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Goldman Sachs Group Inc. (GS) Chief
Executive Officer Lloyd Blankfein said Moscow’s traffic jams are
the biggest obstacle to turning the capital into a financial
hub, according to Deputy Finance Minister Dmitry Pankin.

Blankfein and President Dmitry Medvedev discussed
investment opportunities in Russia and Medvedev’s plans for the
capital at a March 15 meeting outside Moscow that Pankin
attended.

“The first question we asked was about the main problem
for creating Moscow as a financial center,” Pankin said in an
interview in Moscow yesterday. “He said it was bottleneck from
the airport to the city center.”

Medvedev has named 27 people, including Blankfein, JPMorgan
Chase amp; Co. (JPM) CEO Jamie Dimon and Citigroup Inc. (C) CEO Vikram Pandit, to an advisory board as he seeks to bolster Russia’s
role in international finance, according to the Kremlin’s
website this month and a member of the board who declined to be
identified. Medvedev has made diversifying the economy of the
world’s biggest oil and gas supplier a priority.

Transport and infrastructure, as well as child care, are
priorities for bankers working in Moscow, Pankin said. Goldman
Sachs declined to comment, said a spokeswoman, who asked not to
be named, citing company policy.

‘Grueling’ Traffic

Mayor Sergei Sobyanin vowed to focus on easing
transportation in the capital and uprooting corruption after
Medvedev ousted Yury Luzhkov, who had governed the city for 18
years. The president wants investors in Moscow to feel “no less
comfortable than in London, Geneva or New York,” according to
the Kremlin website. Moscow ranked 68th of 75 cities in the
December 2009 Global Financial Centers Index commissioned by the
City of London.

Moscow drivers suffer the longest traffic jams of 20 major
cities, making for a “grueling” atmosphere that inhibits
commerce, according to a July report by International Business
Machines Corp.

The average Muscovite motorist spent a “whopping” 2 1/2
hours stuck in traffic at least once in the last three years,
IBM said in its global study on the “emotional and economic
toll of commuting.”

Goldman Sachs is also among the 23 banks selected by the
government last year to help manage its 1 trillion-ruble ($35
billion) state-asset sale program over three years.

Russia picked advisers “that have experience in launching
big projects” to help build Moscow into a financial hub, said Alexander Voloshin, head of the government working group
overseeing the project and former chief of staff under
Presidents Vladimir Putin and Boris Yeltsin, in a Jan. 11
interview. “And those big banks that can bring business here.”

To contact the reporter on this story:
Jason Corcoran in Moscow at
jcorcoran13@bloomberg.net

To contact the editor responsible for this story:
Gavin Serkin at
gserkin@bloomberg.net

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By Jacqueline Palank

Tim Durham could probably use a vacation right about now.

The chief executive of National Lampoon, the media company behind such films as “Vacation” and “Animal House,” was arrested Tuesday morning at his West Hollywood, Calif., home for allegedly defrauding investors in a now-bankrupt investment firm. According to the Indianapolis Star, Durham and two other former executives of Fair Finance Co. face federal criminal and civil charges for allegedly orchestrating a $230 million fraudulent investment scheme.

According to the Securities and Exchange Commission, which brought the civil charges, Durham and former chairman James F. Cochran pocketed money from investorsmany of them elderlyor diverted it to “struggling and unprofitable” companies under their control. They also allegedly took investor funds to “enhance their own lavish lifestyles,” including buying classic cars.

“These executives looted Fair Finance and exploited unsuspecting investors who trusted the company to prudently invest their funds as it had done for decades,” Robert Khuzami, director of the SECs enforcement division, said in a news release. “To add insult to injury, they squandered the stolen funds on such extravagances as multiple homes, a private jet, a yacht and more than 40 classic and exotic cars.”

That jet, the SEC said, was worth $3 million, the yacht had a $6 million price tag and the cars topped $7 million. Plus there are the gambling, travel, party and credit-card expenses Durham and Cochran are alleged to have run up, never mind the country-club dues.

Fair Finance, which creditors successfully pushed into bankruptcy liquidation in February 2010, sold interest-bearing certificates to investors and used the funds raised through those sales to buy consume- finance contracts at a discount. By late 2009, the SEC said Durham, Cochran and their other businesses owed Fair Finance more than $200 millionabout 90% of the company’s total loan portfolio.

Also charged in the alleged fraud scheme is former Chief Financial Officer Rick D. Snow, whom is alleged to have known or to have been “reckless in not knowing” that something fishy was going on. Snow was also National Lampoon’s interim CFO, as of October 2009.

Not-guilty pleas, court papers show, were automatically entered for all of the defendants in the criminal proceeding, and their jury trials are slated to begin May 16. No pleas have yet been entered in the SEC’s civil proceeding.

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MONTREAL – Finance Minister Raymond Bachand aimed for continuity and consistency in yesterday’s budget: no big surprises and no let-up in his goal of a balanced budget by 2013-14.

A healthy economic performance last year bailed the government out of a tight spot and made the fiscal plan he announced in the last budget look credible.

Still, you can’t help thinking Bachand could have done more this time.

Growth in 2011 is slowing down as new taxes and tariffs kick in. There’s not much wiggle room if things go wrong.

And there’s no real plan to bring down the massive public-sector debt, which has reached $234 billion, according to the Montreal Economic Institute.

The debt, growing at more than $11 billion a year, represents a huge mortgage on Quebec’s future.

Analysts noted that yesterday’s budget did not show much resolve to control program spending, which is growing at 3.7 per cent per year.

Quebec’s biggest employer group, the Conseil du patronat, said it’s particularly concerned by the rate of growth in health-care spending, which has reached five per cent per year.

Health expenditures will soon account for 50 per cent of all program spending.

With no “explicit” moves to control spending, there’s a “structural problem” that can be stopped only by a freeze on public expenditures, said Conseil president Yves-Thomas Dorval.

Carlos Leitao, chief economist at Laurentian Bank, agreed there’s still work to be done on the spending side.

“There’s nothing new really, the big announcements were all made last year and the targets are still being met. We found a little weakness on the spending side,” said Leitao.

“Sure, the targets for the deficit and revenue are being met, we did have a good rebound and good economic growth in 2010.”

“But they’re having trouble making sure that spending remains within the limits they have set.”

Leitao questioned the use of special funds set up to cover some of the government’s expenses, which have the effect of taking spending off the books.

“Once one gets beyond the smoke and mirrors, spending is growing at a faster pace than they had committed to last year.”

For taxpayers, most of the painful measures were already announced: higher gasoline taxes are on the way and another hike in the Quebec sales tax, to 9.5 per cent, is set for next January.

Yesterday’s budget hit students in the wallet with a tuition fee increase – a long overdue measure to correct the imbalance in university funding. As Bachand pointed out, students in the 1960s paid 26 per cent of the real cost of their education, while they’re paying about 13 per cent today.

In related moves, the government made financial aid programs for students more generous, while offering new fiscal incentives to encourage the corporate and philanthropic sectors to donate to universities.

Even so, while universities applauded yesterday’s moves, it’s pretty clear more must be done to address the funding issue in higher education.

“The increase of $325 a year over five years doesn’t go far enough and will not permit us to re-establish the competitive position of Quebec’s universities,” said Michel Leblanc, president of the Montreal Board of Trade.

Yesterday’s “timid” move leaves Quebec well short of the Canadian average for tuition fees, he noted.

One key section of the budge addresses the demographic problem facing the province, as well as the issue of pension funding.

Higher premiums are in the cards for workers contributing to the Quebec Pension Plan, which faces a looming shortfall partly caused by investment losses at the pension fund’s manager, the Caisse de dépôt et placement.

At the same time, to address an expected decline in the size of the labour force, Bachand used a carrot-and-stick approach.

Workers who stay on the job past the age of 65 will be rewarded with modestly higher monthly benefits while those retiring before that age will face a small additional reduction.

The move isn’t major but does send an “important signal” to the labour market that Quebec must hold on to aging workers as long as it can, said Laurentian Bank’s Leitao.

Bottom line: it’s a cautious budget that befits a government on the political skids.

phadekel@videotron.ca

© Copyright (c) The Montreal Gazette   

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NEW DELHI: A day after WikiLeaks disclosure indicated that the Congress had paid lawmakers to survive a vote of confidence in Parliament in 2008, another Wikileaks exposure reveals Washingtons interference in Indian political decisions.

US secretary of state Hillary Clinton is said to have questioned Pranab Mukherjees appointment as finance minister and also asked its embassy in Delhi why Mukherjee was preferred to Montek Singh Ahluwalia.

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On Tuesday, if the Conservatives have their way, the federal government will become quieter. Maybe thats why, in recent weeks, Mr. Flaherty has been quieter, too.

In previous years, the Conservatives have preannounced so much of their budget that there was hardly anything left in the actual document to discover. This year, however, there was only silence until Thursday, when Prime Minister Stephen Harper promised to deliver on a 2008 election pledge to offer a tax credit for parents who enroll their children in arts and culture programs.

Mr. Harpers speech to a Toronto-area business group otherwise simply reiterated previous announcements. The deficit declined by a quarter in 2010-2011 from the year before, and will do the same next year; the Conservatives will not cut funding to the provinces, which means transfers for health care will continue to increase by no less than 6 per cent a year even after an accord with the provinces expires in 2014.

But those who expect to see new spending for new programs should look elsewhere.

The spending control is real, Mr. Harper declared. Program spending this coming year is essentially flat.

This may explain the Finance Ministers low profile. Mr. Harper and Mr. Flaherty may have been refusing to lift the curtain because there is so little to see.

Both men are convinced that smart policy is, in this case, smart politics, that Canadians value balanced budgets and controls on spending above new programs and incentives.

At least one former Liberal finance minister agrees with them.

In Canadian politics, you form a government by occupying the centre, said John Manley, who was Jean Chretiens last finance minister and is now head of the Canadian Council of Chief Executives. And my sense is that the centre is becoming rather prudent.

Which is why he fears that, if Liberal Leader Michael Ignatieff does try to bring the government down by defeating the budget, its going to be a very tough election.

Close observers of the Department of Finance believe the outline of Tuesdays budget is already apparent.

With the economy growing faster than expected, and tax revenues along with it, the 2010-2011 budget deficit will be about $10-billion lower than the 2010 budget estimate of $49-billion.

Although Parliamentary Budget Officer Kevin Page and the International Monetary Fund both warn that there is a structural deficit that economic growth alone wont eliminate, other observers believe that those higher revenues should make it possible to balance the budget by 2015-2016, and perhaps even earlier, provided spending is kept in check.

Mr. Flaherty, who declined to be interviewed, is expected to top up the Guaranteed Income Supplement for low-income seniors, perhaps by as much as $700-million, a key NDP demand and something that the Finance Minister has said he supports in principle.

But other than that, there will be very little in the way of new spending.

What were going to hear is theyre going to keep program spending running basically in line with inflation, 2 per cent, predicted Craig Alexander, chief economist at Toronto-Dominion Bank. A 2-per-cent growth target is very easy to say but extraordinarily hard to do, he added.

The Finance Minister is calculating that if he delivers a sober budget that reins in both spending and deficits, and the opposition defeats it, then the Conservatives will be able to portray the Liberals, especially, as irresponsible.

Mr. Manley thinks he may be right.

If the Liberals position themselves so that they look like perhaps theyve lost their commitment to fiscal responsibility, that they would be in fact tax-and-spend, personally, I think thats risky political ground to be on, he warned.

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