FDIC will seek input on pay plan for banks

WASHINGTON — Federal regulators moved Tuesday to get public input on a plan to link the insurance premiums levied on U.S. banks to the degree of risk-taking encouraged by their executive pay policies.
A divided board of the Federal Deposit Insurance Corp. voted to make public a preliminary proposal for using executive compensation as a factor in assessing the fees that banks must pay for the deposit insurance fund. The plan could involve both rewards and penalties for banks. The idea is for institutions deemed to be higher-risk to pay bigger insurance fees.

"The recent crisis has shown that compensation practices that encourage excessive risk can create significant losses in the financial system and the deposit insurance fund," FDIC Chairman Sheila Bair said before the 3-2 vote. But two heads of Treasury Department agencies, who also sit on the five-member board, voted against floating the proposal.

John Dugan, director of the Office of the Comptroller of the Currency, and John Bowman, acting director of the Office of Thrift Supervision, said it would be premature because Congress and the Federal Reserve were addressing the bank compensation issue.

Smaller banks, especially, could be hurt by a new regulatory burden even though they had little to do with the high-flying compensation of Wall Street institutions leading up to the financial crisis, the two regulators said.

The FDIC is seeking public comment on the plan for 30 days. If there is a final rule, it isn't expected to be adopted until late in the year.

Policies are blamed

Company policies that encouraged excessive risk-taking and rewarded executives for delivering short-term profits were blamed for fueling the financial crisis, and big banks especially were considered to have engaged in the practice.

The FDIC move comes amid public anger over compensation and Wall Street excess at a time of economic stress and a wide range of actions across the government targeting banks and executive pay. President Barack Obama is considering a new levy aimed at recovering tax dollars from bailed-out financial institutions, and calls for a hefty tax on bank bonuses have risen in Congress.

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Luxury retailer Tiffany raises profit forecast

NEW YORK — Shoppers snapped up Tiffany & Co.'s famous jewelry during the holidays, prompting the luxury retailer to raise its annual profit forecast on Tuesday.
The company, renowned for silver jewelry and its signature turquoise boxes, said its worldwide sales climbed 17 percent in November and December.

Tiffany shoppers seized on all sorts of products at a variety of prices, offering hope for luxury retailers, which had been hit hard over the past year as consumers trimmed discretionary spending as the economy faltered.

"Better than expected holiday sales were broad-based geographically, but also across all merchandise categories and price strata, marking another leg up in its recovery from the recession," Caris & Co. analyst Dorothy Lakner told investors in a research note on Tiffany's performance.

The New York-based retail chain, which has a store in Nashville at the Mall at Green Hills, said the holiday boost will help it earn $2.07 to $2.12 per share from continuing operations for the full year, an improvement over an earlier forecast.

Tiffany said companywide sales would hit $2.7 billion.

Tiffany is scheduled to report full earnings results on March 22.

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Nashville People in Business

Andrew R. Matthews is assistant dean for student services for Belmont University's College of Law starting next month. Matthews will leave his position as assistant dean at Faulkner University's Thomas Goode Jones School of Law in Alabama.
Dr. Mark Marsden is medical director for the Saint Thomas Hospital's emergency department. Marsden has been an ER physician there for 16 years.

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Chrysler CEO says automaker needs to raise sales 18 percent

DETROIT — Chrysler can be profitable this year if it sells 1.1 million vehicles in the U.S. and 1.65 million worldwide, CEO Sergio Marchionne said.
Those sales targets represent an 18 percent improvement over Chrysler's 2009 U.S. sales and a 27 percent jump from last year's global total, both tall orders given that most industry leaders say they expect U.S. sales to rise about 10 percent this year to 11.5 million.

The difficulty is heightened by the timing of Chrysler's new product launches, which won't have much impact until the second half of the year.

Marchionne also opened the door slightly to the possible reinstatement of a few of the 789 dealers it terminated last June as part of its bankruptcy exit plan.

"I think we're willing to engage in a dialogue with dealers that were not renewed with Chrysler," Marchionne said.

Congress has passed legislation that would give dealers who lost their General Motors or Chrysler franchises the chance to appeal before an arbitrator. If the arbitrator ruled a dealer lost a franchise despite meeting the automaker's criteria for selecting surviving dealers, that dealer could be offered a new location for selling Chrysler, Jeep, Dodge and Ram vehicles. If the arbitrator upheld Chrysler's decision not to renew the franchise, dealers would have no other appeal.

Marchionne expressed confidence in Chrysler's selection criteria but added that there may be some locations where he would consider adding dealers "if they have a viable business case."

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Soaring U.S. debt could limit growth, history suggests

WASHINGTON — A new report that reviewed 200 years of economic data from 44 nations has reached an ominous conclusion for the world's largest economy: Almost without exception, countries that are as highly indebted as the United States is today grow at sub-par rates.
The report, "Growth in a Time of Debt," was written by two respected academic researchers who recently published a thick book on eight centuries of economic crises.

The study by Carmen Reinhart and Kenneth Rogoff — well-regarded economists from the University of Maryland and Harvard University, respectively — found statistical breaks at different points in the relationship between a country's national debt and its gross domestic product. GDP is the broadest measure of a country's trade in goods and services.

When a nation's debt exceeds 60 percent of its GDP, its growth rate slows precipitously, the study found. When that ratio exceeds 90 percent, nations' economies barely grow and can even contract.

The U.S. national debt is at roughly 84 percent of the country's GDP, and it's projected to cross the authors' 90 percent threshold late this year or early next year.

