McDonald’s, Unable to Fix Its Dismal Monthly Sales Numbers, Will Now Just Stop Sharing Them
There are plenty of reasons why it’s hard to forget McDonald’s is doing poorly, but one of the most important is its monthly same-store sales reports. Every month, McDonald’s announces how much sales have grown (or fallen) at restaurants open at least 13 months in its various market segments and across the globe. Lately, those figures have been nothing but dreadful. As of April, McDonald’s global same-store sales had shrunk for 11 consecutive months while its U.S. numbers had either declined or stayed largely flat. February was particularly bad: Sales plunged 4 percent in the U.S. and 1.7 percent globally, prompting McDonald’s to admit it needed to become a “modern, progressive burger company.”
But the McDonald’s Misery Watch is about to become less frequent: The company is ending its monthly reporting practice, which it began in 2003. According to Bloomberg, the company plans to stop reporting monthly same-store sales after June, when its second-quarter earnings are released. “To focus our activities and conversations around the strategic, longer-term actions we are taking as part of our plan, we have decided to discontinue our monthly sales disclosure, effective July 1,” Steve Easterbrook, McDonald’s chief executive, said at an analysts conference in New York City on Wednesday. Other items on McDonald’s turnaround agenda: increased hourly wages for employees of its corporate-owned stores, more control for franchisees, customized burgers, and all-day breakfast.
While it’ll be sad to see the monthly figures go—especially if your job is to report on McDonald’s fortunes (or lack thereof)—this is probably a good decision for the chain. For starters, reporting monthly sales is a rather outdated practice. In 2009, Walmart decided to give up reporting monthly same-store sales. Two years later, there was a “mass exodus” of retailers as everyone from Abercrombie & Fitch to American Eagle ditched their monthly same-store sales reports. Until now, McDonald’s has continued to report monthly figures even though most of its competitors do not. Pizza Hut, Taco Bell, Chipotle, and Starbucks are among the chains that don’t provide monthly updates on same-store sales. If McDonald’s sales aren’t scrutinized by investors every month anymore, the company might finally have some breathing room to improve.
Vox Media to Buy Silicon Valley News Machine Recode
Vox Media, which owns the Verge, SB Nation, the Curbed network of real estate sites, and Vox, is acquiring the Silicon Valley–based tech news site Recode, known for its unrelenting industry reporting. Recode was founded by Walt Mossberg and Kara Swisher in 2013 after they left the Wall Street Journal and the site they ran for the newspaper, AllThingsD.
The New York Times reports that terms for the all-stock deal aren't public, but given Recode's roughly 1.5 million monthly visitors (according ComScore), Vox Media's 53.2 million unique visitors in April were probably appealing. Swisher told the Times that, “Everybody is bigger than us. ... It’s not a secret that being a smaller fish is really hard.” Recode currently has 44 full-time employees and three contractors. The site will also bring its well-known and valuable tech conferences to Vox Media.
Of course, Recode won't be the only tech site in the Vox universe. Verge editor-in-chief Nilay Patel wrote that the difference between Recode and the Verge is the former's emphasis on business news and the latter's focus on tech and culture (and tech culture). “The Verge is for understanding life on the cutting edge. The Verge is for everyone. So when the opportunity to work more closely with Recode arrived, it made perfect sense: Recode covers the business of technology," Patel wrote.
On Friday, news also surfaced that the startup Knowingly Corp. would acquire the Silicon Valley tech news property Gigaom, which was forced to shutter in March. And news of the Recode acquisition came shortly after Mat Honan of BuzzFeed announced that Verge Silicon Valley reporter Nitasha Tiku would be moving to BuzzFeed's recently established Silicon Valley bureau.
It's a game of musical chairs that's become more common in tech-news media, as sites attempt to meld styles and voices and offer something new and accessible. Vox properties seem to prioritize sharability, while Recode has a reputation for being hard-nosed and delivering scoops.
“This is going to be fun,” Patel wrote.
