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What’s
News
Business & Finance
S ome economists say the
2% inflation rate, long
pursued by central banks,
should be adjusted, but they
differ on the direction. A1
 The ECB decision to offer
no-cost loans was welcomed
by struggling banks in
southern Europe but criti-
cized in Germany. B5
 Italy’s Eni began pump-
ing oil in the Arctic after
getting final approval from
Norway following long de-
lays and cost overruns. B1
 A recent rise in oil prices,
boosted by talk of output
caps, has some questioning
if the rally could spark an-
other downward spiral. B5
 Blackstone is selling a
portfolio of U.S. luxury ho-
tels to China’s Anbang In-
surance, just months after
buying it for $4 billion. B5
 Sequoia said it parted
ways with a partner in the
wake of sex-abuse allega-
tions and a failure to com-
plete a settlement. B2
 Chipotle’s executive pay
will be tied to the share price
as the chain tries to recover
from illness outbreaks. B4
 Valeant’s board consid-
ered replacing the CEO amid
concerns over his health and
management style. B4
 A Go grandmaster
claimed his first victory in
matches against a Google ar-
tificial-intelligence project. B1
World-Wide
 Exit polls in Germany
showed big gains for an anti-
immigrant party in state
elections, in a rebuke to
Merkel’s refuge policy. A1
 A car bomb hit the center
of Turkey’s capital, killing at
least 27 people, in what
officials said was the work
of Kurdish separatists. A1
 Al Qaeda’s affiliate in
Syria attacked a Western-
backed rebel faction, a sign
of rising tensions among
regime opponents. A4
 Terrorists stormed a
beach town in Ivory Coast,
killing at least 12, in an at-
tack that bore the hallmark
of an al Qaeda affiliate. A3
 Western powers threat-
ened sanctions against Liby-
ans who block the formation
of a unified government. A4
 GOP rivals wavered on
whether they could back
Trump if he is the nomi-
nee after fights broke out
before a planned rally. A1
 Doctors who treated the
German co-pilot who inten-
tionally crashed a jet refused
to speak with investigators,
citing privacy laws. A3
 Some big U.S. cities, in-
cluding Chicago and Los An-
geles, have seen an increase
in murders this year. A7
 Brazilians called for the
ouster of Rousseff, who many
blame for corruption and
an economic meltdown. A4
CONTENTS
Business & Tech. B1-4
Crossword.............. A14
Europe File............... A2
Heard on Street.... B8
Markets Digest..... B6
Money & Inv...... B5-8
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DISASTER SCENE: Above, the wreckage of a bus after an explosion in central Ankara, the Turkish capital, on Sunday.
Car Bomb Kills 27 in Ankara
Blast is the latest in
a string of attacks
that have left nearly
200 dead in Turkey
ANKARA, Turkey—A pow-
erful car bomb hit a bustling
business district in central
Ankara Sunday night, killing
at least 27 people and
wounding 75 others in the
nation’s capital, according to
the governor’s office.
The blast, the second such
attack in less than a month
to hit the Turkish capital, en-
Gunmen Hit Ivory Coast Resort
SIA-KAMBOU/AGENCE FRANCE-PRESSE/GETTY IMAGES
ON EDGE: Gunmen stormed a beach town in Ivory Coast on Sunday,
killing at least 12 in what authorities said appeared to be a terrorist
attack. Above, security forces evacuating people afterward. A3
Candidates Waver
On Backing Trump
Ohio Gov. John Kasich
blamed Republican presidential
front-runner Donald Trump for
creating a “toxic” environment
and suggested he may not be
Opinion.............. A12-13 able to back him if he is the
Review................. A8-10
Sports....................... A14
Technology............... B3 By Reid J. Epstein in
U.S. News.................. A7 Sharonville, Ohio,
Weather................... A14
World News....... A2-4
Patrick O’Connor in
Largo, Fla., and
Colleen McCain Nelson
in St. Louis
party’s nominee. Florida Sen.
Marco Rubio also expressed
doubts about whether he stands
by his pledge to support the
eventual GOP choice.
The candidates’ remarks
came after fights broke out at a
Chicago arena where Mr. Trump
MONDAY, MARCH 14, 2016 ~ VOL. XXXIV NO. 31
STOXX 600 342.23 À 2.62% OIL 38.50 À 1.74% GOLD 1258.70 g 1.05% EURO 1.1173 g 0.08%
gulfed cars, buses and people which was driving very fast,
gathered in a popular spot ran into us.”
not far from the nation’s par- Soon after the attack, Tur-
liament. key Prime Minister Ahmet
Dogan Asik, 28 years old, Davutoglu called an emer-
said the attacker was driving gency security meeting at his
a car that sped office, not far
up and ran into By Ayla Albayrak, from the blast
the municipal Dion Nissenbaum site.
bus he was rid- and Emre Peker The attack
ing in at the came two days
time. after the U.S. Embassy in
“I was on a bus,” said a Turkey put out an alert
bloodied Mr. Asik, who ap- warning of a “potential ter-
peared to be in shock as he rorist plot” aimed at central
was treated for injuries from Ankara and warned Ameri-
the attack. “There were at cans to avoid an area near
least 40 or 50 people. A car, where the attack took place.
Inflation Target Faces
Scrutiny From All Sides
BY TOM FAIRLESS
Frankfurt
Central bankers over the
past two decades pursued 2%
inflation as a Goldilocks stan-
dard—neither too hot nor too
cold. After years of under-
shooting in ad-
ANALYSIS vanced econo-
mies, some
economists now
say that target should be ad-
justed.
Trouble is, they can’t agree
whether it should be higher or
lower.
One faction says ultralow
inflation rates are the result of
long-term economic trends
Body Politic Rebuffs French Island’s Nudist Past
‘Textiles’ and other newcomers want locals to be better dressed
BY NOEMIE BISSERBE
planned and then canceled a ILE DU LEVANT, France—On
Friday-night rally. a blustery morning on this Med-
The situation also comes just iterranean island, dozens of na-
ahead of pivotal primaries Tues- ked men and women marched
day in the home states of arm-in-arm in defense of their
Messrs. Kasich and Rubio, right to bare bottoms.
whose fortunes appear to be The target of their protest
heading in opposite directions, was Jean-Yves Gacon, who is
according to a new poll. wielding his authority as head
Mr. Kasich narrowly leads of the island’s homeowners as-
the GOP field in Ohio heading sociation to force people to
into its winner-take-all primary, wear clothing. The coverup has
a new Wall Street Journal/NBC the backing of the mayor’s of-
News/Marist poll shows. The fice as well as local police who
governor is the preferred pick are stopping anyone who dares
of 39% of likely primary voters, stroll through the village square
followed by Mr. Trump at 33% without clothes.
and Texas Sen. Ted Cruz at 19%. “The traditions of this place
The prospects aren’t quite so need to be preserved,” says
rosy for Mr. Rubio in Florida, a Elizabeth Varet, a 70-year-old
state he needs to win to stay in retired English teacher who at-
Please see RACE page A7 tended the protest, held last
Simon Nixon
The EU’s Latest
Crisis Response
EUROPE FILE | A2
* WSJ.com EUROPE EDITION
DLR ¥113.67 À 0.41%
Voters
Punish
Merkel on
Migration
BY ANTON TROIANOVSKI
BERLIN—German voters
dealt a stinging rebuke to
Chancellor Angela Merkel and
her open-door refugee policy in
three state elections Sunday,
delivering historic gains for an
upstart anti-immigrant party
and showing how the migra-
tion crisis is scrambling poli-
tics in Europe’s largest econ-
omy.
Slipping Support
 Germans turn cool to
asylum seekers....................A6
The populist Alternative for
Germany, which focused its
campaign on opposition to Ms.
Merkel’s migrant policy, won
nearly a quarter of the vote in
the eastern state of Saxony-An-
halt, according to projections
based on exit polls and early
results. The result, if confirmed
in the final vote count, would
represent the party’s best total
in a regional election since its
One U.S. official said Sunday founding three years ago, and
that the alert was issued af- was several percentage points
ter the embassy saw a warn- higher than recent polling had
ing from the Turkish govern- suggested.
ment on social media about a The party, known as the AfD,
potential attack and con- also won parliamentary seats
firmed with Turkish officials in two former West German
that it was a serious con- states voting. Supporters gath-
cern. ered at the AfD’s election-night
While there were no im- celebration in Berlin chanted
mediate claims of responsi- “Merkel must go!” after the re-
bility, two Turkish officials sults started to come in.
said soon after the attack “We have a very clear posi-
that they suspected it was tion on the refugee policy: we
the work of Kurdish separat- don’t want to take in any refu-
ists who are embroiled in a gees,” AfD deputy chairman Al-
deepening conflict with the exander Gauland said on Ger-
Please see ATTACK page A3 Please see VOTE page A6
like globalization and aging because you cannot reach it,”
populations that are reducing said Peter Tillmann, professor
prices everywhere and that of monetary economics at the
central banks fight at their University of Giessen in Ger-
peril. many.
Another takes the opposite European Central Bank
view, arguing the inflation tar- President Mario Draghi sig-
get should be raised to help naled which side he’s on last
central bankers avoid their week, launching a second ma-
current fix: With interest rates jor stimulus boost in three
at or near zero and inflation months after inflation in the
rates low, they can’t cut the euro area slid back below zero
real interest rate—after sub- in February. Mr. Draghi has
tracting inflation—as far be- vowed not to “give up” in his
low zero as they would like to pursuit of near-2% inflation.
stimulate the economy. At the heart of the tussle is
A third group warns that Please see TARGET page A2
the entire debate is toxic.
“Credibility means keeping the  ECB’s cheap loans expose
target fixed, not lowering it banks’ divide............................... B5
i i i
year, in the buff. French doctors and brothers,
Mr. Gacon, 67, wearing a André and Gaston Durville, relo-
black shirt, white trousers and cated to the sun-splashed island
sunglasses inside his office, re- with the dream of fostering a
fuses to back down. “Asking a back-to-nature community.
person to throw on a Clothing was op-
beach wrap is hardly pressive, the settlers
the apocalypse,” he believed, because it
says. obscured and disfig-
The clash, which ured the body, break-
raged last summer ing the human form
and is set to resume into pant-legs, skirts
this year as the and shirt sleeves.
weather warms, has With no running
exposed rifts between water or electricity,
nudists and “textiles,” Elizabeth Varet the island’s first in-
caused a jurisdictional habitants lived a sim-
battle with the mainland and ple and secluded life. The
prompted Mr. Gacon to reinter- brothers sold parcels of land to
pret the colony’s history as part newcomers who later formed a
of his campaign. homeowners’ assembly to lay
The nudist colony, one of Eu- down rules for the island.
rope’s most storied, was In the 1960s, the island be-
founded in the 1930s when two Please see NUDE page A2
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Monday, March 14, 2016
EU-Turkey Deal Goes After Migrant Smugglers
EUROPE FILE
SIMON NIXON
There is now a well-es-
tablished pattern to the Eu-
ropean Union’s response to
crises. First, there is denial
of the problem. Then there is
squabbling over who should
take responsibility, and then
a series of half-baked at-
tempts at a solution. Finally,
the member states agree on
a plan of action that may not
remove the underlying issues
but at least holds the union
together.
This was
how the EU
handled the
euro crisis,
and the same
playbook has
been followed in the migra-
tion crisis—a crisis the bloc
initially chose to treat as a
local Italian and Greek diffi-
culty. It now hopes to re-
solve it via a comprehensive
deal with Turkey that EU
leaders hope to seal at a
summit this week.
T
his migration crisis is
the biggest threat to
the survival of the EU
because, in contrast to the
euro crisis, there is no Euro-
pean Central Bank to make
the problem go away or, at
least, hide it from voters. In-
stead, voters see a problem
that already appears unman-
ageable and unending. What
the EU is confronting isn’t
just the tragic displacement
of refugees from Syria but a
NUDE
Continued from Page One
gan attracting a more free-spir-
ited crowd. Thousands of tour-
ists flocked to the island every
summer, many of them sleeping
under the stars.
As the colony grew, Ile du
Levant became divided into
zones with varying codes of un-
dress. The beach and hiking
trails were strictly clothes-free.
Nudity was banned inside the
barbed wire confines of a mili-
tary base set up in the 1950s
and used for missile testing.
Going nude in the village square
was also against the rules, but
nudists say enforcement of the
clothing requirement in town
was lax.
The 1980s drew a curtain on
the island’s hippie culture. Va-
cationers deserted the island in
favor of more buttoned-up holi-
day destinations, fueling a spike
in real-estate prices in nearby
Riviera towns such as St. Tro-
pez. The average age of Ile du
Levant’s residents also rose.
The tourist flight left Ile du
Levant’s vacation homes rela-
tively cheap. That attracted a
TARGET
Continued from Page One
the credibility of central
banks, which have taken a
leading role in beating back
the global financial crisis but
are now, investors and econo-
mists fear, running out of am-
munition.
While inflation rates in the
U.S. are rising back toward the
Federal Reserve’s 2% target—
hitting 1.3% in January accord-
ing to its preferred measure—
they have languished below 1%
in the euro area for more than
two years, and show no signs
of recovering.
Many Germans see nothing
wrong with that. Otmar Issing,
a former chief economist at
the ECB who helped shape its
near-2% inflation target, has
urged policy makers to be pa-
tient about hitting 2% and
called for research into
whether the benchmark is still
appropriate.
One reason to shoot for 2%
inflation rather than zero is
the so-called zero lower bound
problem: Central banks can’t
cut nominal interest rates
much below zero because at
some point, people would
rather hoard cash than pay
fees to deposit it. If inflation
is 2%, cutting the nominal in-
terest rate to zero reduces the
inflation-adjusted rate to mi-
nus 2%. That provides a fur-
A man collected firewood Sunday at a makeshift camp for migrants stranded in northern Greece.
multibillion-dollar people-
smuggling industry with an
apparently inexhaustible
supply of potential custom-
ers from the fast-growing
populations of Africa and
Asia. These smugglers are
taking advantage of the EU’s
deep commitment to human
rights to make a mockery of
its efforts to control its bor-
ders.
The proposed deal with
Turkey is a potential water-
shed because it marks the
first serious attempt by the
EU to destroy the people-
smugglers’ business model.
U
nder the deal, every-
body who illegally ar-
rives in Greece will be
sent back to Turkey; and for
every bona fide asylum
seeker sent back, the EU will
new wave of immigrants—peo-
ple from the mainland who
were skittish toward nudism.
The island’s longtime residents
dubbed the newcomers “the
textiles.”
Among the textiles was Mr.
Gacon, a retired civil servant at
the French Treasury in Paris,
who was elected president of
the homeowners’ assembly in
2013 after buying a house on
the island.
The newly installed presi-
dent was cut from different
cloth than his nudist neighbors.
Mr. Gacon enjoyed skinny dip-
ping in Ile du Levant’s pristine
waters. But whenever he left
the beach, the clothes came on.
“I’m not even sure he’s na-
ked at home!” says Jean-Albert
Vaillant, a 69-year-old who gen-
erally wears reading glasses—
and nothing else—when run-
ning the village grocery store.
These days, Mr. Gacon
stands at the center of a cul-
tural revolution. He has advo-
cated for a zero-tolerance ap-
proach to enforcing the island’s
skimpy dress code. Anyone
caught naked in public spaces
in the village got fined.
The retired civil servant be-
gan re-examining the history of
ther jolt to the economy dur-
ing a recession.
But some economists warn
that a fixation on 2% could be
harmful.
“If you are trying to hit an
inflation target irrespective of
the state of the economy, you
may be introducing other dis-
tortions into the financial sys-
tem that will be ultimately
more damaging,” Hyun Song
Shin, head of research at the
Bank for International Settle-
ments, said in December.
That said, reducing the tar-
get, or accepting it won’t be
reached anytime soon, carries
Low Expectations
Advanced economies have worked mightily in recent years to prop up
inflation, but the share experiencing chronically low prices has swelled.
Distribution of inflation rates for advanced economies*
100%
80
60
40
20
0 Less than –1%
1995 2000 ’05
*As defined by the IMF; excludes Taiwan for which comparable figures are not available
Source: International Monetary Fund
WORLD NEWS
allow one Syrian refugee to
come to the EU—but cru-
cially, not those who made
the illegal crossing. They will
go to the back of the asylum
line. The goal: anyone who
pays a smuggler won’t only
lose their money but also
worsen their prospects of re-
settlement.
Of course, the deal is con-
troversial, not least because
of the manner in which it
emerged. When European
leaders gathered in Brussels
for a summit with Turkey
last week, they were expect-
ing to sign up to a less ambi-
tious deal negotiated by Eu-
ropean Council President
Donald Tusk. This would
have seen only those ineligi-
ble for asylum returned to
Turkey. Syrians would have
been allowed to stay. But at
Dozens protest on the village square in Ile du Levant, France, in defense of nudism.
the colony and its founders. The
Durville brothers, he says,
didn’t go entirely nude but in-
stead wore a stringy garment to
make sure they weren’t inde-
cently exposed. “The Durville
brothers respected the law,” Mr.
Gacon says.
Mr. Gacon’s opponents orga-
nized a referendum to roll back
the island’s piecemeal clothing
requirement, allowing nudism
to be practiced in the village
square and surrounding shops.
plenty of risks. “A 1% target
means giving up,” said Stefan
Gerlach, deputy governor of
Ireland’s central bank until
November and now chief econ-
omist at BSI Bank in Zurich.
“The first thing you’d expect is
an appreciation of the euro.”
To avoid a situation where
inflation-adjusted interest
rates can’t fall deeply enough,
some economists—notably at
the International Monetary
Fund—have called for a 4% in-
flation target, to give central
banks more room to maneuver
in a crisis.
“Once we reached the new
Very high
10% or more
High
3% to 9.99%
Ideal range
1% to 2.99%
Low
–1% to 0.99%
Very low
’10 ’15
THE WALL STREET JOURNAL.
an 11th-hour meeting be-
tween Turkish Prime Minis-
ter Ahmet Davutoglu and
German Chancellor Angela
Merkel, Turkey offered to
take back all migrants in re-
turn for an extra €3 billion
($3.34 billion) of aid and a
deepening of Turkey’s rela-
tionship with the EU.
To some Europeans, this
deal smacked of a desperate
capitulation by Ms. Merkel
ahead of Sunday’s regional
elections in Germany. But
Turkey also had good rea-
sons to strike a deal. Is own
negotiating leverage had
been weakened by Austria’s
decision—ironically, opposed
by Ms. Merkel—to close its
borders to new asylum seek-
ers, thereby causing a dom-
ino effect of border closures
along the Western Balkan
A majority of the island’s
240 property owners voted in
favor of it. Local authorities re-
fused to implement it.
Ile du Levant’s police fall un-
der the jurisdiction of Hyères, a
town on the coast of the main-
land where nudism isn’t gener-
ally practiced. “I respect nud-
ism, but it shouldn’t be
decadent,” says Jean-Pierre Gi-
ran, the mayor of Hyères. Ile du
Levant’s referendum, he
warned, amounted to a power
target, we wouldn’t fall back
into a situation when interest
rates can’t be cut,” said Paul
De Grauwe, professor of Euro-
pean political economy at the
London School of Economics.
Nonsense, says Mr. Gerlach,
who claims it would be “en-
tirely implausible” for central
banks to aim for 4% when they
can’t even hit 2%. Inflation
also becomes increasingly vol-
atile as it rises, he said, so
that annual price growth
might occasionally reach
7%—a level many would find
objectionable.
There are other reasons to
aim for 2%. The way inflation
is measured tends to overstate
it, by about 1.3 percentage
points in the U.S. prior to
1996, according to a study
commissioned by the U.S. Sen-
ate. “So, if the target would be
zero, very likely we would be
targeting a negative inflation
rate,” ECB Vice President Vítor
Constâncio said in October.
Likely reasons for the over-
statement, according to the
Senate report, include failure
to properly account for
higher-quality new products,
like more powerful computers,
or to reflect how consumers
switch to cheaper goods when
relative prices change.
Very low inflation rates also
increase the cost of servicing
debt, which is problematic for
highly indebted economies,
like Europe’s. And central
bankers are eager to keep
THE WALL STREET JOURNAL.
governments are wary that
the European Commission
may try to water down its
assessment of these condi-
tions to facilitate a deal.
A third challenge is what
to do about the asylum seek-
ers already stranded in
Greece. In theory, their ap-
plications should be assessed
in Greece and those qualify-
ing for protection resettled
across the EU according to
DANIEL MIHAILESCU/AGENCE FRANCE-PRESSE/GETTY IMAGES
quotas controversially
agreed last year. But with
four countries in Eastern Eu-
rope refusing to participate
in the resettlement program,
this may be impossible to
enforce.
M
eanwhile the biggest
obstacle, say EU offi-
cials, may lie in Tur-
key’s demand that the EU ac-
celerate its application to
join the bloc. That would re-
quire Cyprus to drop its veto
on five of its so-called “ac-
cession chapters,” or areas
migrant trail that left thou- of policy discussions that are
sands stranded in Greece. part of the road map to be-
Even so, there are four coming an EU member. The
major obstacles to a success- government in Nicosia is un-
ful deal. The first is legal: likely to do that while Tur-
United Nations High Com- key is, in the eyes of interna-
missioner for Refugees has tional law, illegally
warned that mass expulsions occupying the north of the
are illegal under interna- island.
tional law and could only be Does this mean the EU re-
allowed if Turkey met the in- sponse will fall short again?
ternational standards on the Not necessarily. The stakes
treatment of refugees to are so high that compro-
qualify as a safe country. mises may yet be found to
A second obstacle is Tur- ensure the right message is
key’s demand that the EU sent to the smugglers. The
waive visa restrictions for its challenge then will be to en-
80 million citizens by June, sure that what is agreed
four months earlier than upon is actually delivered.
previously envisaged. This But the lesson of past EU
would still depend on Ankara crises is that even a success-
complying with 72 condi- ful deal will likely only buy
tions laid down by the EU, of time—in this case, until the
which it has so far fulfilled smugglers figure out a new
only 10. But many European way into Europe.
dents stared back at the nude
retiree. Then many followed
suit, disrobing one-by-one in
front of Mr. Gacon in a show of
solidarity with Ms. Mertiny.
“The president glowered at
me,” Ms. Mertiny recalls.
The island’s business lobby
NOEMIE BISSERBE/THE WALL STREET JOURNAL
also lined up against Mr. Ga-
con’s regulatory zeal. Gilles Go-
iset, a hotel owner who heads
the island’s small-business as-
sociation, says the island
needed to show off its nudist
traditions to attract new visi-
tors, not conceal them.
Asking tourists to cover up
as they cross the village square
on their way to the beach, Mr.
Goiset says, sows confusion.
Under pressure, the mayor
has offered a compromise: Peo-
grab that tread on Hyères sov- ple will be allowed to cross the
ereignty. village square naked as long as
Ile du Levant “is a private is- they don’t stop and stand still.
land. It’s not the Vatican. I am Many of the island’s resi-
in charge of public order,” he dents see the compromise offer
added. as a mere fig leaf.
The island’s die-hard nudists “It’s better than nothing, but
chafed over the mayor’s intran- that’s not going to solve any-
sigence. In an act of civil dis- thing in the long run,” says Mr.
obedience, 76-year-old Doris Vaillant, in his grocery store. He
Mertiny showed up naked at a thinks some people will always
meeting of the homeowners’ as- be uncomfortable with nudity.
sembly last summer. “We’re all bathing in hypoc-
A room full of clothed resi- risy.”
some distance from the danger
zone of deflation, a risky spi-
ral of ever-lower prices that
increases the value of debt
phanides, a member of the
ECB’s governing council be-
tween 2008 and 2012, and
now an economics professor at
and can cause businesses and the Massachusetts Institute of
consumers to delay purchases. Technology. “A lot of contracts
“I find it very inappropriate were made based on the as-
to speak of changing the tar- sumption that the ECB would
get,” said Athanasios Or- deliver what it promised.”
THE WALL STREET JOURNAL.
CORRECTIONS  Europe Edition ISSN 0921-99
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THE WALL STREET JOURNAL. Monday, March 14, 2016 | A3

