16
The San Juan Daily Star
November 21-23, 2014
Essilor to Close Lense Manufacturing Plant in Ponce
By The STAR Staﬀ
E
yeglass and contact lenses manufacturer Essilor is preparing to shut down
its Ponce plant in a move that will cost
180 jobs.
The closure of the factory at the Sabanetas Industrial Park is scheduled for June
2015 but staggered layoﬀs could start sooner.
“Essilor does not take such business
decisions lightly and did everything possible to keep this facility viable,” company
human resources oﬃcial Robyn Taylor said.
Production at the Ponce installation
will be absorbed by stateside plants.
France-based Essilor employs some
55,000 people in more than 60 countries
around the world. The Ponce plant is its only
manufacturing facility in the Caribbean.
Placement Specialist Sets Up PR Headquarters
By The STAR Staﬀ
T
ax Credits International, Inc., a
tax credit placement and incentives services company lured to
Puerto Rico by Act 20, has established
its headquarters in the south coast
town of Humacao.
Tax Credits International, Inc.
(TCI) has worked with tech/biotech
Christmas Bazaar
at Union Church of San Juan
Saturday November 22nd 2014
9:30am to 2:30pm
Come and enjoy with your family:
• Early Christmas Shopping •
• Arts, Crafts and Treasures •
• Scrumptious Home Baked Goods •
• Food • Live Music
Flu Shots by Walgreens
2310 Calle Laurel Punta Las Marías (787)726.0280
companies, major film studios, and independent producers, placing nearly
$800 million in various incentive tax
credits with Fortune 500 companies.
TCI will continue to provide its tax
credit placement and incentives services to clients throughout the U.S.
through sales representatives.
TCI is positioned to promote
Puerto Rico as an ideal filming location and will manage Puerto Rico TV
and film projects from pre-production
through monetization of the awarded
film tax credits. In addition, TCI will
promote Puerto Rico as a location for
financial and service companies, and
will provide consulting services to
other Act 20 and Act 22 businesses.
“Puerto Rico’s businessfriendly infrastructure oﬀers
the perfect setting for our tax
credit and incentives operations,” said TCI President
Bruce Deichl, himself a former Act 22 applicant. “The
opportunities for growth in
our core business, as well as
new ventures, are limitless.”
TCI has brought on Lisa
Nadal, a local attorney who
brings a diverse tax and incentive background to the
company and will manage
the group’s Act 20 and Puerto Rico
film tax credit business development.
Prior to joining TCI, Nadal was part
of the corporate and tax law practice group at O’Neill & Borges, LLC.
She earned an undergraduate degree from the University of Pennsylvania, a law degree from American
University’s Washington College of
Law, and went on to earn her LLM
in Tax at the Georgetown University
Law Center.
“With Lisa now on our team, TCI
will provide superior consulting services, from ‘A to Z,’ to studios filming in
Puerto Rico, as well as oﬀ-shore companies considering Act 20 tax exempt
status,” Deichl said.
The San Juan Daily Star
November 21-23, 2014
17
New Scrutiny of Goldman’s Ties to the New York Fed After a Leak
By JESSICA SILVER-GREENBERG,
BEN PROTESS and PETER EAVIS
F
rom his desk in Lower Manhattan, a banker at Goldman Sachs thumbed through confidential documents
— courtesy of a source inside the United States government.
The banker came to Goldman through the so-called
revolving door, the symbolic portal that connects financial
regulators to Wall Street. He joined in July after spending
seven years as a regulator at the Federal Reserve Bank of
New York, the government’s front line in overseeing the financial industry. He received the confidential information,
lawyers briefed on the matter suspect, from a former colleWilliam C. Dudley, president of the New York Fed, says,
ague who was still working at the New York Fed.
“I don’t think anyone should question our motives.”
The previously unreported leak, recounted in interviews with the lawyers
An unprecedented look inside one
briefed on the matter who spoke anonof the most powerful, secretive instituymously because the episode is not putions in the country. The NY Federal Reblic, illustrates the blurred lines between
serve is supposed to monitor big banks.
