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16
The San Juan Daily Star
January 23-25, 2015
PR Treasury to Temporarily Paralyze 2% Tax on Wire Transfers
By EVA LLORENS VELEZ
llorenseva4@gmail.com
T
he Puerto Rico Treasury
Department is planning to
temporarily paralyze the 2
percent tax collected on all wire
transfers that went into effect in
December following MoneyGram’s
announcement that it was ending
services in Puerto Rico because of
the tax.
US TREASURY DEPARTMENT
PUBLIC AUCTION
** Friday, January 30 at 10AM **
2 CONDOS IN SAN CRISTOBAL CONDOS, SAN JUAN
Calle Sol No. 109, Apt. 1 - 2BR/2.5BA
Calle Luna No. 311, Apt. 4B - 1BR/2BA
OPEN: WED. 1/21 & SAT. 1/24
www.treas.gov/auctions/treasury/rp
703-273-7373
The announcement was made
by Popular Democratic Party Rep.
Carlos J. Vargas.
He said the moratorium will
give time to the businesses that
handle wire transfers and money
orders as well as the public to get
used to the new tax and analyze its
adequacy.
He said Treasury Secretary
Juan Zaragoza told him that he
was going to issue an administrative order to temporarily paralyze
the imposition of the new tax on all
money transfers.
The island government raised
the tax last year to obtain more revenues for a housing program attached to the Puerto Rico Housing
Finance Administration and to
provide rental subsidies to the elderly.
“I am available to listen to all
those who want to express themselves,” Vargas said. “I will evaluate any alternative presented to
deal with claims and see how we
can adjust them to the new reality
imposed by this legislation.”
Last week, MoneyGram’s press
officer, Michelle Buckalew, said in
a statement that “MoneyGram remains committed to its operations
in Puerto Rico and we continue to
offer our convenient and reliable
money transfer and bill payment
services to and from the territory.”
“However, due to a new 2 percent remittance transfer tax that
went into effect last month, we have
suspended money order services in
Puerto Rico at this time,” she said.
“MoneyGram is currently researching options and hopes to find
a way to continue to provide this
critical service to our customers in
Puerto Rico. We apologize for any
inconvenience this may cause our
customers and our agents.”
PR Seeks Economic Advice
from NY Fed Official
A
vice president at the Federal
Reserve Bank of New York has
met with Puerto Rico senators
to discuss how the commonwealth government can strengthen the island’s
economy.
James Orr says Puerto Rico
should improve the performance of
its state-owned corporations anda impose greater budgetary restrictions.
He says the government also should
create a capital expenditure budget,
approve a tax reform and improve its
financial transparency, among other
things.
The government said in a statement Thursday that Orr was invited
as part of an ongoing push to meet
with experts about how best to solve
Puerto Rico’s economic problems. The
island is in its eighth year of recession
and has $73 billion in public debt.
The San Juan Daily Star
January 23-25, 2015
17
S&P to Pay Nearly $80 Million to Settle Fraud Cases
By BEN PROTESS and MATTHEW GOLDSTEIN
S
tandard & Poor’s, the credit rating agency blamed for
helping inflate the subprime mortgage bubble, has
settled accusations that it orchestrated a similar fraud
years after the bubble burst.
S.&P. has agreed to settle an array of government investigations stemming from 2011, paying nearly $80 million
and admitting some misdeeds, federal and state authorities
announced on Wednesday. As part of the deals, reached
with the Securities and Exchange Commission and the state attorneys general in New York and Massachusetts, S.&P.
also agreed to take a one-year “timeout” from rating certain
commercial mortgage investments at the heart of the case,
an embarrassing blow to the rating agency.
“This was egregious behavior with significant consequences,” Andrew J. Ceresney, the S.E.C.’s enforcement director, said on a conference call with reporters. He added
that the problems pointed to a “deep cultural failure at S.&P.”
and a “failure to learn the lessons of the financial crisis.”
The settlement, which coincided with the filing of an
S.E.C. action against a former S.&P. ratings executive, is the
S.E.C.’s first action against a top ratings firm. Despite the
central role that rating agencies played in the crisis — awarding inflated credit ratings to mortgage investments that
spurred the debacle — they faced no S.E.C. penalties.
Yet the Justice Department and several state attorneys
general did take action in a separate case, suing S.&P. in
connection with the crisis. After fighting that case for two
years, S.&P. reached a tentative settlement that would require it to pay $1.37 billion, people briefed on the matter said
this week, a penalty large enough to wipe out its operating
profit for a year.
In addition to the commercial mortgage settlement,
S.&P. also resolved accusations on Wednesday of internal
control “failures” in its surveillance of rating investments
backed by home mortgages. The breakdowns, which echo
the rating agency’s problems during the crisis, came from
October 2012 to June 2014.