WORLD NEWS
Gunmen Strike Ivory Coast Beach ATTACK Continued from Page One
Deadly assault follows Turkish government. But
other Turkish officials said it
similar strikes by al was too soon to tell who
Qaeda affiliate in might be responsible.
The explosion comes less
neighboring countries than a month after a car
bomber killed more than two
BY DREW HINSHAW dozen members of the Turk-
ish military heading home
Gunmen stormed a beach from work in a convoy of
town in Ivory Coast, killing at buses. A small Kurdish sepa-
least 12 people in what had ratist group took responsibil-
been a quiet West African ity for last month’s attack,
country and confirming fears which Turkey said was the
that terrorists in the region are work of a Syrian affiliate of
SIA KAMBOU/AGENCE FRANCE-PRESSE/GETTY IMAGES

widening the scope of opera- the outlawed Kurdistan

tions. Workers’ Party, or PKK. Syr-
The attack began on Sunday ian Kurdish militants denied
afternoon along the palm-tree- any involvement.
lined shore of Grand Bassam, a
weekend getaway where
wealthier Ivorians escape the
Authorities issued a
nearby city of Abidjan. The old ban on broadcasting
colonial town, a Unesco World
Heritage site, is also popular
information about
with smaller crowds of expatri- the blast.
ates, particularly from France,
the country that ruled Ivory
Coast until 1960. On Sunday, two Turkish
Beachgoers were sunbathing A victim’s body was loaded onto a van in Grand Bassam, Ivory Coast, on Sunday after a deadly attack an al Qaeda affiliate claimed. officials looking into the
and ordering grilled fish from cause of the explosion said
food carts when the gunfire the tourist resort,” AQIM said dent François Hollande said his failed states to successful ones. “It’s a weekend casual spot they believed it was a second
began, said Bram Posthumus, a in a post on a messaging app country denounced the attack, Hotels in Ghana, Senegal, and that’s for everyone, whether it attack by Kurdish separatists
freelance journalist who wit- on Sunday. which killed “at least one Ivory Coast—all thriving de- is expats or Ivoirians. This was aimed at the capital.
nessed the attack. “There was The attack bore the group’s Frenchman.” France would mocracies—have ramped up calculated to strike fear,” said Within an hour of the ex-
a general panic. It was just hallmarks, said Imad Mesdoua, provide logistical and intelli- security. Ivory Coast’s Presi- Ayso van Eysinga, West Africa plosion, Turkish authorities
people running…to get away. a London-based analyst at Af- gence support to find those re- dent Alassane Ouattara has re- researcher at New York’s Eur- issued a ban on broadcasting
They even left their bags on rica Matters, a research con- sponsible, it added. peatedly given speeches calling asia Group. information about the blast.
the beach, and they were run- sultancy. For months, the In striking Ivory Coast, for closer counterterrorism The government said three Including Sunday’s attack,
ning in their bathing suits and French have warned Ivory West African terrorists are tak- collaboration between his hotels had been attacked, Turkey has been hit by six
their shorts and their slippers.” Coast and neighbors that their ing on a new kind of target: a country and others in the re- though it wasn’t clear if terror- major bombings that have
At least five foreigners and resorts could be next. thriving, prosperous nation. gion. ists entered the buildings or killed nearly 200 people over
a child were among the dead, Now, that threat appears to For the past decade, AQIM, as Sunday’s attack seemed to simply rampaged through the the past nine months. Most
the government said. It added have materialized, Mr. Mesd- the al Qaeda affiliate is called, confirm many of those fears. beachfront. Images from the of the attacks, including dual
that it killed six attackers, a oua and other analysts said: and its allies have staged at- When the attackers arrived, scene authenticated by news- suicide bombings in Ankara
claim disputed by al Qaeda in “Unfortunately, it is something tacks across the desperately- most of the people on the verification service Storyful last fall that killed more than
the Islamic Maghreb, the ter- we’re going to have to antici- poor stretches of the Sahara, beach were ordinary Ivorians, showed three bloodied corpses 100 people, have been
rorist outfit that struck hotels pate more and more,” said J. beyond where local armies can passing a Sunday lunch hour clad in bathing suits and blamed on Islamic State.
in Mali and Burkina Faso over Peter Pham, Africa director at control. For the past three by the shore. By attacking the splayed on the beach. One Sunday’s blast created
the past four months and the Washington-based Atlantic years, AQIM has battled French resort town, the gunmen video showed dozens of vaca- new concerns that the fight
claimed Sunday’s assault. Council. “Attacking a beach troops and United Nations struck at the joie de vivre of tioners and hotel staff running with Kurdish militants, which
“By the grace of Allah and front…these are not challeng- peacekeepers in the mountains Ivory Coast, a nation renowned into the hotel complex while has largely been contained to
His granting of success, three ing operations. They can be and desert of northern Mali. within French-speaking Africa chatter through walkie-talkies Kurdish majority communi-
heroes from the knights of pulled off by a terrorist group Lately, African officials have for its music, food, club culture could be heard. ties in southeastern Turkey,
Qaedat al-Jihad in the Islamic with fairly limited investment.” worried that local terrorists and beaches, several analysts —Jason Chow in Paris is spreading to the nation’s
Maghreb were able to storm The office of French Presi- would shift their sights from said. contributed to this article. biggest cities.

Crash Co-Pilot Case Prompts Privacy Challenge

Germanwings investigators find confidentiality rules prevented doctors from reporting concerns over aviator’s stability
Half a dozen doctors not to report their poten-
who treated Germanwings tial concerns to authori-
co-pilot Andreas Lubitz ties.”
over the four months be- Canada, Israel and Nor-
fore he intentionally way are among countries
crashed a passenger jet that have provided guid-
into the French Alps re- ance to strike a balance be-
buffed requests to be inter- tween privacy and public
viewed by investigators, safety, according to the re-
citing Germany’s strict port by France’s Bureau
d’Enquetes et d’Analyses.
By Andy Pasztor The report into the
in Los Angeles and March 2015 crash, which
Jason Chow in Paris killed all 150 people on
board, seeks a compromise
medical-privacy laws. between enhanced scrutiny
Their refusal to cooper- to identify and assist pilots
ate, disclosed by French ex- suffering from psychologi-
perts leading the probe, cal problems, and the risk
has infuriated family mem- of prompting such aviators
termined. daunting financial hit he
However, all of the pri- would have suffered from
vate doctors he visited re- losing his commercial-pilot
fused to speak with the license. As a result, the
French-led investigation BEA called on European
following the event. “We regulators and the largest
don’t have the power to global airline trade associa-
force them to talk to us. tion to find ways to miti-
We are not the police,” said gate such economic risks
Arnaud Desjardin, who linked to medical reasons.
headed up the German- In addition, the report
wings investigation. recommends expanding and
The report says German ramping up peer-support
government doctors who networks—dubbed “safe
conducted a psychological zones”—where pilots can
evaluation of Mr. Lubitz confidentially seek profes-
years before the tragedy sional advice and other
also declined to cooperate types of help. Widely used
and “referred to confidenti- in the U.S. and encouraged
ality. by major airlines for many
FOTO-TEAM-MUELLER/EUROPEAN PRESSPHOTO AGENCY

bers of some of the victims to go underground and hide Doctors in Germany are years, such voluntary pro-
and highlights why the fi- their affliction. concerned that failing to grams encourage aviators
nal investigative report re- In the four months lead- comply with the country’s to self-report problems in a
leased Sunday calls for ing up to the crash, at least nearly ironclad privacy setting “minimizing career
more-precise laws and six doctors—including Mr. laws—considered among jeopardy,” the report said.
guidelines that would allow Lubitz’s main psychiatrist— the strictest in the world— Europe’s air-safety regu-
physicians world-wide to saw the German pilot for could result in the loss of lator welcomed the recom-
breach patient confidential- his mental-health problems. their medical license if they mendations, saying they
ity to protect the flying Some gave him notes for fail to strictly comply, ac- confirm that progress is
public. sick leave, including one cording to medical experts. being made and vowed to
From the World Health who recommended just “Doctors are very reti- propose relevant regulatory
Organization to the Euro- seven days before the crash cent to take any initiative” changes by the end of 2016.
pean Union to German au- that Mr. Lubitz take five to declare that a patient Germany’s primary pi-
thorities, the report says, days off, the report said. poses an immediate threat lots union welcomed what
“the absence of a formal Concerned that Mr. Lub- to public, said Rémi Jouty, Andreas Lubitz running in a half-marathon in September 2009. it called a “balanced” set of
definition of ‘imminent itz was psychotic, another director of the BEA., add- recommendations, and
danger’ and ‘threat to pub- physician gave him a refer- ing that the rules for such tors, the co-pilot never in- The report concludes urged implementation of
lic safety’ drives doctors to ral for psychiatric hospital- disclosure in Germany are formed the airline or that Mr. Lubitz’s efforts to them all.
adopt a conservative ap- ization two weeks before “very general.” sought help from aviation hide his illness stemmed, at —Robert Wall in London
proach and may lead them the crash, investigators de- According to investiga- medicine specialists. least in part, from the contributed to this article.

