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Geithner makes Wall St. sales call OUTREACH ON


OVERHAUL LAW


Bankers told not to fear far-reaching new rules


by Brady Dennis


new york — Timothy F. Geith- ner, traveling salesman, swept through Manhattan on Monday making a pitch to skeptical bank- ers, business leaders and even the mayor. His central message: Far-reach-


ing financial regulations signed into law by President Obama last month aren’t something to fear. Rather, they are the foundation of a stronger economy for the months and years ahead. “Our system allowed too much freedom for predation, abuse and excess risk,” the Treasury secre- tary told a crowd of 150 business executives, lobbyists and others during a speech at New York Uni- versity’s Stern School of Business. “But as we put in place rules for those mistakes, we have to strive to achieve a careful balance and safeguard the freedom, competi- tion and innovation that are es- sential for growth.” Even as Geithner spoke to the


mostly friendly crowd in Green- wich Village, scores of people in nearby skyscrapers were looking for ways to maintain large profits despite the new rules. Two miles south in the financial district, big banks have been examining ev- erything from how to retool their massive derivatives operations to how to deal with new restrictions on proprietary trading, an activity in which banks trade on their own accounts. At J.P. Morgan Chase, for exam- ple, more than 100 project teams are hard at work trying to antici- pate the implications of the new rules and to adjust the firm’s busi- nesses accordingly. Similar efforts are underway at other firms, with lawyers in Washington and New York scouring the legislation for their corporate clients. During his visit Monday, Geith- ner assumed the role of peace- maker, trying to thaw the chilly


10-YEAR TREASURY DOWN $4.80 PER $1,000, 2.96% YIELD


CURRENCIES $1 = 86.46 YEN; EURO = $1.317 DIGEST LEGAL


Toyota knew of problems earlier, suit claims The attorneys leading a class-


action lawsuit against Toyota say they have uncovered internal Toyota documents showing that some at the company were aware as far back as 2003 of the prob- lem of unintended acceleration in cars the company made. In a revised complaint against the automaker filed Monday in U.S. District Court in California,


the plaintiffs’ attorneys say that in a 2003 field report a company technician wrote up a case of sud- den, unintended acceleration. “The author requested imme-


diate action due to the ‘extremely dangerous problem’ and [said] ‘we are also much afraid of fre- quency of this problem in near future,’ ” according to the lawsuit. — Peter Whoriskey


HP reaches settlement of federal lawsuit Hewlett-Packard said Monday


ANDREW HARRER/BLOOMBERG NEWS


relationship that has developed between the Obama administra- tion and the business community. He assured industry officials that the new rules — many of which they spent millions of dollars and thousands of hours lobbying against — would create stability while leaving room for businesses to prosper and grow. He acknowledged the “frustrat-


ing, glacial pace” of federal rule- writing and vowed that regulators would move “as quickly as pos- sible” to put new rules in place. Even on his goodwill tour,


Geithner took time to preach a bit to the pinstriped executives. “Your core challenge is to restore the trust and confidence of the American people and your cus- tomers and investors around the world,” he said. “Don’t wait for Washington to draft every rule be- fore you start changing how you do business.” He urged them to end hidden fees and not to push people into loans they can’t afford. He urged banks to have the courage to in- crease lending. He implored firms to change executive pay “so you are not rewarding them for taking risks that could threaten the sta- bility of the financial system.” “You can do all of that right


Treasury Secretary Timothy F. Geithner addressed bankers and business leaders at New York University. Geithner’s afternoon speech


now, even before the first new rule of financial reform is writ- ten,” he said. It hasn’t been an easy sell. Banks and other firms have con- tinued to pay hefty rewards to top executives. Firms have continued to sit on massive piles of capital, reluctant to hire new workers or ramp up lending until the econo- my shows more resilience. Earlier Monday, Geithner had breakfast with New York Mayor Michael R. Bloomberg (I), who over the weekend called the finan- cial overhaul law “a dream piece of legislation for lobbyists and for lawyers” on NBC’s “Meet the Press.”


Bloomberg on Monday called


Geithner “one of the most compe- tent people in government,” and aides said the pair discussed the broader economy more than the financial overhaul. Later, Geithner met with busi- ness leaders assembled by the Partnership for New York City, an organization of top corporate ex- ecutives. The private event was hosted by Larry Fink, co-founder of the investment firm BlackRock, and attended by Time Warner chief executive Jeffrey Bewkes, billionaire investor Wilbur Ross and other prominent figures.


kicked off a public offensive in which top Treasury officials will venture into the financial world’s nerve centers to make their case that the regulatory overhaul will actually help economic growth, despite the blistering criticisms from opponents that it will harm an already wounded economy. At NYU, Geithner said other tough reforms lie in the months ahead, namely an overhaul of gov- ernment-backed mortgage giants Fannie Mae and Freddie Mac, as well as an international effort to impose new capital and leverage ratios for banks. As for the mas- sive legislation that regulators are just beginning to implement, he sought to reassure business lead- ers and urge them to be partners with government rather than en- emies. “These reforms will be tough,


but they will be toughest on those who took the greatest risks,” he said, “on those who operated clos- est to the edge of prudence; on those who chased the market down and competed in a race to the bottom in standards and prac- tices; and on those who made most of their profits in the most unsustainable of ways.” dennisb@washpost.com


Harman to buy Newsweek from Post Co.