The implication is stark: The authors don't say that the U.S. economy can't grow briskly despite even higher debt, but if it does, it would be an outlier in roughly 200 years of economic statistics.

"We're racing toward this (90 percent) limit, and maybe it will prove a soft limit for the United States. But not forever," Rogoff said. "I think it is certainly a cautionary tale."

Study looks at long term

Reinhart and Rogoff last year published the book This Time Is Different , which examined how countries repeated mistakes from earlier crises over the past 800 years. Their new paper, presented this month at a conference to review important economic studies, wasn't meant to be a diagnosis of today's U.S. debt picture. Rather it seeks answers about the consequences of mounting debt.

"Outsized deficits and epic bank bailouts may be useful in fighting a downturn, but what is the long-run macroeconomic impact of higher levels of government debt, especially against the backdrop of graying populations and rising social insurance costs?" the pair ask in their report.

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Social media, mobile devices pack essential wallop

What do two-thirds of all Americans over the age of 17 have in common?
We visited Google.com in the last month. Furthermore, nearly half of us will visit the site today. Both figures are from Media Audit's latest national report.

We use Google and other search engines such as Yahoo, MSN and Bing to find answers to all sorts of questions, and we increasingly access search engines not just from our desktop computers, but also from mobile devices.

We are also using computers and mobile devices to stay connected or be entertained through social media. Our daily interaction with sites such as Facebook, LinkedIn or YouTube has become a fact of life. In fact, 34 percent of females reported that using social media was their favorite leisure activity (source: the December 2009 Crowd Science survey, "Social Media Insights: Attitudes Toward Social Media Among Users").

So, you no longer can question the size of the audience and the power of online media. As marketers prepare for the post-recession economy, they are almost universal in their plans to increase online spending, especially in social and mobile media.

Strong Mail, a California online marketing firm, surveyed 1,000 businesses globally and found that 59 percent plan to increase spending in social media and that 22 percent expect to boost their investment in mobile marketing.

"No longer will social media be considered a curiosity, but be seen as an aligned channel designed to integrate with other, more traditional, forms of marketing. The end result will be that more money will be shifted to online and, specifically, social media," said Paul Chaney, author of The Digital Handshake , in a year-end piece in SmartBrief for Social Media.

Digital publisher eMarketer projects mobile ad spending will rise from $416 million in 2009 to $593 million in 2010 as more brands and agencies integrate mobile into their marketing mix.

"Whereas consumers once limited their mobile phone purchases to downloadable ring tones and games, today they're using their devices to buy books, apparel and other items associated with online shopping on a PC," said Jeffrey Grau, eMarketer senior analyst.

What do these trends mean for marketers? Shiv Singh, vice president of Razorfish, a leading New York digital agency, declares these points to be guiding principals:

• Brands must become more social. Owners and marketers must let employees and customers be their brands' face and voice.

• Brands must work in real time. Owners and marketers must commit to operating dynamic brands that respond to feedback, and they must be willing to react quickly to changes in the market.

• Brands must manage customer relationships. Owners and marketers must focus on understanding their customers and acknowledge the influence that customers have — individually and in groups — on brand success.

Marketers cannot rest on their laurels. Times have changed.

David Bohan founded BOHAN Advertising| Marketing, a Nashville agency, in 1990. He has worked in marketing and advertising since earning a degree from the University of Tennessee in 1970.

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Automakers lure frugal buyers with smaller, greener vehicles

DETROIT — Electric, hybrid and small cars will grab center stage at the Detroit auto show this week, as the industry adapts to a world reshaped by the Great Recession and environmental worries.
The event will demonstrate just how automakers are responding to this new reality. Ford wants to build on its success in midsize sedans and reignite its small car sales, while Hyundai aims to extend last year's triumph in budget-conscious models. GM and Chrysler will start fresh with electric vehicles but also try to boost their small-car credibility. Toyota hopes to solidify its dominance in hybrids.

The new crop of models must be successful if automakers are to reverse last year's 21 percent sales plunge. Mounting job losses, GM and Chrysler's bankruptcy filings and the death of several iconic brands sent sales skidding to their lowest level since 1982.

Americans feel less wealthy — and more certain that the trend toward higher fuel prices remains a threat. It's a change U.S. automakers were slow to embrace, and it cost them the last two years as gas prices surged and consumers stopped spending. Most Japanese and European carmakers were also caught in the sales downdraft, even though they depended less on pickup trucks.

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In 2010, with frugality embedded in drivers' minds, automakers want to show off new versions of smaller, less expensive cars, many of which get 40 mpg on highways. That also appeals to motorists concerned about climate change.

The show isn't exclusively about small cars. Detroit automakers also will try to revive 1960s-style car passion with muscle cars, a niche that's doing well.

Glittering exhibits

Compared with last year's stripped-down down affair, the show will offer more glitter. GM will have an elevated floor for new cars, a change from 2009's carpet-over-concrete that was just about everywhere.

One big display is a 37,000-square-foot "Electric Avenue" on the main floor, featuring 20 vehicles that run on kilowatts instead of gasoline. Electrics were shown last year but shared the spotlight with cars powered by conventional engines.

"Last year we had that 'sky-is-falling' mentality, and everybody was running for cover," said Doug Fox, an Ann Arbor, Mich., car dealer and chairman of this year's show, officially called the North American International Auto Show. "We are seeing a little more investment made in the actual exhibits than last year."

Although auto sales improved at the end of 2009, the 41 new vehicles to be unveiled at this year's show will be down from last year's 50, Fox said.

Associated Press writer Elaine Kurtenbach contributed to this report.

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