Peer Support Groups Urged to Aid Pilot Mental Health

BY ANDY PASZTOR The French-led investiga-
AND ROBERT WALL tors recommended, among
other things, enhanced pilot-
Nearly one year after a to-pilot support programs,
mentally unbalanced co-pilot stepped-up medical evaluation
intentionally brought down a of pilots with previously diag-
Germanwings jetliner, regula- nosed psychological problems,
tors and pilot union leaders and permitting European avia-
are continuing to spar over tors to continue flying even as
potential measures to prevent they start using certain anti-
another such tragedy. depressants under a doctor’s
Despite a flurry of advisory care. They also recommended
committees, studies and high- rolling back medical privacy
level reports on both sides of laws throughout Europe to
the Atlantic, practically noth- make it easier for physicians
ing has changed in the way to alert authorities about pi-
commercial aviators are rou- lots posing potential threats to
tinely screened for possible public safety.
mental-health problems world- “We don’t want the system
wide. to remain as it is,” said Dirk
But after an international Polloczek, president of the Eu-
team of investigators released ropean Cockpit Association,
its final report Sunday about which represents 38,000 pilots
Germanwings Flight 9525 and from 37 countries. “But we
its 150 victims, the spotlight is need to make smart changes
shifting to various proposals and provide the right tools” to
favored by these experts. identify and deal with psycho-
logical risks, he said in an in- Germany is moving to im- airline accidents or incidents The European Aviation
terview. plement random drug and al- since the early 1980s that are Safety Agency has suggested
Most airlines, national avia- cohol testing, even though the considered to have been inten- other potential moves, includ-
tion authorities and pilot final report didn’t call for that tionally caused by pilots, or ing setting up a repository of
groups agree that wholesale step. Instead, the recommen- when one crew member was pilot medical files to enable
expansion of psychological dations are expected to em- “significantly affected by a information sharing between
testing for cockpit crews phasize the importance of mental disorder.” Some in- European Union states while
would be overly costly and peer support groups. clude pilots locking them- still preserving doctor-patient
likely ineffective. Such mea- The report noted, however, selves alone inside cockpits, as confidentiality.
sures capture a pilot’s condi- that peer-to-peer groups are Mr. Lubitz did when the cap- EASA also wants manda-
tion only as a snapshot in most effective only if aviators tain of Flight 9525 left for a tory, in-depth psychological
time, they argue, while many and their family members are bathroom break. vetting of commercial pilots
serious psychological prob- “reassured that mental health Carsten Spohr, the chief ex- before they begin their ca-
lems can worsen dramatically issues will not be stigmatized, ecutive of Germanwings owner reers, followed by more exten-
and quickly. concerns raised will be han- Deutsche Lufthansa AG, said sive mental-health checks dur-
Widespread screening ef- dled confidentially” and that lessons to be learned from the ing annual physicals.
forts “are blunt and expensive pilots will be assisted “with event are limited because of In the U.S., where the Fed-
instruments that would pro- the aim of allowing them to the unusual circumstances. eral Aviation Administration
vide few benefits,” according return to flying duties.” “This very specific behavior of convened a special industry-
to Martin Chalk, president of Andreas Lubitz, the 27- this individual could just not government committee to as-
the International Federation of year-old Germanwings co-pi- be foreseen,” he said. sess fallout from German-
Air Line Pilots’ Associations. lot, hid his worsening depres- In the wake of the crash, wings, the response remains
The emphasis ought to be on sion from airline officials and German authorities required muted. The FAA likely will is-
providing “some level of sup- regulators because he feared it all carriers to establish a vol- sue guidance aimed at helping
port before a problem mani- would end his career, accord- untary program for pilots to smaller carriers set up more
fests itself on the flight deck,” ing to investigators. report psychological problems successful peer-support net-
Mr. Chalk said in an interview, The report cites 11 other without fear of retribution. works.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Monday, March 14, 2016
SyriaRebelsSufferSetback U.S. and Europe
Assault by al Qaeda
affiliate shows
tensions rising among
regime opponents
BY SAM DAGHER
ANTAKYA, Turkey — Al
Qaeda’s affiliate in Syria at-
tacked a Western-backed rebel
faction, taking over bases and
seizing U.S.-supplied weapons
in a sign of rising tension
among regime opponents,
members of the rebel faction
and residents said Sunday.
The attack by Nusra Front
began Saturday and ended
KHALIL ASHAWI/REUTERS
Sunday, a day before United
Nations-brokered peace talks
between the regime and an
opposition delegation were to
get under way in Geneva.
Nearly 100 rebel groups
have signed on to a two-week-
old truce in Syria, including
13th Division, the rebel faction
that suffered the losses. Nusra
Front and Islamic State are ex-
cluded from the truce.
The fighting was centered
in and around the city of
Maaret al-Numan in the north-
western province of Idlib.
Nusra accused 13th Division
members of initiating the ag-
gression by attacking its mem-
bers in the city.
Members of 13th Division
and residents denied the
claim.
“Nusra feels the groups that
have agreed to the cease-fire
betrayed it and sided with the
infidels against it,” said Ah-
med Alwan, a senior cleric in
Maaret al-Numan.
“It’s going to be one faction
after another because Nusra
wants to be the paramount
force here,” he added, suggest-
ing the weekend attack could
be followed by similar assaults
on other rebel groups in the
area.
Opposition activists said
the ouster of moderate rebel
Angry Brazilians Take to the Streets U.K. Treasury Chief
BY REED JOHNSON
AND MARLA DICKERSON
SÃO PAULO—Hundreds of
thousands of Brazilians poured
into the streets of cities across
the country Sunday calling for
the ouster of President Dilma
Rousseff, whose leftist govern-
ment many blame for a
sprawling corruption scandal
and an economic meltdown
that has humbled Latin Amer-
ica’s largest country.
Opponents of Ms. Rousseff
hope that a massive turnout
RICARDO MORAES/REUTERS
will push federal lawmakers to
impeach the unpopular leader
on charges that she manipu-
lated public accounts to mask
a growing budget deficit—alle-
gations she denies.
In the northeast city of Sal-
vador, traditionally a strong-
hold for Ms. Rousseff’s Work-
ers’ Party, known as the PT, an
estimated 20,000 people
turned out, according to police
figures. Organizers put the
number at 50,000.
Among the demonstrators
was Oscar Cezar Magalhães, a
geologist with Petróleo Brasil-
eiro S.A., the state-run oil
company that is at the center
of a graft probe that threatens
to upend Ms. Rousseff’s gov-
ernment.
A former member of the PT,
Mr. Magalhães, 60 years old,
said he doesn’t recognize his
former party, which prosecu-
tors say pocketed millions
looted from the company.
In the capital of Brasília,
World
Watch
GAZA STRIP
Israeli Airstrike
Kills 10-Year-Old Boy
A 10-year-old boy was killed
in an Israeli airstrike that tar-
geted a Hamas military base,
the Gaza health ministry said
Saturday, after militants had
fired rockets at Israel.
The ministry said shrapnel
from an airstrike on a Hamas
base hit a nearby house, killing
the boy, Yassin Abu Khoussa,
and wounding two of his sib-
lings, one seriously.
It said Israel carried out five
air raids on Hamas facilities.
Protesters wave Nusra Front flags recently; the al Qaeda affiliate attacked Western-backed rebels.
groups from a major rebel
stronghold such as Maaret al-
Numan could weaken the op-
position’s negotiating position
with regard to the Syrian gov-
ernment regime and its back-
ers Iran and Russia, who al-
ready assert that only
extremists hold sway in rebel-
held areas.
“This is Raqqa 2,” said an
opposition activist based in
Maaret al-Numan, likening
Nusra’s move to Islamic State’s
maneuver when it dislodged
other rebels from the north-
eastern city of Raqqa in Au-
gust 2013.
As of Sunday, at least a
dozen 13th Division members
had been killed in the assault
and more than 30 taken cap-
tive, according to leaders of
the group.
The fate of hundreds of
other fighters remains un-
known.
“Until now, we do not know
who fled or is captured and
who is dead or alive,” said a
senior member of the group,
Hundreds of thousands took part in protests against Brazil’s leaders and the ruling PT party.
100,000 people braved a blis-
tering sun to throng parks and
plazas, according to military-
police estimates. A large ban-
ner read “Enough!” not far
from a giant balloon showing
former President Luiz Inácio
Lula da Silva dressed in a
striped prison uniform.
In Rio de Janeiro, lines of
protesters, many dressed in
the nation’s distinctive yellow-
and-green soccer jerseys,
stretched for more than a mile
along the famous Copacabana
beachfront.
In São Paulo, Brazil’s largest
city and a hotbed of antigov-
ernment sentiment, thousands
of demonstrators had arrived
The strikes came after mili-
tants in Gaza fired several rock-
ets at Israel on Friday night,
causing no injuries. No militant
group took responsibility for the
barrage.
Israel holds Hamas, the Is-
lamic militant group that rules
Gaza, responsible for all attacks
from its territory.
Israel is struggling to contain
near-daily Palestinian attacks. A
Palestinian shooting and stab-
bing Friday wounded two sol-
diers and a civilian.
—Associated Press
MALAYSIA
Australian Reporter,
Cameraman Held
A television reporter and
cameraman with the Australian
Broadcasting Corp. were briefly
detained in Malaysia after at-
tempting to interview Prime
Minister Najib Razak while he
HK JP KO ML SI
WORLD NEWS
who along with its commander
were in neighboring Turkey at
the time of the assault.
Mr. Alwan, the cleric, said
Nusra had made the decision
to take out 13th Division more
than a year ago, calling the
group “part of an American
project.”
Members of 13th Division
said they have received weap-
ons from the U.S., including
antitank missiles, and that
some of their fighters were
trained in Qatar recently by
U.S. military advisers.
The group has about 2,000
fighters concentrated in
Maaret al-Numan.
The Nusra Front, which is
the dominant group in Idlib
and includes Syrian and for-
eign fighters, has previously
targeted rebel groups in the
province receiving training
and weapons from the U.S.,
most recently last year.
The latest assault comes at
a critical moment for what re-
mains of Syria’s moderate op-
position.
by late morning for a protest
not scheduled to start until 3
p.m. Imitrios Fyskatoris, the
head of the military police,
said march organizers were
expecting one million or more
people to show up along
Avenida Paulista, the city’s
landmark thoroughfare.
The demonstrators directed
their ire not only at Ms. Rouss-
eff but at her political mentor
and predecessor, Mr. da Silva,
and the PT, which has led Bra-
zil for the past 13 years.
Protesters expressed frus-
tration that their country—a
rising economic star on the
world stage just a few years
ago—has wasted a historic op-
campaigned ahead of a coming
state election in the Borneo
state of Sarawak.
On assignment for the
weekly current-affairs program
Four Corners, reporter Linton
Besser and cameraman Louie
Eroglu were detained in Kuching,
the capital of Sarawak, late Sat-
urday and released Sunday
morning, the ABC reported. Their
passports were seized and they
have been told not to leave Ma-
laysia, according to the report.
Malaysian police confirmed
the arrest, saying the crew were
detained after they allegedly
crossed a security cordon while
trying to interview Mr. Najib.
—Yantoultra Ngui
CHINA
Government to Add
To Consolidations
China’s government is priori-
tizing consolidation over bank-
IN UK FR MN PR
Since Russia’s direct mili-
tary intervention on the side
of President Bashar al-Assad’s
regime at the end of Septem-
ber, many Western-backed
armed groups that oppose the
Syrian government have been
targets of a campaign of
strikes from Moscow’s Syria-
based warplanes, heavy artil-
lery and rocket launchers, U.S.
officials said.
Rebel groups, particularly
those operating in northern
areas in Aleppo and Latakia
provinces adjacent to Idlib,
have as a result of the cam-
paign ceded territory to the
regime and allied Iran-backed
Shiite militiamen from Iraq,
Lebanon and elsewhere.
Nusra Front, which is in the
western half of Syria, and Is-
lamic State, which is concen-
trated in the east, are labelled
terrorist organizations by the
U.N. and the peace talk spon-
sors and are excluded from
both the cease-fire and any
prospective political settle-
ment.
portunity, with many holding
the PT accountable.
Matthew Taylor, an associ-
ate professor at American Uni-
versity in Washington, D.C.,
said that Sunday’s demonstra-
tions need to evince more of
the bipartisan authenticity
that marked the 2013 street
protests that rocked Brazil
ahead of the World Cup tour-
nament.
“I think that if they are
close to what we saw in 2013,
that will be an important
sign,” Mr. Taylor said.
—Paulo Trevisani, William
Connors, Rogerio Jelmayer
and Luis Garcia
contributed to this article.
ruptcies in reorganizing state
companies, a senior official said,
suggesting a go-slow approach
in an effort seen as key to revi-
talizing the slowing economy.
Xiao Yaqing, director of the
powerful government commis-
sion that oversees state assets,
said his agency will protect
workers’ rights as it balances
competing interests in overhaul-
ing the state sector.
China “won’t experience a
wave of layoffs” as seen in the
late 1990s, Mr. Xiao said at a
news conference Saturday, refer-
ring to an earlier period of re-
structuring when tens of mil-
lions of state workers lost their
jobs.
He praised progress made to
date in reorganizing the state
firms that tower over the econ-
omy in diverse strategic sectors
such as oil, banking and tele-
communications.
—Lingling Wei
THE WALL STREET JOURNAL.
Threaten Libya
With New Curbs
The U.S. and European pow-
ers on Sunday threatened
sanctions against Libyans who
block the formation of a uni-
fied national government,
seeking to end political grid-
lock in the oil-rich nation amid
mounting fears it is becoming
a haven for Islamic State.
By Matthew Dalton
in Paris and
Jenny Gross in London
U.S. Secretary of State John
Kerry met in Paris with the
foreign ministers of France,
the U.K., Italy and Germany to
discuss Libya and other crises
in Europe’s neighborhood, in-
cluding the civil war in Syria
and the conflict in Ukraine.
Western powers have been
waiting for months for Libya’s
myriad warring political fac-
tions and militias to agree on
a national government, which
could then officially request
help from Europe and the U.S.
in the fight against Islamic
State.
“Daesh is growing its pres-
ence in Libya,” said Mr. Kerry,
using an Arabic name for the
group, “and we have made it
clear, the determination, that
that will not be allowed to go
unaddressed.”
The West has watched with
concern as Islamic State has
used the power vacuum in
Libya to build up a force of
several thousand fighters
there. Libya is now divided be-
tween two parliaments: one in
the former capital of Tripoli,
representing a coalition of Is-
lamist groups that controls
the Western half of the coun-
try; and a second in the east-
ern city of Tobruk that con-
trols the east. A United
Warns of Budget Cuts
BY JASON DOUGLAS
LONDON—U.K. Treasury
chief George Osborne said
Sunday that he would need to
make fresh cuts to public
spending to meet his goal of
balancing Britain’s books by
2020.
Speaking to the British
Broadcasting Corp. ahead of
his annual budget statement
Wednesday, Mr. Osborne said
that the outlook for the global
economy had deteriorated
since he set out his tax and
spending plans in November
and that further action was
needed to close the U.K.’s bud-
get deficit.
“The world is a much more
difficult and dangerous place,”
he said on the BBC’s Andrew
Marr show. “We need to act
now so we don’t pay later.”
The Chancellor of the Ex-
chequer said he would detail
on Wednesday new savings
that would shave an extra
0.5% off projected public
spending annually over the
next four years to allow him to
meet his goal of pushing Brit-
ain’s public finances into sur-
plus by 2020.
“We’ve got to live within
our means to stay secure,” Mr.
Osborne said.
The chancellor’s move to
further squeeze public spend-
ing follows lower-than-fore-
cast growth and tax receipts
that economists say threat-
STRIKING DISPLAY: Streaks of lightning lit up the sky during
heavy thunderstorms and rain in Bhopal, India, on Saturday.
Nations-recognized unity gov-
ernment has been named, but
the parliaments have so far re-
fused to endorse it.
European and U.S. officials
hope the threat of sanctions
against some of the hardliners
in the two parliaments would
soften their opposition.
European Union foreign
ministers will discuss the
sanctions at a meeting on
Monday. The U.S. signaled it is
ready to mirror those possible
measures.
“It is unacceptable that a
few individuals hold the entire
Libyan people hostage as the
security situation deterio-
rates,” said French Foreign
Minister Jean-Marc Ayrault.
The concern about Islamic
State in Libya has been partic-
ularly acute in Paris: French
officials say French-born ex-
tremists are increasingly
drawn to Libya, as Islamic
State is being pushed back by
airstrikes in Syria and Iraq.
While the U.S. has acknowl-
edged conducting airstrikes in
Libya against Islamic State,
Europe’s main military pow-
ers—France and the U.K.—
have kept a low profile on
their operations in the coun-
try. Five years after champion-
ing the overthrow of Moam-
mar Gadhafi, Paris and London
are wary of intervening again
without a formal request from
a national government.
The result has been covert
programs to train Libyan
forces fighting against Islamic
State, officials say. Those ef-
forts, combined with a series
of airstrikes by the U.S., Egypt
and others have checked the
group’s spread, but allowed it
to maintain a stronghold in
the coastal city of Sirte.
ened his goal of eliminating
Britain’s budget deficit before
the end of the current five-
year parliament.
The Office for Budget Re-
sponsibility, the U.K.’s fiscal
watchdog, in November fore-
cast that Mr. Osborne would
borrow £72.5 billion ($103.5
billion) in the 12 months to
March to make up the short-
fall between taxes and spend-
ing. Borrowing was then pre-
dicted to fall in future years
and the deficit to disappear
entirely by early 2020.
But recent public-borrowing
figures show the chancellor is
set to overshoot borrowing
forecasts this fiscal year.
Economists warned that Mr.
Osborne was at risk of missing
his self-imposed targets with-
out extra spending cuts or
higher taxes.
Wednesday’s budget comes
as the U.K. prepares to vote in
a June referendum on whether
to remain a member of the Eu-
ropean Union. Economists say
uncertainty surrounding the
outcome risks sapping growth
in the run-up to the vote.
Delivering news and insight
on finance and markets
from London
Download on the App Store
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A6 | Monday, March 14, 2016
Germans
Turn Cool
To Migrants
BY ZEKE TURNER
BERLIN—When migrants be-
gan pouring into Germany last
fall, Andreas Tölke decided to
host some of the newcomers in
his spacious Berlin apartment.
With authorities struggling
to accommodate the flow, the
former social worker took in
asylum seekers from Syria, Iraq
and elsewhere, sometimes a
dozen at a time, letting them
sleep on his Armani/Casa
leather sofa and use the $30-an-
ounce Etro Patchouly cologne in
his bathroom.
At the start of this year, he
asked his last guests to leave.
“I just can’t anymore,” Mr.
Tölke said. “I need a place
where I can close my door and I
don’t have people sitting in my
apartment.”
Six months ago, Germans ral-
lied behind Chancellor Angela
Merkel’s decision to throw the
doors open to hundreds of thou-
sands of migrants stranded in
Eastern Europe. Today, the hos-
pitality is wearing thin. As hun-
dreds more arrive each day,
Germans worry the influx will
permanently change their towns
and seed crime or terror. Ms.
Merkel’s power base, the cen-
trist middle class sometimes
called the Mittelschicht, is grow-
ing estranged from her and her
generous policy.
How badly became clearer
Sunday as three states held
elections. The vote propelled Al-
ternative for Germany, a three-
year-old anti-immigration group
known as AfD, into all three
state legislatures and positioned
it as Germany’s third-most-pop-
ular party, calculations coming
out hours after the polls closed
showed.
About a million foreigners
entered Germany last year from
places such as the Middle East
and Africa, a mix of war refu-
gees and economic migrants
seeking opportunity. Deft organ-
ization and an army of volun-
teers helped Germany stay on
top of the flow, avoiding so far a
scenario many economists pre-
dict: higher spending, unem-
ployment and taxes.
Yet this is migration on a
grand scale, the largest Europe
has seen in decades. It amounts
to a real-time experiment in
how one of the world’s greatest
democracies will be affected by
Losing the Center
A majority of Germans reject Angela Merkel's refugee policy, with
the opposition cutting through party lines.
Are you satisfied or dissatisfied with Ms. Merkel's refugee policy?
Satisfied
Overall 39%
Among supporters of:
Greens 67
(center-left)
die Linke 53
(far left)
Social Democratic*
44
(center-left)
Christian Democratic
55
Union/Christian Social
Union in Bavaria*
(center-right)
Free Democrat
29
(center-right)
Alternative for Germany
(anti-immigrant) 100
*In current ruling coalition
Source: Deutschlandtrend survey by Infratest Dimap for ARD,
most recent of 1,005 respondents conducted Feb. 26-27;
margin of error 1.4-3.1 percentage points
VOTE
Continued from Page One
man television. “All who voted
for us stand behind this pol-
icy.”
The votes are unlikely to
have an immediate impact on
Ms. Merkel’s migration policy
even as they put more pressure
on her to change course. The
chancellor has made it clear
she intends to stick to her
strategy of reducing the num-
ber of arrivals by working with
Turkey rather than closing the
German border. Key decisions
on migration are made on the
federal level, not by the states.
But the results laid bare the
extent to which the migration
crisis has polarized German so-
ciety. Left-of-center proponents
a vast inflow of people different
in culture, attitudes, skills and
economic status.
Ms. Merkel faces no immi-
nent threat to her rule. Even
with her popularity sharply di-
minished, it exceeds that of
many ruling politicians around
Europe, and she faces no obvi-
ous rival.
Threat of instability
Yet analysts warn that
mounting political fragmenta-
tion could make Europe’s largest
democracy less stable, more in-
troverted and less inclined to
play the regional leadership role
it has assumed since the end of
the last decade. If AfD enters
the federal parliament next year,
it could become difficult for any
two German parties, including
the two biggest now ruling to-
gether, to form a government.
“If the center-right and -left
mainstay parties—the classic
anchors of middle-of-the-road,
middle-class politics in Ger-
many—become so weak that not
even a grand coalition builds a
center that is stable any longer,
then we have an earthquake in
the party system,” said Jan
Techau, director of the Euro-
pean arm of the Carnegie En-
dowment for International
Peace.
At a recent campaign event
for Ms. Merkel’s center-right
Christian Democratic Union in
Rhineland-Palatinate, one of the
states that voted Sunday, the
crowd was waiting for the chan-
cellor’s motorcade. Christel
Hunsicker, 75 years old, and
leaning on a cane, said she sup-
ported Ms. Merkel until a year
ago, then changed her mind.
“The problems started, and
she just failed to deal with
them,” Ms. Hunsicker said.
In the crowd, a young pro-
tester held a sign that read
“Merkel Farewell Tour
2016/2017.”
Six months ago, Christian
Democratic Union candidate Ju-
lia Klöckner, a 43-year-old who
has drawn comparisons to a
young Ms. Merkel, looked as if
she would easily topple the
state’s center-left premier. On
Sunday night, according to ini-
tial calculations from broad-
caster ZDF, Ms. Klöckner fin-
ished 4% behind the incumbent.
In another state, Baden-
Dissatisfied Don’t know
59%
31
47
53
45
71
THE WALL STREET JOURNAL.
of a welcoming refugee policy
also recorded wins Sunday,
even as Ms. Merkel’s conserva-
tives suffered. Ms. Merkel’s
Christian Democratic Union
was on pace to lose two close
races, trailing the center-left
Greens in Baden-Württemberg
and the center-left Social Dem-
ocrats in Rhineland-Palatinate.
In the traditionally conser-
vative state of Baden-Württem-
berg, one of Germany’s eco-
nomic powerhouses, the
refugee-friendly Greens surged
to first place behind their pop-
ular incumbent premier, Win-
fried Kretschmann. Ms.
Merkel’s CDU failed to win first
place in the state for the first
time since World War II. The
AfD, meanwhile, was on pace to
win about 15%—the best post-
war result for a populist or far-
right party in the state.
FROM PAGE ONE
Helmut Dudenhöffer, above
with other refugee help-center
workers, bemoans a scarcity of
housing; Andreas Tölke, right,
let migrants live in his home
but stopped. Germans’ ardor
for the open door has ebbed.
Württemberg, the CDU lost a 13-
point September lead, heading
into the vote. According to the
initial tally, the party finished
second, trailing the Green Party
by more than 3%. In the third
state that held elections, Sax-
ony-Anhalt, the CDU maintained
control, but the AfD appeared to
gain serious ground Sunday
night, outstripping expectations
and winning as much as 24% of
the vote.
The center-left newspaper
Die Zeit riffed on the slippage
in Ms. Merkel’s popularity in the
weeks leading up to the vote
with a montage of the chancel-
lor balancing on a crumbling
party logo. The headline: “A
people’s party fears the people.”
From 75% last spring, her
popularity tumbled nearly 30
points before recovering some-
what at the end of February.
The survey found 59% of Ger-
mans dissatisfied with her refu-
gee policy.
Ms. Merkel hasn’t admitted
to any mistakes at home. In-
stead, she continues to hunt for
solutions outside Europe’s bor-
ders. On March 6 in Brussels
she hatched a tentative deal
with Turkish Prime Minister
Ahmet Davutoglu to improve ef-
forts to catch migrants who try
to reach the EU’s border in
Greece illegally and send them
back across the Aegean Sea.
Ms. Merkel’s problem, say
pollsters and analysts, is her
close association with a migrant
crisis that she can’t control and
that a majority of Germans
think makes their country a
worse place to live. In a recent
survey, those holding that view
outnumbered Germans who see
benefits from the influx by
three to one.
In the Rhineland-Palatinate
town of Herxheim, where work-
ers in the town’s renowned
chocolate marshmallow factory
now include an imam from Af-
ghanistan, many residents see
migration changing a town they
claim is older than the pyramids.
Refugees in Herxheim num-
bered 46 a year ago. The tally
stood at 170 last month and is
expected to be 300 by the end
of March.
The state, which distributes
newcomers among the towns,
picked an abandoned industrial
structure in Herxheim as a pro-
cessing center for 800 refugees.
Herxheim’s population is 10,000.
“The town doesn’t have any
more housing capacity—it’s at
zero,” said Helmut Dudenhöffer,
a retired schoolteacher who co-
founded a refugee help group
called HerxheimBUNT.
Said Karin Roth, one of the
group’s 100-plus members: “The
In Rhineland-Palatinate, in-
cumbent state Premier Malu
Dreyer of the Social Democrats
beat a rising star in the CDU,
Julia Klöckner. In the cam-
paign, Ms. Klöckner took a
tougher line on migrants than
Ms. Dreyer did.
In Saxony-Anhalt, a state
suffering from one of Ger-
many’s highest unemployment
rates, the AfD’s capture of
roughly 24% of the vote was
poised to scramble typical po-
litical alliances. While Ms.
Merkel’s CDU came in first,
early results suggested that the
party would need to ally with
the center-left Social Demo-
crats, as well as the Greens or
the business-friendly Free
Democrats, to form a govern-
ment. But it wasn’t immedi-
ately clear as results trickled in
whether the latter two parties
image of the town is definitely
going to change.”
In December, unknown ar-
sonists filled canisters at a gas
station and tried to set fire to
the metal structure slated for
the new processing center.
In early January, Mr. Duden-
höffer was at home watching
television reports of New Year’s
Eve festivities in Cologne, where
a throng of mainly North Afri-
can men robbed and sexually
assaulted women, according to
police and victims’ accounts.
The images pushed him to tears.
The incident, he said, using
shorthand for the outpouring of
hospitality Germans showed in
September, was “a catastrophe
for the Willkommenskultur.”
Concerns spread
Nearly four in five Germans
expect crime to increase in Ger-
many because of the immigra-
tion, a survey by Allensbach
opinion poll for daily FAZ
showed. A third expect the
surge to be dramatic.
As such concerns spread,
some candidates from Ms.
Merkel’s CDU have come close
to disavowing the chancellor.
Ms. Klöckner in Rhineland-Pa-
latinate and the CDU candidate
for premier of Baden-Württem-
berg, Guido Wolf, have issued
their own plans for handling mi-
grants, which call for them to be
kept at Germany’s border for
several weeks and processed
there, with a daily limit on ar-
rivals.
Green Party campaigners in
Baden-Württemberg argued, only
half-jokingly, that Merkel sup-
porters ought to back the Green
candidate, who lavished praise
on her during the campaign.
Some of Ms. Merkel’s stron-
gest criticism has come from
economic powerhouse Bavaria,
particularly from Horst See-
hofer, state premier and chair-
man of the CDU’s Bavarian sis-
ter party. Skepticism about her
policy is widespread in the af-
fluent Bavarian county of Da-
chau, still known as the site of
the Nazis’ first concentration
camp.
Marc Aghili, a telecom execu-
tive in Dachau, recalls feeling
would clear the 5% hurdle for
seats in the state parliament.
“The fact is: the democrats
of the middle must now stand
together,” said Saxony-Anhalt
State Premier Reiner Haseloff,
of the CDU, in a television in-
terview. “We will build a stable
government of the middle.”
Ms. Merkel didn’t comment
on the results. Campaigning on
the home stretch this weekend,
she acknowledged problems in
the handling of the migration
crisis but urged voters to pick
her conservative party never-
theless.
“We have lost time in the
question of asylum, of the Ge-
neva Convention, in the ques-
tion of giving protection to
those who need protection but
telling those who don’t need
protection, ‘You can’t come to
our country,’” Ms. Merkel said
THE WALL STREET JOURNAL.
tionaries and voters. In all
cases, she had support from the
broader electorate. The migrant
policy might change all that.
Now, amid widespread mis-
ALEXA VACHON FOR THE WALL STREET JOURNAL (PHOTOS)
givings about her refugee policy,
many analysts say she may not
be able to continue capturing
votes on her left much longer.
Carsten Nickel, an analyst
with Teneo Intelligence, a po-
litical-strategy consultancy,
noted how local governments
are primarily responsible for
looking after migrants.
“The pressure is hardest felt
on the lower level of politics,
and that’s where the dissatisfac-
tion with her politics is really
brewing,” he said.
The corrosive effect on the
proud in September when he political center is evident in
watched his countrymen cheer Hamburg, a well-to-do northern
refugees arriving at Munich’s city-state where Social Demo-
main train station. He also began crats—the center-left party in
to dread what could come after. Ms. Merkel’s governing coali-
“Germany has the lowest unem- tion—have long dominated elec-
ployment rate in Europe—people tions.
make money, there are lots of There, citizens of all persua-
jobs,” Mr. Aghili said. “Wait until sions have joined to try to block
that changes. The Germans will construction of new shelters.
blame other people.” Work on two buildings meant to
Today in Bavaria, the mi- house 2,000 migrants ground to
grants are still coming, but the a halt after citizens sued the
cheering has gone. Hamburg government.
A stopgap refugee shelter In the traditionally working-
sits across the street from Mr. class Altona district, residents
Aghili’s home. Another is oppo- are complaining about gray
site the Bavarian International shipping containers stacked
School in nearby Haimhausen, three high to house refugees,
where his two children study. which block their view of a
Hobby handball and volleyball green space. They cite the fire
players in Dachau twice tempo- code.
rarily lost a local trade school’s Klaus Schomacker, who
gym, commandeered first as an heads a movement comprising
emergency refugee shelter and 12 citizen-action groups from
later as a processing center. across the city, is pressuring the
The international school, Hamburg government to limit
which charges up to €15,000 in the concentration of refugees to
tuition and teaches the children forestall a rise of ethnic ghettos.
of prominent local corporate ex- “Merkel didn’t think about
ecutives, is considering adding the political consequences.
facial-recognition technology to That’s what she’s being blamed
its security, said board member for now,” Mr. Schomacker said,
Louise Holland, whose husband after filing paperwork for a ref-
works in private equity. erendum at city hall. “Her first
reaction was a good one—let
everybody into Germany—but
Nearly four in five she should have immediately
Germans expect the said, ‘This isn’t a solution.’ ”
At recent party rallies in
migrant influx will Rhineland-Palatinate, Ms.
lead to more crime. Merkel challenged the notion
she was losing touch with ordi-
nary voters. She cited a poll for
In the town of Karlsfeld, a public broadcaster ARD show-
gymnastics and sports club ing that 94% of Germans
changed its rules to let refugee- thought their country should
shelter residents take part in its still act as a refuge for people
athletic offerings. One con- fleeing war.
cerned club member asked “if it “Controversial discussions,”
was really a good idea to teach she told a crowd in the town of
the refugees Tae Kwon-Do,” said Landau, “make us think again
the club’s president, Rüdiger about our fundamental values—
Meyer. the lifeblood of our country and
The migrant crisis isn’t the the fiber of our being.”
first time Ms. Merkel has taken In a TV interview a few days
her conservative base to where later, she made a small conces-
it didn’t want to go. In her de- sion.
cade as chancellor, she abol- “Not everyone shares my
ished mandatory conscription, opinion, I have to live with
accelerated a phaseout of nu- that,” Ms. Merkel said. “We’ve
clear energy and raised pension already seen many political is-
payments for certain types of sues where at the start not ev-
workers, against sometimes-bit- eryone was on my side. But nev-
ter opposition from CDU func- ertheless, I was right.”
at a rally Saturday in Baden-
Württemberg. “Those who
want fast decisions must vote
for the Christian Democratic
from last year’s total of roughly
a million. While she has re-
fused to close the country’s
borders to migrants—warning
Union.” of devastating consequences
Despite Sunday’s setbacks, for Europe’s system of pass-
Ms. Merkel remains in a rela- port-free travel—she has
tively strong position at home. toughened asylum laws and
Her approval rating stands at pushed Turkey to prevent peo-
54%, according to pollster In- ple from getting into boats
fratest Dimap—a decline from bound for Greece.
67% last summer but still high But Ms. Merkel’s allies are
compared with many other nervous about the AfD’s rising
leaders in Europe. Nationwide, popularity. In a newspaper in-
the CDU is the most popular terview published Saturday, In-
party, polling at 36%, compared terior Minister Thomas de
with 23% for the left-of-center Maizière, also of the CDU, said
Social Democrats, the junior the AfD and its message were
partner in Ms. Merkel’s govern- damaging to Germany.
ing coalition. “The AfD doesn’t have a po-
Ms. Merkel has responded litical plan or the right an-
to German voters’ concerns by swers,” Mr. de Maizière told
promising to substantially re- newspaper Die Welt.
duce the number of asylum- —Christian Grimm
seekers arriving in Germany contributed to this article.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Monday, March 14, 2016 | A7

U.S. NEWS
Murders on the Rise Again

TANNEN MAURY/EUROPEAN PRESSPHOTO AGENCY

Renewed gang feuds,
drug violence cited as
likely cause of a surge
in several large cities
BY ZUSHA ELINSON
AND PERVAIZ SHALLWANI
A continuing rise in homi-
cides in some U.S. cities during
the first two months of 2016 is
rattling officials hoping last
year’s surge was an aberration
in the decadeslong decline in
the country’s murder rate.
This year, Chicago has seen
109 murders through March 11,
almost double last year’s total
during the period. Los Angeles
has tallied 51 murders through
March 9, a 21% increase.
The growing body count ap-
pears to be driven by renewed
gang feuds and surging vio-
lence linked to the drug trade,
law-enforcement officials said.
In other cities, the upward
trend has reversed. New York
City homicides dropped to 48
this year through March 9 from
64 in 2015.
While the murder rates in
most cities are nowhere near
the levels of the 1990s, police
chiefs are watching the num-
bers closely to see if the 2015
increases continue, said Darrel
Stephens, executive director of
the Major Cities Chiefs Associa-
tion. “They hope it was a one-
year blip,” said Mr. Stephens, a
former police chief. “They are
paying close attention.”
Last year, 44 of the 65 larg-
est police agencies, including
New York City, Los Angeles and
Chicago, reported increases in
murders from 2014, according
to a survey conducted by the
association.
“Like all Angelenos, I am
disturbed by recent increases
in crime that have affected
large cities across America,”
said Los Angeles Mayor Eric
Garcetti. “In Los Angeles, we
have had historically low crime
rates over the last decade, and
experts will tell you there is no
easy explanation for changes in
this trend.”
Mr. Garcetti said the city has
tackled the problem by increas-
ing the number of police offi-
cers deployed to violent crime
hot spots, funding gang reduc-
tion efforts, and expanding
mental-health and domestic-
abuse response teams.
Some observers have attri-
buted increases around the
country to the “Ferguson ef-
fect,” a widely debated theory
that rises in crime can be attri-
buted to the reluctance of po-
lice to engage in confrontation
in the face of continued pro-
tests after the 2014 killing of an
unarmed black teenager in Fer-
guson, Mo.
Mr. Stephens said most of
the chiefs he has talked to say
“their activity levels, the stops,
encounters and arrests, are not
significantly changed.”
The Los Angeles murder rise
has been driven by “a couple of Chicago has seen its homicide rate nearly double this year.
gangs that have reignited long-
dormant rivalries,” said George up murders in Chicago, hit record lows in 2013 and
Tita, a criminology professor at said Anthony Guglielmi, a po- again in 2014, but then saw a
University of California, Irvine. lice spokesman, noting that big increase in the first five
Mr. Tita said the city isn’t in gang activity “has consistently months of 2015. The depart-
danger of returning to 1990s been the primary cause of ment responded by focusing on
levels of violence, when there crime in Chicago.” He said the pockets of persistent violence.
were more than 1,000 killings a police chief has ordered more Since the efforts were
year. There were 283 homicides officers into areas with high launched in June, homicides in
in L.A. last year. levels of gang violence. the city have dropped nearly
Gang violence is also driving Homicides in New York City every month, officials said.

RACE times seek confrontation to

Continued from Page One
the presidential race. Mr. Trump
has 43% support there, well
ahead of Mr. Rubio, who draws
22%. Mr. Cruz, with 21%, is es-
sentially tied with Mr. Rubio.
Mr. Trump said Saturday
that a “planned attack” by pro-
testers, some of whom he said
were supporters of Democratic
presidential candidate Bernie
Sanders, necessitated the can-
cellation of the Chicago event.
On Saturday, Mr. Trump was
briefly surrounded by Secret
Service agents at an airport
rally near Dayton, Ohio, as he
was delivering a campaign
speech. Authorities said Thomas
Dimassimo of Fairborn, Ohio,
leapt over a barricade and
charged toward the celebrity
businessman, the Associated
Press reported. Mr. Dimassimo
was later charged with disor-
derly conduct and inducing
panic, the AP said.
At a later event in Cleveland,
Mr. Trump attacked Mr. Kasich
for supporting free-trade poli-
cies that the New York business-
man said have hurt the job mar-
ket and economy in Ohio, and
accused the governor of aban-
doning his state while running
for president.
Mr. Kasich took on Mr.
Trump at a brief news confer-
ence in Sharonville, Ohio. “Don-
ald Trump has created a toxic
environment, a toxic environ-
ment that has allowed his sup-
porters and those who some-
come together in violence,” he
said. Asked if he could back Mr.
Trump should he win the nomi-
nation, Mr. Kasich said: “It
makes it extremely difficult.”
Mr. Rubio said “I don’t know”
when asked in Florida if he
would back whoever is picked
as the GOP nominee. “It’s get-
ting harder every day,” he said.
Democratic front-runner Hil-
lary Clinton placed blame for in-
tensifying confrontations at Mr.
Trump’s events on him, saying
his divisive rhetoric encourages
violence. “If you play with
matches, you’re going to start a
fire you can’t control,” she told North America will export more
campaign volunteers in St.
Louis. “That’s not leadership.
That’s political arson.”
Mr. Sanders called Mr.
oil than it imports by 2020.
Trump a “pathological liar” in a
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while I appreciate that we had
supporters at Trump’s rally in
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Chicago, our campaign did not example, North American oil and natural gas production
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birther attacks against the legit- managing risks in volatile oil and natural gas markets.
imacy of President Obama.” This is how the energy industry can deliver in the face of
Mr. Rubio warned that Re- ever-changing consumer demand. This is how the world
publicans are in danger of dis-
mantling their own party if they advances. Learn more at cmegroup.com/fuel.
nominate Mr. Trump. “If Donald
Trump is our nominee, it will
fracture the Republican Party,”
Mr. Rubio said. “If you shatter
the Republican Party, that
movement will have no home.”
—Heather Haddon
contributed to this article.

