AppId is over the quota
AppId is over the quota
By Peter Savodnik

Illustration by Peter Arkle; Everett Collection

At Rick’s Café in Casablanca, among the Moorish arcades, palmettos, and elegant, well-heeled patrons, a piano man plays As Time Goes By on an old Pleyel. The establishment features a mahogany bar, lamps with stained-glass shades, and a popular fig-and-goat-cheese salad. It wouldn’t seem out of place to find Humphrey Bogart surveying the room, or Ingrid Bergman requesting a song from Dooley Wilson, who played Sam in the 1942 film Casablanca. But the role of Sam is here played by a local Moroccan pianist named Issam. Everything about Rick’s, which former American diplomat Kathy Kriger opened in 2004, is designed to channel the film’s glamour, radiating nostalgia for an imaginary past.

Alas, the moment one exits the café and emerges onto a dusty sidewalk, surrounded by crumbling facades and the rusting Peugeots known as petits taxis that wind through the garbage-strewn streets, the illusion evaporates: Casablanca meets Casablanca. With Minister of Youth and Sports Moncef Belkhayat talking up a seemingly quixotic bid for Casablanca to become the first African city to host the Olympic Games, in summer 2028, Casablanca’s leaders are hoping the city can claim the Hollywood glory it never had.

They will be aided in that effort by the millions of global cinephiles who know the city only as Michael Curtiz shot it. “We call it the Casablanca Effect,” says Jean AbiNader, the chief operating officer of the Moroccan government’s lobby shop in Washington, the Moroccan-American Center. “I’ve worked for a lot of Arab countries and generally, when you say ‘Arab,’ the first thing people think of is camels or sand. So if you say ‘Casablanca,’ and the first thing people think of is the movie, that’s great.” AbiNader is untroubled by the disconnect between Casablanca and Casablanca. The association “provides a point of departure,” he says. “It’s an opportunity to rebrand.” Local businesses have seized on the association, selling Casablanca-themed tissue boxes or refrigerator magnets and emulating the film’s aesthetic.

Casablanca has more to recommend it than a movie made 70 years ago with no Arabic-speaking actors. The International Olympic Committee has expressed interest in finally having an African city host the games and may be drawn to Morocco’s relative stability amid uprisings throughout the Arab world. The country enjoyed 4.9 percent growth in 2009, and 4 percent last year. Tourism in the first half of 2010 increased by 10 percent from the previous year. Billboards and office parks line the highway between Casablanca and its airport, and there are gated homes that look distinctly West L.A. with their palm trees, stucco walls, and red-tile roofs, and BMW convertibles in the driveway. Soon a high-speed train will connect the city to Tangier, in the north, and Rabat, the Moroccan capital. Construction has started on a $300 million, 80,000-seat stadium where the final round of the Africa Nations Cup, expected to draw thousands of soccer fans to the city, will take place in 2015.

Ahmed Chami, Morocco’s UCLA-educated minister of industry, commerce, and new technologies, credits King Mohammed VI, who came to power in 1999, with investing in highways, tourism, agriculture, energy, textiles, and aeronautics, and surrounding himself with smart young people—like Chami, 40. “We’re being very proactive,” he says.

This is indeed a propitious moment for Morocco, which is poised to act as a bridge between the West and a tumultuous, changing Arab world, much as Bogie’s gin joint served as a nexus for Vichy officials, Resistance fighters, fez-wearing power brokers, and Nazis. In ancient souks, vestiges of the country’s French colonial past merge with Arab, Berber, and African influences. Waiters at Parisian-style cafés read Le Monde, all while serving traditional Moroccan mint tea with lamb couscous.

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AppId is over the quota
AppId is over the quota
November 13, 2011, 8:49 AM EST By Jeff Bliss

(Updates with quotes from “Late Show” in fourth paragraph. For more news on the 2012 campaign, see ELECT.)

Nov. 11 (Bloomberg) -- Texas Governor Rick Perry’s “oops” moment in Wednesday’s Republican presidential debate will secure him a prominent place in the annals of political mishaps.

Perry was stymied after offering to list three federal agencies he would eliminate in a cost-cutting drive as the nation’s chief executive. “It is three agencies of government when I get there that are gone,” he said, preparing to repeat a line he has uttered on the campaign trail innumerable times. “Commerce, Education and the -- what’s the third one there? Let’s see.”

This wasn’t the first such misstep for Perry, and it joins a history of gaffes during the televised debates that have become a central and unforgiving element of modern American presidential campaigns.

Last night, he made fun of his self-described “brain freeze” as he presented the nightly “Top Ten” list on CBS’s “Late Show with David Letterman.” The “Top Ten Rick Perry Excuses” included “Actually, there were three reasons I messed up last night -- one was the nerves, two was the headache and three was, and three, uh, uh -- oops” and “Hey, I wanted to help take the heat off my buddy Herman Cain.”

Campaign Is ‘Toast’

Still, for Perry, the mistake may be fatal to his presidential hopes, said Susan Tolchin, a public policy professor at George Mason University in Fairfax, Virginia.

The lapse in remembering the Energy Department for Perry, the governor of a top energy-producing state, “really rendered him toast in this campaign,” she said in an interview. “It looked like without a teleprompter, he was lost.”

Televised debates have helped shape public perceptions of presidential candidates since the first one was held in 1960. For many listening to that debate on the radio, Vice President Richard Nixon, the Republican candidate, was the winner. Those watching on television saw Nixon appearing unshaven, uncomfortable and sweating. To them, his more telegenic opponent, Massachusetts Senator John F. Kennedy, had the edge, Tolchin said.

In 1976, during a debate with Democratic challenger Jimmy Carter, President Gerald Ford slipped in describing the Soviet Union’s influence over Eastern European nations in its bloc.

“There is no Soviet domination of Eastern Europe, and there never will be under a Ford administration,” Ford said. “Each of those countries is independent, autonomous.”

Unemotional Technocrat

In 1988, Democratic candidate Michael Dukakis, the Massachusetts governor and a longtime opponent of capital punishment, was asked whether he would support the death penalty if his wife were raped and murdered.

“I don’t see any evidence it’s a deterrent, and I think there are better and more effective ways to deal with violent crime,” he replied.

That response confirmed for many voters that Dukakis was a technocrat detached from emotion, said Leonard Steinhorn, a communications professor at American University in Washington who was a volunteer speech-writer for the governor’s campaign.

“Dukakis’s answer was somewhat cold and bloodless,” Steinhorn said in an interview.

Vice presidential candidates also have “stepped in it,” as Perry characterized his debate performance yesterday on NBC’s “Today” program.

In 1992, retired Admiral James Stockdale, running with businessman Ross Perot on a third-party ticket, said during a debate with his counterparts, “Who am I? Why am I here?”

Voters had the same questions, and Perot and Stockdale were outrun by Democrats Bill Clinton and Al Gore.

‘No Jack Kennedy’

In a 1988 debate, Republican vice presidential candidate Dan Quayle, an Indiana senator running with George H.W. Bush, said he had “as much experience as Jack Kennedy” did before Kennedy ran for president.

Quayle’s Democratic rival, Lloyd Bentsen, pounced.

“Senator, I served with Jack Kennedy, I knew Jack Kennedy. Jack Kennedy was a friend of mine. Senator, you’re no Jack Kennedy,” said Bentsen, a longtime Texas senator.

Bloopers haven’t always defined candidacies or killed careers. Americans’ concerns with Quayle’s qualifications didn’t prevent the election of the Republican ticket.

Four years earlier, after a halting performance in a debate raised concerns about his age, President Ronald Reagan in a rematch turned the point in his favor against his Democratic challenger, former Vice President Walter Mondale.

“I am not going to exploit for political purposes my opponent’s youth and inexperience,” he said to laughter from the audience -- and from his opponent.

‘Sorry. Oops.’

In Wednesday’s debate, after drawing a blank on the Energy Department during his statement about closing agencies, Perry was subsequently pressed to name it.

“The third agency of government I would do away with?” he replied. “Education. Commerce and, let’s see. I can’t. The third one, I can’t. Sorry. Oops.”

