THURSDAY, JULY 22, 2010


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Obama ushers in new financial era


LANDMARK LAW IS SIGNED


President says work still lies ahead for regulators


by Brady Dennis As much as it felt like an end-


ing, President Obama launched a new era in the relationship be- tween Washington and the finan- cial world when he placed his sig- nature Wednesday on a massive bill to rewrite the nation’s finan- cial rules. Inside a building named after a Republican president who cham- pioned deregulation and praised the “magic of the marketplace,” the Democratic president signed into law the most ambitious over- haul of financial regulation in generations, saying he was acting to protect ordinary consumers and to “rein in the abuse and ex- cess” on Wall Street that pushed the U.S. economy to the brink of collapse. The landmark legislation, which came after more than a year of legislative wrangling and intense lobbying, grants broad new powers to federal watchdogs — and places great faith in them to prevent another crisis. “For years, our financial sector


was governed by antiquated and poorly enforced rules that al- lowed some to game the system and take risks that endangered the entire economy,” Obama said before 400 supporters at the Ron- ald Reagan Building and Interna- tional Trade Center. “Soon after taking office, I proposed a set of reforms to empower consumers and investors, to bring the shad- owy deals that caused this crisis into the light of day, and to put a stop to taxpayer bailouts once and for all. Today, those reforms will become the law of the land.” But the president acknowl-


edged that the far-reaching reg- ulations in the bill will prove only as good as the people who imple- ment them. “For these new rules to be ef-


fective, regulators will have to be vigilant,” he said. “We also may need to make adjustments along the way as our financial system adapts to these changes. And no law can force anybody to be re- sponsible; it is still incumbent on those on Wall Street to heed the lessons of this crisis in how they conduct business.” The moment marked a second major legislative victory for Oba- ma this year, coming after the health-care bill that passed in


10-YEAR TREASURY UP $6.10 PER $1,000, 2.88% YIELD


CURRENCIES $1 = 87.05 YEN; EURO = $1.276


DIGEST LEGAL Trustee seeks billions from Madoff ‘enablers’


Irving Picard, the court-ap- pointed trustee gathering money to pay the victims of Bernard Ma- doff ’s Ponzi scheme, is demand- ing $3.6 billion from entities tied to Fairfield Greenwich Group, which he says enabled Madoff to run the fraud for at least two dec- ades.


Picard filed papers in U.S. Bankruptcy Court in Manhattan late Tuesday saying that the com- pany, its founding partners and


A U.S. District Court judge re- leased former media baron Con- rad Black from prison on $2 mil- lion bond Wednesday, while she decides whether to throw out his 2007 conviction for defrauding shareholders. Black, 65, left the Coleman Fed-


eral Prison in Florida on Wednes- day afternoon, according to a prison spokesman. Judge Amy St.


BILL O’LEARY/THE WASHINGTON POST


Sen. Christopher J. Dodd and Rep. Barney Frank, the lawmakers who guided the legislation through Congress, shake hands at the signing ceremony Wednesday. The law was named after both men. To watch the president’s signing ceremony, go to PostPolitics.com.


March.


Obama paid tribute in his re- marks to the two lawmakers who shepherded the bill through Con- gress and for whom the Dodd- Frank Wall Street Reform and Consumer Protection Act is named: Sen. Christopher J. Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.). A supportive crowd — composed of administration offi- cials, consumer advocates, top regulators, state attorneys gener- al, congressional aides and law- makers who backed the legisla- tion — gave the pair a standing ovation, one of six during the brief event. The law closely resembles the blueprint unveiled by the admin- istration in June 2009. It estab- lishes an independent consumer bureau within the Federal Re- serve to protect borrowers against abuses in mortgage, credit-card and some other types of lending. It grants the govern- ment new authority to seize and wind down large, troubled finan- cial firms — such as the failed in- vestment bank Lehman Brothers — and sets up a council of federal regulators to monitor threats to the financial system. It mandates oversight of the vast market for derivatives — complex financial instruments that helped fuel the crisis — and gives shareholders more say on how corporate exec- utives are paid.


With few exceptions, the legis-


lation does not attempt to alter the fundamental shape of Wall Street, disappointing some liber- als and consumer groups. It stops short of breaking up the nation’s megabanks, it leaves out a ban on trading certain derivatives, and it doesn’t set firm limits on exec- utive pay. Nor does it signifi- cantly streamline the alphabet soup of financial regulators in Washington. Away from the celebratory scene downtown, Republicans on Capitol Hill and business and fi- nancial industry executives ex- pressed disappointment and dis- dain, arguing that the bill will spawn a more intrusive and ex- pansive federal bureaucracy. They said that the law fails to eliminate the possibility of future taxpayers bailouts, that it could undermine the competitiveness of U.S. companies, stifle financial innovation, crimp credit and ex- acerbate unemployment. “When you cut through all the talking points about what finan- cial regulation will do, the practi- cal, real-world effect of this bill in the near term will be job loss,” Mi- nority Leader Mitch McConnell (R-Ky.) said on the Senate floor. “The White House will declare this bill a victory. But for millions of Americans struggling to find work, for millions of small-busi- ness owners bracing themselves


 Law’s fallout: Ratings off bond prospectuses. A16


for all the new regulations they’ll have to deal with, for ordinary Americans who just wanted to see an end to the bailouts, this bill is no victory.” Thomas J. Donohue, president of the U.S. Chamber of Com- merce, which staunchly opposed the bill, called it “nothing more than a financial regulatory boon- doggle” in a statement. “It won’t strengthen our capital markets, it won’t jumpstart the economy, and it won’t help create any new jobs except in government,” he said.