A Second Super Tuesday

Republican Gov. John Kasich's struggling campaign could gain new
life after voting in his home state of Ohio, one of five states that hold
primaries on Tuesday. He holds a narrow lead there, while Donald
Trump leads in Florida and Illinois. Hillary Clinton leads her
Democratic rival in all three states.

FLORIDA ILLINOIS OHIO

Trump 43% Trump 34% Kasich 39%
Republican

Rubio 22 Cruz 25 Trump 33

Cruz 21 Kasich 21 Cruz 19
Kasich 9 Rubio 16 Rubio 6
Democrat

Clinton 61% Clinton 51% Clinton 58%

Sanders 34 Sanders 45 Sanders 38

Source: WSJ/NBC News/Marist telephone polls conducted March 4–10 of 511 likely Republican
and 500 likely Democratic primary voters in Florida, 421 likely Republican and 529 likely
Democratic primary voters in Illinois and 564 likely Republican and 453 likely Democratic
primary voters in Ohio; margins of error: +/– 4.1 to 4.8 pct. pts.
THE WALL STREET JOURNAL.

State supporter last week, but

U.S. has yet to convict anyone alleged
to actually have participated in
Watch planning an attack.
—Christopher M. Matthews

ARIZONA
Jury to Decide Fate of
Alleged ISIS Plotter
An Arizona jury is expected
to begin deliberating this week
on the fate of the first alleged
plotter of an Islamic State at-
tack to go to trial in the U.S.
Prosecutors allege that Abdul
Malik Abdul Kareem helped plan
an attack in which two gunmen
opened fire on a controversial
event in Garland, Texas, last year
billed as a contest for the best
cartoon of the Prophet Muham-
mad. Islamic State claimed re-
sponsibility for that attack.
The case is a test for the Jus-
tice Department, which won its
first trial conviction of an Islamic
TRADE
Clinton Hits Auto
Rules in Trade Pact
Hillary Clinton called for
tougher rules for auto imports in
a weekend speech in Ohio. She
said she would oppose stan-
dards that would allow auto
makers to build cars with mostly
cheaper parts from China or
other countries and then reap
the benefits of trade agree-
ments such as the Trans-Pacific
Partnership.
Mrs. Clinton said the weak-
ness of rules that would allow
cars made with cheap materials
from China or elsewhere to re-
main eligible for preferences un- CME Group is a trademark of CME Group Inc. The Globe logo is a trademark of Chicago Mercantile Exchange Inc. All other trademarks are the property of their respective owners.
der trade agreements was one Copyright © 2016 CME Group. All rights reserved.
of the reasons she came out
against the Pacific pact.
—Colleen McCain Nelson
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Another side of Smarter job

Syria’s refugee listings, no more
crisis: new self-evaluations:
businesses in How to combat
nearby nations workplace bias
A10 A10

BOOKS | CULTURE | SCIENCE | COMMERCE | HUMOR | POLITICS | LANGUAGE | TECHNOLOGY | ART | IDEAS
A8 | Monday, March 14, 2016 THE WALL STREET JOURNAL. © 2016 Dow Jones & Company. All Rights Reserved.

BY CHRISTOPHER CALDWELL

PHIL KNIGHT, the founder and chairman

of the athletic-gear company Nike,
is the 15th-richest person in the
world and a philanthropist who
specializes in “transformational
gifts,” as they are called in charita-
ble circles. Mr. Knight has given
more than a half-billion dollars to
Oregon Health Sciences University,
which in recent decades has been
spun off from the University of Ore-
gon, his alma mater. OHSU now in-
cludes the Knight Cancer Institute
and the Knight Cardiovascular In-
stitute. He also donated more than $100
million to the Stanford Graduate School
of Business, where he got his M.B.A. a
half-century ago and where the Knight
Management Center now sits at 655
Knight Way.
In February, Mr. Knight made perhaps

DONOR
his splashiest gift yet. He put up $400
million of a $750 million endowment,
meant to pay for young leaders from
around the world to attend graduate
school at Stanford. The so-called Knight-
Hennessy scholarships—Mr. Knight
shares billing with outgoing Stanford

BEWARE
president John L. Hennessy—will be a
21st-century equivalent of the ones set up
at the turn of the 20th by the African
mining magnate Cecil Rhodes to bring
student-athletes to Oxford.
And there’s the rub. Anyone who has
watched the fortunes of Rhodes’s legacy
in the past year can be forgiven for won-
dering whether these scholarships will
Today’s big-name provide Mr. Knight with a legacy as per-
manent as he intends.
philanthropists Last year, students at the University of
Cape Town in South Africa waged a suc-
should worry about cessful campaign to remove a statue of
how history will Rhodes. They also rampaged through uni-
versity buildings gathering “symbols of
judge their gifts the colonizer”—mostly portraits from the
period of white
(and their fortunes). rule—and threw
There is no them on a bon-
The rest of us may way to figure fire. In recent
months, stu-
wonder why we out which of dents led by a
subsidize their giving. today’s South African
Rhodes scholar
failings will have called for
elicit the Oriel College,
Oxford, to re-
wrath of move a statue
tomorrow’s of Rhodes, who
revisionists. studied there.
They called
him the “Hitler
of southern Af-
rica.” In turn,
Oriel alumni threatened to withdraw fi-
nancial support for the college unless it
rebuffed the protesters.
Universities and donors today must be
alert to the possibility that the acts of
philanthropy on which they collaborate
might someday be denounced by the
grandchildren of those they aimed to
help. There is no reason to assume that
today’s philanthropic largess will neces-
sarily escape the fate of last century’s.
When it comes to philanthropy, nam-
ing rights are often essential. They moti-
vate donors, and they get fought over. In
1924, James Buchanan “Buck” Duke, the
tobacco baron, left $40 million to Trinity
College in Durham, N.C., which used the
occasion to change its name to his. A
$100 million gift from Hollywood pro-
ducer David Geffen toward the rebuilding
of Lincoln Center in New York was suffi-
cient to bring about the renaming of Av-
ery Fisher Hall.
Sandy Weill, former Citigroup CEO,
and his wife Joan have a foundation that
Please turn to the next page

Mr. Caldwell is a senior editor at the

Weekly Standard.

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REVIEW

What’s in a Philanthropic Name?

Continued from the prior page
has given more than $600 million to Cornell Medical College,
which is now named after them. But when a judge ruled last year
that Paul Smith’s College in the Adirondacks could not be re-
named to include the name of Mrs. Weill, the couple withheld a
$20 million gift. (Apparently those who drew up the deeds for
Paul Smith had better lawyers than either Avery Fisher or the
Holy Trinity.)
There are exceptions to this preoccupation with naming
rights. The hedge-fund manager John Paulson made a magnifi-
cent $100 million donation to the Central Park Conservancy for,
among other things, restoring the woods at the Harlem end of
the park, but nothing done with the money will bear Mr. Paul-
son’s name. Chuck Feeney of Atlantic Philanthropies gave away
the $6 billion that he made on his duty-free shops, much of it
MIND & MATTER: in total anonymity.
SUSAN PINKER But most donors want to see their name perpetuated in an
institution. At Stanford, much of the Knight-Hennessy funds
not donated by Mr. Knight will come from Robert King and his
The Fear Factor wife Dorothy ($100 million for scholarships and the King Global
Leadership Program) and management expert Steven Denning
If the youth of the year 2066 want to fly into a rage against
today’s philanthropists, they will not lack for reasons. Every
great fortune rests under the suspicion that it is ill-gotten. There
is no permanent set of rules that governs “normal” business
practice. To the extent that there are such rules, the founders of
today’s fortunes tend to boast about breaking them.
Monopoly was one of the great evils of the industrial age.
It is not a failing that Mr. Knight and the other Stanford donors
can be accused of, but it might be raised someday against the
charitable enterprises of Bill Gates and Mark Zuckerberg,
whose fortunes are based on network efficiencies and whose
businesses can thus be considered (after a point) natural mo-
nopolies. As the Yale law professor David Grewal showed in his
masterly book “Network Power,” as long as everyone is using
Microsoft Word, you would have to be an idiot to use an incom-
patible product, even if another came out that worked much
better and sold for much less.
Nike was long accused of using free trade to cut labor costs.
The Asian factories with which it contracted became the sym-
bol of a “race to the bottom,” in both wages and working con-
ditions. Harper’s magazine ran a graphic exposé in 1992 show-

Sells Vaccines and his wife Roberta ($50 million for Denning House, which
will be home to the scholars themselves).
ing the paycheck of one of Nike’s Indonesian workers, who, it
alleged, was making $37.46 a month. Golfer Tiger Woods, the

Against Measles
The muckraker Gustavus Myers, whose “History of the Great company’s best-known celebrity endorser, found himself ques-
American Fortunes” was a reference work for angry egalitarians tioned about Nike’s labor conditions by reporters at the 1997
for decades after it was first published in 1907, was fascinated by British Open. The company has since adjusted workers’ salaries
IN 2000, the U.S. considered how common it was for “plutocratic nabobs,” after years of roll- and started community development and micro-credit pro-
measles eradicated, but the ing in the dough, to start paying out. Their need, Myers believed, grams in an effort to improve its practices and recover its rep-
picture has changed alarm- was to “give themselves a new character.” utation.
ingly since then. In 2014, 667 Consider Alfred Nobel, the inventor of dynamite. In 1888, Still, this election season indicates that we might be enter-
unvaccinated people con- when his brother died, French newspapers confused the two, ing a more protectionist and egalitarian age. If we are, Nike’s
tracted measles. Last year, an and Nobel received the dubious privilege of reading the head- early years will not go unremembered.
outbreak that began in California’s Disney- line on his own obituary: “The merchant of death is dead.” The Big philanthropy tends not to be egalitarian. It is often, in
land infected more than 100. episode may have spurred him to endow the prizes that today fact, explicitly elitist. Andrew Carnegie, whose gifts form the
Many Americans have been refusing to bear his name. bedrock of the nation’s public-library system, believed that
protect themselves and their children with Myers insisted that the libraries endowed by Andrew Carne- “wealth, passing through the hands of the few, can be made a
the measles vaccine. According to a recent gie should not lead us to forget that his wealth had its source much more potent force for the elevation of our race than if it
study in the American Journal of Public in “underpaid and overworked employees.” Never, though, did had been distributed in small sums to the people themselves.”
Health, as much as 5.5% of children are un- Myers suggest that one of these institutions un-name itself on For Carnegie, the best gifts were not only from elites but for
vaccinated in some U.S. communities, and the the grounds that its origins were tainted. elites. “The 37,000 frequenters of the Pratt Library,” he wrote,
parents most likely to refuse vaccines tend to Today’s student radicals are different. They are sensitive to “are of more value to Baltimore, to the State, and to the coun-
be affluent, well-educated and white. Their try than all the inert, lazy, and hopelessly-poor in
resistance can largely be traced to a 1998 ar- the whole nation.”
ticle in a British medical journal that falsely This philosophy now goes under the name of
linked childhood vaccines to autism. That “leadership,” and it is a philosophy to which Stan-
study was debunked, but the damage had ford’s donors subscribe heartily. Mr. Knight told
been done. the Stanford Report that “John [Hennessy] and I
Now doctors must figure out how to per- dream of a future 20, 30 or 50 years from now,
suade these parents to change their minds. when thousands of graduates—who can think out-
Late last year, they got some help from a team side the box as skilled problem-solvers—will be
of psychologists from the University of Illinois working together for a more peaceful, habitable
at Urbana-Champaign and the University of world.” But does building a leadership class help
California, Los Angeles, who were interested in the world or does it help the leadership class?
what might sway anti-vaxxers’ opinions. That depends on what those leaders do. At the
Measles can be devastating. A highly con- height of President Lyndon Johnson’s Great Soci-
tagious and virulent disease, it can lead to ety, the political scientist and future senator Dan-
convulsions, hearing loss, brain damage and iel Patrick Moynihan called foundations “a new
even death. Vaccination efforts have been so level of American government.” They underwrite
successful up to now, however, that almost experiments in “governance” that, over time, turn
half of the nation’s pediatricians have never into government-with-a-capital-G. Philanthropy is
seen a real case. The question is how to make thus a means by which elites can control the rules
people understand that the threat is real. that govern the replication of elites.
Would correcting misconceptions about In an age of widening inequality, this can lead
the childhood vaccine-autism myth do the to distrust. The double favoring of philanthropists
trick? Or would testimonials and graphic pho- in the federal tax code—tax preference for gifts
tos of sick children be more effective? and tax-free growth for endowments—means that
The study, led by Zachary Horne of the the philanthropists set policy priorities that other
University of Illinois and published last Au- taxpayers subsidize.
gust in the Proceedings of the National Acad- The $400 million in assets that Mr. Knight has
emy of Science, or PNAS, asked 315 partici- dedicated to Stanford’s new scholarships will pass
pants to complete questionnaires about their into a project wholly of his own choosing. Had he
attitudes to vaccines and their plans to vacci- left the money to a family member in his will, the
nate their children. The subjects were chosen federal government would tap about 40% of it, or
at random and not prescreened, although $160 million, and a state government might also
some dropped out or were later disqualified take its share—which these public authorities would
for not paying attention to the testing. then invest, following priorities established in a
The researchers randomly divided subjects more democratic fashion. Had Mr. Knight sold his
into three groups. They showed the “disease stock, the government would get 20% of the appre-
risk” group photos of young, infected children ciation in the form of capital-gains taxes.
with florid rashes and a paragraph written by People differ on what the proper tax rates are for
a mother of a child with measles, as well as all of these things. But it is clear that, when the rich
three short warnings about the disease. The divert their assets to
“autism correction” group read research sum-
maries showing that childhood vaccines do
Big tax-free purposes,
however laudable
not cause autism. And a control group read philanthropy those purposes may
unrelated scientific vignettes.
Once again, all the participants completed
is often be, it is other, non-
rich taxpayers who
the questionnaire about attitudes to vaccines. explicitly must pick up the
Which intervention was most likely to alter elitist. budgetary slack.
their views? When there is a
Surprisingly, the “autism correction” ap- trend toward in-
proach was no more influential in changing
anti-vaxxers’ minds than the control condi-
tion. Telling people that their beliefs aren’t the slightest evidence of TOP, a defaced statue of
true just didn’t work. But showing people im- human failing or frailty Cecil Rhodes before its
ages of sick children with ugly rashes did, as in matters of race, just removal at the University
did reading a parent’s account of how it feels as 65 years ago people of Cape Town, South
to have a baby with measles who is spiking a were sensitive to the Africa, April 9, 2015.
fever of 106 de- slightest evidence of RIGHT, Nike founder
grees. “We sympathy for commu- Phil Knight, Sept. 2015.
Up to 5.5% of spent three days nism. Princeton has
children are in the hospital
fearing we
been riven by demands that the university rename
buildings and graduate schools that honor Woodrow
unvaccinated might lose our Wilson, on the argument that, while president, he ad-
FROM TOP: RODGER BOSCH/AGENCE FRANCE-PRESSE/GETTY IMAGES; DAVID DOW/NBAE/GETTY IMAGES

in some U.S. baby boy,” the vanced segregation in Washington, D.C.

mother wrote. Harvard Law School is poised to change its shield,
communities. “He couldn’t pending final approval, to expunge the memory of
drink or eat, so Isaac Royall, the school’s 18th-century founder, who
he was on an IV, owned slaves. A sign that the agitation had turned
and for a while into hysteria came over the winter when Harvard an-
he seemed to be wasting away.” nounced—in a move reminiscent of the Cincinnati
Why would frightening people change Reds changing their name to “Redlegs” at the height
their minds more than giving them the of the McCarthy era—that the faculty member pre-
facts? The human brain evolved to give pri- siding over each of its residential houses would no longer be equality, you cannot expect the middle class to like that.
ority to appalling, negative events over posi- called a “master” but rather an anodyne “faculty dean.” The Knight-Hennessy scholarships are especially open to such
tive ones, according to a seminal paper pub- No one would suggest that Mr. Knight and the other Stan- criticism because students of all nations are eligible for them.
lished in the Review of General Psychology ford donors have violated any of the tenets of today’s public During the Vietnam War, the left-wing populist Rep. Wright Pat-
in 2001. Lead author Roy Baumeister, a psy- morality regarding race. And perhaps names that thank a bene- man of Texas urged Congress to abolish deductibility in the IRS
chology professor at Florida State Univer- factor should be considered in a different light than names that code for gifts made abroad. Asking the public to underwrite the
sity, documented hundreds of ways that honor a political actor. domestic whims of civic-minded elites is one thing, Patman rea-
“bad is stronger than good,” as he and his The point, though, is that political agitation can be fickle and soned. Asking them to underwrite the transfer of resources
colleagues titled the paper. It’s a position faddish. Isaac Royall, Cecil Rhodes and Woodrow Wilson were abroad is another thing altogether.
that has been confirmed by the PNAS study not considered beyond the pale in their own day. Decades from Such views may return in today’s ideological climate, with
on vaccines and by a 2015 analysis in Psy- now, some other ideological enthusiasm will descend, and some growing populist movements on the left and the right. We may
chological Bulletin of the impact of fear- of our own most heroic citizens, who will then be figures from be nearing the end of the era when megadonations like Phil
JAMES YANG

