Wisconsin, would replace the tax-free treatment of health benefits with a refundable tax credit for the purchase of insurance — an idea similar to one advanced in the 2008 presidential campaign by Senator John McCain, Republican of Arizona.
Other Republicans say that eliminating the current tax break for employer-provided insurance would amount to a tax increase and should be opposed.
Some Republicans, like Mr. Coburn and Mr. Ryan, would encourage but not require states to set up health insurance exchanges, or marketplaces, where consumers could compare and buy coverage. The exchanges would require insurers to offer coverage to all applicants, regardless of their age or medical history. Insurers participating in the exchange would have to offer at least the same benefits made available to members of Congress.
While Republicans generally oppose any new entitlement or tax increase, they do have some areas of potential agreement with Democrats. They agree, for example, on the need to emphasize wellness and preventive health programs; to provide more transparency for price and quality data on doctors and hospitals; and to speed the approval of lower-cost generic versions of high-cost biotechnology medicines.
Many Republicans would also join Democrats in requiring insurers to let dependent children stay on their parents’ policies through age 25 or 26.
Democrats and Republicans share another goal: making it easier for small businesses to buy insurance. The House and Senate bills would offer tax credits for two years to businesses with 25 or fewer employees to help them buy coverage.
Republicans would help small businesses band together and buy insurance through trade associations and professional societies.
But Democratic lawmakers, like consumer advocates and many state officials, oppose Republican suggestions that such small-business health plans should be exempt from state regulation, including requirements for the coverage of specific services.
In a letter to the White House on Monday, the top two House Republicans, Representatives John A. Boehner of Ohio and Eric Cantor of Virginia, said members of their party would be “reluctant to participate” in the meeting with Mr. Obama if the bills passed by the House and the Senate were the starting point. The American people have “soundly rejected” those bills, they said.
Senator Judd Gregg of New Hampshire, the senior Republican on the Budget Committee, welcomed Mr. Obama’s invitation. But like many in his party, he expressed concern that the session would be used as “an arena for political theater.”
The NYT also reports that flush with cash despite the global economic downturn, China’s sovereign wealth fund quietly bought more than $9 billion worth of shares last year in some of the biggest American corporations, including Morgan Stanley, Bank of America and Citigroup.
Although most of the stakes were small, the China Investment Corporation, the government’s $300 billion investment fund, now owns stock in some of the best-known American brands, including Apple, Coca-Cola, Johnson & Johnson, Motorola and Visa.
The detailed list, which contained holdings totaling $9.6 billion as of Dec. 31, was disclosed Friday in a filing with the Securities and Exchange Commission; it lists stakes only in companies traded in the United States.
The filing offers a glimpse of how China is trying to diversify its more than $2 trillion in foreign currency holdings with stock, rather than investing almost entirely in United States Treasury bonds and other debt securities issued by governments and by government-sponsored enterprises like Fannie Mae.
Prime Minister Wen Jiabao of China and other officials have repeatedly expressed worry about how the country’s holdings of Treasury securities could be hurt by inflation or by mounting United States debt. By buying the securities of international companies, China is trying to spread its fast-growing wealth more widely. It is also seeking to acquire strategic stakes in companies that could feed its hungry economy with a range of commodities.
The China Investment Corporation, already one of the world’s largest sovereign funds, was formed in 2007 with about $200 billion. It now has assets of nearly $300 billion and, according to state-run news media, is expecting another large injection of funds.
A spokeswoman for the corporation, which is based in Beijing, did not return e-mail messages or phone calls seeking comment. But analysts said the filing showed that the fund had invested only a small portion of its $300 billion in American stocks, and the fund seemed to be following a cautious strategy to diversify globally after initially having put its biggest investments into shoring up the capital of Chinese banks.
“This is still a relatively small amount compared to the total size of the fund,” said Chang Chun, a professor of finance at the China Europe International Business School in Shanghai.
The sovereign wealth fund got off to a rocky start in 2007 and early 2008 by acquiring a $3 billion nonvoting stake in the American private equity firm Blackstone and paying $5 billion more for a 9.9 percent stake in Morgan Stanley.
Shares of both companies plummeted in 2008 during the financial crisis, leading to a storm of criticism directed at the wealth fund. But analysts say the fund performed well in 2009, particularly because it was buying aggressively as the market recovered.
Exactly when the investment corporation bought the shares of various companies was not disclosed in the filing. Its acquisition of nonvoting units of Blackstone and its early stake of preferred shares in Morgan Stanley are not listed in the filing, apparently because they are not traded equities.
The filing indicates that the corporation owns about $19 million worth of Bank of America stock, close to $30 million worth of Citigroup shares and about $333 million worth of shares in Visa, as well as holdings in various index funds.
The fund’s largest listed holdings were $1.7 billion worth of shares in Morgan Stanley and nearly $650 million worth of shares in BlackRock, the New York money management fund.
The Morgan Stanley stake was acquired last June, when the investment bank issued about $2.2 billion worth of common shares to help repay the United States government under the Troubled Asset Relief Program. The Chinese fund acquired about $1.2 billion worth of shares at that time.
Some United States politicians in both parties have been nervous about China’s growing financial reach, and have been particularly wary that China might seek political influence in the West commensurate with its corporate stakes. Four years ago, Congress discouraged Cnooc, a state-owned Chinese oil company, from buying the oil company Unocal, which instead merged with Chevron.
Most sovereign wealth funds, with the exception of Norway’s, disclose few details about their holdings. But the Chinese fund made its list available for the first time on the S.E.C.’s form 13F, which is filed quarterly by institutional investors and mutual funds in the United States.
Ben Simpfendorfer, an economist at the Royal Bank of Scotland, said the Chinese sovereign wealth fund’s decision to disclose its holdings could limit concerns about secrecy in government holdings.
“This should help reassure politicians that Chinese sovereign wealth funds can take minority positions responsibly,” he said.
The Chinese fund’s holdings outside the United States are substantial and growing. In Canada, it owns a $3.5 billion stake in Teck Resources, a mining and resources company listed in the United States, and a $1 million stake in Research In Motion, the maker of BlackBerry mobile phones.
The sovereign wealth fund has also been buying small stakes in Australia’s biggest banks and paid $646 million last autumn for a stake in the Noble Group, a diversified commodities company based in Hong Kong with operations around the world in industries like iron ore mining and sugar mills.
Executives whose companies have accepted investments from the Chinese fund tend to defend it as apolitical.
Richard S. Elman, the founder and chairman of Noble, said last month that executives of the Chinese fund had been businesslike in their approach to the investment.
“They are hugely commercial, and they want results,” he said. “They do not interfere in the day-to-day operations.”