Such criticism did little to hin- der the festive atmosphere Wednesday inside the Reagan Building. Aides and administra- tion allies shared hugs and hand- shakes. Lawmakers donned their favorite ties to pose beside Oba- ma. Harvard law professor Eliza- beth Warren, a key proponent of the new consumer watchdog, pulled a camera from her purse and got a picture of herself with former Fed chairman Paul Volck- er, who had pushed to limit risky trading at banks. They both sat front and center, smiling. “It’s a wonderful thing,” Assis-


tant Treasury Secretary Michael Barr, who brought his wife along for the occasion, said to one well- wisher. After his speech, Obama sat at a wooden desk and signed the bill with 11 different pens. “It’s done,” he said, rising to leave. But really, it’s only beginning. dennisb@washpost.com


Ford Explorer responds to shifting terrain Once-dominant SUV


improved fuel efficiency by Peter Whoriskey


In the boom years, when living


large went unquestioned, the Ford Explorer ruled the roads. Bigger than necessary and a fuel hog, the Explorer flew out of showrooms by the hundreds of thousands year after year, becom- ing the nation’s best-selling SUV over a decade. Then times changed, a reces- sion intervened and the cultural icon seemed like a relic. So on Monday, Ford will reveal what company officials have called an “extreme makeover,” the re-inven- tion of an emblem of boom-time excess and environmental wan- tonness. “You won’t have to be ashamed when you drive into the driveway and the neighbors come over,” Ford Executive Vice President Mark Fields said in an interview. In its new incarnation, the company says, the Explorer will get as much as 30 percent better fuel economy. Its pricing, moreover, is built on the premise that consumer values have changed: While the old Explorer offered a more pow- erful engine as an option, the new one gives consumers the option of paying more for a fuel-stingy “Ecoboost” engine.


And with the Explorer’s new


styling, gone is some of the pre- tension that by driving one, you were bound for a rugged off-road adventure, rather than merely


will relaunch with


Exploring sales Ford Motor Co. is trying to reverse its downward trend of Explorer sales.


Ford Explorer market share of all midsize SUVs sold


24.6% (415,921 Explorers sold) DANIEL ACKER/BLOOMBERG NEWS


Coca-Cola boosts profit as North American sales rise Coca-Cola increased sales in North America for the first time in four years during the second quarter, and the world’s largest soft-drink maker said net income rose 16 percent, to $2.37 billion. Sales rose 5 percent, to $8.67 billion, as shoppers snapped up smaller cans and new bottles. The company left its 2010 guidance unchanged Wednes- day but said it remains cautious about meeting its targets. — Associated Press


ALSO IN BUSINESS  Morgan Stanley tops forecasts: Morgan Stanley said Wednesday its second-quarter profit rose to $1.58 billion, easily beating ex- pectations, as its Smith Barney brokerage helped the bank re- cover from a year-earlier loss of $1.26 billion. Revenue rose to $7.95 billion from $5.2 billion. Morgan Stanley joined other banks in reporting that revenue from trading stocks and securi- ties declined, dropping 11 per- cent from the first quarter, to $3.35 billion. Trading revenue nearly doubled from the second quarter of last year, however. The company, which suffered steep losses in real estate in- vestments last year, reaped $3.07


Ford Motor Co. will unveil on Monday the results of the “extreme makeover” of the


Explorer.


JEFF KOWALSKY/ BLOOMBERG


13.0% 9.9%


Total market share of midsize SUVs


(31,864 sold 4.4%


’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10


NOTE: Sales include Explorer, Explorer Sport and Explorer Sport Trac.


*As of Jun SOURCE: Edmunds.com THE WASHINGTON POS


venturing beyond the cul-de-sac to drop the kids off at soccer. “It’s more suburban than it


ever was,” said Jessica Caldwell, an analyst at Edmunds.com. Whether the revamped Explorer can revive sagging sales — they really began to plummet in 2005 — will be closely watched for signs of how the recession has al- tered consumer tastes. During the truck’s heyday of


the late ’90s and early ’00s, Ford sold more than 400,000 Explor- ers annually. But in 2000, con- gressional hearings highlighting rollover accidents involving the Explorer and Firestone tires tarnished its reputation. The company made the truck less prone to roll over, and it contin- ued to sell more than 400,000 an-


nually into 2001 and 2002. But in- creasing competition and the growing worries over oil depen- dence caused by the Iraq war, as well as the growing conservation ethic, eventually squashed its sales. Last year, only 52,000 were sold, according to figures from Edmunds.com. Some said Ford’s decision to re- launch the Explorer showed that the demand for bigness — big homes, big cars, big meals — has revived.