based appeals on changing people’s behavior. history books, will face reappraisal and possible repudiation. Knight’s are fairly commonplace. Time will tell whether we are
So, public officials, go ahead—scare par- From our vantage point, there is no way to figure out which of looking at the dawn of a new egalitarian age, or just looking a
ents silly. today’s failings will elicit the wrath of tomorrow’s revisionists. gift horse in the mouth.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A10 | Monday, March 14, 2016
MARTA MONTEIRO
Real Fixes for
Workplace Bias
To ensure that women get
a fair shot, focus on how
companies hire and promote
BY IRIS BOHNET
CORPORATIONS, not-for-profit groups and
governments spend billions of dollars every
year on diversity training—without knowing
whether the programs work. A review of al-
most 1,000 studies on interventions aimed at
reducing prejudice found that most programs
weren’t tested. For the few that were, includ-
ing media campaigns and corporate-diversity
training, the effects, wrote Elizabeth Levy Pa-
luck of Princeton and Donald P. Green of Yale
in the Annual Review of Psychology (2009),
“remain unknown.”
It is hard to ignore the possibility that all the
time and money devoted in recent decades to
promoting diversity at our major institutions
has largely been wasted.
This shouldn’t come as a surprise. As my own
field of study, behavioral economics, has docu-
mented so well, all of us bring a bundle of biases
SYRIAN FIRMS TAKE REFUGE
ABROAD—AND CREATE JOBS
BY KAREN LEIGH
AND SUHA MA’AYEH
WHEN ONE of Syria’s largest food companies
left the suburbs of Damascus for the dusty Jor-
danian border city of Irbid in 2012, it was
among the first Syrian businesses to register
there. Today, Al Durra General Trading and In-
vestment Co. shares a “free zone” (as free-trade
zones tend to be called in the region) with more
than 20 other enterprises that have also left
Syria. Hundreds more have relocated to else-
where in Jordan as the bloody conflict in their
home country enters its sixth year.
With the implosion of the Syrian economy,
businesses such as Al Durra have relocated to
many of the same Middle Eastern countries to
which their customers have fled in vast num-
bers. The success of these companies has chal-
lenged the idea that Syrian refugees are a drain
on host economies and steal jobs from locals.
Capital flight and a brain drain from Syria
have especially benefited Jordan, Lebanon and
Turkey, which have seen jobs and new busi-
nesses spring up as a result. Among the refu-
gees are Syrian business owners who saw their
factories and offices destroyed. Others decided
to leave as their customers disappeared and
their distribution networks collapsed.
“Investments need stability and security,”
said Khaled Khamees, Al Durra’s director of ex-
ports. “The conditions in Syria forced us to
move our business.”
In Turkey, Syrians set up 1,429 registered
companies last year and have become an “im-
REVIEW
to our everyday decision making, not least in
how we see and evaluate others. And decades of
research on cognitive biases have revealed that
our minds are amazingly difficult to change.
But what if we took a different approach?
What if we stopped focusing on trying to change
the biases of individuals and instead turned our
efforts to fixing the design of institutions them-
selves? The record here is much more promis-
ing, especially when it comes to ensuring that
women get a fair shot in the workplace.
Consider a small design innovation that has
transformed symphony orchestras in the U.S.:
a curtain to shield auditioning musicians from
the evaluation committee. This has helped
judges to focus on the music played instead of
what the musician looks like, as Claudia Goldin
of Harvard and Cecilia Rouse of Princeton
showed in a paper for the American Economic
Review (2000). Curtains increased by 50% the
likelihood that women advanced to future
rounds of tryouts. Today, almost 40% of musi-
cians at major American orchestras are female,
a contrast to the 1970s, when curtains were
seldom used and women made up only about
5% to 10% of musicians.
What would it mean to transfer such insights
portant actor” in the economy, the country’s Di-
saster and Emergency Management Authority
said in a January report. Syrians have invested
$71 million in joint ventures with Turkish busi-
nesspeople—about 20% of the foreign cash in-
jected into local partnerships in Turkey in 2015.
In Cairo, Syrian restaurants serving sha-
warma wraps and cheese-stuffed desserts have
proliferated. Since 2011, when Syria’s uprising
began, the total capital of businesses set up by
Syrians and their Egyptian partners in Egypt is
$792 million, according to the country’s General
Authority for Investments and Free Zones.
Syria’s neighbors, overwhelmed by the exo-
dus, have pared back support for bulging refu-
gee populations and partially sealed once-open
borders. Turkish, Lebanese and Jordanian offi-
cials say that the investment and skills that Syr-
ian businesses bring don’t compensate for the
burden of caring for so many refugees—and that
massive amounts of foreign aid are still needed.
“Lebanon is unable [to] finance the enormous
burden alone,” said Prime Minister Tamam
Salam at a high-level U.N. donor conference on
Syria’s crisis in London last month.
King Abdullah of Jordan, which hosts some
600,000 Syrians registered with the U.N. refugee
agency, said at the same conference that the ref-
ugees consume more than 25% of Jordan’s an-
nual budget. “It is as if the U.K. had to absorb
the entire population of Belgium,” he said.
Despite the financial strains, Jordan is reap-
ing the dividends of Syrian business investment.
Jordan’s free zones have annual exports of $5
billion, and of that, a half-billion dollars comes
from Syrian companies, according to Nabeel
to ordinary work environments? A good starting
point is to ensure that the language in job ad-
vertisements is gender-neutral. Research by
Danielle Gaucher and Justin Friesen of the Uni-
versity of Waterloo and Aaron C. Kay of Duke
University, published in the Journal of Personal-
ity and Social Psychology (2011), found a clear
pattern in how men and women responded to
certain words on job search websites. Men were
drawn to jobs looking for candidates who were
competitive, assertive, individualistic and ambi-
tious; women, to jobs seeking
applicants who were commit-
ted, supportive, compassion-
ate and understanding.
At auditions,
New, more sophisticated putting
tools also can help. The use
of big data in human-re-
musicians
sources management, often behind a
referred to as “people ana- curtain went a
lytics,” enables companies
to track biases much more long way.
precisely. Based on such
data, Janice Fanning Mad-
den of the Wharton School
discovered, in a study published in Gender
and Society (2012), that the female stockbro-
kers in two of the largest U.S. brokerage firms
made less money than their male counter-
parts because they were given worse-per-
forming accounts to start with.
Using data to learn about the possible dispa-
rate treatment of employees shouldn’t be con-
troversial. No company runs its finances based
just on intuition, and the same should hold for
SYRIAN REFUGEE Abdul Halim al-Attar, left, watches an employee at his Beirut restaurant,
Nov. 26, 2015—one of three small businesses the entrepreneur runs in Lebanon’s capital.
Romman, chairman of the Jordan Free Zones In-
vestors Commission.
For displaced Syrians, re-establishing them-
selves in new countries means having to deal
with local competition and legal hurdles. Obtain-
ing work permits can be tough. Syrian refugees
cannot work legally in Lebanon; Turkey recently
moved to make it easier for them to obtain the
required permits.
A Syrian who owns a fragrance shop in Trip-
oli, Lebanon, said that most Syrian business-
people operate without registration, often em-
ploying fellow Syrians without work permits.
More than half of Syrian businesses in neigh-
boring Lebanon were established after the refu-
gee influx began in 2011, the World Bank said
last year. Lebanon has since taken in more than
THE WALL STREET JOURNAL.
personnel decisions. We should apply the same
rigor to the management of people, and technol-
ogy can help.
Tools such as EDGE—software for workforce
analytics developed by a Swiss foundation—al-
low companies to detect potential gender gaps
in outcome variables such as pay, recruitment
and promotion and in input variables such as
training, mentoring and company policies and
practices. (I serve on the scientific advisory
board of EDGE.) Tracking progress over time,
companies that have used EDGE, such as L’Oréal
USA, Deloitte Switzerland and Banco Comparta-
mos Mexico, have been able to focus resources
on fixing what is broken rather than blindly
throwing money at the problem.
A few years ago, female employees at Google
were twice as likely to quit as the average
Googler. Simple data analysis revealed that the
gender gap was primarily due to young mothers
leaving. Laszlo Bock, the head of Google’s HR
department, immediately increased maternity
and paternity leave substantially. New mothers
at Google are now no more likely to leave than
the average employee.
Data analytics also can help to find where the
well-documented gender gaps in promotion oc-
cur. We now know, for example, that bias is
more likely to creep into performance appraisals
when managers try to evaluate the potential of
employees rather than their past performance.
This “performance-reward bias” means that the
same performance doesn’t necessarily translate
into the same rewards. Stereotypes that see men
as possessing more long-term career ambition
and leadership qualities gave them an advantage
over female colleagues whose actual perfor-
mance was just as strong.
Companies also should reconsider the com-
mon practice of having managers receive self-
evaluations from their employees. I know of no
evidence that this does any good, but in my own
work with companies, I have come across an un-
surprising pattern: Managers’ ratings are af-
fected by the self-evaluations of employees. Be-
cause women (as research shows) tend to be
less self-confident than men and fear backlash
from “bragging,” they assign themselves lower
ratings. Managers then use employee self-ap-
praisals as the starting point for their own ap-
praisals, putting women at a disadvantage.
Smart design allows a way out of this thicket
of biases. In recruitment: Be vigilant about the
language you use. If you want to benefit from
the whole available talent pool, use gender-neu-
tral wording. When hiring, learn from the blind
auditions of symphony orchestras and stop ask-
ing for demographic information. Take advan-
tage of new tools that easily allow firms to ano-
nymize applicant information.
And level the playing field in
performance management.
Rely on data to understand
what is broken, and measure
whether there are biases in
how employees are supported
in performing their jobs and
evaluated for results.
Smart antibias design can
change the way that we run
any organization, not just
businesses. It may not free
our minds from prejudice,
but it can make our biases less influential
and help us to make our major institutions
more inclusive and productive.
Dr. Bohnet is the author of “What Works: Gen-
der Equality by Design,” recently published by
Harvard University Press. She is a professor of
public policy at Harvard’s Kennedy School of
Government.
HUSSEIN MALLA/ASSOCIATED PRESS
1.2 million Syrians.
Al Durra had 1,500 employees and three fac-
tories back in Damascus. Now, 450 Syrians and
Jordanians work shoulder-to-shoulder in its Ir-
bid complex, packing stuffed vine leaves and
stirring caldrons of sesame halwa. The company
has also opened a smaller factory in Egypt,
which it says operates legally.
Al Durra’s executives hope to change the im-
age of Syrians from helpless refugees to ready
investors and able workers. Some 70% of Al Du-
rra’s workforce in Irbid is Jordanian; the rest
are Syrian, all on work permits, the firm said.
“There’s a difference between investors and
refugees,” said Mr. Khamees.
—Dana Ballout, Emre Peker, Felicia Schwartz
and Dahlia Kholaif contributed to this article.
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A12 | Monday, March 14, 2016 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
Hillary’s Other
The Donald and The Barack Server Scandal
P
resident Obama is said to be a reflec- economic revolution. Bernie Sanders is Mr.
tive man, and often he is the one say- Trump’s leftward duplicate. The difference is Bernie Sanders keeps Clinton at State (unpaid), while on
refusing to hit Hillary the foundation payroll.
ing so, but you wouldn’t know it from that the Democratic establishment is doing a
Clinton over her email. While in government, Ms. Mills was
his Thursday press confer- better job keeping their out- Or so it seems. But paid by an outside entity to negotiate
ence with Canadian Prime Obama is Trump’s more sider away from a delegate maybe the Vermont with a foreign country (the United
Minister Justin Trudeau. sophisticated, articulate majority. senator’s relentless as- Arab Emirates) that had donated to the
Asked about political polar- The source of this public
ization and the Donald liberal antecedent. frustration is no great mys- POTOMAC sault on Mrs. Clinton’s Clinton Foundation. She was also
corporate ties is about among those who reviewed Bill Clin-
WATCH
Trump phenomenon, Mr. tery. For the 10th straight By Kimberley
her email after all. ton’s speaking events.
Obama denied all responsi- year, the U.S. economy is Maybe Mr. Sanders is Ms. Abedin held her own clintone-
A. Strassel
bility. He doesn’t seem to appreciate the kind growing by less than 3%. Such a long stretch of betting that Hillary has mail.com account. We recently found
of country he will leave behind. underperformance hasn’t happened since the a bigger problem than out that the State Department’s in-
“What I’m not going to do is to validate some 1930s. Slow growth for a decade means middle- classified information. spector general issued a subpoena to
The question hanging over the Clin- the foundation last fall, demanding
notion that the Republican crack-up that’s been class incomes are stagnant, which in turn in-
ton campaign is whether she will be documents about projects it engaged
taking place is a consequence of actions that creases economic anxiety, which in turn creates indicted for mishandling state secrets. in while Mrs. Clinton was the na-
I’ve taken,” Mr. Obama said. He explained Mr. political unrest. Grilled by Jorge Ramos at the Demo- tion’s top diplomat. That subpoena
Trump’s ascent as the result of “the nasty tone As for tone, the 1980s and 1990s featured bit- cratic debate Wednesday, Mrs. Clinton specifically asked for records related
of our politics, which I certainly have not con- ter partisan conflicts—and for that matter so was again forced to roll out a trail of to Ms. Abedin.
tributed to.” He blamed Republicans for this did the 1880s and 1790s. But the late 20th cen- misdirection, to insist (with astonish- Mrs. Clinton would have us believe
tone, as ever. tury had popular two-term Presidencies almost ing brazenness) that an indictment is that the 31,830 emails she deleted
“Objectively,” Mr. Obama said, “it’s fair to back to back, and the era didn’t produce back- “not going to happen.” from her server pertained to yoga
say that the Republican political elites and lash candidates promising to burn Washington Classified information matters, and and weddings. Yet look at what the
many of the information outlets—social media, to the ground and salt the earth. The reason is Mrs. Clinton stands accused of sloppy press has gleaned even from the few
handling. Yet the former secretary of emails and foundation details that
news outlets, talk radio, television stations— that the economy was booming.
state didn’t set up a home-brew server were released.
have been feeding the Republican base for the Mr. Obama’s apologists claim 2%-2.5% to expose national secrets—that was in-
last seven years a notion that everything I do growth is the best we can do, but the truth is cidental. Mrs. Clinton went to elaborate
is to be opposed; that cooperation or compro- that the natural dynamism of the U.S. economy lengths to build a secret, private system The focus is on state secrets
mise somehow is a betrayal.” He listed a few has been swamped by waves of Mr. Obama’s bad for some other reason. She says it was
more GOP shortcomings, but you’ve got to hand policy. Instead of a second term that is bereft for “convenience.” Others speculate she
in her email—but what
it to him for that “objectively.” of domestic achievements, in an alternate uni- did it out of the Clintons’ longtime personal favors lay within?
As Mr. Obama tells it, all of this reflexive verse he might have worked with the duly paranoia over paper trails.
Obama bashing created “an environment where elected Republican majority and started to re- Mr. Sanders is likely hitting closer
somebody like a Donald Trump can thrive. He’s pair the economy from the center out. to the truth. Lost in the kerfuffle is the Foundation cash after Russian min-
just doing more of what has been done for the Instead, Mr. Obama has shown contempt for other, lately ignored but still potent, ing approvals. More than a dozen
scandal: the Clinton Foundation, and speeches by Bill to corporations and
last seven and a half years.” In other words, Re- institutions that he doesn’t run, and, notably,
the unethical mixing of Mrs. Clinton’s governments with business pending
publicans didn’t clean up the standing water in most of his growth-subtracting policies have public work and her personal fundrais- before Hillary’s State Department. Doz-
their own backyard and now they’re complain- been imposed through unilateral executive ac- ing/speech-giving/favor-doing. The ens more donations to the foundation
ing about mosquitoes. tion. He doesn’t do persuasion and compromise. more evidence that comes out, the from companies that were lobbying the
One irony is that even as Mr. Obama denied Some policies were intended to sow division, like more it looks as if that server was set State Department. Checks to the foun-
any liability for Mr. Trump, he lapsed into the his lawless immigration order that inflamed the up to provide an off-the-grid means for dation from a Swiss bank after Secre-
same rhetorical habit that helped fuel the busi- restrictionist right, divided Republican elites those two worlds to interact. tary of State Clinton solved its IRS
nessman’s ascent. For Mr. Obama, principled and was only stopped by the courts. Take Bryan Pagliano, now reported problem. An email to Ms. Abedin,
opposition to his policies is always illegitimate The nature of Mr. Trump’s appeal can be ex- to have received U.S. Justice Depart- while she was at State, asking for help
or motivated by bad faith. plained by Mr. Obama’s own rule-by-regulation ment immunity in return for talking winning a presidential appointment for
Like the President’s nonstop moral lectures governing methods and polarizing political about his email services rendered. Mr. a Clinton Foundation donor.
Pagliano ran Mrs. Clinton’s IT shop What else? Plenty, surely. The Clin-
about “our values” and “who we are as Ameri- style. You might even call him The Barack, the
during her 2008 presidential cam- ton Foundation existed in recent
cans,” by which he means liberal values and more articulate and sophisticated liberal ante- paign, then worked for her political-ac- years to serve as an unofficial PAC for
who we are as Democrats, he reads his critics cedent to The Donald. tion committee. She custom-built a job Mrs. Clinton’s expected presidential
out of politics. No wonder so many Americans The stability of the American political sys- for him at the State Department. He run. Mrs. Clinton’s job at State was
feel disenfranchised and powerless. tem depends on deeply rooted norms. What this arrived only a few months after her in designed to serve the same end. Of
And if we’re being objective, maybe Mr. primary season has revealed is that when a 2009, and he left when she left. course the business of the two was
Obama could account for the populist uprising President violates these unwritten rules, the Mr. Pagliano maintained Mrs. Clin- intertwined. Here’s to betting the
among disaffected Democratic primary voters damage to self-government leads into un- ton’s server in her New York home. server was maintained to facilitate
for a 74-year-old Vermont socialist vowing an charted territory. The State Department paid him, but a that intertwinement.
Clinton official confirmed to the Wash- Mr. Sanders started ramping up his
ington Post that the Clintons paid him attacks on Mrs. Clinton for her ties to
Accountability for Preet Bharara in addition. Mr. Pagliano didn’t report
that outside money on disclosure
“billionaires” and “Wall Street” in mid-
January. That’s almost precisely the

W
all Street holy warrior Preet Bhar-
ara may finally answer for abuses
of his prosecutorial power. On
Thursday a federal district court ruled that a
lawsuit alleging that the U.S. Attorney for the
Southern District of New York violated the
civil and constitutional rights of former hedge-
fund manager David Ganek can proceed to dis-
covery and trial. Hear, hear.
This fiasco began in 2010 when the Federal
Bureau of Investigation publicly raided Mr.
Ganek’s Level Global for insider trading, and
Mr. Ganek was forced to liquidate the fund
amid the damage to his reputation. The Second
Circuit Court of Appeals has since overturned
the conviction of the Level Global portfolio
manager who had been found guilty, noting
there was “no evidence” he committed securi-
ties fraud, and the Securities and Exchange
Commission is disgorging penalties.
Mr. Ganek was never charged, even under
the theory of insider trading that the Second
the Level Global search contained false and
perhaps deliberately fabricated claims about
his personal involvement. He says in his suit
against Mr. Bharara that FBI agents deprived
him of due process.
This is a major development in the case
that we first wrote about last year (“Preet
Bharara’s Methods”). Prosecutors and law en-
forcement enjoy qualified immunity that
shields government officials from being sued
for all but the most egregious violations of
legal rights.
Yet New York Judge William Pauley rejected
the government’s motion to dismiss. “Discov-
ery is now appropriate to ascertain whether
this is a case about a simple misunderstanding
or whether something more troubling was
afoot,” he writes, referring to the question of
how and why the false allegations that de-
stroyed Level Global entered the warrant.
Mr. Bharara’s media image is the Elliot Ness
of Wall Street. Now we may learn if he has his
forms—as he was required to. And
State claims to have been unaware that
Mr. Pagliano was getting personally
paid by the secretary of state.
So Mr. Pagliano gets added to the list
of insiders compensated to work
simultaneously for the government and
the Clintons. Huma Abedin at one point
worked for the State Department, the
Clinton Foundation, Mrs. Clinton and a
private company tied to the Clintons—
all at the same time.
Cheryl Mills worked for Mrs. Clin-
ton at State while holding a position
at the Clinton Foundation. Sidney
Blumenthal secretly assisted Mrs.
Zimbabwe May Starve,
But at Least It’s GMO-Free
time that news organizations reported
(without garnering much public atten-
tion) that the FBI had expanded its
email probe to examine the “intersec-
tion” between Mrs. Clinton’s State De-
partment and the foundation. What is
Mr. Pagliano now telling as part of his
immunity deal?
Mr. Sanders knows that his corpo-
rate-special-interest line already plays
well with crowds; it reminds people of
the stench of the Clintons’ ethics. But
he may also be betting that the FBI
finds more to peg on Mrs. Clinton
than simply classified emails. And he
may be right.

Circuit tossed, and the FBI affidavit to support
A Trade Tutorial for Trump
M
Chikombedzi, Zimbabwe
own house in order. y country’s government would
rather see people starve than
let them eat genetically modi-
fied food.
That’s the only conclusion to draw
that has studied them knows.
They are also positively good for the
environment, allowing farmers to fight
soil erosion by planting high-yield crops
that need less water, reduce greenhouse
gases—and, most important, grow more