That stumble was substantial, Tolchin said.

“That’s a significant thing to forget,” she said. “He could be somebody brand new and he’d be in great trouble.”

Steinhorn said the mistake falls into a pattern of Perry’s lackluster performances in the Republican debates. “It doesn’t necessarily mean he would be a bad chief executive, but it does make people wonder whether he has the intellectual capacity to become president of the United States,” he said.

Perry, who rose to a lead in polls after declaring his candidacy on Aug. 13, plummeted after he flubbed discussions of illegal immigration and other issues in earlier debates.

‘Brain Freeze’

Yesterday, on CNN’s “American Morning,” he said his “brain freeze” was a moment all candidates suffer.

“There are going to be people who make mistakes, stumble over words or can’t remember an agency as I did,” he said. Voters want “substance, not necessarily the slickest debater.”

In three swing states -- Florida, Ohio and Pennsylvania -- Perry’s support doesn’t exceed 5 percent, according to a Quinnipiac University poll of voters conducted Oct. 31-Nov. 7.

In an e-mail sent within hours of the debate’s end, the Perry campaign attempted to pivot, encouraging supporters to “let us know what federal agency you would most like to forget.”

Perry’s campaign treasury will help him survive for now, allowing him time to change voters’ impressions, Steinhorn said.

“That really is his only chance,” he said.

Perry led Republicans in fundraising in the third quarter, collecting $17.2 million and entering October with more money banked than rivals, Federal Election Commission reports show.

In television appearances yesterday, Perry said he was committed to continuing his bid for the presidency. He will be ready, he said, for the next debate tomorrow in South Carolina.

--With assistance from Julie Hirschfeld Davis and Roger Runningen in Washington. Editors: Jim Rubin, Leslie Hoffecker

To contact the reporter on this story: Jeff Bliss in Washington at jbliss@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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AppId is over the quota
AppId is over the quota
By Crayton Harrison

The world’s richest man just can’t take no for an answer. Banned by regulators from offering television service in his native country, Carlos Slim, the Mexican telecom billionaire, has started streaming shows, news, sports, and cultural programming for free on the Web.

Rivals are not taking it lightly. Mexico’s No.?2 broadcaster, TV Azteca, has sued Slim’s phone carriers—América Móvil and Teléfonos de México —for Web broadcasts such as last month’s airing of the Pan American Games. Telmex was a sponsor of the Games and had online rights for Mexico, while TV Azteca owned a portion of the TV broadcast rights. Luis Niño, a spokesman for TV Azteca and other companies controlled by billionaire Ricardo Salinas, compared it with taking away business from Slim’s Mixup Music Store chain, which sells CDs and DVDs. “It’s as if I went right outside a store and started selling pirated music and movies, and told them, ‘It’s O.K. I downloaded them from the Internet,’ ” he says. Emilio Azcárraga, chief executive officer of market leader Grupo Televisa, has called on Mexican regulators to scrutinize Slim’s moves.

Under the terms of his telecom license, Slim is barred from using his networks to offer TV service. Slim, 71, has tried unsuccessfully to reverse the ban, especially as Televisa has begun offering phone and Internet service to lure away his customers. “Streaming on the Internet isn’t TV,” Renato Flores, a Telmex spokesman, posted on his Twitter account. Flores, in an e-mail, declined to comment further.

For Slim, Mexico is the exception. América Móvil is already the biggest pay-TV provider across Latin America, with 12.5 million subscribers, mostly in Brazil, compared with DirecTV’s 10.3 million. Last month it acquired video distribution company DLA for an undisclosed fee, gaining a platform to offer pay-per-view and online streaming of movies. “Having content is going to be an important part of the future for all of América Móvil,” says Martin Lara, an analyst at Corp. Actinver, a Mexico City brokerage. “It makes sense to build up content and acquire content even though they don’t have a license.”

Mexico’s pay-TV business generates about $3 billion a year, so it’s not surprising that Azcárraga and Salinas, whose companies are also players in cable and satellite, are putting up a fight. Stay tuned to see how this battle of the billionaires turns out.

The bottom line: Slim is using digital distribution to escape regulation, sparking the ire of Mexican TV broadcasters.

Harrison is a reporter for Bloomberg News.

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AppId is over the quota
AppId is over the quota

Illustration by Harry Campbell

By Carol Eisenberg

Pharmaceutical companies can easily spend years—and more than $1 billion—bringing a new drug to market, in part because they can’t find enough patients to do the required testing of the compound. Such delays can cost up to $1 million a day, fritter away valuable months of patent protection, and allow rival developers to catch up. One remedy: pay hospitals to sift through the health records of their patients.

Five big drugmakers, led by Pfizer, are planning to use electronic health data gathered from patients of 13 hospital systems across New York State to help them identify and enroll participants in drug studies. The effort, which begins testing this month, is projected to make $75 million a year for the hospitals and save the pharmaceutical companies time and money in developing new products. “This is going to be a game changer, making medicine more of a science and less of an art,” says John Murphy, senior director of clinical analytics for Quintiles Transnational, which helps drugmakers conduct trials.

The program, called the Partnership to Advance Clinical Electronic Research, or PACeR, is among scores of such initiatives created nationally as medical providers, software vendors, and health data businesses seek ways to profit from the flood of clinical data now being gathered electronically. Besides Pfizer, companies helping fund PACeR include Merck, Roche, Johnson & Johnson, and Bayer HealthCare. Quintiles and Oracle are developing the system.

Federal law bars medical providers, hospitals, and insurers from disclosing identifying information such as names, addresses, and Social Security numbers. So drug companies that want to test a new product or compound would pay PACeR to query the records systems of participating hospitals to compile a list of patients who match a trial’s requirements. Each query would cost between $50,000 and $200,000.

Once they determine how many patients might qualify and where they’re located, and get approval from a local ethics board, the hospitals would contact the patients’ doctors. A drugmaker would have access to personal information only if the patient consents, says David A. Krusch, head of PACeR’s leadership team and director of medical informatics at the University of Rochester Medical Center. “There is no central database,” Krusch says. “We’re not dumping big buckets of de-identified data anyplace. Pfizer will not have a network connection, say, to the University of Rochester, or to any other participant in the network.”

Still, some civil liberties groups worry about data breaches and the potential for third parties to reconnect names to the data. “In a world where so much data is being retained, exchanged, and sold, being able to protect the privacy of individuals is a lot more difficult,” says Lillie Coney, associate director of the Electronic Privacy Information Center, a Washington-based advocacy group. Even data scrubbed of someone’s name and Social Security number can be “re-identified,” Coney warned, citing a 2006 case where AOL released information about people’s search queries, which others were able to combine with publicly available data to identify an elderly Georgia woman who had used her AOL account to research medical conditions.

Consumer and ethics groups who advised the New York project say they see patient benefits as long as confidentiality is protected. “One of the problems with clinical trials is it’s very hard to get the information out to the average physician, or to the average cancer patient being treated in the community,” says research scholar Karen Maschke of the Hastings Center, a bioethics group that consulted on PACeR. Maschke says that while she supports the PACeR concept, “I’m also a skeptic. There probably should be conversations at the national level about best practices for these endeavors to guard confidentiality.”

Such discussions are expected to increase around the country as the use of electronic health records increases dramatically over the next few years, spurred by $27.4 billion set aside in the 2009 U.S. stimulus to pay doctors and hospitals to adopt and use them.

Drugmakers are big potential customers of aggregated health data since drug development times have more than doubled in the past 20 years without a marked increase in the percentage of compounds successfully brought to market. “If pharmaceutical companies can make this happen faster and more cheaply, they’re big winners,” says C. William Schroth, a former consultant for the New York State Health Dept., who first broached the concept behind PACeR to a group representing New York hospitals and also to drug companies.

Doctors and hospitals liked the idea because it makes them more attractive research partners. It wasn’t a hard sale for Big Pharma, either: Every day of delay during a Phase 3 trial costs drugmakers more than $1 million, with an average delay of 90 days, says David Leventhal, director of clinical innovation at Pfizer, citing a Deloitte Consulting analysis. “Even if that number is only 25 percent right, it’s still a compelling message.”