Charter Communications Will Buy Time Warner Cable for $55 Billion
It’s been barely a month since Comcast’s $45.2 billion bid for Time Warner Cable fell apart at the hands of regulators, but already the companies have moved on. Comcast has committed to being somewhat nicer to consumers. And Time Warner Cable said Tuesday that it will be acquired by Charter Communications, one of the largest cable operators in the United States, in a $55 billion cash-and-stock deal that values Time Warner Cable at $78.7 billion, or approximately $196 a share. Charter will also acquire Bright House Networks for $10.4 billion. Altogether, that will give Charter control of 23.9 million customers in 41 states.
While the month between the death of the Comcast–Time Warner Cable deal and the announcement of this one might seem short, it’s a merger that Charter and Time Warner Cable have considered plenty of times before. Charter made several bids for Time Warner Cable in 2013 but was turned away in favor of Comcast. This time around, John Malone, a telecom billionaire and the deal’s main backer thanks to a 27 percent stake in Charter held by his company Liberty Media, helped to nudge the merger along. The Wall Street Journal reports that Malone and Charter together “took a more light-handed approach”:
Mr. Malone got more involved, people familiar with the matter say, calling Time Warner Cable Chief Executive Rob Marcus in the early stages of Charter’s pursuit to indicate he wanted a friendly deal. Charter’s camp made a point of not submitting a lowball bid that would put off Time Warner Cable, the people said.
As with Comcast’s ill-fated deal, the big question with this new merger will be whether it can pass regulatory muster. The Journal reported last week that Federal Communications Commission Chairman Tom Wheeler had reached out to both Charter and Time Warner Cable to suggest that his agency was not necessarily opposed to any and all future big cable deals. At the same time, since Comcast’s deal collapsed, Wheeler has suggested he’d like to see the cable industry move toward competition rather than consolidation. “More competition would be better,” Wheeler said in a speech earlier this month at the National Cable and Telecommunications Association conference. He encouraged cable operators to “overbuild” into each others’ turf, essentially undoing their patchwork of regional monopolies. “While I know it is an anathema to your geographically defined way of looking at the industry, I believe—as some have already demonstrated—that it can also be an opportunity,” Wheeler added.
Does that mean Wheeler would also like to see Charter build into Time Warner Cable’s territory instead of buying it out? For now, the FCC has simply released a short statement noting that every merger is reviewed “on its merits” to determine “whether it would be in the public interest.” But Todd O’Boyle, program director at public interest group Common Cause, says there’s “no reason to assume that this will get a rubber stamp or pro forma approval.” Wall Street, for its part, appears to agree. Shares of Time Warner Cable were up just 7 percent in midday trading—far less than the 14 percent premium in Charter’s offer—suggesting investors are hesitant to buy in. Time Warner Cable might already be over the failed Comcast deal, but it seems like just about everyone else is not.
Young Twentysomethings May Have a Leg Up in the 1099 Economy
The more Uber and Uber-but-for services proliferate, the more people wonder: What do all these independent-contractor jobs mean for the economy? With an estimated 34 percent of the American workforce currently in freelance or independent contractor jobs and as many as 40 percent forecast to be in those jobs by 2020 according to Intuit, it’s an increasingly pressing question. And while there’ve been a few stabs at answering it—including one earlier this year by Uber, which unsurprisingly concluded that people like working for Uber—the truth is no one knows. A report released this week by the group Requests for Startups doesn’t really know either, but it does add some interesting statistics to the discussion.
To conduct the report, the authors (three students at Stanford University and one Y Combinator alum) and their collaborators (mostly startups and on-demand service providers) distributed online surveys to 1,330 independent contractors. Respondents were offered a chance at winning one of 20 $100 Visa gift cards if they completed the survey, which 897 ultimately did. The authors analyzed the responses by dividing companies into four segments: ride-sharing (companies like Uber), manual labor (companies like HomeJoy, a house-cleaning service), delivery (companies like Postmates, a food delivery service), and passive income (companies like Airbnb). A lot of their findings support points we’ve heard before: People who work as contractors value the flexibility but worry about the money they earn, and juggle the contract work with other full-time or part-time jobs.
What's interesting about this report, though, is the picture it provides of contract work for young adults, particularly those under 24. About 39 percent of the survey’s respondents said they were between age 18 and 24—the biggest age cohort. For select questions, the report broke out how these people answered questions as opposed to all other workers. Here’s what it found:
Young adults are much more likely to take a 1099 job because the pay is better, the flexibility is greater, or they have friends who also work there.