Wall Street and the government — and
But when Carmen Segarra was hired,
the potential conflicts of interest that
what she witnessed inside the Fed was so
can result. When Goldman hired the foralarming that she got a tiny recorder and
mer New York Fed regulator, who is 29,
started secretly taping.
it assigned him to advise the same type
In response to the revelations, a
of banks that he once policed. And the
spokesman
for Goldman issued a statebanker obtained confidential informament
to
The
New York Times saying that
tion, along with several publicly available
it
was
“reviewing
our policies regarding
facts, in the course of assignments from
any
hiring
from
governmental
instituhis bosses at Goldman, the lawyers said.
tions
to
ensure
that
they
are
appropriaThe information provided Goldman Carmen Segarra is a plaintiﬀ in
tely eﬀective and robust.” The spokesa window into the New York Fed’s privaa lawsuit that claims that the Fe- man, Michael DuVally, noted that “upon
te insights, the lawyers said, including
deral Reserve fired her after she discovering that a new junior employee
details about at least one of Goldman’s
taped conversations suggesting had obtained confidential supervisory
clients, a midsize bank regulated by the
that the Fed went soft on Gold- information from his former employer,
Fed. Although it is unclear how Goldman
the Federal Reserve Bank of New York,
bankers used the information, if at all, man Sachs.
we immediately began an investigation
the confidential details could have heland notified the appropriate regulators, including the Feped them advise the client.
The emergence of the leak comes as questions mount deral Reserve.” He added that Goldman has “zero tolerance
about a perceived coziness between the New York Fed and for improper handling of confidential information.”
Similarly, the New York Fed said in a statement that
Wall Street banks — Goldman in particular. Revelations
from a former New York Fed employee, Carmen Segarra, it has “zero tolerance” for employees who do not safeguard
recently stoked that debate. Ms. Segarra released taped confidential information. The statement added that “we
conversations suggesting that her supervisors went soft on have detailed rules and controls protecting confidential
Goldman, specifically over a deal that one regulator called information” and require employees to receive training on
“legal, but shady.” Senator Sherrod Brown of Ohio, a senior handling the information. But the statement acknowledged:
Democrat on the Senate Banking Committee, plans to hold “We also know that we are not perfect, that information
today is more diﬃcult to safeguard, and we are resolute to
a hearing on Friday about Ms. Segarra’s accusations.
On the same day in September that ProPublica and learn from our experiences.”
Soon after Goldman detected the leak, the bank and
the radio program “This American Life” released excerpts
the
Fed
alerted authorities, which opened preliminary infrom Ms. Segarra’s tapes, Goldman stopped the unrelated
vestigations,
according to the lawyers briefed on the matter.
leak of confidential New York Fed records. Although it is
unclear whether the Goldman banker or the New York Fed The F.B.I., along with the United States attorney’s oﬃce in
employee knew that sharing such information was inappro- Manhattan, the Federal Deposit Insurance Corporation and
priate — and federal rules are somewhat vague about what New York State’s banking regulator, Benjamin M. Lawsky,
records are confidential — Goldman promptly fired the are examining the release of records and whether it amounbanker. The bank also fired one of his supervisors, saying ted to a crime. The investigations are at an early stage and
he should have caught the leak. The New York Fed then there is no indication that the three men will face charges.
fired the employee it suspected of sharing the information. It is unclear whether more senior individuals at Goldman
or the New York Fed knew about the sharing of the information before it was stopped.
Still, the story behind their firings brings to life some
of the worst fears about the revolving door.
The job hopping has long fostered a culture of coziness
that, even without direct evidence of impropriety, generated
a public perception that regulators and bankers form unholy
alliances. But the new accounts of a regulator and a banker
actually sharing confidential documents — violating a cardinal rule of the regulatory world — suggest that those impressions may no longer be purely hypothetical.
The leak strikes at the heart of questions about the
ability of the New York Fed — the public’s eyes and ears on
Wall Street — to maintain its independence from the banks
it regulates. It also comes as a popular image of Goldman as
a bank that puts profit above all has begun to fade.
Goldman, perhaps more than any other Wall Street
bank, appears to be entwined with the New York Fed. While
the firm and the Fed bristle at suggestions of coziness, they do
swap the occasional employee. The New York Fed’s president,
William C. Dudley, was once Goldman’s chief economist.
With the spotlight trained on the New York Fed, Mr.