W
ith the presidential frontrunners of Nonetheless, Mr. Trump on Tuesday rapped from the announcement in February food on less land.
both parties flogging made-in- Japan for “playing around with the yen,” which that Zimbabwe will reject any food aid For too long African countries have
America populism, it’s no surprise he claimed has undercut U.S. companies. “Cat- that includes a genetically-modified-or- looked to Europe for economic and in-
ganism ingredient—such as grains, corn tellectual leadership—and now we’ve
that voters are turning against erpillar is being hurt very and other crops made more vigorous or accepted Europe’s sweeping opposi-
free trade. So allow us to add A few facts beyond that badly by Komatsu” of Japan, fruitful through GMO breeding. The ban tion to GMOs. The difference is that
some facts to this so far data- misleading Komatsu- he The said. comes just as Zimbabweans are suffer- Europe is a wealthy continent that can
free debate, and we’re avail- yen has fallen by about ing from our worst drought in two de- afford this ideological luxury. In Af-
able to give Donald Trump a Caterpillar anecdote. 25% to the dollar since 2012, cades and up to three million people rica, we can’t. Grinding poverty is nor-
tutorial upon request. when it was widely thought to need emergency relief. mal here. We need an agricultural sec-
The real-estate developer be overvalued, and this has “The position of the government is tor that keeps up with population
recently added Japan to his most-wanted list benefited Japanese exporters. But the Bank of very clear,” said Joseph Made, the min- growth, rather than one that keeps on
of job killers, which includes China and Mexico. Japan’s monetary interventions have been ister of agriculture. “We do not accept falling behind.
“We have a trade deficit with Japan of over aimed at stimulating domestic demand and in- GMO as we are protecting the environ- A handful of African countries appre-
ment from the grain point of view.” ciate the value of GMOs. Across the
$100 billion a year,” he said during his postpri- flation, not boosting exports. In any case, Cat-
In other words, my country—which southern border of Zimbabwe lies
mary press conference in Florida on Tuesday. erpillar’s recent struggles are mainly due to can’t feed itself—will refuse what mil- South Africa, where farmers are grow-
“They’re killing us. You know what we sell to plunging commodity prices that have hurt lions around the world eat safely every ing more than five million acres of GMO
Japan? Practically nothing.” global sales for its mining equipment amid day in their breakfasts, lunches and din- corn each year.
Is $116 billion worth of annual goods and slowing demand from China. ners as a conventional source of calo- In Burkina Faso farmers plant GMO
services exports to Japan practically nothing? By the way, Komatsu employs thousands of ries. It doesn’t matter whether the aid cotton. Last month Kenya approved the
Japan is the fourth-largest U.S. export market workers at nine U.S. locations. Notwithstanding arrives as food for people or feed for an- first field trial for corn genetically mod-
in goods after Canada, Mexico and China. In the weakening yen, Japanese auto makers have imals. Our customs inspectors will make ified to fight pests. The commercializa-
2013 the top U.S. exports to Japan were agricul- also increased production in the U.S., in part sure that no food with GMOs reaches a tion of this GMO corn could come next.
tural products ($12.1 billion), machinery ($10.7 to avoid import duties, hedge foreign-exchange single hungry mouth. But these bright spots are the rare ex-
billion), medical devices ($8 billion) and air- risks and reduce shipping costs. More than The drought has devastated my fam- ceptions, proving the sad rule that in Af-
ily’s farm, which will produce almost no rica farmers lack access to the basic
craft ($7.1 billion). three-quarters of Nissans sold in the U.S. are
sorghum or corn this year. We’re short seed technologies that peers in the U.S.,
According to the U.S. Census Bureau, the produced domestically. on money and the drought has caused Brazil and India take for granted as they
overall U.S. trade deficit in goods with Japan The best way to boost American exports is prices to soar, even for the simplest produce record-setting harvests.
was $68 billion last year. Vehicles accounted to remove trade barriers with new trade agree- goods. In the markets, cabbages the There are no easy solutions to a
for much of the deficit, but that’s primarily ments. U.S. farm producers would particularly size of tennis balls sell for $1. drought, and even crops with GMOs
because Japanese car makers can produce su- benefit from the Trans-Pacific Partnership with People are desperate for work. Last can’t bring us the rain we need. Yet the
perior small cars at a lower cost than U.S. Japan and 10 other countries. Japanese tariffs week I watched a man my grandfather’s drought may serve the purpose of high-
manufacturers. Federal fuel-economy stan- on beef would fall to 9% in the 16th year of the age carry a hoe from house to house, try- lighting the madness of Africa’s anti-
dards harm American automakers more than deal from 38.5% while the 20% tariff on ground ing to trade whatever labor he could of- GMO extremism. After all, we need
trade does. pork would be eliminated in six years. Japan’s fer for a meal. He wound up performing these GMOs in the form of emergency
Notably, the U.S. enjoys large comparative 21.3% levy on poultry and eggs would be abol- backyard chores for a cup of tea. food aid. But we should be able to enjoy
The rejection of GMO food aid is a them soon as an ordinary part of farm-
advantages in high-value manufacturing and ished in six to 13 years. humanitarian outrage—a man-made di- ing and food production.
agriculture. In 2012, according to the White Mr. Trump claims that as President he saster built on top of a natural disaster.
House trade rep, the U.S. ran a $20 billion trade would make smarter and “fairer” trade deals. Yet something even worse lies behind Ms. Mudukuti is a biotechnology stu-
surplus with Japan in private commercial ser- He could help persuade voters by showing it: a denial of science. GMOs pose no dent at Chinhoyi University of Technol-
vices such as consulting, legal services and in- that he knows more than nothing about for- threat to human health, as virtually ev- ogy in Zimbabwe, and a member of the
formation technology. eign trade. ery scientific and regulatory agency Global Farmer Network.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Donald Trump, Meet Your Customers
By Joseph Rago
‘S
New York
o you have the water,
you have the steaks,
you have the airline. I
mean, what’s wrong
with selling?” Donald J.
Trump asked Tuesday in his remark-
able election-night defense of his
business empire. “Every once in a
while you can sell something. You
have the wines and all of that, and
Trump University, we’re going to
start it up as soon as I win the law-
suit.” He went on to invoke other “as-
sets” including his hotels, Trump
Vodka, the New York towers, the golf
links and the Mar-a-Lago club—but
missed the opportunity to plug his
Trump-branded neckties, restaurants,
jewelry and mattresses.
Mr. Trump says he’s the candidate
of the common man, and, well, the
common man now regularly shares
online his opinions of the stuff he
buys. By coincidence, a few weeks be-
fore Mr. Trump’s speech, I wondered
what the amateur critics who contrib-
ute to websites like TripAdvisor, Yelp
and Amazon were saying about his
consumer-facing products, and I
started to comb through their reviews
whenever I had a spare half-hour.
Trump say he’s the tribune
of the common man. I read
26,000 online reviews to
find out what the common
man thinks of his products.
According to my spreadsheet, I’ve
now read about 26,000 individual re-
views. It has been slow, bleary-eyed
scutwork, trust me, and remember,
kids, this is what happens if you go
into journalism.
The digital portrait of Mr. Trump
that emerges, review by review, is in-
structive, however subjective and im-
pressionistic. You might call it an un-
scientific poll—Mr. Trump’s favorite
kind—of his achievements, failures
and the relationship between his
grandiosity and reality.
i i i have a store worth more than Mitt
Mr. Trump was flanked on Tuesday
by a pile of what he called Trump
Steaks, but his mail-order beef busi-
ness is defunct. The label on the
steaks indicated that they were sold
by Bush Brothers Provision Co., a
West Palm Beach grocery.
The reviews for Trump Steaks are
still posted on the QVC website, how-
ever. One reports that the Classic Col-
lection, which cost $199 for two filets,
two bone-in rib-eyes and a dozen
burgers, had “no redeeming quali-
ties.” “Dreadful pieces of meat for a
high price,” reads another. “It’s hard
A New Tool for Avoiding Big-Bank Failures: ‘Chapter 14’
By Emily C. Kapur
And John B. Taylor
F
or months Democratic presi-
dential hopeful Bernie Sanders
has been telling Americans that
the government must “break up the
banks” because they are “too big to
fail.” This is the wrong role for gov-
ernment, but Sen. Sanders and others
on both sides of the aisle have a
point. The 2010 Dodd-Frank financial
law, which was supposed to end too
big to fail, has not.
Dodd-Frank gave the Federal De-
posit Insurance Corp. authority to
take over and oversee the reorganiza-
tion of so-called systemically impor-
tant financial institutions whose fail-
ure could pose a risk to the economy.
But no one can be sure the FDIC will
follow its resolution strategy, which
leads many to believe Dodd-Frank will
be bypassed in a crisis.
Reflecting on his own experience
as overseer of the U.S. Treasury’s
bailout program in 2008-09, Neel
Kashkari, now president of the Fed-
eral Reserve Bank of Minneapolis,
says U.S. government officials are
once again likely to bail out big
banks and their creditors rather
than “trigger many trillions of addi-
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to believe these are the same pieces
that Mr. Trump eats.”
Disenchantment with Trump food
is a running motif. “After all, how bad
can a restaurant be that has Donald
Trump’s name on it?” a TripAdvisor
user wonders about DJT, a restaurant
at Trump Hotel Las Vegas. “Well,
pretty bad,” he concludes. “Donald,
they don’t deserve your initials,”
somebody else says.
JOE SKIPPER/REUTERS
Drinkers can also no longer enjoy
“Donald J. Trump: The World’s Finest
Super Premium Vodka, Success Dis-
tilled,” which was discontinued in
2011, though it is unclear if anyone
ever enjoyed it. A connoisseur at the
website Vodkaphiles compares the
flavor to “gas station burritos,
slightly expired 2% milk, hard boiled
eggs, and canned pears.”
Perhaps Mr. Trump’s people simply
have different preferences when it
comes to the human senses. On a fra-
grances bulletin board, a reviewer
says the notes of Success by Trump
eau de toilette spray evoke adjectives
like “cloying, synthetic, annoyance,
headache inducing and maybe even
household cleanser.” Another chimes
in, “Maybe it could make the dump-
ster outside my house smell better,
but I doubt it.”
“We were almost violently ill from
the smell,” TripAdvisor’s Rady re-
ports about the Trump Taj Mahal ca-
sino in Atlantic City. “The ‘roof deck
pool’ was nothing but a used hypo-
dermic needle collection area,” notes
Lauren W.
Alas, the Taj is just another bank-
rupt Atlantic City casino, not another
Atlantic City casino whose bank-
ruptcy Mr. Trump caused. He took a
buyout in 2009, and his trademark re-
mains because the hedge funds that
run the joint told a chapter 11 judge
that they lacked the funds to change
the “ubiquitous” Trump signage.
This brings us to Mr. Trump’s un-
conventional conceptions of ownership
and property. Buildings he no longer
controls live on in the Trump pantheon,
sometimes because of insolvency but
more often because he claims anything
with his name on it is “his.” Even com-
panies he has nothing to do with can
become Trump companies.
Mr. Trump likes to boast that “I
Romney”—as if the Gucci flagship
that leases commercial real estate in
Trump Tower agreed as a tenant to
become the landlord’s possession. If
that’s how it worked, at least it
would explain this Yelper’s outlook:
“99 Cent Store quality and even
worse service.”
True to form, this week I noticed
that the “Trump Restaurants” section
of the Trump Organization website
claimed Daniel, the Upper East Side
dining room that is among the
world’s finest. It has great reviews—
though I figured Daniel is no more a
tional costs to society.”
The solution is not to break up
the banks or turn them into public
utilities. Instead, we should do what
Dodd-Frank failed to do: Make big-
bank failures feasible without tank-
ing the economy by writing a pro-
cess to do so into the bankruptcy
code through a new amendment—a
“chapter 14.”
Chapter 14 would impose losses on
shareholders and creditors while pre-
venting the collapse of one firm from
spreading to others. It could be initi-
ated by the lead regulatory agency
and would begin with an over-the-
weekend bankruptcy hearing before a
preselected U.S. district judge. After
the hearing, the court would convert
the bank’s eligible long-term debt into
equity, reorganizing the bankrupt
bank’s balance sheet without restruc-
turing its operations.
A new nonbankrupt company,
owned by the bankruptcy estate (the
temporary legal owner of a failed
company’s assets and property),
would assume the recapitalized bal-
ance sheet of the failed bank, includ-
ing all obligations to its short-term
creditors. But the failed bank’s share-
holders and long-term bondholders
would have claims only against the
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OPINION
The candidate and his merchandise at a March 8 news conference in Jupiter, Fla.
Trump Restaurant than Gucci is a
Trump Store.
A spokeswoman wrote back that
the condo building where Daniel is
housed is now managed by a differ-
ent real-estate company and
emphasized that the Trump Organi-
zation “had no direct relationship
with the restaurant other than as
manager of the building . . . Daniel is
not appropriately listed on the
Trump website, which we are
addressing with them now.”
The Daniel trophy has disappeared
from the Trump website, but I saved
the screenshots.
i i i too far from the strip. Guests like the
Mr. Trump seems to do better as a
hotelier than steak merchant, albeit
with his usual overcooking. “I mean,
Chicago, I have one of the greatest
buildings, rated the No. 1 hotel in
North America, and I’m very proud of
it. It’s great, great,” he said Tuesday.
Yet Trump International Hotel &
Tower isn’t even the greatest hotel in
Chicago, according to TripAdvisor.
Users rank the place No. 12, behind
the Langham (the winner) and the
Talbot (the runner-up), as well as the
mass-market chain Radisson Blu
Aqua (No. 11).
Then again, Mr. Trump’s celebrity
and mythology profoundly shape per-
ceptions of his properties. “You really
do feel as rich as Donald Trump is
when you come here,” explains Valer-
ian L. “Trump knows how to entertain
his rich guests,” Petras B. says. “I’m not
one of them, but it’s nice to pretend.”
Amelia568 even says the Trump
Hotel Collection delivered “the most
amazing experience of my life!!!” She
adds that “One special feature among
too many to mention was Trump
Tower Sparkling Water! I am quite an
expert in this field and this was the
best in the world!” The point goes to
Mr. Trump.
One takeaway is that reviewers are
as willing to overlook Mr. Trump’s
politics as GOP voters are. “Trump,
himself, is horrible, but man, are his
hotels nice,” Ghia G. writes.
Alma L. adds, “As much as I despise
Donald Trump, this has to be one of
estate, not the new company.
The new firm would take over the
bank’s business and be led by the bank-
ruptcy estate’s chosen private-sector
managers. With regulations requiring
minimum long-term debt levels, the
new firm would be solvent. The bank-
ruptcy would be entirely contained,
Bernie Sanders is right,
Dodd-Frank doesn’t work,
but his solution is wrong.
Here’s what would work.
both because the new bank would keep
operating and paying its debts, and be-
cause losses would be allocated en-
tirely to the old bank’s shareholders
and long-term bondholders.
An examination by one of us (Em-
ily Kapur) of previously unexplored
discovery and court documents from
Lehman Brothers’ September 2008
bankruptcy shows that chapter 14
would have worked especially well for
that firm, without adverse effects on
the financial system.
Here is how Lehman under chapter
14 would have played out. The pro-
cess would start with a single, brief
hearing for the parent company to fa-
cilitate the creation of a new recapi-
talized company—a hearing in which
Notable & Quotable: On ‘Darkness at Noon’
From the April 7, 2016 issue of the
New York Review of Books, Michael
Scammell writing about a recently
discovered typescript of Arthur
Koestler’s 1940 novel “Darkness at
Noon,” written in German and pre-
dating the “unintentionally mislead-
ing” English-language translation:
When Darkness at Noon appeared
in 1940, it illuminated realities that
were little known (and sometimes de-
nied) in the West: show trials, con-
fessions, prison conditions, totalitar-
ian psychology, and human
oppression. After the Soviet Union
became the West’s ally during World
the best hotels I’ve ever stayed at.”
A few did seem to dislike Trump
hotels because they disliked the
man. Brett M. says the Trump Ocean
Club in Panama “is a bit like Donald
Trump himself: showy and full of
flashy style and big rhetoric, but al-
most wholly lacking in substance
and attention to detail.”
In general, a consensus jells about
the merits of Trump properties,
which fall into the upper half of the
ratings distribution on both TripAdvi-
sor and Yelp. It’s weird the bathrooms
in the guest rooms of the Trump Soho
don’t have doors. Trump Las Vegas is
welcome letters from Mr. Trump that
are left on the beds. Trump Interna-
tional Hotel & Tower Waikiki Beach
Walk sounds lovely.
There is less unanimity about
value for money. Reviewers conduct
debates about whether Trump accom-
modations, however opulent, are
worth the high prices.
“Pricey as hell—but what do you
expect? It’s the Trump!” notes Steph-
anie L. “If you don’t have the money
to spend, go to a cheaper option.” Ev-
elyn A. adds, “I’m not going to pre-
tend the price tag isn’t etched in gold,
but screw it. You’re worth it!”
Keri N. provides the opposing
argument in a post on the Trump Las
Vegas. “While the hotel is nice, it’s
comparable to your average business
hotel that you would find in any
other city.”
“I travel a lot,” remarks Mercedes
M., “and frankly, what you get at a
Courtyard Marriott far exceeds what
I’ve experienced the last couple of
days.”
Bill Z. puts it more bluntly in a
post about Trump International Hotel
& Tower Toronto: “At the risk of
sounding condescending, I can’t help
but wonder how many of these five-
star reviews were written by people
who frequent five-star hotels on a
regular basis and know what their ex-
pectations of such hotels should be. I
do . . . As a hotel, the Trump is above
average. As a five-star, elite luxury
hotel, the Trump falls short.”
the judge would have minimal discre-
tion. By contrast, Lehman’s actual
bankruptcy involved dozens of com-
plex proceedings in the U.S. and
abroad, creating huge uncertainty and
making it impossible for even part of
the firm to remain in business.
When Lehman went under it had
$20 billion of book equity and $96 bil-
lion of long-term debt, while its per-
ceived losses were around $54 billion.
If the costs of a chapter 14 proceeding
amounted to an additional (and con-
servative) $10 billion, then the new
company would be well capitalized
with around $52 billion of equity.
The new parent company would
take over Lehman’s subsidiaries, all of
which would continue in business,
outside of bankruptcy. And the new
company would honor all obligations
to short-term creditors, such as re-
purchase agreement and commercial
paper lenders.
The result: Short-term creditors
would have no reason to run on the
bank before the bankruptcy proceed-
ing, knowing they would be protected.
And they would have no reason to run
afterward, because the new firm
would be solvent.
Without a run, Lehman would have
$30 billion more liquidity after reso-
lution than it had in 2008, easing sub-
sequent operational challenges. In the
broader marketplace, money-market
funds would have no reason to curtail
War II, the book’s topicality faded,
only to reassert itself with the start
of the cold war. Moreover, when the
cold war ended, Darkness at Noon
did not fade away as many cold war
books, movies, and other cultural ar-
tifacts did. Like Animal Farm, 1984,
and a few other novels from that
time, Darkness at Noon had staying
power, for Rubashov’s story, like all
good stories, transcends time and
place. The book has little in the way
of conventional plot, but it power-
fully illuminates the human condi-
tion, men’s moral choices, the attrac-
tions and dangers of idealism, the
corrosive effects of political corrup-
Monday, March 14, 2016 | A13
Amid this conversation, one emo-
tive word appears again and again,
and that is “splurge.” These reviewers
are not regular patrons of establish-
ments where the faucets are gold-
plated, and they typically discuss one-
or two-day getaways to celebrate a
special occasion.
“This is a place everyone should
splurge on at least once in their life-
time,” says a TripAdvisor user about
the Trump Chicago. Another notes,
“For the average person like me, one
would think it would be unaffordable
and out of reach . . . I think once in a
lifetime everyone should surround
themselves with this kind of luxury. I
was quite happy with the TV in the
bathroom, so I could take a shower
and continue watching my show I
was watching in the bedroom.”
The nature of luxury economics is
that the more so-called Veblen goods
cost, the more they are desired.
Nearly all of the splurgers were satis-
fied, by their own testimony. But
when you read person after person
describing once-in-a-lifetime Trump
purchases, it’s hard to shake the woe-
begone impression they’re being sold
an overpriced caricature of what
someone who is not rich imagines be-
ing rich would be like.
i i i
Deep into Amazon reviews of
Trump apparel—“This shirt makes no
pretense of being top quality. But it’s
not cheap garbage either”—I became
fatigued and decided I needed to give
something back after taking so much.
I went with a friend to get lunch at
the notorious tourist trap that is the
Trump Grill, in the gilded atrium of
Trump Tower on Fifth Avenue. My
review: This place couldn’t make a
Gentleman’s C at Trump University.
A lobster ravioli appetizer ($14)
appeared to be frozen food, which of-
fered reassurance: “unlikely to be poi-
sonous.” Meat was riskier. To the
cows that gave their lives in vain for
the Gold Label cheeseburger ($20)
and the Trump Tower steak sandwich
($23), we apologize.
Our glasses of “red wine blend”
from Trump Winery—a Meritage, the
2013 vintage ($11), and a 2012 New
World Reserve ($16)—also disap-
pointed. The esophageal burns speak
for themselves.
Afterward we repaired to Trump
Bar and did catch sight of Don Jr. The
thrill was no compensation for my
friend’s signature cocktail, the Doral
($16), which he said tasted like the
golf course it is named after. The Bil-
lionaire Martini ($20) was unworthy
of a mere millionaire, much less the
average-looking Americans who were
opening their wallets for products
that had been expertly hyped but
couldn’t deliver. Sad!
Mr. Rago is a member of the Jour-
nal’s editorial board.
lending to corporations, hedge funds
would not flee so readily from prime
brokers, and investment banks would
be less likely to turn to the govern-
ment for financing.
Eventually, the new company
would make a public stock offering to
value the bankruptcy estate’s owner-
ship interest, and the estate would
distribute its assets according to stat-
utory priority rules. If the valuation
came in at $52 billion, Lehman share-
holders would be wiped out, as they
were in 2008. Long-term debtholders,
with $96 billion in claims, would re-
cover 54 cents on the dollar, more
than the 37 cents they did receive. All
other creditors—the large majority—
would be paid in full at maturity.
Other reforms, such as higher capi-
tal requirements, may yet be needed
to reduce risk and lessen the chance of
financial failure. But that is no reason
to wait on bankruptcy reform. A bill
along the lines of the chapter 14 that
we advocate passed the House Judi-
ciary Committee on Feb. 11. Two ver-
sions await action in the Senate. Let’s
end too big to fail, once and for all.
Ms. Kapur is an attorney and eco-
nomics Ph.D. candidate at Stanford
University. Mr. Taylor, a professor of
economics at Stanford, co-edited “Mak-
ing Failure Feasible” (Hoover, 2015)
with Kenneth Scott and Thomas Jack-
son, which includes Ms. Kapur’s study.
tion, and the fatal consequences of
psychological and ideological fanati-
cism.
This is all the more impressive
given the novel’s flawed translation,
and it is a tribute to the quality of
Darkness at Noon that it has had
such a strong impact on readers de-
spite this handicap. Now we no lon-
ger have the excuse of being denied
the original text. It’s not only possi-
ble, but in my view imperative, that
someone undertake a new translation
that will communicate the book’s ar-
tistic qualities more accurately and
offer a richer and more nuanced ac-
count of Koestler’s complex narrative.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A14 | Monday, March 14, 2016 THE WALL STREET JOURNAL.

SPORTS

In Tennis, No Tears
Shed for Sharapova
Facing a lengthy ban side an email. “I think most fact that Sharapova tested
people would call it too hard positive at a Grand Slam
and receiving little to find,” she said. She tested event made her defense even
sympathy, the ex-No. 1 positive for meldonium after more difficult.
losing in the quarterfinals of “She played a Grand Slam
has a long road ahead the Australian Open and was with a performance-enhanc-
notified by the International ing drug—there’s not too
BY TOM PERROTTA Tennis Federation. many ways you can talk your
“I want to believe that for way out of that,” Davenport
Indian Wells, Calif. sure it’s a mistake for Maria, said. “It’s pretty tough to ask
When Maria Sharapova ad- she didn’t want to do it, but the players to be sympa-
mitted last week that she had it’s obvious that it’s negli- thetic.”
failed a drug test at the Aus- gence,” Rafael Nadal said last Sharapova, the winner of
tralian Open, she hoped her week ahead of the BNP five Grand Slam singles ti-
explanation—that she didn’t Paribas Open in Indian Wells. tles, could be suspended for
know a drug she had used for “The rules are like this. It’s four years, which would
a decade was recently fair and now she must pay for likely end her career. Provi-
banned—would garner a le- it.” sions in tennis’s anti-doping
nient sentence and support Novak Djokovic, the top- program allow for reduced
from the tennis community. ranked man in world and a sanctions, and several sus-
As more details have friend of Sharapova’s, said pensions have been reduced
emerged, though, it’s clear that he felt sorry for her, but to 6 months or less because
that the 28-year-old that she still must be ready of tainted supplements or
Sharapova is facing the most for punishment. “The player other factors.
difficult challenge of her ca- that has made this mistake John Haggerty, Sharapova’s
reer, against both anti-doping has to suffer certain kind of lawyer, said her defense
authorities and the so-far un- consequences,” he said. would rely in part on her will-
sympathetic opinions of her ingness to admit this error.
colleagues on the tennis tour. Haggerty said he hopes to
Sharapova said she had
Sharapova could be have a hearing before a panel
taken Mildronate, the brand suspended for four by May.
name of a Latvian-made car- “In our view, there is no
diac drug called meldonium,
years, which would possibility for a four-year
likely end her career.

AARON FAVILA/ASSOCIATED PRESS

since 2006. She said her fam- sanction because this is com-
ily doctor recommended it pletely not intentional,” he
because of recurring illnesses, said. “We’re now in the world
low magnesium, irregular Dozens of athletes, includ- of zero-to-two” years of sus-
electrocardiogram results and ing many from Russia, are pension.
a family history of diabetes. facing positive tests for the Several sponsors, including
“I made a huge mistake,” drug. The large number of Nike, have suspended con-
Sharapova said in a news con- athletes could strengthen tracts with Sharapova until
ference in Los Angeles last Sharapova’s claim that this her sanction is determined.
week. “I have to take full re- was a mistake. But Andy Mur- One sponsor, the racket Maria Sharapova, above during January’s Australian Open, said she takes ‘full responsibility.’
sponsibility for it because it’s ray, ranked No. 2 in the maker Head, has backed her,
my body.” world, said the volume of saying it intends to extend to the ITF’s guide to sample not to litigate the matter in agencies on Sept. 16, 2015, ex-
Meldonium was on the positive tests also raises her contract. collection. The reason: “This the press, I must refrain from plained that “meldonium
World Anti-Doping Agency’s questions. Key details in Sharapova’s section is provided for your proving answers to these (Mildronate) was added be-
watch list last year and “You just don’t expect case remain unclear. When protection, in order that you questions to the media,” he cause of evidence of its use
banned as of Jan. 1 of this high-level athletes at the top tennis players submit to dop- can show that you are not said via email. by athletes with the intention
year after studies suggested of many different sports to ing tests, they are given a concealing the use of any In an interview earlier last of enhancing performance.”
it could enhance performance. have heart conditions,” Mur- form that asks them to “de- such supplement, substance week, Haggerty said the name The memo can be found on
The ban was first announced ray said. “If you’re taking a clare any medications, sub- or medication.” of the drug could play a role the ITF’s website. An ITF
last September. In a Facebook prescription drug that you stances or supplements that Haggerty wouldn’t say in Sharapova’s defense. She spokesman said that it was
letter posted Friday to her don’t actually need for what you are taking or have taken whether Sharapova listed Mil- knew the drug as Mildronate, posted there on Dec. 7, and
fans, Sharapova said that the it’s giving you, then that’s in the last seven days, irre- dronate on her form in Aus- but it is only listed as meldo- that players received notifica-
Dec. 18 notification she re- wrong.” spective of their source and tralia or any time in the past. nium on WADA’s list of pro- tion that this document, as
ceived about changes to the Lindsay Davenport, the re- your perceived risk of taking “Out of respect for the ITF hibited substances. However, well as others about the
doping code was buried in- tired American star, said the those substances,” according process and a strong desire a WADA memo sent to sports changes, were available.

