Fiscal cliff raises recession risks, and other top business news stories of the day.
Regulators Investigate Facebook IPO
William Galvin, the Massachusetts secretary of state, on Tuesday subpoenaed Morgan Stanley over the firm’s discussions with investors over the initial public offering of Facebook shares, The New York Times reports. The Financial Industry Regulatory Authority, a self-governing authority, is also investigating concerns that the bank did not broadly share information with investors about Facebook and its prospects, as required by the law.
Mary Schapiro, chair of the U.S. Securities and Exchange Commission, said yesterday that her agency is also looking into issues related to the Facebook IPO, The Times reports.
In a statement released by a company spokesman, Morgan Stanley said its procedures for the Facebook IPO “are in compliance with all applicable regulations,” according to The Times.
Fiscal Cliff Could Lead to Recession
Big tax increases and spending cuts in early 2013 could trigger a recession according to a report released yesterday by the nonpartisan Congressional Budget Office, The New York Times reports.
The expiration of several big tax cuts at the end of 2012, followed by deep cuts to the federal budget in early 2013, could deliver an economic shock that would cause the economy to contract at an annual rate of 1.3 percent in the first half of the year. The economy would resume growing at a slow rate in the second half of 2013.
The office recommends a more gradually phasing in tax increases and spending cuts to avoid the risk of recession, according to The Times.
World Bank Warns of Inflation Risk in China
A report released Tuesday by the World Bank warns against the risk of inflation in developing East Asia, Bloomberg New reports.
The global lender said Asia policy makers must be prepared to reverse recent interest rate cuts, even though the European debt crisis and slowing growth in China are hurting imports. The World Bank predicts growth in the region will slow to 7.6 percent in 2012, down from 8.2 percent in 2011.
At the same time, Asian policy makers are feeling renewed pressure to support growth in an effort to bolster the global economy, under serious threat from the sovereign debt crisis in Europe, Bloomberg reports.
Settlement Resolves Native American Lawsuit
A U.S. appeals court upheld a $3.4 billion settlement of a class-action lawsuit over mismanagement of government trust funds for hundreds of thousands of Native Americans, Reuters reports. The settlement resolved a 1996 lawsuit that claimed the U.S. Department of the Interior had mismanaged funds held in trust on behalf of Native Americans.
The trust money, Reuters said, was from transactions involving land allotted to individual Native
Americans under an 1887 law. The proposed settlement, initially reached in December 2009, received final approval from a federal judge about a year ago. The court ruled that the settlement was fair, reasonable, and adequate, and rejected a challenge by class member Kimberly Craven who argued it was unfair.
Get the Picture? Getty Images Considers Sale or IPO
Here’s an interesting development. Financial Times reports that the owners of Getty Images, the world’s largest distributor of stock photos, video and other digital content, have retained bankers to examine a possible sale or public offering of the business they took private four years ago for $2.4 billion.
Others recently have made moves to get into the picture business. Last week, FT reports, the private equity fund Kohlberg Kravis Roberts took a 50 percent stake in stock photography manager Fotolia to consolidate the fragmented marketplace for licensing online digital images and videos. In the same week, rival Shutterstock, with its archive of 19 million images, filed papers to raise $115 million in an as yet unpriced New York IPO being led by Morgan Stanley.
Wal-Mart Loses Confidence of Pension Fund
The California State Teachers’ Retirement System, one of the nation's largest pension funds, says it will vote its 5.3 million shares against all of Wal-Mart’s nominees to the board of directors at the annual shareholders' meeting in late May, the Associated Press reports.
The pension fund said it has lost confidence in the board’s independence in the wake of accusations of bribery in the world’s largest retailer’s Mexican operation. Late last month, The New York Times reported that Wal-Mart allegedly failed to notify law enforcement after its own investigators found evidence of a bribery scheme in Mexico.