Young adults work significantly fewer hours than other 1099 employees.
They’re also more likely to grow out of the need for a 1099 job and leave it.
Here’s the real kicker, though: Young adults are also way more likely than everyone else to have health insurance. Considering that one of the big drawbacks of freelance and contract work tends to be lack of benefits, having health insurance is huge. Presumably, most of them also have Obamacare to thank, which lets children stay on their parents’ health insurance policies until they turn 26.
There’s been a little written on how Obamacare drives the 1099 economy, mostly focusing on how it lets workers purchase health coverage without a traditional employer. But it makes sense that another big piece of that would also be giving young adults still on their parents’ plans the freedom and peace of mind to take piecemeal, contract-style work while they figure out what they actually want to do for a career—or look for better full-time options. So when you consider the health insurance benefits many of these young adults have alongside the other trends in contract work—fewer total hours, and a much more short-term outlook—you can see how being a contractor as a young twentysomething might not seem so bad. Which gives them a big leg up on just about everyone else.
Almost Half of America’s Biggest Cities Are Basically Built Like Giant Suburbs
The word city may conjure up the image of a dense urban space full of street life and people willing to pack themselves like tinned fish into subway cars for their morning commute. But in the real world, a city is just a set of political boundaries. And often, what's inside those lines looks all but indistinguishable from a suburb, from cul de sacs to roomy houses to lots and lots of highways. If you've ever driven around a place like Phoenix or Austin—or lived basically anywhere outside the East Coast—you're well aware of this.
Recently, Jed Kolko, chief economist at the real estate website Trulia, has been on a mission to show precisely how suburban many of the country's biggest cities really are. Even if you're familiar with how American metropolises tend to sprawl, his findings are striking.
The U.S. Census Bureau doesn't distinguish between urban and suburban tracts in its official data. So Kolko and Trulia developed their own definition by asking more than 2,000 adults whether they thought they lived in an urban, suburban, or rural neighborhood. "Our analysis showed that the single best predictor of whether someone said his or her area was urban, suburban or rural was ZIP code density," Kolko explained in an article for FiveThirtyEight this week. "Residents of ZIP codes with more than 2,213 households per square mile typically described their area as urban. Residents of neighborhoods with 102 to 2,213 households per square mile typically called their area suburban."
Using those benchmarks, Kolko categorized each ZIP code in the United States as urban, suburban, or rural, then calculated the percentage of households within different cities that lived in each sort of zone. He kindly sent me the results for 34 U.S. municipalities with 500,000 or more residents (only a few of which he published at FiveThirtyEight). In 16 of them, more than half the city could be considered suburban, based on density. Eight of them were about two-thirds suburban, or more. Sun Belt cities like like Charlotte, North Carolina; Forth Worth; Phoenix; Tuscon, Arizona, are especially diffuse. Nashville has little more than an urban nub.
Initially, I was surprised by the fact that both New York and Washington, D.C., qualified as 100 percent "urban" by Kolko's measure. Large sections of Queens, where it's not unheard of to find backyard pools and front lawns, seem awfully 'burblike, as do some wealthier, mansion-studded chunks of Northwest D.C. What that speaks to is the fact that the areas many Americans consider "urban" aren't really hyper-dense. As Kolko noted at FiveThirtyEight, ZIP codes at the threshold between urban and suburban include places like Falls Church, a strip mall-filled stretch of Northern Virginia, and Teanec, New Jersey.
"The variation across big cities in how urban they really are is enormous," Kolko wrote to me in an email. "Even the least urban parts of Queens are still more urban than the average neighborhood in many other cities."
And many other cities, for that matter, barely look like cities at all.
EBay Joins the Turf War for Amazon Prime Subscribers With Its Own Loyalty Program
Last week it was Walmart getting into subscription delivery to ostensibly take on Amazon Prime; this week it’s eBay. The company is piloting a loyalty program in Germany that gives members benefits on shipping and returns, one which it plans to introduce there more widely in the second half of the year. A Web page advertising the program, to be called eBay+, doesn’t offer specifics on cost, but it’s been reported that the annual fee could be around €15 to €20, or about $17 to $22. That would make eBay’s loyalty offering among the cheapest out there. Amazon Prime—which comes with many more perks than free shipping—costs $99 a year, and Walmart’s service is being priced at $50.