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
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To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
BUSINESS & TECH.
Valeant Weighed CEO Ouster
Replacement sought during Pearson’s medical leave BUSINESS | B4
© 2016 Dow Jones & Company. All Rights Reserved.
Virtual
Reality to
Dominate
Game Event
BY SARAH E. NEEDLEMAN
The brains behind virtual
reality get another chance
this week to woo videogame
developers before a wave of
long-hyped hardware finally
lands in people’s hands.
At the annual Game De-
velopers Conference, open-
ing Monday in San Fran-
cisco, more
THE WEEK than 26,000
AHEAD people from
around the
globe will be
hoping for a peek at new VR
gear from the likes of Sony
Corp. The five-day gathering,
which is geared toward in-
dustry professionals, also
gives game creators a chance
to explore emerging strate-
gies and technologies in the
nearly $100 billion industry.
GDC covers myriad indus-
try angles, but this year it
will be dominated by ses-
sions dedicated to VR as well
as augmented reality, which
blends digital images with a
person’s view of the real
world. The burgeoning tech-
nologies are poised to hit it
big in the coming years, with
applications for gaming,
travel, health care and more.
Investors already have
pumped $1.1 billion into aug-
mented- and virtual-reality
companies this year, more
than the total for any prior
year, according to Digi-Cap-
ital, a mergers-and-acquisi-
tions advisory firm. Re-
searchers at Gartner Inc.
estimate nearly 40 million
headsets will be sold world-
wide by 2020.
The developer conference
comes weeks before consum-
ers get their hands on the
first high-end systems: the
$599 Oculus Rift from Face-
book Inc. and the $799 Vive
from HTC Corp. Representa-
tives from both companies
will be running demonstra-
tions of the products at the
event.
A third piece in the com-
petitive landscape could be
placed by Sony, which is
holding a news conference
on the sidelines of GDC. The
company has yet to say how
much its PlayStation VR will
cost or when the system will
be available to buyers. It
previously said the hardware
would ship in the first half
of 2016.
The coming wave of hard-
ware will roll out with only a
handful of games and other
entertainment content. Much
more is needed for VR to
thrive, analysts and industry
professionals say.
“If there’s not enough
content, people won’t see as
much value in the plat-
forms,” said Nick Donaldson,
lead designer for VR at Epic
Games Inc., known for the
widely used game-software
Please see VIRTUAL page B3
Monsanto’s Biotech Plans Falter in India In Machine Matchup,
BY JACOB BUNGE
AND BIMAN MUKHERJI
In a research laboratory
surrounded by acres of arid
land in western India, Bharat
Char showed off tiny sprouts
of rice, wheat and okra in
glass bottles.
These plants could solve a
lot of India’s food problems,
he said. Because they are ge-
netically modified to resist
bugs and weed-killing sprays,
said the scientist for Maha-
rashtra Hybrid Seeds Co., or
Mahyco, an Indian firm that
joined Monsanto Co. to de-
velop biotech crops, the plants
could boost impoverished In-
dian farmers’ profits and re-
duce food imports.
Eni Starts Pumping Oil in Arctic
BY GIADA ZAMPANO
ROME—After long delays
and cost overruns, Italian oil
company Eni SpA has started
to pump oil from the world’s
most northern offshore plat-
form, Goliat, which is located
in the Arctic 80 kilometers
from Norway’s northern coast.
A spokesman for Eni said
Sunday that the company
started pumping oil on Satur-
day night, after receiving the
final go-ahead from the Nor-
wegian government.
Eni’s plans to begin pump-
ing from Goliat were already
two years behind schedule and
Ryanair’s
New Strategy:
Being Nice
Budget carrier, as a
way to win customers,
asks its staff to be
less confrontational
BY ROBERT WALL
DUBLIN—Ryanair Hold-
ings PLC, Europe’s biggest,
no-frills budget carrier, has
pulled out of what was start-
ing to look like a tailspin.
Chief Executive Michael
O’Leary’s unorthodox strategy
for the recovery? Being nice
to passengers.
Mr. O’Leary and Ryanair
helped pioneer the rock-bot-
tom budget airline, taking a
page from Southwest Airlines
in the U.S., but going much
further. It offers some of the
lowest airfares in Europe—
sometimes as low as $15 one-
way across Europe.
It does that by keeping op-
erating costs low—spending
minimally on cabin décor, for
example—and charging for al-
most everything on top of the
price of a ticket.
Mr. O’Leary has been the
airline’s best-known spokes-
A cotton farmer from Jalna in Western India uses genetically
modified seeds that resist bugs and weed-killing sprays.
There is precedent: Geneti-
cally modified organisms, or
GMOs, grow in an estimated
97% of India’s cotton fields
and have helped India by some
THE WALL STREET JOURNAL.
well over budget when they be just below $50 a barrel.
hit another snag last Decem-
ber, as Norwegian regulators
requested more information
Eni said in a written state-
ment Sunday that Goliat, the
first oil field to start produc-
about safety and other issues tion in the Barents Sea, is esti-
before giving the green light. mated to contain reserves to-
The Italian oil and natural- taling 180 million barrels of
gas company has invested oil. Its daily output is expected
about $6 billion in Goliat so to reach 100,000 barrels. The
far. With the fall in oil prices Italian oil company holds a
denting its margins, Eni is 65% stake in Goliat. Norway’s
likely to struggle to make Go- national oil company, Statoil
liat economically viable. Sev- ASA, controls the rest.
eral analysts have put the Goliat’s production will take
break-even point for the plat- place through a subsea system
form at more than $100 a bar- consisting of 22 wells, of
rel. A spokesman for Eni said which 17 are completed. Eni
Sunday that the company ex- stressed on Sunday that the
pects the break-even point to field uses the most advanced
man for years, with his no-
apologies marketing. Taking Off
He once defended Ryanair’s Ryanair has grown into Europe's biggest single airline by passengers
€70 (about $75) penalty fee flown, surpassing the continent's once-mighty legacy carriers
for passengers who show up
at the airport without a 120 million passengers
boarding pass, saying they
were “being so stupid.” The 100
fee is now €45 for airport
check-in. He has in the past
proposed a standing room 80
only cabin and a charge of
one British pound (about 60
$1.41) for using the in-flight
toilet.
The no-frills model, once 40
novel but now widely mim-
icked, has turned the 32-year- 20
old Ryanair into Europe’s sec- Lufthansa
ond-biggest airline by
0
Ryanair Group*
passengers flown, behind
Deutsche Lufthansa AG. 2010 ’12 ’14 ’10
Ryanair’s long-haul com- *Includes Lufthansa, Swiss International Air Lines, Austrian Air
petitors still outdistance it in †Includes British Airways, Iberia, Vueling, Aer Lingus
terms of passenger miles, a Source: the companies
closely followed metric that
also takes into consideration struggle to keep costs low
journey distances. In 2013, a amid all the new competition.
price war with full-service The headwinds were similar
carriers and upstart budget to those now hitting U.S.-based
airlines alike threatened that carrier Spirit Airlines Inc.
success. Spirit’s new CEO has said the
A pair of rapid-fire profit carrier is working to address
warnings spooked investors, customer complaints and make
who worried Ryanair might its operations more reliable.
proval for biotech food crops,
KARAN DEEP SINGH FOR THE WALL STREET JOURNAL
seeds for plants like Mr. Char’s
remain in limbo, stymied by
environmentalist opposition,
farmer skepticism and bureau-
cratic inertia. Despite dozens
of biotech-food-crop trials in
India, the country has ap-
proved none for commercial
cultivation. “To see a country
that has the potential and in-
tellectual ability to be a leader
in these biotech advances, to
be stymied politically, I think
it’s a tragedy,” said Robert
Fraley, Monsanto’s chief tech-
nology officer.
measures become the fiber’s India’s Agriculture Minister,
top global producer. Radha Mohan Singh, said the
But after a decade of Mon- government was waiting for
santo’s efforts with Mahyco to India’s Supreme Court to rule
win Indian-government ap- Please see GMO page B2
INSIDE:
MONEY &
INVESTING
ECB Cheap Loans
Show Banks’ Rift
MARKETS | B5
Monday, March 14, 2016 | B1
technology aimed at minimiz-
ing the impact on the environ-
ment. It receives power from
the shore by means of subsea
power cables that reduce car-
bon-dioxide emissions by 50%
compared with alternative
methods, while water and gas
products are re-injected into
the reservoir, Eni said.
“Goliat’s startup is an im-
portant milestone for Eni’s
growth strategy,” the Italian
company said.
At the end of February, Eni
promised more cost cuts after
the recent plunge in global
crude prices that tripled its
fourth-quarter net loss.
mimicked, has turned the 32-
Air France-
IAG† KLM
’15 ’10 ’15 ’10 ’15
THE WALL STREET JOURNAL.
To win back customers, Mr.
O’Leary relaxed onerous hand-
luggage restrictions and rede-
signed Ryanair’s cumbersome
website. It cut fees and told
staff to be less confronta-
tional. The airline also made
headlines by dropping its
trademark bugle call, which it
Go Champ Gets a Win
BY ALASTAIR GALE
AND IN-SOO NAM
SEOUL—A simple computer
pop-up message gave humans
some relief in a high-profile
man-versus-machine board-
game battle: “AlphaGo re-
signs.”
With those words, South
Korean Go grandmaster Lee
Se-dol on Sunday claimed his
first victory in a best-of-five
series against AlphaGo, an ar-
tificial-intelligence project de-
veloped by Alphabet Inc.’s
Google. The win in the ancient
chess-like game restored some
pride to Mr. Lee, as well as big
smile across his face.
JAN-MORTEN BJOERNBAKK/NTB SCANPIX/ZUMA PRESS
The Goliat oil platform in 2015.
RUI VIEIRA/PA WIRE/ZUMA PRESS
The no-frills model, once
novel but now widely
year-old Ryanair into one of
Europe’s biggest airlines.
blasted through cabins each
time a flight arrived on time.
The practice, amusing at first,
had started to annoy passen-
gers.
“Standing room only and
charging for toilets was a
great PR wheeze when we
were young, dumb and grow-
ing rapidly,” Mr. O’Leary said
in an interview. But after ri-
vals started painting the
moves as cheap and nasty,
“the laddish noise was dis-
placing the great fares, bril-
liant punctuality and new air-
craft,” he said. Passengers
responded. In 2013, passenger
growth was stuck at 1% to 3%
some months, with as much
as 20% of seats unsold. This
year, monthly growth is
climbing by 10% or more.
Full-year results are due in
May, and Ryanair expects pas-
sengers hit 106 million, about
6% more than forecast.
Ryanair’s load factor, a
measure of seats sold, should
average at least 92% this year,
up from 83% in March 2014.
Ryanair has “regained its
crown as Europe’s best-per-
forming airline on virtually
Please see CARRIER page B2
He had been well beaten in
the opening three games after
predicting he would win the
series easily.
“I couldn’t be happier to-
day…this victory is priceless. I
wouldn’t trade it for the
world,” Mr. Lee said after the
game at a news conference,
where journalists greeted him
with cheers and applause.
The matchup has been
billed as an important moment
in gauging the progress of ar-
tificial intelligence because Go
had been widely thought of as
still out of reach for computers
to challenge top professionals.
The game, which has its ori-
Please see GAME page B3
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Monday, March 14, 2016
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
Anbang Insurance
A
Air India......................B4
Alphabet ................ B1,B3
Group.........................B5
Apple......................B3,B8
Audi.............................B4
B Inc. waited in Chicago for a
Banco Popular
Espanol......................B5
Bank of America.........B8
Blackstone Group ....... B5
C Teneo Intelligence......A6
Chevron ....................... B7
China Oilfield
Services.....................B4
Commerzbank ............. B7
Cruise Automation.....B3
D Agency ...................... B7
Deutsche Bank ...... B5,B8
Die Zeit.......................A6
E Volkswagen.................B4
Electricite de France...B4
ENI...............................B1
Etro..............................A1
Exeter Finance............B5
F Q
Flagship Credit
Acceptance................B7
INDEX TO PEOPLE
A H
Ammann, Dan.............B3
B Hassan, Fred...............B4
Baptiste, Amber.........B2
Brzeski, Carsten ......... B7
C L
Cryan, John.................B8
Currie, Jeffrey.............B5
D It would be a grueling test
Donaldson, Nick..........B1
Doolittle, Diane...........B2
Draghi, Mario.........B5,B8
Duignan, Kevin............B7
F O
Flanzraich, Neil...........B4
G P
Goguen, Michael.........B2
Sequoia Partner
Is Out Amid Suit
BY SCOTT MARTIN
Venture-capital firm Se-
quoia Capital said it parted
ways with longtime partner
Michael Goguen in the wake of
allegations he sexually abused
a woman and failed to follow
through on a $40 million set-
tlement.
A breach-of-contract suit,
filed last week on behalf of
Amber Baptiste in San Mateo
County Superior Court in Cali-
fornia, claims that Mr. Goguen
abused her “sexually, physi-
cally and emotionally” for
over 13 years. It further al-
leges that Mr. Goguen agreed
to settle claims with Ms. Bap-
tiste, paying her $10 million in
compensation but balking at
the remaining $30 million.
Mr. Goguen denied the alle-
gations in a statement on Sat-
urday, saying they came at the
end of a lengthy romantic re-
lationship with Ms. Baptiste
that ended badly. A partner at
Sequoia for nearly 20 years,
Mr. Goguen said he would file
on Monday a cross-complaint
alleging extortion.
Michael Goguen
denies allegations
that he sexually
abused a woman.
“This matter is purely per-
sonal and has no connection to
Sequoia,” Mr. Goguen said.
“My departure from there al-
lows me to focus with full
force on clearing my name and
vigorously pursuing justice.”
Sequoia said it learned of
the allegations on Thursday.
“We understand that these alle-
gations of serious improprieties
are unproven and unrelated to
Sequoia,” said a Sequoia
spokesman in a statement.
“Nevertheless, we decided that
Mike’s departure was the ap-
propriate course of action.”
Sequoia declined to com-
ment further on the lawsuit.
Sequoia is a fixture of
famed Sand Hill Road and an
early investor in some of the
most valuable companies in
the world, including Apple
Inc., Google Inc. (now Alpha-
bet Inc.) and Oracle Inc. The
firm is also currently an inves-
CARRIER
Continued from the prior page
every measure of margin, re-
turn on capital and cash gen-
eration,” Barclays analyst Oli-
ver Sleath said.
Investors worried costs
would rise as Ryanair tried to
win back disgruntled passen-
gers. Low global oil prices
helped, but the airline also
kept nonfuel costs in check.
THE WALL STREET JOURNAL.
BUSINESS NEWS
Ford Motor.............B3,B7
G
General Motors ..... B3,B7
Glaser Weil Fink
Howard Avchen &
R
Rabobank Group ......... B7
Ryanair Holdings ........ B1
S
Sequoia Capital...........B2
Munoz Faces Big Hurdles
On Oct. 15, union leaders at making him the point man on
Shapiro......................B2 Sidecar Technologies..B3
Goldman Sachs Group B8
United Continental Holdings some of the many visits to
Skopos Financial.........B5
shareholders. “They have to
H Sony.............................B1
Spirit Airlines ............. B1
“labor summit” with Oscar schlep all over the country,”
Hewlett Packard
Enterprise.................B3 Statoil....................B1,B4 Munoz, the airline’s new chief said one of the advisers.
executive. He never showed. A spokeswoman said United
Huawei Technologies..B3 T
I is eager for Mr. Munoz to re-
Intel.............................B8 Terna............................B8 By Susan Carey, sume his duties.
International Business U Rachel Feintzeig Mr. Munoz’s doctors signed
Machines...................B3 UniCredit.....................B5 and Joann S. Lublin off March 4 on his full-time
K United Continental return to work. He began tak-
Holdings....................B2 A heart attack that day had ing part in some key meetings
Kroll Bond Rating
V landed Mr. Munoz in the hos- earlier and participated on the
L pital and a heart transplant in airline’s fourth-quarter earn-
Valeant Pharmaceuticals
early January has mostly kept ings call in late January. In
Lyft..............................B3 International ....... B4,B5
him on the sidelines. But on the past two weeks, he visited
P
X Monday Mr. Munoz is return- employees at several airports.
Pfizer...........................B4
Philidor Rx Xiaomi Corp ................ B3 ing to full-time work with the But for medical reasons, he
Services.....................B5 Z long-delayed labor meeting on is for now traveling by private
Zoomlion Heavy his agenda and even bigger plane, most likely a precau-
Quinn Emanuel Urquhart Industry Science & challenges ahead. tion because he is on immu-
& Sullivan ................. B2 Technology................B5 Mr. Munoz faces a lengthy nosuppressive drugs intended
ANTONIO PEREZ/TNS/ZUMA PRESS
to-do list as he attempts to to prevent a rejection of his
speed up United’s rehabilita-
tion. He has to improve cus-
tomer service, spend time with
donor heart. Medical experts
said a weakened immune sys-
tem could make him more
Pearson, Michael........B4 corporate clients, select a per- vulnerable to infection.
Hassabis, Demis.........B3 Porter, Daniel..............B7 manent chief financial officer, Other executives who have
Q rebuild morale among 85,000 been through similar circum-
I Quinlan, Joseph..........B7 workers, and fend off two stances said Mr. Munoz must
Ingram, Robert............B4 S hedge funds looking to shake not to overtax himself.
Schiller, Howard ......... B4 up the country’s third largest United CEO Oscar Munoz is to return to work full-time on When Catherine Bessant,
Lee Se-dol...................B1 Spohr, Carsten............B2 airline—all while managing his Monday, about two months after undergoing a heart transplant. the chief operations and tech-
Leissner, Tim .............. B8 Srivastava, Pankaj......B4 own health. nology officer for Bank of
Lin, Bin........................B3 V
“were thrilled” about his early LP—which hold 7.2% of the America Corp., returned to
M van Zwol, Evert .......... B2 for any CEO, not least a 57- vision for the airline’s success, company’s shares, try to win work after surgery for breast
Munoz, Oscar..............B2 Vogt, Kyle ................... B3 year-old man who recently re- according to Sara Nelson, in- six seats on the recently aug- cancer in 2010, she sensed
N W ceived a new heart. ternational president of the As- mented 15-member board at some colleagues were con-
Neglia, Eric..................B7 Watson, John..............B7 Mr. Munoz took over as sociation of Flight Attendants. the annual meeting this spring. cerned that she would get sick
Weinger, Ben .............. B7 CEO on Sept. 8 after five-year But other executives who Chief executives and advis- again. “You want to say, ‘No,
O'Leary, Michael.........B1 Wolgast, Michael........B7 CEO Jeff Smisek was ousted as have returned to work soon af- ers who have endured proxy no, I’m back, I’m fine, it’s all
Z the result of an internal com- ter suffering serious illnesses contests describe them as all- cool,” she said.
Paolini, Luca................B7 Zivic, George...............B5 pany investigation related to have said there are limits to consuming, involving constant Ms. Bessant, who is now 55
an ongoing federal probe of resuming business as usual. talks with bankers and lawyers, years old, quickly resumed
United’s dealing with the gov- Those strictures are directly rapid responses to activist let- travels, but she feels that
ernmental operator of one of at odds with the demands of ters and extensive travel to ramping up too quickly may
its hubs in Newark, N.J. waging a successful proxy meet important shareholders. have contributed to a ruptured
Three big unions represent- fight like the one United faces, Advisers in other proxy appendix that kept her out of
ing pilots, airport ground as two hedge funds—PAR Capi- fights said United will want to the office for several more
workers and flight attendants,
support Mr. Munoz. Employees
tal Management Inc. and Al-
timeter Capital Management
show investors that Mr. Munoz
is healthy. That could mean
weeks in October 2010. “I went
too hard too fast,” she added.
tor in at least 27 private start- pendent scientists and compile
ups valued at over $1 billion, Millions data to challenge the govern-
of acres
more than any other venture ment over its handling of bio-
150
firm, according to Dow Jones tech crops.
50
VentureSource. 10 In 2005, she filed a petition
Sequoia’s rival next door in with India’s Supreme Court
Menlo Park, Calif., Kleiner Per- seeking a moratorium on GMO
kins Caufield & Byers, last field trials, arguing that such
year was embroiled in a gen- crops would damage the nutri-
der-discrimination suit that it tional qualities of the food.
later won after a five-week Biotech Bloom The court accepted her pe-
trial. That case galvanized Sili- tition, which is still winding
con Valley into conversations Commercial cultivation its way through India’s notori-
across corporations and ven- of government- ously slow judicial system.
ture firms about concerns over approved biotech crops As public pushback in-
alleged misogyny, gender in- by type, as estimated creased, India in 2010 placed a
equality and pay. at the end of 2014 surprise moratorium on an in-
Sequoia has no U.S.-based sect-resistant brinjal, or egg-
female investing partners, but plant, which had been set for
it does have five female in- Allowed GM crops Corn Cotton Soybeans Canola Other* approval. India’s potential
vesting partners in other areas nevertheless persuaded Mon-
of the world. U.S. Colombia Portugal santo to continue research
Ms. Baptiste stated in the China Uruguay Spain here and it continued to get
complaint, filed Tuesday, that approvals for trials, including
Canada Australia Sudan
she had been the victim of hu- biotech corn. Other companies
man trafficking since she was Brazil Cuba Burkina Faso pursued rice, mustard, pea-
15 years old and that after she Paraguay Honduras Pakistan nuts, potatoes and sorghum.
was brought to the U.S., she “We never lost hope that
was introduced to Mr. Goguen Chile Bolivia Bangladesh things were moving,” said
in 2001. Argentina Czech Republic India Monsanto Treasurer D. Narain,
Ms. Baptiste’s complaint al- who led its India business
South Africa Slovakia Myanmar
leges that she “submitted to from 2010 to 2013.
Mr. Goguen’ s constant sexual Mexico Romania Philippines India’s Supreme Court is ex-
abuse, relying on his promise Costa Rica *sugar beet (U.S., Canada), alfalfa (U.S.), papaya (U.S., China), squash (U.S.), pected to rule soon on the pe-
that he would help her break poplar (China), eggplant (Bangladesh), tomato (China) or sweet pepper (China) tition to bar GMO-crop culti-
free of the human traffickers Source: International Service for the Acquisition of Agri-Biotech Applications THE WALL STREET JOURNAL. vation. But Monsanto faces
who held her in perpetual more immediate challenges in
debt.”
Ms. Baptiste is only suing
for breach of contract and to
claim the remaining amount
GMO ant, the company had intro-
duced the world’s first
genetically modified cotton in
the U.S. in 1996.
Monsanto’s success seemed
to augur well for GMOs in In-
dia, which boasts the most ar-
able land of any country and is
cotton, after India’s agricul-
ture ministry this month im-
posed a 70% cut in the royalty
fees that Monsanto and
she is allegedly owed. The suit Continued from the prior page India cultivated the world’s projected to surpass China as Mahyco had charged for their
claims she and Mr. Goguen had in a case opposing genetically largest cotton-growing area, the world’s-most-populous by crop genes.
previously agreed to a settle- modified food crops before de- yet produced among the few- 2023. By late 2006, Mon- The companies also face an
ment in May 2014, in which Mr. ciding on their commercial est bales per acre. Four mil- santo’s Bt genes blanketed inquiry from India’s antitrust
Goguen would pay $40 million cultivation. lion Indian cotton farmers bat- about 40% of India’s cotton enforcer over pricing of their
in four separate $10 million in- Meanwhile, Monsanto’s es- tled many of the same pests fields, according to the Inter- pest-resistant cotton genes,
stallments. He made the first tablished cotton business in that U.S. farmers did—pests national Service for the Acqui- and some Indian seed compa-
$10 million payment in May India faces new threats, in- that could resist a gene Mon- sition of Agri-Biotech Applica- nies have withheld tens of mil-
2014, according to the suit. cluding new government price santo created with a bacte- tions, or Isaaa, a nonprofit lions of dollars in royalty pay-
In December 2014, Mr. controls around seed genetics rium called Bacillus thuringi- that tracks and promotes agri- ments, according to Monsanto.
Goguen allegedly sent a letter and an antitrust probe into ensis, or Bt, that lets plants cultural biotechnology. The price controls on crop
to Ms. Baptiste refusing to pricing practices, prompting secrete a bug-killing protein. “I had gravitated to Bt cot- biotechnology—which Mon-
make the second payment and Monsanto on March 4 to warn Monsanto in 1997 formed a ton because my yields used to santo and Mahyco license to
was said to have rescinded the that it could withdraw its bio- joint venture to pair its bio- be poor,” said Dheeraj about 50 Indian seed compa-
contract, claiming their settle- tech crop genes from the technology with Mahyco seeds Chhaganbhai Wadodariya, a nies—may force the companies
ment agreement was null and country. The backlash has suited to India’s soil. When farmer in India’s Gujarat state. to reassess all aspects of their
void as procured under extor- slowed global-sales growth of Mahyco won permission to sell Genetically modified seeds in- joint venture in India, they
tion, according to the com- genetically modified seeds. India’s first biotech cottonseed creased his earnings so much, say.
plaint. Sales grew 4.7% to $21 billion in 2002, scientists and staff he said, he can now buy cattle, “We need innovation in ag-
Mr. Goguen is being repre- in 2014, compared with 8.7% threw a party at its research do up his home and occasion- riculture in the country,” said
sented by attorney Diane growth in 2013 and average center in Dawalwadi, said Mr. ally travel. Shilpa Divekar Nirula, chief ex-
Doolittle of Quinn Emanuel annual growth of 21% from Char, who joined Mahyco in Fears that India’s govern- ecutive of Monsanto’s India
Urquhart & Sullivan LLP. 2007 through 2012, according 1999. ment relied too heavily on bio- unit. “The government seems
The plaintiff is being repre- to research firm PhillipsMc- “It was like India winning tech companies to research intent on promoting innova-
sented by Glaser Weil Fink Dougall Ltd. the cricket world cup,” said safety and that GMO plants tion…but something like this is
Howard Avchen & Shapiro India appeared fertile Monsanto Treasurer D. Narain, would mix with wild versions at cross-purposes with what
LLP, which didn’t respond to a ground for Monsanto two de- its India unit’s chief financial prompted nutritionist Aruna the government is seeking to
request for comment. cades ago. Once a pesticide gi- officer in the late 1990s. Rodrigues to seek out inde- do.”
“If I had only known that
being nicer to our customers