The bottom line: A group of 13 New York hospitals will sell access to patient data to drugmakers for $50,000 to $200,000 per search.

Eisenberg is a reporter for Bloomberg News.

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AppId is over the quota
AppId is over the quota
November 13, 2011, 9:01 AM EST By Marcus Bensasson, Natalie Weeks and Maria Petrakis

(See EXT4 for debt crisis news.)

Nov. 12 (Bloomberg) -- Greek Finance Minister Evangelos Venizelos said his priority is to ensure the payment of a sixth loan under a European Union-led bailout to avert financial collapse, hours after Prime Minister Lucas Papademos took charge as head of a new interim government.

Venizelos retained his posts as deputy premier and finance minister in the government sworn in yesterday by Archbishop Hieronymos of Athens and All Greece. The clock is ticking on the payment of the 8 billion-euro ($11 billion) loan installment under the 110 billion-euro EU-led rescue agreed on in May 2010.

The tranche must be paid before the middle of December to prevent a collapse of the country’s economy.

“The ministry’s first priority is to secure the payment of the sixth loan on completion of all the necessary actions,” Venizelos told reporters in Athens yesterday. He said that the group of euro-area finance ministers can approve the release of the loan after a telephone conference call.

The new government must implement budget measures and decisions related to an Oct. 26 European bailout amounting to 130 billion euros as well as manage a voluntary debt swap, before holding elections that have been tentatively set for Feb. 19.

“The new unity government will do the best it can to resolve the country’s problems,” Papademos said in a meeting with former Prime Minister George Papandreou after the ceremony. “I believe with the collaboration and unity of all we will achieve the results we want.”

Government Mandate

Health Minister Andreas Loverdos, Education Minister Anna Diamantopoulou and Energy Minister George Papaconstantinou also kept their posts. Anastasios Giannitsis, currently chairman of Hellenic Petroleum SA, will head the interior ministry and Stavros Dimas, deputy leader of the main opposition party, New Democracy, and a former European commissioner, will be foreign minister.

President Karolos Papoulias gave Papademos the mandate to form a government on Nov. 10 after agreement from Papandreou, New Democracy leader Antonis Samaras, and opposition LAOS party leader George Karatzaferis following four days of wrangling after Papandreou said he’d resign.

Papandreou announced agreement on a unity administration on Nov. 9 after his proposal for a referendum on a second Greek financing package roiled markets and angered Greeks and European Union partners.

Merkel Halts Funds

Disbursement was halted by German Chancellor Angela Merkel and French President Nicolas Sarkozy after Papandreou called a referendum on the European bailout terms. He later dropped the idea.

The euro rose 1 percent to $1.3747 at 10:17 p.m. Athens time yesterday. European stocks advanced, with the Stoxx Europe 600 gaining 2.4 percent to 240.98. Greece’s benchmark general index lost 0.9 percent to 755.65. The Standard & Poor’s 500 closed up 2 percent at 1,263.85 yesterday.

The yield on the 10-year Greek bond was little changed at 28.45 percent. Two-year note yields rose 81 basis points to 108.9 percent.

Greece’s new government includes six members of New Democracy and four members of LAOS as ministers or deputy ministers. Papandreou’s Pasok party has 36 members in the Cabinet. The most senior position held by New Democracy is the foreign ministry post by Dimas, who served as EU environment commissioner starting in 2004 until 2010.

Lost Credibility

Dimas, 70, has degrees from the University of Athens and New York University. He worked as a lawyer for the World Bank from 1970 to 1975 and was deputy governor of the Hellenic Industrial Development Bank from 1975 to 1977. He has been elected to the Greek Parliament 10 consecutive times since 1977 with New Democracy, holding various posts including head of the energy and agriculture ministries.

The coalition “can resurrect the lost credibility of the political system,” Dimitris Sotiropoulos, associate professor of political science at the University of Athens, said in a telephone interview. “It is extremely important that more than two parties agreed on someone who hasn’t faced the mistrust and suspicion of voters. That can only help the economy as well as restore some faith in political life.”

Scale of Task

The scale of the task facing Papademos and his new team was underlined on Nov. 10 when the European Commission said the country’s debt will be almost twice the size of the economy in 2012 amid a fifth straight annual contraction. The unemployment rate rose almost two percentage points in August, a record monthly increase, to 18.4 percent.

Greece’s debt will reach 163 percent of gross domestic product this year and jump to 198 percent in 2012, the EU’s Brussels-based executive arm said in its fall economic forecast. That compares with 173 percent predicted by the Greek government in its 2012 draft budget.

Those figures are based on no policy changes and don’t include plans for a writedown of Greek debt that is included in the Oct. 26 plan and may slice as much as 100 billion euros off Greece’s debt burden.

Germany will support Papademos in his task of overhauling the country, according to a message from Merkel to Papademos released by the German government yesterday in Berlin.

Hopes and Expectations

Papademos faces “great hopes and expectations” and his government will have to undertake “reform measures quickly to lead Greece out of the current crisis,” Merkel said in the note. “Germany will stand by you and the Greek people in the difficult mastering of the common challenges in Europe and the euro zone.”

Greece plans to pay lenders 50 cents for each euro the government borrowed under the terms of the bailout plan agreed to at the Oct. 26 summit. Its 4 percent notes due in August 2013 now trade at about 35 cents. Fitch Ratings says the agreement with creditors would amount to a “default event” if implemented, while the International Swaps and Derivatives Association says it won’t trigger credit-default swaps.

Papademos, 64, a former governor of the Greek central bank who oversaw the country’s adoption of the euro, will need the backing of 180 lawmakers in the 300-seat parliament to secure approval for Greece’s second aid package.

A debate on a motion of confidence in the new government may begin in Athens early next week.

--With assistance from Tony Czuczka in Berlin, Paul Tugwell, Eleni Chrepa and Maria Petrakis in Athens. Editors: Kevin Costelloe, Paul Tighe

To contact the reporters on this story: Tom Stoukas in Athens at astoukas@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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AppId is over the quota

[ by: dino9wynn ] [ RESPIN ] [ Copy HTML Below ]

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Illustration by Alex Eben Meyer

By Adam Satariano and Peter Burrows

About five years ago, Apple design guru Jony Ive decided he wanted a new feature for the next MacBook: a small dot of green light above the screen, shining through the computer’s aluminum casing to indicate when its camera was on. The problem? It’s physically impossible to shine light through metal.

Ive called in a team of manufacturing and materials experts to figure out how to make the impossible possible, according to a former employee familiar with the development who requested anonymity to avoid irking Apple. The team discovered it could use a customized laser to poke holes in the aluminum small enough to be nearly invisible to the human eye but big enough to let light through.

Applying that solution at massive volume was a different matter. Apple needed lasers, and lots of them. The team of experts found a U.S. company that made laser equipment for microchip manufacturing which, after some tweaking, could do the job. Each machine typically goes for about $250,000. Apple convinced the seller to sign an exclusivity agreement and has since bought hundreds of them to make holes for the green lights that now shine on the company’s MacBook Airs, Trackpads, and wireless keyboards.

Most of Apple’s customers have probably never given that green light a second thought, but its creation speaks to a massive competitive advantage for Apple: Operations. This is the world of manufacturing, procurement, and logistics in which the new chief executive officer, Tim Cook, excelled, earning him the trust of Steve Jobs. According to more than a dozen interviews with former employees, executives at suppliers, and management experts familiar with the company’s operations, Apple has built a closed ecosystem where it exerts control over nearly every piece of the supply chain, from design to retail store. Because of its volume—and its occasional ruthlessness—Apple gets big discounts on parts, manufacturing capacity, and air freight. “Operations expertise is as big an asset for Apple as product innovation or marketing,” says Mike Fawkes, the former supply-chain chief at Hewlett-Packard and now a venture capitalist with VantagePoint Capital Partners. “They’ve taken operational excellence to a level never seen before.”