Editor to resign as local philanthropist takes reins; price undisclosed


by Frank Ahrens


Iconic but troubled Newsweek magazine has been sold by one Washington power family to an- other. Washington philanthropist,


education innovator and hi-fidel- ity stereo pioneer Sidney Har- man will buy Newsweek from The Washington Post Co., the company said Monday, three months after Post Co. Chairman Donald E. Graham admitted that his company could not lead the struggling newsweekly back to profitability. The Post Co. did not release the sale price of Newsweek. The cash component of the purchase is minimal, but the total obliga- tions taken on by Harman — as- suming leases, satisfying sub- scribers who have already paid to receive the magazine — run into the tens of millions of dollars, ac- cording to a source close to the deal who spoke on condition of anonymity. The Post Co. will con- tinue to pay the Newsweek staff- ers’ pensions. Four-year Newsweek editor


Jon Meacham, who tried to as- semble a bid to buy the magazine, will resign when the deal closes, which is expected by early Sep- tember. A majority of the remain- ing 350 employees will be re- tained, the company said, but no decisions have been made on when or how many employees may be let go.


“I do this because I see work- ing hands-on at Newsweek as the culmination of a lifetime career in industry and government and education,” Harman said Monday in an interview. “I see it as both the culmination and synthesis of everything I’ve ever learned, . . . and I find it extraordinarily meaningful to be entrusted with carrying on the legacy of the Gra- ham family.”


JOHN GRESS/GETTY IMAGES


In an Internet age, print magazines have struggled. Newsweek subscriptions have fallen from a high of 3.2 million to 1.5 million.


Harman, 91, made his name in


high-fidelity stereo equipment, founding Harman Kardon premi- um audio company in 1952. But he became a high-pro- file philanthropist and author on such topics as quality of working life, productivity and education. He earned a PhD in education in 1973 and founded the Program on Technol- ogy, Public Policy and Human Development at Harvard University. In Washington, he is a trustee of Shakespeare Theatre Company.He is married to Rep. Jane Harman (D- Calif.). “My wife has absolutely noth- ing to do with this, other than wishing me the best,” Harman said. Harman’s lawyer — Robert Barnett, of Washington’s Wil- liams & Connolly — said News- week will be owned by Harman Media, which is solely owned by Sidney Harman. His wife will have no ownership stake. Harman added that his “pri-


mary responsibility” will be building a succession plan for Newsweek to hand it over to his children or an outside owner upon his death. The Post Co. bought Newsweek in 1961, after former executive editor Benjamin C. Bradlee —


Sidney Harman founded a hi-fi audio company.


then Newsweek’s Washington bu- reau chief — brought the deal to former Post publisher Philip Gra- ham. The magazine was a jewel of The Post Co. for sev- eral decades but has been in decline in re- cent years, struggling with shrinking reader- ship and advertising sales, like most print publications. The Post Co.’s magazine division —chiefly, Newsweek — earned $31.4 million in 2007 but reported a $47.5million operating loss in 2009. News- week has 1.5 million


subscribers, down from its high of 3.2million. American newsweekly maga- zines, once a voice of authority in the United States and overseas, have fallen on hard times as read- ers and advertisers have fled to faster-paced forms of media, es- pecially on the Internet. News- week, Time and U.S. News & World Report were once the mighty three of newsweeklies. But the magazines have shrunk in size in recent years, as have their subscriber bases, and they have slashed budgets while try- ing to remain relevant in a Face- book-and-Twitter world. Now there seems to be one of


two ways for a newsweekly to survive: as part of a much-larger


conglomerate, such as Time and Businessweek, which was pur- chased by Bloomberg last year; or as the vanity project of a wealthy owner who may be willing to trade financial losses, at least in the short term, for a high-profile media platform. In that category, Harman’s Newsweek now joins U.S. News & World Report, which was purchased by New York me- dia tycoon Mortimer Zuckerman in 1984. U.S. News, however, makes significant revenue from its college rankings publications. At Newsweek, Meacham tried but failed to remake the maga- zine into what some termed an American version of the United Kingdom’s Economist: heavy on opinion, high-brow and, he hoped, attractive to affluent read- ers who would attract advertis- ers.