Dudley has come to the defense of his organization. Mr. Dudley said last month that “I don’t think anyone should question our motives or what we are attempting to accomplish.”
Under Mr. Dudley, the New York Fed has adopted a sharper tone about Wall Street misdeeds. In a speech last month,
Mr. Dudley lamented “the culture problem” on Wall Street.
But the recent leak of confidential records underscores the stubborn challenges facing the New York Fed. To
become less deferential to banks, it must overcome patterns
that are decades in the making.
Mr. Dudley commissioned an independent report to
examine the New York Fed’s culture. And in response to
the findings, he has said that he adopted a number of changes, including having more senior examiners engage with
top bank executives.
Goldman carried out its own image overhaul. Recently, the bank has also avoided most of the legal woes
that have stung its rivals. At the same time, like its rivals,
Goldman has sought out former regulators to help the bank
and its clients navigate new regulations.
Rohit Bansal, the 29-year-old former New York Fed
regulator, was one such hire. At the time he left the Fed, Mr.
Bansal was the “central point of contact” for certain banks.
Seizing upon Mr. Bansal’s expertise, Goldman assigned
him to the part of the investment bank that advises other financial institutions based in the United States. That assignment
presented Mr. Bansal with an ethical quandary: He might have
to advise some of the same banks he once regulated.
Before starting at Goldman, Mr. Bansal sought to
clarify whether New York Fed policy prevented him from
helping those banks, according to a person briefed on the
matter. Initially, he presented Goldman with a notice from
the New York Fed, which indicated that he might have to
steer clear of certain assignments for one client, the midsize
bank in New York. (While the person briefed on the matter provided the name of the bank, The Times decided to
withhold the name because the bank was not aware of the
leak at the time.)
November 21-23, 2014
The Star
18
Stocks
Wall Street Closes Slightly Higher
T
he stock market moved higher on Thursday, rebounding from its losses a day before. Positive data on home
sales, weekly applications for unemployment benefits
and manufacturing helped lift the stock indexes. Investors also
cheered strong earnings from several retailers.
KEEPING SCORE The Standard & Poor’s 500-stock index
rose 4.03 points, or 0.2 percent, to 2,052.75. The Dow Jones industrial average gained 33.27 points, or 0.2 percent, to 17,719.00.
Both indexes closed at nominal record highs. The Nasdaq composite index added 26.16 points, or 0.6 percent, to 4,701.87.
THE QUOTE “Housing was good, leading indicators
were good, manufacturing was good,” said Doug Cote, chief
market strategist at Voya Investment Management. “On top of
that, U.S. corporate earnings for the third quarter are at an alltime high,” Mr. Cote added, referring to companies in the S.&P.
500.
HOME SALES Sales of previously occupied homes
jumped last month to the briskest pace this year. The National
Association of Realtors said sales rose 1.5 percent last month to
a seasonally adjusted annual rate of 5.26 million. October was
the first month in 2014 when sales increased compared with a
year ago, registering a 2.5 percent gain. The report helped lift
shares in most home builders. William Lyon Homes led the
gainers, adding 4.2 percent.
RETAIL STANDOUT Best Buy reported higher earnings
and revenue in the third quarter, beating Wall Street expectations. The results were a positive sign for the electronics retailer
as the holiday season kicked oﬀ. Best Buy’s shares jumped 7
percent.
EARNINGS LIFT The discount retailer Dollar Tree and
the home decorations chain Kirkland’s each reported betterthan-expected quarterly earnings. Dollar Tree gained 5.2 percent and Kirkland’s soared 24.5 percent.
SETTLEMENT DIVIDEND Activision Blizzard jumped
7.9 percent on news that the video game maker reached a settlement with Vivendi and others in a shareholder lawsuit and will
receive $275 million.
BIG DECLINER Keurig Green Mountain fell 7.4 percent
to lead the decliners in the S.&P. 500 index.
SECTOR WATCH Four of the 10 sectors in the S.&P. 500
index rose, led by energy stocks. Telecommunications stocks
declined the most.
GLOBAL ECONOMIC WORRIES A broad gauge of business activity in the 18-country eurozone fell this month to a 16month low, stirring concerns that the region could be headed
for another recession. In China, a preliminary survey of factory
activity showed manufacturing in the world’s second-largest
economy slid to a six-month low this month.
INFLATION IN CHECK Consumer prices in the United
States were unchanged in October, as low gasoline costs continued to keep inflation at bay. For the last 12 months, overall
inflation is up 1.7 percent, while core inflation, which excludes
volatile energy and food prices, is up 1.8 percent. Both gains are
below the Federal Reserve’s 2 percent inflation target, giving the
central bank leeway to keep interest rates low.
MOST ASSERTIVE STOCKS
PUERTO RICO STOCKS
COMMODITIES
CURRENCY
LOCAL PERSONAL LOAN RATES
LOCAL MORTGAGE RATES
Bank
FHA 30-YR POINTS CONV 30-YR POINTS
BPPR
Scotia
CooPACA
Doral
First Mort
Oriental
3.00%
3.50%
4.50%
4.00%
4.00%
3.00%
0.00
0.00
2.00
0.00
0.00
0.00
3.50%
3.50%
5.75%
4.00%
5.75%
2.87%
000
0.00
1.25
0.00
0.625
5.50
Bank
PERS.
CREDIT CARD
AUTO
BPPR
8.49
17.95
5.75
Scotia
5.99
14.99
4.99
CooPACA
6.75
8.95
3.95
Doral
--.--
17.95
--.--
BBVA
--.--
16.95
7.59
First Mort
7.99
--.--
--.--
Oriental
6.75
9.99
5.49
The San Juan Daily Star
November 21-23, 2014
19
Senate Report Finds Goldman and JPMorgan Can Influence Commodities
By NATHANIEL POPPER and PETER EAVIS
A
two-year Senate-led investigation is throwing back
the curtain on the outsize and sometimes hidden
sway that Wall Street banks have gained over the
markets for essential commodities like oil, aluminum and
coal.
The Senate’s Permanent Subcommittee on Investigations found that Goldman Sachs and JPMorgan Chase assumed a role of such significance in the commodities markets
that it became possible for the banks to influence the prices
that consumers pay while also securing inside information
about the markets that could be used by their own traders.
Bankers from both firms, along with other industry
executives and regulators, will testify about the allegations
at hearings on Thursday and Friday.
The hearings will cover topics including conditions at
a Goldman-owned coal mine in Colombia and the airline
fuel arrangements that Morgan Stanley struck with United
Airlines.
The report provides extensive details about the enormous global operations the banks have built up in recent
years since politicians and regulators lifted longtime curbs
on banks owning physical commodities and infrastructure.
The investigators found that regulators have struggled
to respond to expanding ambitions of the banks to get involved in every aspect of the production and sale of commodities.
Some banks, including JPMorgan, have recently been
pulling back from the commodities markets, partly in response to the public scrutiny of the activities and partly because of the shrinking profits in the sector. But Goldman Sachs and some others have stated a desire to maintain their
roles.
The chairman of the Senate subcommittee, Carl Levin,
Democrat of Michigan, said that the current rules were not
adequate to stop the problems.
“We’ve got to get banks out of this kind of business
because of the risk to the economy and the possibility of manipulation,” Mr. Levin said in an interview on Wednesday.
The 400-page report, which was made public on Wednesday evening, included case studies on nine diﬀerent
commodities in which banks have taken big ownership
stakes, including the 100 oil tankers and 55 million barrels of
oil storage capacity that were owned by Morgan Stanley, and
the 31 power plants owned by JPMorgan.
The subcommittee discussed several reasons that these
commodity operations could create problems. The potential
for price manipulation and the unfair advantage that banks
can gain in these markets were among the top concerns expressed by Senator Levin and Senator John McCain, the top
Republican on the subcommittee.
But both senators also echoed previous warnings that
the the enormous holdings of oil, uranium and other hazardous materials could expose the banks to significant legal
liability that could, in turn, dent public confidence in the
banks.
A 2012 study by the Federal Reserve, cited in the report, found that banks have not put aside enough money and
insurance to adequately prepare for the “extreme loss scena-
rios” involving commodities.
“Imagine if BP had been a bank,” Senator McCain said
on Wednesday, refering to the Deepwater Horizon oil spill
for which BP has had to pay billions of dollars in damages.