Here’s a little more from the Wall Street Journal:
Ebay is promising better product placement for sellers’ merchandise, and also discounts on selling fees and a subsidy to help cut the cost of shipping and returns, according to a spokeswoman. Sellers will have to agree to dispatch goods on the day they are purchased and offer free returns within one month. The spokeswoman declined to disclose the price, and said eBay will have more details to share once it is introduced in the second half.
While eBay’s program hasn’t started yet, the Street is reporting that people are already skeptical. Maike Fuest, eBay's director of communications for Germany, told the Street that eBay+ will help sellers “commit existing customers even more strongly to themselves” and also “gain new customers.” But sellers are concerned that they’ll have the bear the cost of all these new eBay+ benefits. Customers, for their part, might wonder how eBay plans to standardize same-day shipping (and free returns one month later) when they are buying from scattered eBay sellers instead of eBay directly. EBay, after all, isn’t exactly the well-oiled logistics machine that Amazon is, nor has it built its reputation on customer service in the same way.
But perhaps that’s why eBay feels like the time has come for eBay+. When eBay spins off PayPal in the third quarter of this year, the company will lose its thriving, fast-growing payments arm, and be left with its dwindling marketplace and a vague aura of dustiness. To make itself viable as a standalone business, eBay desperately needs to reinvigorate its offerings and refresh its reputation with consumers. A loyalty program could be a great way to do that. If it’s executed well, that could draw far more customers into eBay and, maybe more importantly, put it back alongside modern e-commerce successes like Amazon Prime and Google Express in their minds. The key phrase, of course, is “if it’s executed well.”
Austin, Texas, Is Blowing Away Every Other Big City in Population Growth
Austin, Texas, keeps tearing along as the fastest growing big city in the country. According to census figures released today, its population shot up 2.9 percent during the 12 months that end in July of 2014. Among the 50 largest American cities (and to be clear, these figures are for cities proper, not their wider metro areas), the next closest on the list was Denver, which managed 2.4 percent growth. Which is to say, no other major city even came close to Austin's pace of expansion, much as has been the case ever since the recession ended.
Three quick takeaways after the graph:
Americans still love the sun
Overall, the vast majority of U.S. population growth is concentrated in the South and West. Likewise, the cities topping this list are mostly scattered through states like Texas, California, North Carolina, Florida, and Colorado (And did I say Texas? Let me say it one more time: Texas.). There are some prominent Eastern and Midwestern exceptions in Minneapolis; Washington, D.C.; and Columbus, Ohio. But the Sun Belt's lure of cheap housing and warm weather isn't losing its appeal to Americans. That said, Pacific boomtowns like Seattle and San Francisco are benefiting more from hot job markets, which have outweighed their miserably expensive real estate prices.
America's fastest growing city is really a fast growing suburb
Austin is a delightful town with a growing number of high-rises and walkable neighborhoods packed with trendy restaurants and bars. But it's nearly impossible to survive there without a car, an enormous amount of the housing stock is made up of single-family homes, and it's not actually all that noticeable when you leave its city limits. Like many of the places topping the growth charts, much of it just feels like a large collection of 'burbs. Today on FiveThirtyEight, Trulia economist Jed Kolko points out that based on neighborhood density, Austin could be considered more than half suburban, as would other high-growth locales like Phoenix; Fort Worth, Texas; Charlotte, North Carolina; and Houston. So while cities are growing as political units (which is wonderful for their tax bases), that doesn't necessarily mean Americans living in them are opting for what most of us would consider urban lifestyles.
Only a few big cities are outpacing their wider regions
Given how indistinguishable some major cities are from the suburbs that ring them, I got to wondering: How many are actually growing faster than their wider metro area? Not many, it turns out. Among the top 50 cities, only 14 had grown faster than the state as a whole and grown at least 0.2 percentage points faster than their wider metro area (sadly, the census didn't includes a margin of error on its growth estimates, so I wanted to leave a little room). Of that group, the star destinations were Portland, Oregon, and Miami, which are just about as far apart, geographically and spiritually/culturally/psychologically, as two cities could be.