was good for business, I
would have done it years
practices—which rely heavily
on using pilots and crew as
contract workers.
The mayor of Copenhagen
which says it speaks for pilots
working for the airline.
Ryanair closed a Danish
base in response to the Copen-
Emboldened by its recent
turnaround, Ryanair is now
pushing out of its traditional
network of mostly second-tier
many, in particular. It has
started flights between Co-
logne and Berlin and added
50% more seats in the Ger-
ago,” Mr. O’Leary says. last year accused the carrier hagen mayor’s accusations, European airports, like Beau- man market this winter. Rya-
Ryanair has also avoided of using pilots with foreign though it still operates flights vais-Tille, a tiny airport about nair wants to reach 15% to
the sort of labor trouble that contracts to circumvent local to the country. It says the use 50 miles outside Paris.Major 20% market share in Europe’s
has hung over other European labor laws, calling it “social of contract workers is compli- hubs in Brussels, Amsterdam largest economy in around
carriers. Employees last year dumping.” ant with European Union labor and Milan have courted bud- five years, up from 5% today.
ripped the shirt off a senior “The contracts pilots are rules and typical for other in- get airlines as legacy carriers Lufthansa, meanwhile, is
Air France manager amid required to sign to work for dustries like health care. retrench. seeking to build its own low-
talks over job cuts.But Rya- Ryanair could be described as Mr. O’Leary said his pilots With those new destina- cost business and “won’t be
nair has drawn fire from legally unconscionable,” said don’t want to be unionized, tions, Ryanair is hoping to squeezed out of its home mar-
unions and some govern- Evert van Zwol, chairman of and those flying under con- lure more business travelers. ket,” CEO Carsten Spohr said
ments about its own labor the Ryanair Pilot Group, tract have work guarantees. Ryanair is targeting Ger- in an interview last year.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
ANINDITO MUKHERJEE/REUTERS
Xiaomi sells most of its phones online. Above, Xiaomi’s Mi 4i phone.
Xiaomi Seeks Boost
From Sales in India
BY SEAN MCLAIN
NEW DELHI—Chinese
smartphone maker Xiaomi
Corp. is betting on an e-com-
merce boom in India to help
offset slowing sales at home.
The Indian market is still
tiny compared with China’s,
but Xiaomi’s sales here are
climbing. And Xiaomi’s presi-
dent, Bin Lin, said that means
its growth prospects are
brighter than in China.
The reason, Mr. Lin said, is
India’s budding love affair with
online shopping. “E-commerce
has proven to be a very power-
ful tool in China, and now in
India,” he said.
In China, Xiaomi holds a slim
lead over rivals Huawei Tech-
nologies Co. and Apple Inc.
Each sold nearly as many
phones last year, but Huawei
and Apple are growing faster.
Xiaomi sells almost all its
phones online to hold costs
down. Its flagship Mi 5 costs
$250, compared with $650 that
Apple charges for an iPhone
6s. Xiaomi recently launched a
made-in-India smartphone, the
Redmi Note 3, here for $150.
In China, one-in-three of all
phones are sold online, Mr. Lin
says. In India, he hopes that
number will be 50% in a few
years. It is now 30%.
“Look at the growth of Flip-
kart, Amazon, Snapdeal,
Paytm, all these guys. We ha-
ven’t even remotely seen the
limit of that,” Mr. Lin said. E-
commerce startups have re-
ported booming sales in India
as millions of Indians access
the Internet for the first time.
Xiaomi is counting on sales
in India to rise after missing its
global sales target of 80 mil-
lion phones last year.
Other Asian markets are rel-
HP Enterprise Bets
On ‘Machine Learning’
BY DON CLARK
Hewlett Packard Enterprise
Co., having backed away from a
key portion of the cloud com-
puting-on-demand market, is
expanding into cloud services
to help companies analyze data
such as photos, audio clips and
comments on social media.
Haven OnDemand, which
runs on computers operated by
Microsoft Corp.’s Azure cloud-
computing division, gives users
access to sophisticated tech-
niques such as machine learn-
ing without the need to main-
tain a data center or develop
the underlying technology.
Haven service helps
companies analyze
data such as photos
and audio clips.
HP Enterprise and others,
including Microsoft and Inter-
national Business Machines
Corp., are setting up such ser-
vices in part to court software
developers—an audience that
increasingly defines capabilities
of all kinds of products used by
companies and consumers.
“Developers are everything,”
said Colin Mahony, an HP En-
terprise senior vice president
who oversees its efforts in the
field known as big data.
The company, one of two re-
sulting from the breakup of
Hewlett-Packard Co. in Novem-
ber, announced Haven in late
2014 and began offering it for
sale last week.
Haven initially was expected
to run on Helion Public Cloud, a
computing-on-demand service
developed by the combined H-P.
atively small and smartphone
sales in the U.S. and European
market are still dominated by
carrier-subsidized handsets,
which makes it hard for Xi-
aomi’s model to work, Mr. Lin
said.
Mr. Lin’s prognosis for In-
dian e-commerce is sunnier
than that of some startup in-
vestors, who have dialed back
their bets amid fierce competi-
tion and blistering discount
wars. Some mutual-fund inves-
tors in Flipkart Ltd. recently
wrote down the value of their
stakes, as concerns mount that
the flow of easy money to
cash-hungry startups could be
drying up. Flipkart previously
declined to comment on the
markdowns by its investors.
It is also unclear how
large Xiaomi can grow in India
without selling more phones in
the mom-and-pop stores where
most Indians still shop. Sam-
sung Electronics Co. extended
its lead in the Indian smart-
phone market last year by fo-
cusing on brick-and-mortar
sales, analysts say.
Just over 100 million smart-
phones were sold in India last
year, compared with 434 mil-
lion in China, according to In-
ternational Data Corp.
While analysts and investors
worry about losses at Indian e-
commerce firms, online sales
are expected to grow rapidly
over the next few years. Last
year, 50 million Indians were
regular users of online shop-
ping websites and apps. Mor-
gan Stanley analysts expect
that number to hit 320 million
by 2020.
Xiaomi ranks seventh in
terms of market share in India,
close behind Apple. But Mr. Lin
said it ranks third in terms of
online sales.
But the company in October an-
nounced that it would discon-
tinue that service, though it
still helps customers develop
cloud-like services run on their
own premises. HP Enterprise
the following month announced
plans to collaborate with Mi-
crosoft Azure in several areas.
The company can use new
businesses. HP Enterprise, re-
porting its first separate fi-
nancial results since its
breakup with Hewlett-Packard
Inc., said earlier this month
that total first-quarter reve-
nue declined 2.5%.
Machine learning refers to
programming that enables com-
puters to make inferences. In-
stead of defining attributes of a
face, for example, a programmer
may show the computer numer-
ous photographs of faces and al-
low the machine to come up
with its own criteria to detect
the presence or absence of one.
One initial Haven customer
is Blink, a startup developing a
kind of mobile speed-dating
app that sets up two-minute
video chats between users. The
company every three seconds
sends to Haven a still image
from each participant’s camera
to verify the presence of
faces—rather than potentially
obscene imagery, said Evan
Gow, chief executive of the Aus-
tin, Texas, company.
If the computer determines
that a face isn’t present, it inter-
rupts the video conversation.
HP Enterprise says Haven
offers more than 60 such com-
mands that invoke particular
computing functions. They in-
clude the ability to recognize
barcodes, transcribe speech to
text from audio or video files,
and analyze text for positive or
negative sentiments.
TECHNOLOGY
GM Spurs Self-Driving Plan
Cruise Automation
has tech that can add
autonomous driving
software to cars
BY GAUTHAM NAGESH
AND MIKE RAMSEY
General Motors Co.
punched the accelerator on its
quest to sell cars that pilot
themselves, unveiling plans
Friday to acquire a San Fran-
cisco firm that developed a
system for retrofitting existing
vehicles with autonomous-
driving software.
GM’s plan to purchase the
upstart Cruise Automation
Inc. adds to industry efforts to
extend more control of driving
functions to computers.
A growing portion of cars
are sold with semiautonomous
features, such as automatic
braking or lane-keeping assis-
tance, but the introduction of
vehicles capable of operating
without human intervention
still faces regulatory and tech-
nological hurdles.
Terms of GM’s pact with
Cruise weren’t disclosed. Ac-
cording to people familiar
with the matter, the deal is
valued north of $1 billion in
cash and stock.
By snapping up Cruise’s
small operation, GM adds a
team of engineers who have
been developing sophisticated
autonomous-vehicle software
on a relative shoestring in an
environment much nimbler
and more casual than Detroit’s
sprawling engineering centers.
Cruise employees are accus-
tomed to catered lunches and
snacks, for instance, a practice
virtually unheard of in the Mo-
tor City. The auto maker
spends billions of dollars on
research and development an-
nually and has been working
on autonomous driving for de-
cades.
Cruise, founded in 2013 by
a 20-something entrepreneur
with venture backing, has
raised $20 million and was re-
cently valued at less than $100
million. The deal is expected
to close by the end of the sec-
ond quarter, but Cruise has al-
GAME
Continued from page B1
gins about 3,000 years ago in
China, has a near-infinite num-
ber of moves and is played
with intuition as much as cal-
culation. That has made it
hard to crack for computers
that rely on brute-force num-
ber crunching.
AlphaGo uses programming
modeled on biological pro-
cesses to replicate human in-
stincts, as well as self-learning
through millions of games
against itself.
Demis Hassabis, the head of
the U.K.-based team that de-
veloped AlphaGo, has de-
scribed it as a “Mount Ever-
est” challenge for computers.
All other board games have
been mastered by computers
to the level of grandmasters.
Mr. Hassabis congratulated
Mr. Lee on his win, which he
said would help his team learn
about AlphaGo’s weaknesses to
make it stronger. “This is why
we came here: to test AlphaGo
to its limits,” he said.
The matchup has enthralled
South Korea, where Mr. Lee is
by far the most successful
player of a game that has two
dedicated television channels
and a dedicated fan base.
Mr. Lee has deflected sug-
gestions that he has the
weight of mankind on his
shoulders, but newspaper, TV
and social-media commentary
has been full of humor about
computers gaining conscious-
ness and challenging humans.
Some observers have made
references to movies such as
the “Terminator” series, in
which machines try to wipe
out humans.
Commentators at the Go
tournament, which has been
VIRTUAL
Continued from page B1
toolbox Unreal. “We need to
give consumers as many rea-
sons as possible to buy the
hardware.”
Mr. Donaldson is scheduled
to give a talk Tuesday on the
making of “Bullet Train,” a
GM’s Dan Ammann says the company will boost recruitment.
ready begun touting the rela-
tionship on its website,
inviting potential job candi-
dates to “join the driverless
revolution.” Fortune earlier re-
ported on the deal’s value.
Detroit is racing to keep up
with Silicon Valley, which has
made big strides in penetrat-
ing the auto industry follow-
ing the initial success of Tesla
Motors Inc., Uber Technolo-
gies Inc. and other startups
that are credited with shaking
up the car business. Alphabet
Inc.’s Google X project and Ap-
ple Inc. are both working on
cars in a potential threat to
established auto makers.
Ford Motor Co. on Friday
said it created a new subsid-
iary focused on autonomous-
car development and other
projects, mirroring a move GM
made in January. Toyota Mo-
tor Corp. on Wednesday dis-
closed hiring the entire staff
of Cambridge, Mass.-based
Jaybridge Robotics Inc., a
company providing technology
for autonomous tractors and
mining equipment.
Audi AG, Delphi Automotive
Go grandmaster Lee Se-dol claimed his first victory against artificial-intelligence program AlphaGo.
streamed live online, have bol-
stered the story line of rising
machine intelligence by refer-
ring to AlphaGo as “he” and
describing moves with adjec-
tives such as “beautiful.”
“[Mr. Lee] finally won. This
is touching. I don’t want to see
humans succumb to machines
someday,” Lee Oi-soo, a Korean
novelist with more than two
million followers on Twitter
wrote on the microblogging
service soon after the latest
game. He is unrelated to Lee
Se-dol.
Mr. Lee, the Go champion,
said after the game that Al-
phaGo appeared to have a
weakness in responding to un-
six-minute VR game demo the
29-year-old helped create for
Facebook’s Rift. It is impor-
tant that developers share
knowledge with each other so
that poor early-adopter expe-
riences don’t turn off future
buyers, he said. “We definitely
don’t want to poison the well.”
Michael Angel, a 27-year-
old mobile-app developer in
Plano, Texas, will be attending
Monday, March 14, 2016 | B3
REBECCA COOK/REUTERS
PLC, Inrix Inc. and Continental
AG are among companies re-
cently disclosing investments
in smaller startups to keep
pace with autonomous-vehicle
research or other technology
developments poised to re-
shape the car industry.
Myriad tie-ups, however,
can’t solve regulatory puzzles
complicating the effort to in-
troduce driverless cars. Indus-
try experts and rule makers
believe these cars will be far
safer than vehicles operated
by people, but big engineering
hurdles present uncertainty.
A report U.S. regulators re-
leased Friday highlights po-
tential conflicts between exist-
ing federal rules and
automated vehicles like those
being developed by Google
that lack controls for human
drivers, such as steering
wheels or pedals.
In hopes of cutting red
tape, U.S. officials said their
immediate focus will be on ad-
vising individual states on
driverless cars instead of un-
dertaking a lengthy rule-mak-
ing process for federal stan-
orthodox moves. “It might be a
bug. I don’t know if I can call it
that,” he said.
He also said AlphaGo
seemed to be weaker when
playing with black counters,
which make the first move of
the game against an opponent
playing with white counters.
After winning on Sunday
while using white counters,
Mr. Lee said he wanted to play
with black in the final game to
test his theory. Mr. Hassabis
agreed to the proposal.
Commentators on the latest
game said Mr. Lee’s victory
largely stemmed from a deci-
sive attack on the middle of
the board. The Go board con-
the conference for the first
time. He is eager to get insight
into whether his VR ideas will
work. “I want to know where
to put my time and money,
and what kind of things I
should be creating,” he said.
“Getting some feedback would
be useful.”
The virtual world won’t be
the only hot topic at hand.
GDC has panels dedicated to
@wsjd | wsjd.com
dards that could be outpaced
by technological develop-
ments.
GM has made a series of
moves to prepare for the tran-
sition. Its portfolio of vehicles
with semiautonomous features
has grown, and it is expected
to launch in 2017 a more-ad-
vanced version of Super
Cruise, a system that allows
for hands-free driving on high-
ways.
In January, GM announced
a $500 million investment in
ride-hailing service Lyft Inc.,
saying the partnership will
help establish a network of
self-driving cars.
That move is coupled with
other so-called mobility ven-
tures, including the creation of
an in-house car-sharing ser-
vice called Maven and the ac-
quisition of assets belonging
to Sidecar Technologies Inc.
In an interview, GM Presi-
dent Dan Ammann said the
Cruise acquisition provides
foundation for faster develop-
ment and the company will re-
cruit to expand the team. ”We
think this capability is critical
to where we want to be in the
future,” Mr. Ammann said.
Cruise founder Kyle Vogt
said tying up with the manu-
facturing experience and re-
sources of GM should allow
Cruise’s engineers to achieve
goals sooner. About 40 Cruise
employees will join GM, but he
wouldn’t say whether he has
made a commitment to stay
on board for a specific time
period.
Mr. Vogt tinkered with cars
when young and participated
in autonomous-vehicle pro-
grams while attending the
Massachusetts Institute of
Technology. He was inspired
to start Cruise with a team of
co-founders after working on
another Silicon Valley startup,
Twitch.TV.
Cruise’s RP-1 is a system
that puts vehicles into high-
way autopilot mode. The com-
pany designed it to be com-
patible with certain Audi
vehicles. It is not designed for
new cars.
—Christina Rogers and
Mike Spector
contributed to this article.
LEE JIN-MAN/ASSOCIATED PRESS
sists of a 19-by-19 grid of lines,
on which players place coun-
ters on each intersection and
try to claim the most territory.
Toward the end of the
game, AlphaGo played desper-
ate moves similar to those of
humans facing defeat, com-
mentators said. AlphaGo re-
signs by displaying a pop-up
message when it calculates
that its probability of winning
falls below a preset threshold,
Mr. Hassabis said.
“Congratulations! [Mr. Lee]
was too good for us today and
pressured AlphaGo into a mis-
take that it couldn’t recover
from,” Mr. Hassabis tweeted
immediately after the game.
competitive gaming, or so-
called e-sports, and to the
free-to-play strategy that has
become the gold standard for
mobile-gaming apps in recent
years. There will also be ses-
sions on artificial intelligence,
community management and
storytelling in games.
The Week Ahead looks at
coming corporate events.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Monday, March 14, 2016
Chipotle
Executives’
PayTiedto
SharePrice
BY JULIE JARGON
Chipotle Mexican Grill Inc.
executives now have an even
more direct personal stake in
the burrito maker’s recovery:
their pay.
Part of their future com-
pensation will be directly tied
to the company’s share-price
performance, according to a
securities filing late Friday.
Chipotle, which has suf-
fered from illness outbreaks
tied to its restaurants starting
last year, has seen its shares
fall roughly 23% in the past
year, triggering a number of
shareholder lawsuits.
The company’s safety woes
had appeared to be mostly
passed, but last week the com-
pany temporarily closed a Bos-
ton restaurant after four em-
ployees reported being sick
with norovirus.
On Wednesday, the com-
pany is scheduled to address
investors at a Bank of America
investor conference and is ex-
pected to provide an update
on its first-quarter sales be-
fore that. The board’s compen-
sation committee said in Fri-
day’s filing that share prices
would have to return to above
$700 for 30 consecutive days
to trigger the new stock
awards, which currently repre-
sents a considerable climb.
Chipotle shares on Friday
slipped 0.2% to $506.80 in af-
ter-hours trading.
“We had concerns that us-
ing 2015 year-end financials or
stock price at the beginning of
2016 as the basis for relative
performance evaluation for a
2016 performance share pro-
gram could create a misalign-
ment of shareholder returns
and executive officer compen-
sation,” lead director and com-
pensation committee chair
Neil Flanzraich said in a letter
to shareholders that was in-
cluded in the securities filing.
Take Your
Investments
Wherever Life
Takes You
Clarity. So you can jump straight to it.
With a streamlined dashboard, quick-read
market indexes and a seamless device-to-device
experience, the new MarketWatch gives you easy
access to critical data wherever you are.
Explore now at MarketWatch.com
Valeant Considered Firing CEO
Drugmaker’s board
hunted for successors
amid concerns about
Pearson’s health, style
Michael Pearson, chief exec-
utive of Valeant Pharmaceuti-
cals International Inc., sent
word last month that he was
ready to return from a lengthy
medical leave. But not all of the
drugmaker’s directors were
sure they wanted him back.
By Jacquie McNish,
Liz Hoffman and
Jonathan D. Rockoff
Shortly after Mr. Pearson
was hospitalized with pneumo-
nia in late December, the board
launched a search for a possible
successor, according to people
familiar with the decision. The
hunt was partly prompted by
concerns about his health.
But as regulatory and politi-
cal challenges piled up and
Valeant’s stock continued to
sink, the people said, some di-
rectors also worried Mr. Pear-
son’s intense focus on profits
and fast-paced decision-making
style were ill-suited for the
mounting set of problems. Some
executives at the Canadian
drugmaker expressed similar
reservations, one person said.
Valeant became a poster
child for criticism of high drug
prices, and a target of congres-
sional inquiries, after The Wall
Street Journal reported the
company was buying the rights
to certain treatments and sub-
stantially raising their prices.
Among those approached as
the board explored replacing Mr.
Pearson and bringing in new di-
rectors, people familiar with the
matter said, were Chris Vieh-
bacher, former chief executive of
French drug company Sanofi SA,
and Fred Hassan, a veteran
pharmaceutical executive who
once ran Schering-Plough and
was chairman of Bausch &
Lomb, now a Valeant property.
Some of Valeant’s directors
talked with potential CEO candi-
dates in February, one of the
people said. For a while, board
BUSINESS NEWS
Valeant CEO Michael Pearson in Toronto last year. His management style worried some directors.
sentiment was tilting toward re-
placing Mr. Pearson. But when
Valeant’s directors assembled on
the last Friday in February to re-
view a list of possible CEO ap-
pointments, including Mr. Pear-
son and interim CEO Howard
Schiller, another concern was
gaining steam. Some pharmacy-
benefit managers, which are
firms that pay for drugs on be-
half of clients, were threatening
to abandon Valeant’s more-ex-
pensive products, after details
emerged last year about the
company’s strategies to get pa-
tients to use its offerings rather
than cheaper alternatives.
Among those incensed, said
people familiar with the matter,
was Express Scripts Holding Co.
The largest U.S. pharmacy bene-
fit manager had griped to
Valeant about pricing in Mr.
Pearson’s absence, and in early
February stopped covering the
Valeant diabetes drug Glumetza
after a cheaper generic became
available, citing an 800% price
increase for Glumetza in 2015.
Mr. Pearson, who is 56 years
old, insisted at that Friday meet-
ing that he was the company’s
best bet for its future, people fa-
miliar with the matter said. No
one, he told the board, could
match his close ties to benefit
©2016 Dow Jones & Co. Inc.
All rights reserved.3DJ3356
managers, insurers and doctors,
and few shared his grasp of what
drug discounts Valeant could af-
ford, these people said.
Also working in his favor: If
he were fired, he would be
owed some $200 million in de-
ferred stock compensation, an
unusually rich exit package that
could spark investor outrage,
some of the people said.
Valeant became
a poster child for
criticism of high
drug prices.
After a marathon session, the
board agreed Mr. Pearson would
report back to duty on the fol-
lowing Monday, and the com-
pany would suspend its earnings
guidance as its revenue outlook
was becoming less clear in light
of pushback from payers and
drug prescribers.
Thus began Mr. Pearson’s sec-
ond act as Valeant’s CEO. It will
be quite different from his first
eight years.
The board has stripped him
of his title as chairman and on
Wednesday added three inde-
pendent directors, two of whom
Business
Watch
VOLKSWAGEN
Global Sales Drop
On Low Demand
Volkswagen AG’s global vehi-
cle sales declined in February,
with gains in Europe eclipsed by
slumping sales in troubled
emerging markets and a further
decline in demand for the Ger-
man automotive group’s name-
sake VW brand, notably in the
U.S.
February’s sales report shows
Volkswagen global sales dropped
1.2% from the same month last
year to 693,300 units, with
gains at its Audi, Skoda, Seat
and Porsche brands failing to
offset a 4.7% drop in VW brand
deliveries. The Volkswagen
group’s other brands include
Bentley, truck units MAN and
Scania, and motorcycle maker
Ducati.
Volkswagen sales in the U.S.
dropped 7.2% to 37,700 units.
The group’s weak sales risk
piling more pressure on manage-
ment given the company could
faces tens of billions of dollars
of penalties for cheating on die-
sel-engine emissions tests in the
U.S., with legal action under way
in other countries. “Europe in
particular saw positive develop-
ment in February.
Sales in core European mar-
kets rose sharply, with deliveries
in Western Europe and Germany
itself up 6.5% and 7.7% respec-
tively.
Sales in emerging markets
were grim, however, with a 36%
fall in sales in Brazil and a 17%
drop in deliveries to Russia,
which Volkswagen blamed on
economic woes in both the
countries. Sales also fell 1.8% on
the year in China.
—William Wilkes
PFIZER
Cancer Drug Gets
Expanded Approval
The U.S. Food and Drug Ad-
ministration on Friday approved
Pfizer Inc.’s Xalkori for treat-
ment of a rare form of advanced
non-small-cell lung cancer, mak-
ing it the first therapy for the
condition.
The drug’s use has been ex-
THE WALL STREET JOURNAL.
can generate enough sales to
pay off its heavy debt and
boost a stock that now trades
near $70, down from over
$262 in August.
It is under pressure to replace
prescriptions lost after it cut ties
with mail-order pharmacy Phili-
dor Rx Services LLC that had
helped it get its often higher-
priced drugs to patients. Philidor
has said it behaved appropri-
ately. To replace Philidor,
Valeant has entered a new distri-
bution partnership with Wal-
KEVIN VAN PAASSEN/BLOOMBERG NEWS
greens Boots Alliance Inc., the
largest U.S. pharmacy chain.
Valeant’s core challenge is the
biggest U.S. drug payers. They
weren’t pleased with how
Valeant, in their view, sought to
bypass them with Philidor and
now Walgreens. In addition to
Express Scripts, CVS Health
Corp. plans to limit its reim-
bursement of Valeant’s toe-fun-
gus drug Jublia, which sells for
have ties to Robert Ingram, the $1,000 per 8-milliliter bottle.
new chairman. The board also Valeant has said it adjusted cer-
has launched a succession pro- tain underpriced drugs to reflect
cess to ensure a back-up CEO is market value.
in place, some people said. An Express Scripts spokes-
An internal review has re- man said: “We will take action
vealed problems with Valeant’s when manufacturers attempt to
accounting, and the firm has yet get around the cost-saving solu-
to file fourth-quarter financial tions our clients put in place to
statements. The U.S. Securities make medicine more affordable
and Exchange Commission has and accessible.”
opened an investigation into the In his first week back at
company’s close ties with a mail- Valeant, Mr. Pearson held drug-
order pharmacy. On Thursday, a pricing talks with representa-
congressional committee inves- tives from Express Scripts and is
tigating drug prices chided Mr. expected to meet with other key
Pearson in a letter for Valeant’s customers soon, people familiar
response to document requests. with the matter said.
A lawyer for the company has Kenneth Beer, a dermatolo-
defended that response. gist in Palm Beach, Fla., said he
Since its peak last August, used to write dozens of prescrip-
Valeant’s stock has fallen more tions for Valeant drugs such as
than 70%, wiping out almost $50 Jublia and Luzu, an athlete’s foot
billion of shareholder value. