Saturday, September 20, 2014
Inquirer Daily News

POSTED: Monday, September 15, 2014, 4:45 PM

John Bogle, founder of Vanguard Group, the $3 trillion-asset, Malvern-based No. 1 company in the mutual-fund business, is due in Washington Tuesday morning to lecture the U.S. Senate Finance Committee about what ought to be done to prevent retired Americans from ending up in their kids' closets and garages and the streets, now that most big companies no longer offer guaranteed pensions.

Bogle's office passed along a copy of his prescription. Summary:
- Save Social Security by "gradual" delays in the eligibile retirement age until 69; boost benefits based on inflation, not wage increases; extend the Social Security tax to higher wages; limit payouts to rich retirees.
- Pressure old-fashioned guaranteed pension plans still more, by dropping return targets to around 5%, forcing employers and unions to make "disruptive and painful" additional payments if they want to keep these plans.
- Make it harder for IRA and 401(k) savers, who mostly "lack the knowledge and understanding of the principles of sound investing," to cash out or borrow their savings or to transfer it to "Wall Street's salesmen" once it's invested;
- Push the SEC and Labor Department to force plan managers to tougher fiduciary standards (which could end up favoring low fees and index funds, like Vanguard's.)

Bogle praised the federal Thrift Savings Plan, which offers low-fee index funds, as a model for other retirement investors. He also praises Vanguard's own Retirement Saving Plan, which he says contributes 10% of wage compensation, 5.7% of compensation above the Social Security tax base, and a match for the first 4% of workers' voluntary contributions.

POSTED: Monday, September 15, 2014, 3:09 PM
New Jersey Gov. Chris Christie. (Jessica Kourkounis / Getty Images)

SEE UPDATE BELOW: So far, municipal bond-investors are going easy on New Jersey Gov. Chris Christie and mostly ignoring the alarms credit rating agencies have sounded over the growing gap between the money the Garden State collects and what it spends, writes analyst Alan Schankel, managing director at Janney Capital Markets, Philadelphia. (New Jersey plans to borrow about $270M in appropriations-backed debt tomorrow, testing investor demand and the state's recent yields.)

"Credit spreads do not reflect New Jersey's recent credit deterioration," he told clients in a note today. The state is having to pay a little more to get investors to lend it money, since Christie cut payments to New Jersey's chronically underfunded pension system and provoked credit ratings cuts by all three major rating agencies earlier this year. The gap has widened by 11 basis points, or about $1.1 million on every $1 billion the state borrows, so far this year -- a fraction of what bond-watchers might have expected given the state's' steady downgrades.

So maybe Christie is right to dismiss the ratings reductions, at least for now: "I don't pay attention to those guys," Christie told my colleague Andrew Seidman last week, citing the rating agencies' poor record predicting the home-loan-financing collapse and Great Recession of the late 2000s.

POSTED: Monday, September 15, 2014, 11:26 AM
Inequality appears to be "dampening overall economic growth," perhaps because the broad mass of consumers are buying less, and rich people aren't necessarily increasing their in-state spending by a corresponding amount. ((istock photo))

The growing concentration of income among the richest Americans has made it tougher for states to fund their budgets, because of the way most states fund public services, writes Gabriel J. Petek, San Francisco-based primary credit analyst for Standard & Poor's Rating Services. 

On the one hand: Republican-run states like Texas and Florida, which tend to rely more on sales taxes, have seen revenues flat-line (compared to earlier increases) since 2000. That's because poor and middle-income people aren't buying any more, and rich people are more likely to save and invest (often out-of-state) than to use their higher incomes to buy more stuff locally.

On the other hand: Democratic-run states like California and New York, which rely more on income taxes, have been able to collect a higher proportion of rich people's higher incomes. However, the gravy train stalled in the recession of the late 2000s, and revenues went flat from that source, too, when the stock market dived -- a warning that income taxes are more volatile in rough economic times, and less steady than sales taxes when the investment markets dive.

POSTED: Friday, September 12, 2014, 12:24 PM
The Trentonian is one of several area newspapers that may soon be on the market.

Digital First Media, the second-largest U.S. newspaper chain, says it's weighing "strategic alternatives" that could include a sale or split-up of 76 daily newspapers, 160 weeklies and hundreds of news websites, including the major papers in San Jose, Denver, St. Paul, and local dailies in Montgomery, Delaware and Chester Counties, Pa., and Trenton, N.J. 

Boss John Paton in a statement said Digital First has "many options available to us to maximize the value of our businesses for our stockholders," that he and his board will be talking those over with investment bankers at UBS Securities and lawyers at Hughes Hubbard & Reed LLP, and that he's not sure any sale will materialize.