How a Danish Company Is Helping People With Autism Get Jobs in IT and Tech
This post originally appeared in Inc.
William Hughes is a marketing intern at Towers Watson. Hughes holds a master’s degree in political science from Stony Brook, which he received in 2013, as well as a bachelor's degree from Hunter College. He also has autism.
"We're highly talented individuals. We may not see things the same way as a neurotypical person, but we will get to where we're going," the 48-year-old Hughes said.
The fact that Hughes is employed—let alone by the largest human resources consulting firm in the world—makes him an exception. Typically, it's very difficult for people with disabilities to find work: Just 68 percent between the ages of 16 and 64 have jobs, according to research from the American Community Survey. And only 32.5 percent of young adults with autism work for pay, according to the National Longitudinal Transition Study 2.
Hughes is bucking the trend in part thanks to the training he received from Specialisterne, a company that hires high-functioning autistic employees and prepares them for employment in the IT and technology sector. In many cases, people with autism may actually have more to offer companies than the average worker, especially in the world of tech.
Thorkil Sonne, who founded Specialisterne in 2004, wants to change the professional fate of people with autism—and he has a personal stake in the cause: His own son Lars was diagnosed with autism 15 years ago. The Danish company—which literally translates as "the specialists"—is off to a promising start and has since expanded to nine countries worldwide. The United States is his next target because it represents a huge market with about 50,000 people with autism turning 18 each year, according to the New York Times. But changing the way companies think of autistic employees is going to be a marathon, not a sprint.
Sonne has learned that Specialisterne has a difficult business model to uphold abroad, especially without the same level of government support that it receives in Denmark: He told the Times that it would take roughly $1.36 million and three years for the U.S. branch to fully sustain itself.
Training and finding jobs for people on the autism spectrum still goes against so many social norms in the workplace.
"Employers aren't hiring people with autism because they're locked into a social paradigm, where everyone is looking for happy, mainstream employees who are good team players and good at promoting themselves," Sonne said. "There's a total divide between talent and vacant jobs in the high tech sector. Our mission is to remove that divide."
Specialisterne has already seen some success: Software juggernaut Microsoft announced in April that it will partner with the organization in an effort to promote workforce diversity at its Redmond, Washington, headquarters. Specialisterne has also worked with the German database company SAP, with Hewlett-Packard in Australia, and with a number of American technology companies. Sonne estimates that Specialisterne has generated 500 jobs for people with autism so far.
Employees with autism can often bring exceptional skills to the table, such as pattern recognition, enhanced memory, and the ability to consistently engage in repetitive tasks, according to Sonne. And in 2009, scientists researching autism at King's College in London found that most individuals diagnosed with the disease possess "some form of outstanding ability," according to the Times. But people with autism tend to lack the social aptitude that employers, like those in Silicon Valley, tend to screen for.
That's why traditional hiring practices like phone interviews may actually be discriminatory, according to Timothy Weiler, the director for talent and rewards at HR consulting firm Towers Watson. Weiler helped to get the Specialisterne program up and running at his company.
"Employers need to alter the way they're screening candidates and be careful about expecting the type of social interaction that most of us were screened on, which is direct eye contact, firm handshake, a smiley sunny disposition. ... Some of those things really have no correlation to success in the workplace," Weiler said.
Of course, everyone with autism is different. "The autism spectrum is a very wide, broad net, and so not everyone is going to have the same issues," Hughes said.
Sonne, for his part, urges hiring managers to keep an open mind with those employees.
"Say what you mean and mean what you say. Don't use irony or sarcasm," he said. People with autism likely won't be pick up on those cues, he added.
Even so, Sonne's organization wants to help autistic workers cultivate their social skills as much as possible. The program uses a "show versus tell" methodology in lieu of a sit-down interview. After an introductory workshop, where individuals are asked to complete tasks such as building and programming their own robots, Specialisterne chooses a handful of applicants to go through with the assessment training course. The company evaluates applicants on their teamwork, motivation, and professional skills. When Specialisterne worked with SAP, this was a four-week session. Hughes' program lasted from February through September: After the training, most candidates worked as seasonal employees at the company's White Plains, New York, location.
