Information Security & US & Life & Love & Fashion & Hacking & Passion

Banks and hedge funds that hold $6.9 billion in Chrysler LLC debt have proposed forgiving $2.5 billion of it in exchange for about a 40 percent stake a Chrysler-Fiat alliance, according to two people briefed on the proposal.

One of the people said the lenders delivered their counterproposal to Chrysler and the U.S. Treasury Department late Monday night. Neither person wanted to be identified because the negotiations are private.

The counteroffer comes as Chrysler races to meet a government-imposed April 30 deadline to swap debt for equity, cut labor costs and negotiate an alliance with Italy's Fiat Group SpA. If it misses the deadline, government aid will end and Chrysler likely faces liquidation.

Last week, creditors rejected a Treasury Department offer to reduce the debt to $1 billion, absolving Chrysler of about 85 percent of its secured loans. The counteroffer, which would swap about 35 percent of the debt for equity, falls short of government restructuring goals that called for Chrysler to retire at least two-thirds of its debt.

Messages were left with spokeswomen for the Treasury Department and Chrysler.

Chrysler is living on $4 billion in federal loans and could get another $500 million to survive through April. But without massive restructuring and a Fiat deal, government officials have said they won't lend the struggling automaker any more money.

The counteroffer from a steering committee would give the equity stake to first-lien lenders including Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley and several smaller banks, plus some hedge funds. Chrysler has about 45 first-lien lenders who would be first in line to get money if the company's assets were liquidated.

"The goal is something close to 40 percent of the equity" in the combined Chrysler-Fiat company, according to one of the people briefed on the lenders' proposal. "Taking equity is a risky proposition," the person said.

When the Bush administration agreed to give Chrysler and General Motors Corp. loans last year, they set targets for the companies to swap two-thirds of their debt for equity. The Obama administration has been less clear about how much debt must be exchanged, saying in a March 30 statement that Chrysler must have a "sustainable debt burden."

"This at a minimum will require extinguishing the vast majority of Chrysler's outstanding secured debt and all of its unsecured debt and equity, other than trade creditors providing normal trade terms," the statement said.

One of the people briefed on the counteroffer said the debtholders are aware that it doesn't meet the two-thirds debt-for-equity swap required by the Bush administration, but it would be a piece of an overall plan to wipe out most of Chrysler's debt.

Including the secured debt and government loans, Chrysler owes about $23.5 billion, including $10.6 billion to a United Auto Workers trust fund that will take over retiree health care costs starting next year. It also owes $1 billion each to its current owners, Cerberus Capital Management LP and Daimler AG.

The company is negotiating with the UAW to take equity for part of the trust fund obligation.

Bankruptcy experts have said the secured debtholders would be less likely to settle for pennies on the dollar because their loans are secured by Chrysler's physical assets and because they likely purchased credit default insurance that would repay them if Chrysler defaults.

Chrysler and Fiat are discussing a deal in which Fiat would take a 20 percent stake in the company in exchange for Fiat's small-car technology. Fiat CEO Sergio Marchionne is in the U.S. through today taking part in the negotiations.

AP Auto Writer Dan Strumpf reported from New York.

Copyright 2009 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

A  somber President-Elect Barack Obama announced his economic team, largely as expected, and laid the groundwork for a “substantial” economic stimulus package in January to “jolt this economy back into place.” He also took pains to reassure the financial markets that his administration doesn’t plan to reverse course on financial-rescue efforts in place, though he said “adjustments in the coming weeks and months” are still possible as events warrant.

Obama made clear that his economic team’s first priority is crafting an economic plan that will both revive the economy in the short term and create 2.5 million jobs over the next two years. And he made equally clear that the deficit is secondary, for the time being, despite projections by some that some the budget gap could reach $1 trillion next year.

“We’ve got to focus first on getting the economy back on track,” he said, acknowledging that “we’re going to see a substantial deficit next year, bigger than we’ve seen in some time,” though he declined to put a number on either the deficit or stimulus spending. “It’s going to be costly,” he said.

Nonetheless, perhaps to emphasize that reining in the deficit will be part of his longer-term planning, he said that on Tuesday, he would address plans to “reform how business is done in Washington, how the budgeting process works” with “meaningful cuts and sacrifices.”

Gains in the Dow Jones Industrial Average, which had risen some 320 points when Obama began speaking shortly after noon Eastern time, fell back to about 225 points over Friday's close after the last question before climbing again to a gain of about 264 points over the following hour.

Although Obama said some of the current administration's efforts to address the financial crisis "didn't work exactly as [intended]," he said they had helped stabilize the financial system. "My administration will honor the public commitments made by the current administration to address the crisis," he said in his prepared remarks.

As has been his habit since winning the Nov. 4 election, Obama said the government must move "swiftly and boldly" to prevent the economic slump from becoming significantly worse, saying "we cannot hesitate or delay." But he also reinforced the prevailing assumption that little in the way of economic stimulus is likely before he is sworn in on Jan. 20, urging "the new Congress" to "work on an aggressive economic recovery plan when they convene in early January." Congress left town last week having passed only an extension of unemployment benefits, with the possibility of returning to provide aid to automakers in December.

Obama also appeared to lay the groundwork for shifting his position on some tax changes, leaving open the possibility that his administration would not seek to quickly undo tax-cuts for upper-income Americans, but rather let them expire by 2011 as they would under current law.

He also supported assistance to the auto industry, but said it must be tied to meaningful reforms by automakers to ensure they remain viable once government aid ends. "We can't just write a blank check to the auto industry," he said. "Congress did the right thing, which is saying, you guys need to come up with the right plan and come back" with it before receiving any financial assistance.

The tone of his comments to reporters at the Hyatt Chicago were grave, warning that the country is "facing an economic crisis of historic proportions." But he tempered that with faith in "the spirit of determination and optimism that has always defined us."

"Again, this won't be easy," Obama said. "There are no shortcuts or quick fixes to this crisis ... and the economy is likely to get worse before it gets better." Then, wrapping up his prepared comments, he added: "I know we can work our way out of this crisis because we've done it before."

The economic team announced at the event was largely as reported over the weekend, with New York Federal Reserve President Timothy Geithner named as Obama's Treasury nominee and former Treasury chief Lawrence Summers named as director of the National Economic Council, making him perhaps Obama's top economic adviser. (BusinessWeek.com has more on Geithner and Summers.)

However, Obama tapped Christina D. Romer, a Berkeley economist and co-director of the committee that officially declares recessions, as director of the Council of Economic Advisers. Many had expected Austan Goolsbee, a University of Chicago behavioral economist and senior campaign economic adviser, to take the position. Romer's work includes research into the U.S. recovery from the Great Depression.

Obama also named Melody C. Barnes as director of the Domestic Policy Council, which coordinates domestic initiatives across the executive branch to match presidential priorities. Barnes, who works at the progressive Center for American Progress think-tank and served as a top domestic-policy adviser to Obama's campaign, will focus in part on health-care reform, working with the administration's Health and Human Services secretary. Former Senate Majority Leader Tom Daschle is expected to take that post.

Heather Higgenbottom, a former legislative director for Sen. John Kerry and founder of a national-security think-tank, will be Barnes' deputy.

• View Slide Show

Imagine you were offered a dream job that required you to relocate to your favorite city. Which city would it be? And why?

If you're like most Americans, you might select New York, San Diego, or San Francisco, according to a soon-to-be released survey of 2,500 employees and entrepreneurs across the nation by the Human Capital Institute, a Washington-based think tank and professional association largely made up of human resources professionals.

As the economy softens, this becomes more of a pressing issue because many Americans will find that they may be forced to relocate to find work. But even though some workers may not have the luxury of choice, some cities remain more desirable than others.

Favorite, Least Favorite? New York, New York

Interestingly, New York, which seems to evoke strong feelings in people, also topped the list of America's least favorite places to live and work. Survey-takers who like the Big Apple gave it high marks for entertainment options, professional and personal opportunities, and ease of transportation. Workers who don't like it overwhelmingly point to the high cost of living.

Detroit, which has seen its image only worsen with the collapsing auto industry, was the second-least appealing city, followed by Los Angeles (also No. 5 on the best cities list) and New Orleans.

"People have a love-hate relationship with New York," said Allan Schweyer, the industry group's executive director. "There are still people who think New York isn't part of the United States.…There are people who might think that even if they were offered their dream job in New York, they don't want to go from a 3,000-square-foot house in the suburbs to a 1,200-square-foot apartment."

Leading Factors: Environment, Affordability

The survey is part of the professional organization's 2009 National Talent Markets report, which is meant to help cities determine how to improve and properly market themselves to attract talented out-of-town workers. The most important issue for workers in determining where to relocate is environment, including climate and park space, according to the survey.

Affordability, which was No. 4 in last year's list, is now the second-most important attribute workers consider before relocating, thanks to the economic downturn. Affordability might have something to do with the fact that Las Vegas, where home prices have fallen faster than in most cities, climbed to fourth place on this year's list of America's favorite cities.

Companies often have trouble recruiting out-of-state talent because people—especially older professionals—simply don't like to move. The slumping real estate market has made it even more difficult for many homeowners to move because they can't easily sell their homes. According to the survey, 65% of responders said they were satisfied with the city area where they live now and 67% said they are unlikely to move within the next five years. The most mobile workers are in their mid-20s to mid-30s, have a degree or an advanced degree, earn more than $100,000 a year, and work in science and technology, media and entertainment, or professional services, the report said.

Image Is Also a Part of It

Scott Simmons is vice-president and founding partner of Crist|Kolder Associates, an executive recruiting firm in Chicago, said it's easier to find workers willing to move to big cities such as New York, Chicago, or San Francisco than it is to convince people to move to a midsize city such as Erie, Pa., which is a one-hour 45-minute drive from either Pittsburgh or Cleveland. People on the coasts, especially in California, are reluctant to move, he said. And workers often would rather not move to cold rust-belt cities such as Cleveland, Detroit, and Buffalo, he said.

"Perception is a big deal when it comes to places," said Simmons, adding that it's important to have candidates visit the city before making a decision. "Everybody has preconceived notions…. Everybody thinks Chicago is Siberia when it comes to late fall and winter."

Detroit is a particular challenge, especially now that companies like General Motors (GM) are on the brink of bankruptcy (BusinessWeek, 11/19/08). The city, which also suffers from crime and poverty, is still a one-industry town and could do more to diversify its economy, Simmons said.

Jane Howze, managing director of The Alexander Group, a national executive search firm headquartered in Houston, said workers who are flexible about relocating have a strong advantage in this economy.

"These are times where we're all asked to do more challenging things than we did a year ago," Howze said. "The winners are the ones that step up and do that…. Maybe you take that job and make it a better place than when you got there."

Word of mouth is one of the most common ways homebuyers and sellers find a real estate agent. Now, there are several Web sites that tout a more scientific approach: ranking agents based on criteria such as years of experience, how many sales they've closed, and the number of positive testimonials from past clients.

On auction sites like eBay.com, user feedback-based rankings can give anonymous buyers and sellers instant credibility. But is it a reliable way to find a real estate professional? Can it trump the referral from your a trusted relative or friend with firsthand experience?

Sites like HomeGain.com, AgentRank.com and IncredibleAgents.com function as repositories of agent profile pages. They make money from ads or, in some cases, by selling the contact information of potential customers who visited the site. Their rating schemes vary widely, and lack of active participation by agents can affect the quality of their results.

AgentRank, for example, launched in March and remains in its beta stage of development. The company brews agent rankings through a complex recipe.

Put simply, it bakes all kinds of variables into an agent's profile -- recent sales history, client reviews, experience, average days homes stay on market, among others -- and assigns them secret values that are then pumped through an algorithm that distills everything down to a rank between one and 10, with 10 being the best.

Visitors can search for agents by ZIP code or city and state, and they receive a list of agents ranked in descending order.

A key component of AgentRank and similar sites is the gathering of testimonials from agents' clients. What better way of ranking agents than by the number of positive reviews from past clients?

The site tells agents they can improve their ranking if they "close deals and make your clients happy."

Currently, agents solicit testimonials from their clients to place on the site. But that will change by next spring, when the site begins accepting unsolicited reviews, says AgentRank.com chief executive Marc Dugger.

A search of agents in Los Angeles on AgentRank turned up only 15, which is a precious few.

Dugger acknowledges the site is a work in progress. It has profiles for up to 5,000 agents spread out nationwide, which can lead to some regions having more than others, he notes.

Ultimately, relying on referrals from friends or relatives doesn't always work out, Dugger insists.

"People are very quick to hire an agent based on a single referral, but the power of these reviews are the fact that you get to see a pattern of success for an agent," Dugger says. "There are some agents that have upward of 15 to 20 reviews on the site, and that, in my opinion, would instill great confidence in that agent."

Another site, IncredibleAgents, beefs up its roster of agent profiles by tapping states' data on licensed real estate agents. As a result, many agent profiles on the site haven't been updated by the agents and offer slim to no details or client reviews.

The site, which launched two years ago, has 25,000 agents who are actively updating their profiles, says owner Damon Pace.

But faced with incomplete search results that turn up many stale profiles, it's hard not to feel like the overall rankings are pretty thin.

The rankings themselves are also somewhat puzzling. The site's current top agent in California, John La Mattery, has a score of 926. The next highest agent has 883.

The scoring is an average of 16 attributes, among these: "Office Logo," "Photo" and "Welcome Message." These seem arbitrary at best, when one considers what makes a good real estate agent.

Pace says the site helps validate agents' success and rewards those who are actively promoting themselves on the site, not just asking clients to submit testimonials.

"In a referral, you don't really have validation," Pace says. "You don't really know if that person is who they say they are, or who that person (that referred them) says they are."

The site lets anyone post a review of an agent on the site, whether it's positive or negative.

San Diego-based La Mattery racked up 70 reviews in the two months since he discovered his information on the site.

A link to the site on his e-mail signature is the only encouragement he gives clients to submit testimonials to the site, he says.

Even with his top gun ranking, La Mattery says he has yet to see any client referrals from the site.

"It's just to me another piece of the puzzle and it takes a lot of different pieces to have a client trust you and rely on your expertise and then actually work with you," he says. "Truly, it's an experiment for me."

Another site whose rankings might not instill great confidence is HomeGain.

Agents are ranked with one to five stars based entirely on consumer feedback. However, agents post the client testimonials of their own choosing, and to get a five-star raking, all they need to do is post five.

It's telling the site warns visitors that "consumer feedback may not reflect the actual quality of service" that they receive from the agents.

Matt Malmgren, senior manager of client services for HomeGain, says the site performs audits of agent profiles to make sure the testimonials are legit. In one example, the company booted an agent last year who elicited several consumer complaints and allegations of fraud. Prior to the agent's expulsion, however, he had a star rating of four or five, Malmgren says.

"It can be misleading," Malmgren says of the feedback ranking system. Still, he stresses, "if you meet an agent on the street, they're only going to give you testimonials they want to give you."

Another entrant into agent ranking is ZipRealty.com, an online real estate brokerage that is taking a slightly different approach.

The company rates its own agents based on responses from clients who are surveyed by an outside vendor. Clients are allowed to post comments and rate agents on a five-star scale. The company says, on average, 75 percent of survey recipients respond.

"We have them rate how we did as a company ... agents' performance," says Pat Lashinsky, ZipRealty's chief executive.

One sign ZipRealty's approach may be on the right track -- Lashinsky says: "Agents are nervous."

Emanuel Accepts

Newly installed White House chief of staff Rahm Emanuel and President-elect Barack Obama. Photo by Charles Rex Arbogast of the Associated Press

Illinois Rep. Rahm Emanuel has, as expected, accepted the job as chief of staff to President-elect Barack Obama, according to informed Democratic sources.

Emanuel's hiring ensures that the candidate who ran against the Beltway will have a seasoned Washington hand as his top staffer.

Emanuel was elected to Congress in 2002 to a strongly Democratic Chicago-area seat once held by legendary Ways and Means Chairman Dan Rostenkowski. He rapidly rose through the ranks of the Democratic Caucus -- serving as the chairman of the Democratic Congressional Campaign Committee in 2006 and then as the Caucus Chairman over the last two years.

But, Emanuel's experience prior to coming to Congress as an elected official may be more instructive when seeking to understand what sort of chief of staff he will be.

During the 1988 election cycle, Emanuel served as national field director at the DCCC under then Chairman Beryl Anthony (Ark.) and then spent the better part of the 1990s affiliated in one way or another with the campaign and then presidency of Bill Clinton. Emanuel oversaw fundraising during the presidential campaign of Clinton and served as political director in the White House.

Over those fifteen years as a staffer, Emanuel earned a take-no-prisoners reputation and a nickname -- "Rahmbo" -- to go with it.

House Minority Leader John Boehner (Ohio) seized on Emanuel's partisan reputation to condemn the choice.

"This is an ironic choice for a President-elect who has promised to change Washington, make politics more civil, and govern from the center," said Boehner in a statement.

But, Emanuel allies argue that the image of the Illinois Congressman as a partisan brawler is more myth than reality.

Emanuel regularly speaks with current White House chief of staff Josh Bolton and has even attended a baseball game with the Republican. He counts Sen. Lindsey Graham (R-S.C.), one of John McCain's closest allies, and retiring Rep. Ray LaHood (R-Ill.) as friends. And, Emanuel's allies point to SCHIP legislation and a G.I. Bill of Rights as examples of where he worked across the aisle to secure support.

Our sense on Emanuel is that he is the ultimate political pragmatist. He understands that Obama was elected in part (a major part) due to his promise to change the way politics is conducted in Washington. Does that mean Emanuel's tough minded approach to the intersection of politics and policy change? Absolutely not. But it does mean that Emanuel will understand that reaching across the aisle for Republican support is absolutely essential to Obama's political brand and will look for opportunities to do so.