This operational edge is what enables Apple to handle massive product launches without having to maintain large, profit-sapping inventories. It’s allowed a company often criticized for high prices to sell its iPad at a price that very few rivals can beat, while still earning a 25 percent margin on the device, according to the estimates of Piper Jaffray analyst Gene Munster. And if the latest rumors are to be believed, Apple’s operational expertise is likely part of what gives the company enough confidence to enter the notoriously cutthroat television market by 2013 with a TV set that would tightly integrate with existing Apple software like iTunes. The widespread skepticism over Apple’s ability to compete in such a price-sensitive market, where margins are often in the single digits, is “exactly what people said when Apple got into cell phones,” says Munster.

Apple began innovating on the nitty-gritty details of supply-chain management almost immediately upon Steve Jobs’s return in 1997. At the time, most computer manufacturers transported products by sea, a far cheaper option than air freight. To ensure that the company’s new, translucent blue iMacs would be widely available at Christmas the following year, Jobs paid $50 million to buy up all the available holiday air freight space, says John Martin, a logistics executive who worked with Jobs to arrange the flights. The move handicapped rivals such as Compaq that later wanted to book air transport. Similarly, when iPod sales took off in 2001, Apple realized it could pack so many of the diminutive music players on planes that it became economical to ship them directly from Chinese factories to consumers’ doors. When an HP staffer bought one and received it a few days later, tracking its progress around the world through Apple’s website, “It was an ‘Oh s—’ moment,” recalls Fawkes.

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Monument Valley on the Navajo Nation reservation Robert Harding World Imagery/Getty Images

By Amanda J. Crawford

The largest American Indian tribe, the Navajo Nation, plans to issue its first bonds in a $120 million offering that would be the biggest sale of nongaming tribal debt in at least a decade. The tribe intends to use the money to create thousands of jobs and stimulate the economy on its reservation in America’s Southwest. Despite the Navajo Nation’s energy revenue, more than 37 percent of the reservation’s 170,000 residents lived below the federal poverty level in 2009. “I am concerned with the time when we won’t have revenues from our natural resources,” said Katherine Benally, head of the Navajo Nation Council’s resources and development committee, while taking a break from a council budget session in Window Rock, Ariz. “We need to be ready for that.”

Gross revenue for the tribe was about $193 million in fiscal 2010, with $29 million from oil and gas and $61 million from coal royalties, according to budget documents. In May, Standard & Poor’s awarded the Navajo Nation an A rating—one level above California’s—citing its natural resource revenue and cash reserves of more than $1 billion. That money is held in a fund established in 1985 after the tribe won a court case over taxes from energy companies doing business on Navajo lands. Taxes, and leases on land and business sites, are the other major sources of revenue, according to S&P. Karl Jacob, senior director for state and local government at S&P in Boston, said his firm has only one other active municipal-bond rating for a tribal government. The Southern Utes of Colorado have a top AAA rating. “I don’t know that many tribes over the years have had the resources to garner an investment-grade rating on their own,” Jacob says. The Navajo Nation’s rating is an assessment of the tribe’s overall credit, and any specific bond issue could be rated differently based on the details of the deal, according to Douglas E. Goe, vice-chair of finance for Orrick Herrington & Sutcliffe, the tribe’s bond counsel in Portland, Ore.

In July, a special prosecutor hired by the tribe filed a civil lawsuit against 85 current and former Navajo officials alleging financial mismanagement. The suit, which is on hold after the tribe hired a new special prosecutor last month, accuses officials of funneling millions of dollars intended for the poor to family, friends, and political insiders. Jacob says S&P considered the impact of the lawsuit but decided that it would not change the tribe’s rating.

The proceeds of the bond offering will finance about 50 projects on the 27,000-square-mile reservation in Arizona, New Mexico, and Utah, according to the Navajo Nation Division of Economic Development. A tentative project list includes a dozen convenience stores, several fast-food restaurants, two shopping centers, office and industrial complexes that the tribe would lease out, a radio station, and a $14 million tourist center. Tribal estimates say the projects will generate $3.2 million annually in rental income and taxes, leading to the creation of more than 6,000 jobs.

The Navajo reservation stretches from the Grand Canyon through some of the most remote areas of the Southwest. Many residents live without electricity, running water, or paved roads. A trip to shop or see a movie often means traveling hours to towns outside the reservation. The projects would create more places where Navajos can spend money on Navajo lands. It’s about “keeping money on the reservation,” says Raymond Nopah, chief financial officer for the Economic Development Division. Gavin Clarkson, an associate professor at the University of Houston Law Center who studies tribal finance, says the projects “will be able to have a dramatic impact in an economically disadvantaged area.”

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Illustration by Topos Graphics

By Elizabeth Ody

(Corrects J. Reilly Dolan's title in the fifth paragraph.)

Debt settlement companies—which promise to negotiate with creditors on behalf of strapped consumers—are switching tactics to skirt new consumer protection rules.

The debt settlement business has boomed in recent years as more Americans find themselves unable to keep up with credit-card balances and other loans. The number of debt settlement firms grew tenfold, to about 1,000 in 2010, from 100 or so in 2007, according to estimates by Andrew Housser, an executive board member at the American Fair Credit Council, an industry lobbying group.

As the industry grew, so did the complaints. Consumers said some firms charged thousands of dollars in upfront fees and never delivered any debt relief. The Better Business Bureau has received more than 2,500 complaints about debt relief firms this year, according to Katherine Hutt, a spokeswoman. The bureau started tracking the debt relief services industry as a separate category in 2010 in response to a “significant increase” in the number of complaints it received about the companies, she says.

Hoping to stop rip-offs, the Federal Trade Commission last year barred debt settlement companies that use telemarketing from accepting upfront fees. (The FTC regulates firms that sell over the phone.) Some companies soon found a loophole, though. It remains unclear whether the rule applies to legal fees, so debt settlement firms are affiliating with lawyers to charge initial fees as high as $7,000 or more.

J. Reilly Dolan, acting associate director of the division of financial practices at the FTC, says that the telemarketing rule includes no specific exemption for lawyers and that the FTC would need to evaluate firms that affiliate with attorneys on a case-by-case basis to see whether they are in compliance. “We are concerned about companies that are associating themselves with attorneys but are not complying with the telemarketing sales rule,” he says. Trying to rein in dodgy debt settlement practices is “like playing Whack-A-Mole,” says Suzanne Martindale, an attorney for the Consumers Union in San Francisco. “We do expect we’ll continue to see more businesses cropping up trying to exploit loopholes” in the new regulations.

The premise behind debt settlement firms has always been questionable. When customers enroll in a debt settlement program, they’re usually told to stop making minimum payments to creditors and instead to pay into a trust or escrow account. Once that account has accumulated enough money, the firm negotiates with creditors to try to settle in cash for an amount less than the consumer’s outstanding debt.

The problem with charging upfront fees is that all of a consumer’s monthly payments may go toward the settlement firm’s charges first, meaning customers may not accumulate a positive balance in their accounts for months after starting a program, according to critics such as Martindale. Customers may continue to accrue late fees or interest and possible negative marks on their credit reports, and they may still be sued by creditors after enrolling in a program. Says William Binzel, corporate secretary for the National Foundation for Credit Counseling, a Washington-based network of nonprofit credit-counseling agencies: “I think a consumer goes into a debt settlement thinking, ‘At last, I’ll solve the problem,’ only to find out nine or 10 months down the road that while they’ve been paying into this account, they’re actually deeper in debt and may be subject to being sued by creditors.”

Some firms began shifting to an attorney model—partnering with a law firm—before the FTC rule took effect because of loopholes for lawyers in state laws, says Scott Johnson, chief executive officer of U.S. Debt Resolve, a settlement firm that does not charge upfront fees. In the past two years attorney-model firms have become a majority of the debt settlement industry, says Amy Clark Kleinpeter, an Austin (Tex.) attorney who represents consumers against debt settlement firms. “Most seem to have converted relatively easily,” she says. Some also have started meeting with clients face to face when signing documents because the FTC rule was directed at telemarketers and may not cover agreements made in person, says Housser of the American Fair Credit Council.

Membership in the U.S. Organizations for Bankruptcy Alternatives, a trade association for debt settlement firms, has declined to about 30 from more than 200, according to Executive Director Jenna Keehnen. The American Fair Credit Council is down to about 35 firms from about 220, Housser says. Both groups require that members comply with the FTC rule and only charge “performance-based” fees, meaning fees are assessed only after a debt is settled. “They haven’t left the industry,” says USDR’s Johnson. “They’ve left the trade associations, because they don’t want to abide by a performance-based service fee.”

The bottom line: As the credit crisis put more people underwater, the number of firms promising debt relief grew tenfold, to 1,000, from 2007 to 2010.

Ody is a reporter for Bloomberg News.

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Bricks: Alamy; Jackhammer: Getty Images; Excavator: Alamy; Organ: Thorsten Futh.

By Manuel Baigorri

The small-to-midsize enterprises of Europe’s periphery—Ireland, Spain, Greece, Portugal, and Italy—have their backs to the wall. Their domestic markets are tanking. So they have little choice but to try to export.

That’s a difficult task. Germany’s midsize companies have spent decades turning themselves into world-class contenders. In contrast, the 8 million so-called peripheral SMEs, which employ 27 million people, have long struggled to overcome the high costs of labor, transport, and real estate in their domestic markets. These costs leave their largely low-tech products—including furniture, bricks, piping, and other construction equipment—ill-prepared for global competition.

“Small companies in peripheral countries will try to find new export markets, but they need to improve competitiveness,” says Peter Braendle of Swisscanto Asset Management. That’s especially tough, he says, since these euro zone countries can no longer devalue their currencies to make their products more affordable abroad.

Making matters worse is that many small businesses in these economies were involved in the construction industry, which last decade benefited from low interest rates and now is at an ebb throughout much of Europe.

Biossol, a Greek company that has roots in the 19th century, prospered for decades as a maker of construction products, such as scaffolding and heating and air-conditioning units. Since 2008, Biossol’s last profitable year, sales have slumped 57 percent, to €14 million ($19 million), and its workforce has shrunk to 100 employees from 250, says Executive Vice-Chairman Antonios Svoronos. The company has outsourced much of its manufacturing and diversified into more tech-oriented water treatment products such as water softening systems, which it sells at home and in Central Europe. “The situation of the economy in Greece is very difficult,” Svoronos, 51, says. “It’s in free fall.” Plans for bolstering the more profitable water division could be hindered because “it’s impossible to get financing from banks.”

High labor costs and low productivity are the twin evils besetting many small companies based in peripheral countries, says Gerhard Huemer, director of economic and fiscal policy at the European Association of Craft, Small and Medium-Sized Enterprises. In Germany, Austria, or Switzerland, says Huemer, companies think constantly about nurturing productive, cost-efficient employees.

Thus, 40 percent of young people without a degree enroll in training programs with companies to become highly qualified workers. In Spain, Huemer adds, low-qualified people demand high salaries, which companies can’t afford. Software and other information technology companies that boost productivity are also more widespread in Germany than in any of the peripheral countries.

To keep his business alive, Paco Casanova, founder of Spanish furniture maker Casanova Gandía, plans to expand to Russia, where consumers still have money to spend and Spanish furniture is popular. Although he has managed to sell furniture in Lebanon, Cyprus, Argentina, and the Dominican Republic, he calls exporting complicated. In Russia, Casanova says, in addition to cultural differences there are trade barriers and many local rivals. Overcoming these difficulties becomes an even tougher task because he needs to trim costs as demand back home shrinks dramatically. “The Spanish market is really depressed,” Casanova, 54, says. As sales sank 80 percent, to about €1 million, Casanova first thought pricing was the problem, so he cut his prices to be more competitive. He later realized that a shortfall of consumption was the real problem. His company is also facing a credit squeeze from banks, and his once-best customers struggle to pay what they owe. “It’s kind of the Wild West,” he says. “Nobody trusts anybody anymore.”

Brickmaker Cerámica Acústica, founded in 2001 in Zamora, Spain, grew to 60 employees by 2007 at the peak of the boom, with sales of €14 million that year. After the financial crisis hit and real estate collapsed, Cerámica had to fire 35 workers. The company expects to finish 2011 with about €3 million in sales. “Prices have been cut by 50 percent since 2007,” says accounting manager Javier Fincias. “We used to work 24/7 all year, and we now only work two to four months a year.”

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November 13, 2011, 8:54 AM EST By Glen Carey and Ola Galal

Nov. 13 (Bloomberg) -- Syria has called for an emergency Arab League summit a day after the organization suspended the country as President Bashar al-Assad’s government pressed on with a crackdown against protesters.

The summit would “address the Syrian crisis,” the official Syrian Arab News Agency reported today, citing an unidentified government official. The Syrian government also would welcome an Arab League delegation, the news service said.

Syria has continued a crackdown on dissenters since agreeing to a Nov. 2 Arab League plan for ending the violence. Security forces killed 11 people today, Al-Arabiya television reported, citing activists.

Anti-regime protests erupted in Syria in mid-March, inspired by uprisings that toppled the leaders of Tunisia and Egypt and led to the death last month of Libya’s long-time ruler, Muammar Qaddafi. More than 3,500 protesters have been killed in Syria, the United Nations said Nov. 8.

Assad has blamed the fighting on Islamic militants and foreign provocateurs. Thousands of Syrians rallied today in different cities to condemn the Arab League’s decision, SANA reported.

--With assistance from Zaid Sabah Abd Alhamid and Nadeem Hamid in Washington and Paul Tighe in Sydney. Editors: Louis Meixler, Digby Lidstone.

To contact the reporter on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net Ola Galal in Cairo on ogalal@bloomberg.net;

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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November 13, 2011, 6:05 AM EST By John Glover and Elisa Martinuzzi

(Updates prices throughout.)

Nov. 11 (Bloomberg) -- Italy’s highest bond yields since the birth of the euro are reverberating through the financial system of Europe’s biggest debt issuer, driving lenders to seek record amounts of central bank financing.

Italian banks borrowed 111.3 billion euros ($152 billion) from the European Central Bank at the end of October, up from 104.7 billion euros in September and 41.3 billion euros in June, Bank of Italy data show. The five biggest lenders -- UniCredit SpA, Intesa Sanpaolo, Banca Monte dei Paschi di Siena SpA, Banco Popolare SC and UBI Banca ScpA -- accounted for 61 percent of the country’s use of ECB resources in September, almost double the share in January.

After punishing Greece, Ireland and Portugal for their rising debt loads, the bond market is now targeting Italy, pushing bonds yields in the euro zone’s third-largest economy above 7 percent as the nation’s lenders prepare to refinance $120 billion of debt maturing next year. Italy’s $2 trillion in liabilities exceed those three countries combined, plus Spain.

“The banks are deleveraging on a tightrope,” Alberto Gallo, a credit strategist at Royal Bank of Scotland Group Plc in London, said in an interview. The slump in Italy’s bonds, which sent the 10-year yield soaring to as high as 7.48 percent Nov. 9, is reducing the value of fixed-income securities held by banks, eroding their value as collateral for loans, Gallo said.

Bill Rates

Bond investors charged the nation an interest rate of 6.087 percent yesterday to buy 5 billion euros of one-year bills, the highest in 14 years. Greece, Ireland and Portugal sought a bailout from the ECB, the European Union and the International Monetary Fund after their bond yields rose amid the region’s sovereign debt woes.

The crisis that’s engulfing Italy and other so-called peripheral countries is also spreading to Europe’s richer economies. Credit-default swaps protecting against a French default jumped to a record 203 basis points yesterday, before falling back to 201, according to CMA prices. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments was at 336 basis points, compared with an all-time high 358 on Sept. 23.

As Italy’s government faces collapse after Prime Minister Silvio Berlusconi promised to resign once Parliament approves austerity measures, deputy finance ministers meeting at the Asia-Pacific Economic Cooperation forum in Hawaii this week expressed concern over the danger Europe poses to the world economy.

European ‘Firewall’

U.S. Treasury Undersecretary for International Affairs Lael Brainard said European officials must speed up construction of a “firewall” to protect countries that have sound policies. The 17-nation euro has weakened 4 percent since Oct. 27.

International Monetary Fund fiscal monitors are due to visit the Italian capital, and European Union Economic and Monetary Affairs Commissioner Olli Rehn says he wants answers to “very specific questions” on economic pledges by the weekend. U.K. Prime Minister David Cameron said Italian interest rates are “getting to a totally unsustainable level.”

The extra yield investors demand to hold Italian 10-year debt rather than German bunds rose to a euro-era record 5.53 percentage points on Nov. 9 before falling back to 4.56 percentage points.

Italy’s top 32 banking firms have about 88 billion euros, or 3.2 percent of their liabilities, maturing in 2012, according to the Bank of Italy. Next year’s maturities coincide with about 307 billion euros of the government’s debt coming due, the most ever, according to data compiled by Bloomberg.

Broader Funding

Italian lenders are seeking to broaden their sources of funding. Corrado Passera, the chief executive officer of Intesa Sanpaolo SpA, said on Nov. 8 the bank can do without wholesale funding for all of next year, and rely on deposits and bonds it sells to individual customers.

Retail funding made up 54.1 percent of the Italian banking system’s total as of June, compared with 48.8 percent in the rest of the euro zone, according to the Bank of Italy.

The cost of that money increased 0.4 percentage point, or 40 basis points, to 1.7 percent in the nine months ended Sept. 30 as the funding mix shifted to products such as repurchase agreements and fixed-term deposits that pay clients more, central bank data show.

Italian banks’ share of ECB lending rose to about 19 percent of the total in October, according to the Bank of Italy. That’s up from 15 percent, or 91 billion euros, in September, the data show.

Likely Recession

“The Italian banks are trapped,” said Roger Doig, a London-based analyst at Schroders Plc, which manages about $58 billion in fixed-income assets. “They are where they are and that’s with the Italian sovereign. The austerity required if the sovereign wants to remain in the euro zone means there’s going to be a recession, which will mean losses for the banks.”

Default swaps tied to the senior debt of UniCredit, a proxy for the cost of funding at Italy’s biggest lender, jumped 150 basis points this month to 502 basis points, approaching the record 504 reached in September. Contracts on Intesa Sanpaolo, the second-largest, jumped 129 to 467, also close to an all-time high, according to CMA in London.

Five-year contracts on Italy rose to a record 571 basis points on Nov. 9, up from 445.5 at the end of last month and 239 at the beginning of 2011, according to CMA. The price was 533 basis points today.

Credit-default swaps typically decrease as investor confidence improves and rise as it deteriorates. They pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

‘Assuming Italy Fails’

“The market is pricing in an Italy event and assuming that Italy fails,” said Patrick Lemmens, a senior money manager who helps oversee about $13 billion, including Intesa Sanpaolo shares, at Robeco Groep in Rotterdam.

Household deposits in Italy still are expanding “at a moderate pace,” according to the Bank of Italy. That’s a contrast to withdrawals seen in Greece, Ireland and Portugal.

The annual rate of decline in Irish private-sector deposits was 10.5 percent at the end of September, according to that nation’s central bank. In Greece, deposits fell 2.9 percent in September for a net outflow of 6.29 billion euros, the biggest one-month drop since the start of the crisis, according to Manos Giakoumis, research director at Euroxx Securities SA, an Athens- based brokerage.

Increasing Reliance

Italy’s lenders started increasing their reliance on the ECB in July, when end-of-month borrowings from the central bank minus the amount deposited reached 58.8 billion euros, according to John Raymond, an analyst at CreditSights Inc. in London. Before that, net borrowings from the ECB ranged from 9 billion euros to 30 billion euros, he said.

The amount surged to a record 87 billion euros at the end of October, according to Raymond, citing Bank of Italy figures.

“This is all symptomatic of what’s going on around the banks,” Raymond said. “Everything hinges on the sovereign.”

RBS economists forecast a recession in Italy in the fourth quarter, and expect the economy to contract 0.2 percent in 2012. The government’s austerity packages, totaling 124 billion euros and including cuts to health care, pensions and regional subsidies, are adding to the recession risk, said RBS’s Gallo.

Italian institutions can borrow what they need in the ECB’s refinancing operations, paying the current policy rate of 1.25 percent as long as they have the required collateral. Lenders have “ample availability” of ECB-eligible assets, according to the Frankfurt-based central bank, and can help themselves by ensuring the assets are suitable as security.

Intesa Sanpaolo said it’s looking to increase ECB-eligible assets to 100 billion euros from the current 83 billion euros.

The ability to fund at the ECB is vital for Italy’s banks that can’t access markets, though the central bank is keen to wean borrowers from its support. The ECB applies a discount on securities used as collateral to protect itself against loss.

“Italian banks have been crushed in the carnage in the government bond market,” said Suki Mann, a strategist at Societe Generale SA in London. “It could get worse.”

--Witrh assistance from Simon Kennedy in Paris. Editors: Andrew Reierson, Paul Armstrong

To contact the reporters on this story: John Glover in London at johnglover@bloomberg.net; Elisa Martinuzzi at emartinuzzi@bloomberg.net

To contact the editors responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net; Edward Evans at eevans3@bloomberg.net

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November 13, 2011, 8:37 AM EST By Allison Bennett

Nov. 12 (Bloomberg) -- The euro rose from a one-month low versus the dollar amid optimism European leaders are tackling their debt crisis after Italy’s Senate approved an austerity bill yesterday and Greece swore in a new prime minister.

The 17-nation currency pared a weekly loss versus the greenback to 0.3 percent as Italian bonds rose, pushing yields below the 7 percent level that led Greece, Ireland and Portugal to seek bailouts. The euro fell earlier on concern the debt crisis was worsening and before data next week that may show the region’s economic growth stagnated.

“We had one week of good progress, and now hopefully we’ll have technocrats in charge in Greece and Italy,” said Greg Anderson, a senior currency strategist at Citigroup Inc. in New York. “Markets at this point will demand implementation. There’s a lot that needs to be done before the deep underlying fears are resolved.”

The euro declined versus the dollar to $1.3750, from $1.3792 on Nov. 4, after rallying 1.5 percent in the past two days. It touched $1.3484 on Nov. 10, the weakest level since Oct. 10. Europe’s shared currency slid 1.7 percent against the yen to 106.10, its biggest weekly loss since the five days ended Sept. 23.

The Japanese currency gained 1.4 percent to 77.20 per dollar, the most in a week since Aug. 12. The yen rose against all of its 16 most-traded peers after tumbling 3.1 percent last week, the most since April, following the Bank of Japan’s sale of yen on Oct. 31 to weaken the currency. Investors bet this week the nation would refrain from further aggressive steps.

Three-Month Gain

The yen gained 1.9 percent versus nine developed-nation peers over the past three months, according to the Bloomberg Correlation-Weighted Currency Indexes. The dollar climbed 4.1 percent, and the euro rose 0.5 percent.

The euro dropped 2.1 percent on Nov. 9, the most on a closing basis since August 2010, as Italy’s 10-year government bonds fell, pushing up yields to as high as 7.48 percent. The securities slid as LCH Clearnet SA, a clearing house that guarantees investors’ trades are completed, boosted the deposit it demands from clients to trade Italian government bonds.

The shared currency rebounded after Italy drew double the bids for the amount on offer at a bill sale and political wrangling in Greece, where the two-year debt crisis began, produced a new government charged with the immediate task of securing funds to avert an economic collapse. Former European Central Bank Vice President Lucas Papademos was sworn in yesterday as prime minster.

Italian Austerity Bill

The austerity legislation in Italy stemmed from a 45.5 billion-euro ($63 billion) package initially passed by Parliament in September that helped convince the ECB to buy Italian bonds to try to contain surging borrowing costs.

In a bid to shore up international confidence, Prime Minister Silvio Berlusconi presented a timetable for implementing some of them to European Union leaders and is now converting that plan into law. EU leaders pushed the nation to implement it.