The settle-at-all-costs mentality from S.&P., which is
owned by McGraw Hill, signifies an abrupt shift in its strategy. It also reflects a change atop McGraw Hill’s legal department, which recently installed a new general counsel,
Lucy Fato, formerly a partner at the law firm Davis Polk.
In a statement on Wednesday about its settlement with
the S.E.C. and the state attorneys general in New York and
Massachusetts, S.&P. said it was “pleased to have concluded
these matters.” It added that it “takes compliance with regulatory obligations very seriously and continues to make
investments in people and technology to strengthen its controls and risk management throughout the organization.”
In settling, S.&P. agreed to pay more than $58 million
to the S.E.C., $12 million to New York State’s attorney general, Eric T. Schneiderman, and $7 million to the office of the
Massachusetts attorney general, Martha Coakley. S.&P. previously announced that it expected to pay about $60 million
to settle the investigations.
The settlements largely center on S.&P.’s ratings of eight
commercial mortgage-backed securities deals. Although
S.&P. publicly claimed it used a conservative approach for
rating certain commercial mortgage investments, it actually
used a different methodology that lowered its standards.
To reinforce the impression that the new criteria were
still relatively conservative, S.&P. “published a false and
misleading article purporting to show that its new credit
enhancement levels could withstand Great Depression-era
levels of economic stress,” according to the S.E.C. That article “relied on flawed and inappropriate assumptions,” according to the S.E.C., which noted that the original author of
the article complained that the S.&P. had turned the article
into a “sales pitch” for the new criteria. The author said it
could lead to his facing the “Department of Justice or the
S.E.C.”
“Investors rely on credit rating agencies like Standard
& Poor’s to play it straight when rating complex securities
like C.M.B.S.,” Mr. Ceresney said, referring to commercial
mortgage-backed securities. “But Standard & Poor’s elevated its own financial interests above investors by loosening
its rating criteria to obtain business and then obscuring these changes from investors.”
The behavior detailed in the S.E.C.’s complaint seems
ripped from the same playbook that led S.&P. to help enable
the mortgage crisis of 2008. It lowered ratings criteria after
losing market share. It ignored or stifled red flags, the S.E.C.
said, including internal dissent and an anonymous email
complaint. And it misled the public about the rigor of its
methodology.
“In the wake of the housing crisis and the collapse of
the global economy, credit agencies like S.&P. promised not
to contribute to another bubble by inflating the ratings on
products they were paid to evaluate,” Mr. Schneiderman
said in a statement. “Unfortunately, S.&P. broke that promise in 2011, lying to investors to increase their profits and
market share.”
The S.E.C. also filed an administrative proceeding
against Barbara Duka, the former co-head of S.&P.’s commercial mortgage group, contending that she “fraudulently
misrepresented the manner in which the firm calculated a
critical aspect” of ratings. Ms. Duka, the S.E.C. said, “allegedly instituted the shift to more issuer-friendly ratings criteria, and the firm failed to properly disclose the less rigorous
methodology.”
Ms. Duka jumped the gun on the S.E.C., filing a lawsuit in federal court last week that seeks to have any enforcement action against her heard before a federal judge
as opposed to an administrative law judge. The S.E.C. has
increasingly filed enforcement cases before administrative
law judges, and some critics say this gives the S.E.C. an unfair home-court advantage.
Google Planning To Sell Wireless Phone Service, Reports Say
G
oogle is planning to sell wireless phone service directly to consumers using the networks of Sprint and
T-Mobile, according to reports published Wednesday.
If everything falls into place, Google Inc. could offer
discounted wireless data plans that would pressure other
major carriers to offer better deals and services or risk losing customers to a powerful rival.
More affordable plans, in turn, could bring more
people online, something that Google is trying to do because it runs the Internet’s dominant search engine and
largest advertising network. The Mountain View, California, company would profit from a potentially larger audience for its services.
Google also implants its services in its Android mobile operating system, the mostly widely used software
on smartphones.
Both the technology news site The Information and
The Wall Street Journal reported Google’s intention to become a wireless service provider. The reports cited unnamed people familiar with the matter.
Representatives from Google, Sprint Corp. and TMobile US Inc. declined to comment on the reports.
It’s unclear how widely Google plans to sell wireless
plans to smartphone owners or when the service would
launch. The company already is selling an ultra-fast Internet and cable TV service directly to homes, but that
Google Fiber product so far is only available in parts of
Kansas City, Kansas; Kansas City, Missouri; Provo, Utah;
and Austin, Texas.