“I am pleased with the out- come for the magazine,” Mea- cham wrote in an e-mail. “I think Newsweek is an important force but no one can minimize the challenges facing magazines in particular and the news business in general.” Graham was picky about


Newsweek’s buyer. The Post Co. turned away Newsmax, a month- ly conservative magazine, as well as a hedge fund manager, accord- ing to several sources familiar with the process. Harman also bested bids by Avenue Capital Partners, publisher of the Nation- al Enquirer, and OpenGate Cap- ital, which owns TV Guide, the sources said. “In seeking a buyer for News- week, we wanted someone who feels as strongly as we do about the importance of quality jour- nalism,” Graham said in a state- ment. “We found that person in Sidney Harman.” In addition to its flagship


newspaper, The Post Co. owns Kaplan education company, which provides more than half of The Post Co.’s revenue, six televi- sion stations, Cable One cable company and several smaller print and online publications, in- cluding Express and Slate. ahrensf@washpost.com


that it has agreed in principle to settle a lawsuit by the Justice De- partment, which alleged that HP and other technology companies paid kickbacks to Accenture in exchange for recommendations for government work. HP denied “engaging in any il- legal conduct.” It said the deal will lower its fiscal third-quarter profit by 2 cents per share. “We believe it is in the best in-


MERGERS & ACQUISITIONS


terest of our stakeholders to re- solve the matter and move be- yond this issue,” the company said in a statement.


The settlement still needs to be approved by the Justice Depart- ment, an Arkansas district court where the original lawsuit was filed, and government agencies. A Justice spokesman declined to comment.


— Associated Press


TUESDAY, AUGUST 3, 2010


STEVEN SHI/REUTERS China’s Geely completes $1.5 billion Volvo deal


Geely Holding Group completed its acquisition of Ford’s Volvo unit Monday in a $1.5 billion deal that gives the small-but-ambitious Chi- nese automaker a global brand and large management challenges. Geely said it paid $1.3 billion in cash plus a $200 million note. Volvo will keep its headquarters and manufacturing operations in Europe. — Associated Press


ALSO IN BUSINESS  Probe into Amazon, Apple e-


reader tactics: Connecticut At- torney General Richard Blumen- thal is investigating deals that Amazon.com and Apple struck with publishers to offer low prices on electronic books, say- ing the agreements could block rivals from providing attractive prices.


Earlier this year, Amazon and Apple worked out a “most fa- vored nations” deal with major publishers such as Macmillan, Si- mon & Schuster, HarperCollins and Penguin, which ensures that rival booksellers would not be able to work out an even lower price, Blumenthal said. Blumenthal sent letters to Amazon and Apple asking to meet with their officials to ad-


dress the concerns. Amazon and Apple did not immediately re- spond to requests for comment.  CBS, Comcast strike long-term content deal: Comcast has locked in access to CBS programming for the next decade and will be able to expand on-demand access to the network’s programming in a deal announced Monday. The agreement is unusual be- cause most arrangements be- tween broadcasters and cable TV providers are negotiated every few years. It covers the CBS tele- vision network, Showtime net- works and the CBS College Sports channel. The companies did not say how much CBS will get from Comcast per subscriber.


— From news services Post Tech CECILIA KANG Excerpt from voices.washingtonpost.com/posttech


Key lawmaker urges approval of Comcast-NBCU merger The chairman of the House communications subcommittee urged


federal regulators on Monday to approve Comcast’s proposed merger with NBC Universal, but with the condition that the combined company promise not to withhold online video from competitors or distribute some content exclusively to its own cable subscribers. In letters to Justice Department Assistant Attorney General Christine


Varney and Federal Communications Commission Chairman Julius Genachowski, Rep. Rick Boucher (D-Va.) said the merger could harm consumers without those conditions. Analysts say the merger, which was proposed in December, is likely to be approved by antitrust and communications regulators. But the process has been costly — in the quarter ended June 30, Comcast said costs associated with the transaction totaled $59 million. The deal’s most contentious points concern distribution of content over the Internet. Because Comcast is the nation’s biggest broadband provider and NBC Universal has a large library of movies and TV programs, analysts say the merged company could be inclined to withhold content from Web competitors.


Rick Boucher


In his letters, Boucher said that open-Internet requirements — which would prevent Comcast from blocking or slowing certain Web sites or applications — should not be a condition of regulatory approval. He said that such net-neutrality rules — which Congress might take up as legislation — should “apply a uniform set of network openness principles to all broadband providers.” Comcast has argued that it should not be singled out by having


net-neutrality conditions attached to the merger. But there is a precedent for applying net-neutrality conditions to corporate acquisitions. Former FCC chairman Kevin Martin applied net neutrality conditions to Bell South’s merger with AT&T.


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