Group of 20 nations policy makers at a summit last week in Cannes, France, demanded details of a Greek rescue package and refused to commit new money to the region’s debt crisis, reflecting irritation with Europe’s failure to resolve it.

Italy’s Chamber of Deputies will give final approval to the austerity legislation today and Berlusconi will resign “a minute later,” Chamber Speaker Gianfranco Fini said. The new government may be led by former EU Competition Commissioner Mario Monti.

The euro region’s gross domestic product grew 0.2 percent in the third quarter, the same as in the second quarter and lowest level since the three months ended in June 2009, when it was contracting, according to analysts in a Bloomberg News survey before the EU reports the data Nov. 15.

Japan on Guard

The yen reached its strongest level versus the dollar yesterday since Japan intervened last month, touching 77.05. Finance Minister Jun Azumi said he’s on guard against speculative yen trades. He declined to comment on whether the nation has been selling the currency this month.

Japan took the action after the yen reached a post-World War II high of 75.35 per dollar on Oct. 31. Barclays Plc and Tokyo-based Totan Research Co. estimated the nation sold 8 trillion yen ($103 billion) that day, based on changes in the central bank’s balance sheet.

“There are indications the Bank of Japan stepped away from intervening after the G-20 summit,” Lee Hardman, a strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, said yesterday. “Now that risk of intervention is reduced, I would expect the yen to recuperate the losses it sustained.”

Dollar Index Falls

The Dollar Index was little changed for the week at 76.911 after better-than-forecast U.S. economic data help spur stocks and commodities to five-day gains. The number of Americans filing applications for unemployment benefits last week fell to the lowest level in seven months, Labor Department data showed, and consumer confidence rose more than projected this month, according to the Thomson Reuters/University of Michigan preliminary index of consumer sentiment.

The S&P 500 Index 0.9 percent and the S&P GSCI Index of 24 raw materials jumped 1.9 percent.

The Canadian dollar climbed versus all of its most-traded counterparts except the yen. It gained 0.8 percent to C$1.0104 to the greenback.

South Africa’s rand dropped after Moody’s Investors Service lowered its outlook for the nation’s sovereign debt Nov. 10. The loss eased as investor risk appetite improved, and the currency ended the week down 0.4 percent to 7.9365 per dollar.

--With assistance from Keith Jenkins and Anchalee Worrachate in London. Editors: Greg Storey, Dave Liedtka

To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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November 13, 2011, 9:00 AM EST By Jonathan J. Levin

Nov. 13 (Bloomberg) -- Mexican investigators presented radar and video images supporting their findings that fog in the mountains around the capital caused the helicopter crash that killed the country’s second-highest official.

The reports yesterday eased concerns Interior Minister Francisco Blake Mora may have fallen victim to assassination as President Felipe Calderon eulogized his top Cabinet member.

Blake Mora, 45, was among eight people killed Nov. 11 when his Super Puma helicopter went down en route from Mexico City to a prosecutors’ meeting in the central city of Cuernavaca. Cameras captured foggy conditions around the capital that morning, and radar showed how the pilot left his planned route, presumably to find a clearer course, according to evidence presented yesterday by the government.

“We have no indication, no suggestion from what we’ve collected with the available information at this moment, that would make one think that this could be anything but an accident,” Communications and Transportation Minister Dionisio Perez-Jacome said yesterday, responding to a reporter’s question on whether the minister had been targeted by a drug gang.

Perez-Jacome was making his second public comments since the incident as the administration downplayed such theories. Initial concerns that Blake Mora’s death signaled an escalation of cartel violence erased gains in the Mexican peso on Nov. 11, leading the currency to its second weekly decline as it closed little changed on the day.

Calderon, speaking yesterday at a funeral service in Mexico City, called Blake Mora “one of my closest collaborators and dearest friends.”

‘Move Forward’

The Mexican leader praised Blake Mora’s work as coordinator of his security cabinet and said he promoted dialogue between public officials and victims of Mexico’s soaring drug cartel violence.

Calderon said the nation had been tested by other tragedies and that the death of Blake Mora wouldn’t hold up progress in his government.

“I’m absolutely sure that Mexico will move forward, once more, with the strength of its people,” he said.

Blake Mora is the second interior minister in the administration to die in an aviation accident. Juan Camilo Mourino died along with security officials when their Learjet plane crashed in a Mexico City neighborhood three years ago.

Jose Luis Santiago Vasconcelos, who served as former President Vicente Fox’s top prosecutor against organized crime, also died in the crash, which killed 15 people. The government blamed the incident on pilot error.

No Fire

Evidence collected at the helicopter crash site suggests there was no fire or explosion aboard the aircraft, Perez-Jacome said.

The distribution of the debris was orderly and rectangular in a space of no more than 200 meters (656 feet) by 40 meters, suggesting the helicopter crashed under “normal” flight conditions and at a slow speed, Gilberto Lopez Meyer, the ministry’s head official for airports and auxiliary services, said at the same event.

The interior minister coordinates policy between Mexico’s security forces and oversees the administration’s relations with Congress, response to natural disasters and the monitoring of dissident groups.

--Editor: Paul Tighe, Jim McDonald

To contact the reporters on this story: Jonathan J. Levin in Mexico City at jlevin20@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

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By Ira Boudway

A general manager’s job is to turn payroll dollars into wins. We’ve run the numbers on the last five NHL, MLB, NBA, and NFL seasons to see who’s done it best—by winning often, spending little, or (sometimes) both.

Our method: By culling player payroll data from reported sources and pairing them with wins and losses over the last five completed seasons, we calculated an average cost per win in each league. Based on that number, we measured (by standard deviation) how far each team varied above or below the league norm. The result is a cross-sport rating of how every U.S. franchise compares to its peers in squeezing wins from money. We call it the Efficiency Index.

— with Benjamin Lindbergh, Kenton Powell, and David Yanofsky

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This season SMU won five straight games and upset 2010 Rose Bowl champ TCU Manny Flores/AP Images

By Paul Wachter

After two-plus decades of incompetence, the Southern Methodist University football team, with a 6-3 record, seems primed for its third-straight bowl appearance, a result that might tempt sportswriters to reach into the deep well of the trade’s clichés and call it a “resurrection.” In a manner of speaking, the team has returned from the grave. In 1987, after the Mustangs’ flagrant violations of National Collegiate Athletic Assn. regulations were exposed, SMU became the first and only football program to be slapped with what is colloquially known as the death penalty.

But the story of SMU’s second coming, like its earlier fall, is more about money than miracles. To build an early-1980s juggernaut—which included an undefeated season in 1983—SMU’s boosters set up a slush fund to pay players. The illicit payments continued even after the school was placed on probation and happened with the full knowledge and encouragement of university officials (including then Texas Governor Bill Clements, who served on SMU’s board). When the NCAA’s guillotine fell, SMU’s 1987 season was canceled and the number of athletic scholarships the school could bestow for the five following years was severely limited. Over the next 20 years, SMU mustered only one winning season. “It was a very harsh penalty for a very egregious case,” says NCAA spokesman Bob Williams.

Nearly every football season, it seems, is overshadowed by past misdeeds. Although the death penalty has not been invoked against another program, it now threatens the University of Miami, in light of accusations that its players for years accepted payments (and in some cases prostitutes) from convicted Ponzi-schemer Nevin Shapiro. But if SMU’s long, arduous rise from disgrace provides a lesson, it’s that, in college football at least, there can be life after death. And while boosters can’t necessarily buy players for a collegiate program anymore—they can buy nearly everything else.

It began with a new stadium. SMU’s home games were played outside its Dallas campus at the Cotton Bowl and at Texas Stadium, home of the NFL’s Cowboys. In post-death-penalty years, playing in those massive arenas could be embarrassing. The 1998 game against Texas Christian University, SMU’s archrival in nearby Fort Worth, drew just 26,000 fans—a large swath of them clad in TCU purple—who occupied a mere third of the Cotton Bowl’s capacity.