Google’s plans to make its entry into the wireless Internet market by buying access on the networks of Sprint
and T-Mobile is known as a mobile virtual network operator, or MVNO, agreement. Google probably will still have
to set up its own operations to handle customer service
and billing, an area in which the company doesn’t have
much previous expertise.
Leasing space to Google represents a calculated risk
by Sprint, the third largest wireless carrier, and T-Mobile,
the four largest. While a deal with Google figures to boost
their revenue, it also opens the door for a deep-pocketed
company that could turn into a competitive threat.
T-Mobile already has been shaking up the industry
during the past year by cutting prices and introducing
new service plans that have prompted the two biggest carriers, Verizon Communications and AT&T Inc., to match
some of the features.
January 23-25, 2015
The Star
18
Stocks
Wall Street Gains as ECB Prepares to Flood Markets
T
he S&P 500 and Nasdaq turned positive for the year as
U.S. stocks rallied on Thursday on the back of a larger
than anticipated stimulus from the European Central
MOST ASSERTIVE STOCKS
PUERTO RICO STOCKS
Bank.
The ECB will buy 60 billion euros worth of assets per
month, more than markets had been hoping for, in a program that will last through September 2016.
The choppiness seen early during the Wall Street session was due to some lingering questions about the effect of
the announced measures on U.S. markets, said David Lebovitz, Global Market Strategist for J.P. Morgan Asset Management.
But as investors digested the details of the program it
became more clear that the ECB was accomplishing exactly
what it intended to.
“This is really the bazooka people had been looking for
in the past years,” Lebovitz said.
He said the sectors most likely to gain from the ECB
move would be “anything that benefits from a stronger European economy,” with bank and other cyclical stocks leading.
Banks led gains on Thursday with the S&P 500 financials .SPSY up 2.45 percent.
Wells Fargo (WFC.N) and Bank of America (BAC.N)
rose 3.2 percent and 4.4 percent, respectively.
The Dow Jones industrial average .DJI rose 259.7 points,
or 1.48 percent, to 17,813.98, the S&P 500 .SPX gained 31.03
points, or 1.53 percent, to 2,063.15 and the Nasdaq Composite .IXIC added 82.98 points, or 1.78 percent, to 4,750.40.
Shares in Europe .FTEU3 jumped 1.6 percent to close at
a seven-year high.
After the closing bell, Starbucks shares rose 3.2 percent
to $85.41 after sales at established restaurants in its Americas
region were slightly stronger than analysts’ estimate.
American Express (AXP.N) was the largest points
weight on the S&P 500, down 3.8 percent to $84.37, a day
after it said it would cut more than 4,000 jobs this year as
expenses and provisions for bad loans rose.
F5 Networks Inc (FFIV.O) slumped 10 percent to
$113.40. The network equipment maker’s revenue missed
expectations for the first time in eight quarters. It also forecast current-quarter revenue and profit below estimates.
Avon Products shares (AVP.N) jumped as much as 20.1
percent after Dealreporter said the company was in talks
with private equity firm TPG Capital about a potential transaction, citing three industry sources. Avon shares closed up
14.6 percent at $8.66.
Volume was slightly above the norm with about 7.7
billion shares changing hands on U.S. exchanges, above the
daily average of 7.27 billion so far this month.
NYSE advancing issues outnumbered decliners 2,428
to 651, for a 3.73-to-1 ratio; on the Nasdaq, 2,015 issues rose
and 746 fell, for a 2.70-to-1 ratio.
The S&P 500 was posting 78 new 52-week highs and
5 new lows; the Nasdaq Composite was recording 61 new
highs and 73 new lows.
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
January 23-25, 2015
19
Google Hopes to Take the Web Directly to Billions Lacking Access
By CONOR DOUGHERTY
G
oogle has never shied from novelty or
spending big to find ways to connect more
people to the Internet. Over the last two
years, its ideas have included fleets of little satellites, solar-powered drones that would fly around
the world and balloons that float high into the
stratosphere, beaming the Internet to those below.
Building on that, Google and the mutual fund
giant Fidelity announced a $1 billion investment
on Tuesday into Space Exploration Technologies, a
growing private rocket company that is still trying
to prove itself on the world stage. The company,
also known as SpaceX, could give Google a way to
put its devices into outer space.
With that growing collection of devices in
the sky, Google believes it can spread the Internet to underserved areas around the world. The
investments also reflect a bit of enlightened selfinterest, since the more people who are connected
directly to Google, the more ads it can show them.
And that is how Google makes its money.
“Anything they provide, if it’s going through
their own pipe, they have more control over the
experience and more potential for revenue,” said J.