Hughes said these lessons were valuable to him.
"It helped me get insight into what I was doing wrong, and it's been helpful to get me back into the workforce," he said.
Of Hughes' training group, he was the only one to get a job at Towers Watson. At least one of his colleagues went back to school after the training, although many stayed on as employees with Specialisterne in White Plains.
It's worth noting all of the individuals in Hughes' group already had college degrees, although Sonne said that this isn't a requirement for someone who wants to enter the program.
"It's important for them to know how teamwork works, because many have been told that they cannot do it," Sonne said. "Our experience is that if we can explain the expectations, they will be able to fit in."
Hughes, for his part, agrees: "We have different backgrounds but we can work together very well. Ultimately, as the group succeeded, each one of us felt like we succeeded. That's the important thing for people to realize."
Expectation management is one of the organization's greatest challenges, given that it's highly selective: It hires only about one in six of the people it evaluates, the Times reported. While the company does its best to help the applicants get jobs, not everyone is successful in the end, and Sonne admits that recovering from that rejection can be especially difficult for their candidates.
Still, Specialisterne aims for more in the future: Its ultimate goal is to have 1 million people with autism employed.
This Chart Shows How Oil Is Losing Its Total Grip on American Transportation
Long term, seemingly immutable trends break. All the time. Especially in the realm of energy.
The U.S. Energy Information Administration just published a great chart that shows how oil—once pretty much the only transportation fuel we used in America—is losing its grip at a nontrivial rate.
The chart shows the changing amount of BTUs (British thermal units) consumed across all modes of transportation by energy source. And for much of the past half-century, the picture was rather simple. It was pretty much all petroleum (gasoline/diesel), and it rose pretty much every year.
But several years ago, we started to see the beginnings of the slow-motion disintermediation of petroleum as a transportation fuel. No, gasoline, isn’t quite going the way of whale oil. But it has been losing market share at an alarming rate—and at the same time as the need for energy throughout the system has been declining.
According to the EIA, the U.S. transport system required about 6 percent fewer BTUs of energy to function in 2014 than it did in 2007. And it used nearly 10 percent less oil than it did that year. In fact, oil consumption was lower in 2014 than it was in 2000. And as a proportion of transportation fuel, petroleum hasn’t been this low since 1954, when coal was still a significant transportation fuel. Petroleum’s market share has fallen from 96.5 percent in 2004 to 91.5 percent in 2014.
We can chalk that up to two powerful trends—the simultaneous rise of alternate fuels and the growing efficiency of America’s vehicle fleet.
First, other fuels are slowly gaining traction. Especially biofuels—chiefly ethanol, the controversial, subsidy- and mandate-aided gasoline substitute made from plants like corn. From a tiny base, 135 trillion BTUs in 2000, ethanol consumption rose eightfold to 1.092 quadrillion BTUs in 2014. Add in the small amount of biodiesel, and these renewable biomass fuels in 2014 accounted for 4.7 percent of the transport sector’s energy consumption—up from .5 percent in 2000. They have increased their market share tenfold in 14 years.
At the same time, the fracking revolution has made natural gas cheap and plentiful. As a result, it is increasingly being used as a transportation fuel, especially for buses and trucks. (The natural gas figures in this chart include gas used to operate pipelines as well as vehicles that run on natural gas.) Check out the website NGTNews.com, and you’ll see a daily flow of news stories about large numbers of fuel-intensive vehicles switching to natural gas, such as a school bus fleet in Oregon or the latest additions to the fleet of UPS, which has 2,500 vehicles that run on natural gas. Meanwhile, companies like Clean Fuel Energy are building filling stations and inking supply deals with big users—which in turn make it easier for more companies to adapt. According to the EIA, natural gas in 2014 accounted for 946 trillion BTUs, or about 3.5 percent of the transport sector’s energy consumption, up from 2.2 percent in 2004.
Combined, natural gas and biofuels account for 8.2 percent of the energy used by the sector.