“Obviously, it was too soon to write the obituary for excessive consumption,” said John DeCicco, senior lecturer at the University of Michigan and a former senior fellow for automotive strategies at the Environmental Defense Fund. “It was naive to think that a spike in gas prices in ’08 would usher us into a new era.” But given the demand, DeCicco


praised Ford’s decision to meet it with a more fuel-efficient vehicle. “All of the industry has been chastened now,” he said. Ford officials said the new Ex- plorer has two primary advan- tages over the old. First, though its size hasn’t been reduced — it now seats seven instead of five — it gets better fuel economy. With the standard V-6 engine it is ex-


pected to get about 171⁄2 miles per


gallon in the city and about 25 on the highway — up from 14 city and 20 highway. Second, it offers a far smoother ride, they said. “We want to change people’s perceptions of what an SUV can deliver,” Fields said. In marketing the new vehicle,


too, Ford is tapping into the grow- ing public recognition of how im- portant the industry is to the economy, touting 1,200 jobs add- ed to the Chicago plant where it will be assembled. Moreover, company officials said, about 600 more jobs will be created at sup- pliers, which number more than 100 across 23 states. About 65 percent of the value of an Explorer is created by the sup- pliers, and about 90 percent of the current Explorer is consid- ered domestic content, Ford says. Moreover, as the Obama ad-


ministration has set a goal of dou- bling U.S. exports, Ford has noted that the Explorer is the company’s most popular export. The top countries to which the United States exports vehicles are Cana- da, Germany, Mexico, Saudi Ara- bia and China, according to fig- ures from the American Automo- tive Policy Council. whoriskeyp@washpost.com


EARNINGS


two dozen affiliates, among oth- ers, represented nearly half of Madoff ’s reported assets under management, and that they “can- not deny their knowledge of many ‘red flags’ indicating the likelihood of that fraud.” “They were enablers,” the filing


said. Fairfield denied the charge and said the warning signs were apparent “only in hindsight.” — Associated Press


Media mogul Conrad Black released on bond ⁄2


S


A13


Eve set him free about two years into his 61


dered him to stay in the continen- tal United States.


Black, who led the company behind the London Daily Tele- graph, the Chicago Sun-Times and others, and three executives were convicted of swindling in- vestors out of $6.1 million. — Associated Press


-year sentence but or-


billion in revenue from Smith Barney, a year after Morgan Stan- ley acquired a majority stake in the brokerage from Citigroup. Wells Fargo joins big banks’ profit streak: Better payment rates for mortgages, auto loans and credit cards helped lift Wells Fargo’s second-quarter results, which beat analyst expectations. The bank posted net income applicable to common sharehold- ers of $2.88 billion, up 12 percent from last year, though profit fell 3 percent, to $3.06 billion, before paying out preferred dividends. Revenue was $21.39 billion, dipping from $22.51 billion. — From news services


Post Tech CECILIA KANG Excerpt from voices.washingtonpost.com/posttech


For Facebook, a milestone and an ownership question Facebook chief executive Mark Zuckerberg announced Wednesday


that the social network he started out of his college dorm room six years ago has 500 million active users, a much-anticipated milestone that comes amid legal questions over the firm’s ownership. Zuckerberg thanked users in a blog post, and the company provided fresh statistics that show those users are spending lots more time on the site, producing content and visiting often. Here are some highlights: Half of the site’s members use it every day; the average user has 130 friends; 1 million developers have created 550,000 Facebook apps. “This is an important milestone for all of you who have helped spread Facebook around the world,” Zuckerberg said. “Now a lot more people have the opportunity to stay connected with the people they care about.” (Washington Post Co. Chairman Donald E. Graham is a member of Facebook’s board.) Clouding the picture is a lawsuit by New York businessman Paul Ceglia, who claims that Zuckerberg signed away a big chunk of the company to him in 2003 before the site became an Internet sensation. At the time, Zuckerberg worked for Ceglia as a software coder. Facebook lawyer Lisa Simpson told Judge Richard Arcara that the company was “unsure at this moment” whether Zuckerberg signed a contract entitling Paul Ceglia to 84 percent of the firm, according to Bloomberg News. Ceglia’s attorney produced the document Tuesday at a hearing in U.S. District Court in Buffalo. In an interview Wednesday night with Diane Sawyer of ABC News,


Zuckerberg said he thought that Simpson’s remarks were taken out of context and that the company was certain no contract had been signed transferring ownership rights to Ceglia. “We can’t be focused when people try to say things that aren’t true,”


he said.


on washingtonpost.com Video chat about Facebook’s CEO


Join Cecilia Kang at 10 a.m. for a live video chat grading Facebook chief executive Mark Zuckerberg’s interview


Wednesday with ABC News’s Diane Sawyer.


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