P. Gownder, an analyst at Forrester Research. That
means those consumers are more likely to stick
with Google services like search, Gmail or YouTube rather than going somewhere else.
Google’s interest in satellites is anything but
original. Last week, the Virgin Group and Qualcomm, a maker of communications semiconductors, announced they had invested in OneWeb, a
network of Internet connectivity satellites, while
Planet Labs, a maker of shoebox-size satellites that
offer Earth imagery, announced Tuesday that it
had received $95 million in financing.
Last year, Facebook bought a British drone
maker and hired a bevy of top aerospace scientists, with the goal of deploying high-altitude, unmanned planes to deliver Internet service to parts
of the world that have little connectivity now. It
is also experimenting with satellites and lasers to
deliver Internet services.
These companies have different technologies
and different ideas for making money, but the bind
among them is a common assumption that there
is no economic way to physically wire the world’s
underserved consumers. So the only way to do it
is with satellites and other wireless technologies.
There is another benefit for Google: The company is always looking for ways to get around
Internet service providers. As Google executives
have shown with new offerings, from insurance
A Planet Labs Dove satellite is released into space in
February 2014. Planet Labs makes shoebox-size satellites that capture images of the Earth
shopping to the growing Google Fiber broadband
service, if there is one thing they believe, it is that
their company’s interests are best served by going
directly to the consumer.
And as first reported on the tech website The
Information, Google has been in talks with cellular network companies with a goal of providing
its own wireless service, according to two people
familiar with Google’s efforts.
“If you’re a big Internet company, you don’t
want to have to deal with every cable company,
every telco, that are potentially or actually trying
to interfere with your freedom to do business,”
said Steve Jurvetson, a founder and partner at Draper Fisher Jurvetson, a Menlo Park, Calif., venture
capital firm. He is on the boards of both SpaceX
and Planet Labs.
This idea of sky-high Internet connections
seems to be a fixture of technology booms. In the
mid-1990s, there were similar efforts. One, called
Sky Station, was a sort of stratospheric blimp that
would hover over areas that needed broadband Internet service. It was not successful, mostly because there was not much demand for the high-speed
access it could provide, said Martine Rothblatt, inventor of the satellite service SiriusXM who was a
Sky Station partner and is now chief executive of
United Therapeutics, a biotechnology company.
“Twenty years ago, when people were like
really happy to get a phone call on a mobile phone, it was inconceivable that most people’s television platform would be their mobile” device, Ms.
Rothblatt said.
Today, Ms. Rothblatt added, the demand for
bandwidth is “essentially insatiable.”
The interest in satellites also extends to services. Last year, Google spent about $500 million to
buy Skybox Imaging, a maker of small high-reso-
lution imaging satellites that could do things like
monitor crops or map the terrain below a forest
canopy.
But be it imaging or connections, the recent
interest in satellites stems from a reduction in satellite cost. Unlike the first space race, when governments had to make almost everything themselves, there are now all kinds of off-the-shelf chips,
batteries and other components that can be mixed
and matched. And just as the camera on your mobile phone becomes better with each upgrade, the
advancement in space imaging technology has
been rapid.
“Aerospace is following business because the
dominant research and development dollars are
no longer in the Air Force or NASA, but they are
in Google and Apple and all these places pushing
the boundaries of miniaturized electronics,” said
Will Marshall, co-founder and chief executive of
Planet Labs.
There is nothing new about connecting to the
Internet via satellite. People do it on airplanes, at
sea and in remote corners of the world. ViaSat, a
Carlsbad, Calif., satellite company, beams satellite
Internet to 700,000 homes and apartments in the
United States. But this is done with bigger, higherorbiting satellites that sit in a geosynchronous orbit, meaning that they move at the same speed as
the earth and so stay above a fixed point.
Mark Dankberg, ViaSat chief executive, estimated that dozens of companies around the world
are working on satellite-based Internet services
that are regional in scope and use these higherorbit technologies.
But the satellites Internet companies have become enamored with use lower orbits and can cover the world to put the three billion people who
do not have Internet access online.
Low-earth-orbit satellites are already revolutionizing imaging technologies by allowing companies to receive continuously updated pictures of
earth, which lets them do things like measure a
mall’s hourly parking lot traffic. But whether these satellites can be used to connect people to the
Internet more cheaply has yet to be proved, Mr.
Dankberg said.
One advantage is that low-earth satellites
could have less lag between typing a search into
Google and receiving the results.
But since most of the world is water and barren land, Mr. Dankberg said, a fleet of Internetconnected satellites would have many of its components hovering over unpopulated areas.
“It has yet to be proven that lots of little satellites can provide Internet more cheaply than a
handful of big ones,” he said.