And this data set doesn’t include electricity used to power cars. Every month, several thousand cars are sold that run exclusively or partially on electricity—combined sales of plug-in hybrids and all-electrics were about 9,000 in April. There are also a few buses that run entirely on electricity.
There’s another big factor that’s taming the need for all fuels—and that is particularly taking a bite out of oil use. Vehicles that use petroleum have been getting much more fuel-efficient. As Michael Sivak and Brandon Schoettle of the University of Michigan report, the typical car sold in April 2015 gets 25.2 miles per gallon, compared with 20.1 in October 2007—an increase of 25 percent. Companies are developing technologies and products that make large, gas-guzzling vehicles more efficient, whether it is XL Hybrids tricking out cargo vans to be hybrids, or Greenroad’s slightly Orwellian behavior modification software that can cut buses’ fuel consumption by a few percentage points.
That’s not to say that petroleum is out as a transport fuel. It’s still the dominant one by far. Most companies would be psyched if their product had a 91.5 percent market share. But there’s reason for concern. With each passing day, a slightly smaller proportion of America’s vehicles run on petroleum. And with each passing day, companies that profit by helping vehicle operators and owners use either less oil, or less fuel, are getting bigger.
Banks Are Now Pleading Guilty to Crimes. So Why Aren’t They Being Punished Like Criminals?
Not so long ago, federal prosecutors were simply terrified by the idea of what might happen if they ever brought criminal charges against a major bank. They worried that the consequences of a felony conviction might cause a large financial institution to collapse and wreak havoc on Wall Street, much as the accounting firm Arthur Andersen went bust after it was convicted for its role in the Enron scandal.
So the Department of Justice and the Securities and Exchange Commission landed on a compromise. When bankers got caught doing something illegal, the government asked them to pay a hefty fine and sign a "deferred prosecution agreement," in which they promised to mend their behavior forever more. The government lawyers got to trumpet billion-dollar penalties. The banks got to go back to their businesses without much long-term damage. For everyone else, it was pretty clear Wall Street had simply gotten "too big to jail."
Lately, the government's lawyers have gotten a little braver. Attorney General Loretta Lynch announced Wednesday that four of the world's largest banks had pleaded guilty to criminal charges that their traders had conspired to fix the massive and poorly regulated foreign exchange market. Citigroup, JPMorgan Chase, Barclays, and the Royal Bank of Scotland all admitted to being felons. Meanwhile, Switzerland's UBS, pleaded guilty to manipulating the benchmark Libor interbank lending rate. The five banks are ponying up $5.6 billion in fines.
But that's basically the extent of the punishment. As the New York Times reports:
For the banks, though, life as a felon is likely to carry more symbolic shame than practical problems. Although they could be technically barred by American regulators from managing mutual funds or corporate pension plans or perform certain other securities activities, the banks have obtained waivers from the Securities and Exchange Commission that will allow them to conduct business as usual. In fact, the cases were not announced until after the S.E.C. had time to act.
So, federal prosecutors are now confident they can bring criminal charges against major banks without ushering in a financial catastrophe, as long as they water down the consequences. Is this progress?
Maybe. Promisingly, Bloomberg reports that the Justice Department is still considering bringing charges against some of the individuals involved in the foreign exchange scheme. Even if the targets of its investigation turn out to just be relatively low-level traders, that would still demonstrate some determination to treat blatantly criminal activity as blatantly criminal activity; we are talking about a group of conspirators that had the gall to call itself "the cartel," after all. Moreover, this is "the first time in decades" that any American megabank has pleaded guilty to a criminal charge, as Reuters notes. Previously, the Justice Department had extracted pleas from foreign banks like Credit Suisse and BNP Paribas. And as I wrote last year, there were reasons, mostly involving cooperation from regulators, to doubt that prosecutors would try to do so with a U.S. firm.
Still, so long as banks are allowed to pay for their crimes by simply writing a check, it's hard to think of these as anything other than ersatz convictions.
So here's the big question. Is the Justice Department still too scared to pursue actual criminal penalties against a bank? Or, now that prosecutors have taken the step of forcing an actual plea from an American institution, will they feel empowered to seek somewhat harsher punishment the next time around? How brave are they, really?