In 2000 the 32,000-seat Gerald J. Ford stadium and the adjacent Paul B. Lloyd, Jr. All-Sports Center were completed at a total cost of $56.8 million, much of it donated by two businessmen who sit on SMU’s board of trustees. (Ford is a billionaire banker, not a former U.S. President; Lloyd is an oilman.) At first glance the west side of Ford Stadium, which is partially sunk into the ground, seems to consist largely of air-conditioned luxury boxes, where individual suites go for $40,000 per year.

Every big-time football program also needs a big-time coach. In 2008, SMU’s athletic director, Steve Orsini, courted June Jones, head coach of the University of Hawaii and formerly of the Atlanta Falcons, known for his swaggering, run-and-shoot offense. Orsini invited 20 boosters to join SMU’s “Circle of Champions” and to each commit $100,000 per year for five years. “We needed a guy who was a proven recruiter,” says Lloyd, a Circle donor who played for the Mustangs in the 1960s.

Jones arrived on campus with a five-year, $10 million contract, making him the highest-paid coach in Conference USA—or in any conference that lacks automatic consideration for a Bowl Championship Series bid. But that’s what winning takes, argues Jones. “They paid me a lot of money,” he says, “and that commitment alone changes the dynamics of everything.”

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"You've got to have some way to ensure that healthy people are going to sign up" — Paul Heldman, Potomac Research Group

By Greg Stohr and Alex Wayne

For insurance companies nervously watching the legal fight over the constitutionality of the President’s health-care law, it would be the unthinkable: The U.S. Supreme Court strikes down the law’s so-called individual mandate, which requires millions of young, healthy people to buy coverage—but leaves intact rules compelling insurers to cover sick people, who are likely to cost far more in benefits than they pay in premiums. Congress is then left to fix the problem.

The scenario is a real possibility. In a challenge to the health-care law brought by 26 states, a federal appeals court took exactly that approach, declaring in August that the mandate is unconstitutional while saying the rest of the law could stand. The Supreme Court is expected to take up the question of the statute’s constitutionality next year. If the justices agree with the lower court and strip out the mandate, “that would be the worst of all worlds for insurers,” says Paul Heldman, a health policy analyst with Potomac Research Group in Washington. “You’ve got to have some way to ensure that healthy people are going to sign up for coverage to offset the cost of sicker people.”

The Obama Administration says if the mandate is struck down, much of the law—including Medicaid provisions and requirements that employers offer insurance—could still function and should remain intact. But Administration officials, along with insurance companies, insist that removing the mandate would undermine other provisions, including a requirement that insurers issue a policy to anyone who applies and a ban on higher premiums for people with preexisting conditions. Without the premiums of healthy people, insurers would raise their prices as more high-cost patients enrolled, driving away low-cost policyholders. “Decoupling the mandate from those other requirements would destabilize the insurance market throughout the nation,” the industry’s trade group argues in court papers. The Administration says the mandate can’t be severed from the other insurance provisions: If one falls, the others must, too. The appeals court saw things differently, ruling that the insurance reforms and other provisions in the law do enough to increase coverage without the mandate.

The appeals court pointed to Supreme Court rulings that call on judges to excise an unconstitutional provision whenever possible. “Generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem,” Justice Sandra Day O’Connor wrote in a 2006 abortion ruling. That sort of minimalist approach has been the court’s tendency under Chief Justice John Roberts. In 2010, Roberts quoted O’Connor’s language as the court left intact an auditing industry oversight board while voiding a provision that insulated its members from being fired. With health care, the court’s dilemma may be figuring out which leaves the smaller footprint: striking only the mandate or deferring to the Administration’s contention that the provisions are inseparable. Bradley Joondeph, a constitutional law professor at Santa Clara Law in California, says the Administration’s all-or-nothing argument “ratchets up the pressure a little on the court,” demanding that if it rejects the mandate it also “has to strike down the most popular parts of the legislation.”

A ruling affecting only the mandate would spark an immediate effort to find something to replace it before the law takes full effect in 2014. Congress could use other methods to encourage people to buy insurance at a young age, including tax incentives and reduced premiums during open enrollment periods. “There are viable alternatives to an individual mandate that would make this construct stick together,” says Dan Mendelson, chief executive officer of Avalere Health, a Washington consulting firm. It’s not clear whether they would be as effective as the mandate at inducing millions of people to buy insurance. And given the acrimony over the issue, it won’t be easy for Congress to reach agreement on any such fixes—especially since Republicans plainly say they want to get rid of the law altogether. Administration officials aren’t saying whether they are preparing for the possibility of once again doing battle over health care. Says Adora Andy, a Justice Dept. spokeswoman: “We are confident that the law is constitutional.”

The bottom line: If the Supreme Court finds the mandate unconstitutional but leaves the rest of the law intact, it will be up to Congress to find a fix.

Stohr is a reporter for Bloomberg News. Wayne is a reporter for Bloomberg News.

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By Aaron Kirchfeld and Fabio Benedetti-Valentini

Under pressure from regulators, European banks are unloading risky sovereign bonds to shore up their balance sheets. Yet the move to strengthen the banks may have a perverse consequence: raising the cost of borrowing for struggling governments, thereby worsening the region’s debt crisis. “European regulators and leaders are shooting themselves in the foot,” says Otto Dichtl, a London-based credit analyst at Knight Capital Europe. “The downward spiral will continue until policymakers find a backup solution for the sovereigns.”

Banks across the region are reducing their exposure to debt of southern European nations as regulators demand higher reserves to shoulder possible losses. European banks cut their foreign lending to the Greek public sector to $37 billion as of June 30 from $52 billion at the end of 2010, according to the latest data from the Bank for International Settlements. European banks lending to the Irish, Portuguese, and Spanish public sectors also fell, data from Basel (Switzerland)-based BIS show.

In recent weeks, BNP Paribas and Commerzbank have said they sold sovereign bonds at a loss, and Barclays and Royal Bank of Scotland announced reductions in holdings. “You can’t really blame BNP or other European banks for selling sovereign debt,” says Christophe Nijdam, an AlphaValue bank analyst in Paris. “You don’t want to wait to see what happens for Italy and Spain.” Banks can cut their exposure through writedowns and by hedging and letting bonds mature, as well as by selling.

Such moves have helped push down bond prices, raising yields on existing debt—and forcing governments to pay higher rates when they sell bonds. Greek bond prices have dropped 42 percent since July, the most among 26 sovereign debt markets tracked by Bloomberg/European Federation of Financial Analysts Societies indexes. Italian debt declined 8 percent and Portuguese 5 percent. The impact of falling prices spread to New York on Oct. 31, when MF Global, run by Jon Corzine, filed for bankruptcy protection after making a $6.3 billion bet on European sovereign debt.

While it’s hard to determine who’s buying the bonds, Knight Capital’s Dichtl says that beyond purchases by the European Central Bank, some hedge funds or distressed-asset investors may be acquiring Greek government bonds, and money managers and pension funds are still purchasing Italian debt.

Of about €355 billion ($491 billion) in outstanding Greek debt, the European Union, the International Monetary Fund, and the ECB hold about €127 billion, and European banks, led by Greek lenders, have about €90 billion, according to estimates by Open Europe, a research group based in London and Brussels. Foreign nonbanks such as hedge funds and insurers have about €80 billion. Scarce data makes estimates difficult, according to Raoul Ruparel, an analyst at Open Europe.

In the past, domestic banks in countries such as Greece and Ireland “filled the gap” when foreign demand for their nations’ bonds slipped, says Alberto Gallo, head of European credit strategy at RBS in Edinburgh. “The question is how to disentangle the link between banks and sovereigns,” says Gallo, who described the situation as a Catch-22. If you force the banks to sell bonds, you risk creating a vicious cycle that will drive down prices, he says, adding, “If you don’t, you end up with a bank system very correlated with sovereign bonds and vulnerable to shocks.”

The bottom line: European banks cut lending to the Greek public sector by $15 billion during the first half of the year, helping to push down bond prices.

Kirchfeld is a reporter for Bloomberg News. Benedetti-Valentini is a reporter for Bloomberg News.

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