CWA-Newspaper Guild Local 10, which represents news, advertising, circulation and finance workers at the Inquirer, Daily News and Philly.com and at four of the six suburban dailies, "could put together an ownership group to buy the six-paper cluster in the suburbs," union staff representative Bill Ross told me.

POSTED: Friday, September 12, 2014, 12:05 PM

CCMP Capital Advisors LLC, New York, says it has agreed to buy 47% of Malvern-based chemical maker PQ Corp., for an undisclosed payment. The deal leaves 53% of PQ still owned by the buyout giant Carlyle Group, PQ management, and chemical maker INEOS. 

CCMP helped fund an earlier management-led buyout of PQ, the onetime Philadelphia Quartz Corp., in 2005, and has since then weighed various assets sales and other schemes to wring profit from the company's performance chemicals, catalysts and glass-bead businesses and its energy, automotive and industrial customers.

Amid the run-up in stock market values, Carlyle had considered an initial public stock offering for PQ earlier this year. Carlyle is also considering an IPO or sale of Philadelphia-based car-paints maker Axalta Corp., a DuPont Co. spin-off, according to Bloomberg LP.

POSTED: Friday, September 12, 2014, 10:22 AM

The newest building erected by the University City Science Center, the landlord consortium serving Penn, Drexel, CHOP and other west-of-Schuylkill institutions, opens today. Baltimore developer James R. Berens' Wexford Science & Technology dedicates 3737 Market St., two years in the building, topped out at 13 floors and 334,000 sq. ft., after two floors were added to meet growing medical-related demand.

The building opens 83% occupied. 3737's major tenants include the University of Pennsylvania Health System, Good Shepherd Penn Partners (runs the Penn Institute for Rehabilitation Medicine), Sparks Therapeutics (a gene therapy company spun out by Children's Hospital with $50 million in capital), and Rose Group's Corner Bakery Cafe (due to open by Christmas.) 

Cost was $115 million, with federal taxpayers kicking in a piece from New Market Tax Credits, plus a $5 million matching grant from Pennsylvania taxpayers via the Redevelopment Assistance Capital Program. Intech Construction led the work; architect was Zimmer Gunzel Frasca. 

POSTED: Thursday, September 11, 2014, 12:07 PM
Photo from boydcomm.com

M&T Bank, the Buffalo-based bank that bought Wilmington Trust Corp. as Delaware's largest bank was on the edge of financial collapse three years ago, has agreed to pay $18.5 million to the Securities and Exchange Commission to settle "accounting disclosure and fraud charges" because Wilmington Trust understated its loan losses by $300 million in late 2009 (corrected), the SEC said. "It’s important to resolve issues from the past as we continue to build on Wilmington Trust’s legacy," M&T spokesman C. Michael Zabel told me.

The settlement with M&T's Wilmington Trust unit comes amid a continuing SEC investigation, which the SEC said has been aided by the FBI and other federal agencies, into bankers' mismanagement of failed loans to developers. At least three Wilmington Trust lenders or middle managers and two developers have separately been accused in federal court of bank loan fraud during the late 2000s. More on those cases here and here and here.

Despite concerns voiced at the time by lower-level bank employees, the SEC said unnamed senior Wilmington Trust officials signed off on quarterly investor reports that were "failing to report the true volume of its loans at least 90 days past due as they substantially increased in number during the financial crisis."

POSTED: Thursday, September 11, 2014, 10:26 AM
An aerial view of the former Exelon Delaware Station power plant in Fishtown. (Photo from DelawareStation.com)

UPDATED with Exelon comments at the end: "It was with great interest that I read the story about the future sale of the former Delaware Station property. I worked there in the '60s and '70s," writes Ed Zajkowski, of Narvon, Lancaster County."The property has a "rich history," he adds: "There were two plants, the 'old' plant, which still exists and the 'new' plant, which was demolished just a few years ago, now the parking lot. But what exists under the site has always enthralled me."

The 'new' plant was built atop a drydock for the former Cramps shipyard, "so well built, they left it there to build the plant, it was under the #8 [PECo generator] unit.  Just upriver was a one-million-gallon oil tank... I observed the difficulty they had driving 350 pilings for it. Couldn't do it. So they dug up the spot. Behold, underground was another Cramps 100-plus-year-old masterpiece -- a marine railway. This was made of 12" x 12" timbers stacked in cross sections and spiked with 2' nails. Except where the tank was, most of that is still there."

And the old plant: "Many years ago -- I'm 71 -- a fellow employee and I recognized the historical significance of what was under this plant. It was the former Neafie & Levy shipyard. They built the nation's first US Navy destroyer, U.S.S. Bainbridge, and America's first steam-powered fire engine...

About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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