“It could have led to its failure and another round of bailouts.”
Senator Levin, though, put the most emphasis on
Goldman Sachs’s role in the aluminum market, which was
the focus of an article in The New York Times.
In 2010, Goldman Sachs purchased Metro International Trade Services, a Detroit company that is responsible for
storing most of the exchange-traded aluminum in the United
States.
That purchase was made at the same time that Goldman was beginning to significantly ramp up its trading in
aluminum. From 2010 to 2013, the firm’s holding of the metal
increased significantly each year, to a peak of $3 billion worth of aluminum at one point in 2012.
The Senate subcommittee asserts that Goldman used
unorthodox measures at its warehouses in Detroit that made
it harder to get the aluminum out and raised the prices paid
by aluminum users like automakers and brewers.
Goldman has previously said that the delays were a
result of the decisions of the customers who actually owned
the metal.
But the investigators found that Goldman created
new and unusual incentives that encouraged a few significant financial players to move their holdings between
Goldman-owned warehouses, making it more diﬃcult for
other customers to get their metal from the warehouses.
The New York Times had referred to this as the “merrygo-round of metal,” a description the Senate subcommittee
also used.
Goldman has categorically denied that its policies in
Detroit had any role in pushing up prices for consumers. The
bank noted on Tuesday that 75 percent of the aluminum held
in storage was not subject to any queue, and that the price of
the metal had been falling steadily since 2008.
Within Metro, though, employees complained about
the new practices instituted by Goldman, which were approved by the Goldman employees on Metro’s board, and resulted in long lines of customers waiting to remove aluminum.
The London Metal Exchange opened a formal investigation into the practices at Metro in 2013, after The Times
article, according to the Senate report. Goldman has been
trying to sell Metro International, even though it has stayed
in other commodities markets.
The exchange told the subcommittee that the practices describes in The Times article were “inconsistent with
the ‘spirit’ of the relevant requirements” even if they did not
“violate the ‘letter’ of those requirements.” The exchange did
not reveal the status of its investigation to the subcommittee.
The report also raised concerns about the flow of information between Metro and Goldman’s trading desks, which
are supposed to be strictly separated. The Senate investigators
found that important information about Metro’s inventories,
which could inform trading strategies, were distributed at
various times to dozens of employees at Goldman, including
the head of Goldman’s commodities trading business.
Senator Carl Levin said current rules regulating the
role banks can play in commodities markets were not
adequate.
A Goldman report on the Senate investigation says
that it has not found that any improper information was exchanged.
“Regular audits, including by Goldman Sachs’s compliance department and third-party auditors, have identified
no instances in which Metro’s confidential information has
been disseminated improperly to Goldman Sachs’s sales or
trading personnel,” the report said.
Until about 20 years ago, regulated banks faced tight
constraints that barred them from owning physical commodities and limited them to trading in financial contracts that
were linked to the prices of commodities. But a substantial
relaxation of the rules allowed the banks to own actual
commodities themselves, known as “physical assets” on
Wall Street.
The banks’ hunger for profits from commodities even
led them to acquire the plants that produce and transport
commodities, like coal mines and power stations. The banks
still face some restrictions, though, and the report argues that
Wall Street firms have moved to exploit those gray areas.
Federal Reserve rules mandate that bank holding companies cannot hold physical commodity assets that exceed 5
percent of their capital.
But the report says that JPMorgan Chase held physical
commodities assets in 2012 that were equivalent to 12 percent of a measure of the bank’s capital. The bank justified
this by assigning those commodities to its bank, rather than
the bank holding company.
JPMorgan said on Wednesday that it had never gone
beyond the Fed’s 5 percent limit.
One notable flash point occurred in 2011 when JPMorgan carried out a huge trade in aluminum that caused it to
surpass a regulatory limit established by the Oﬃce of the
Comptroller of the Currency.
The bank responded by shifting some of the position
to an aﬃliate. The report asserts that the incident caused the
Federal Reserve to realize for the first time that JPMorgan
was not counting assets at its bank as part of the assets with
the bank holding company, the entity that the Fed regulates.
The Fed has been reconsidering its rules on how
commodities are reported, but it so far has not objected to
JPMorgan’s approach.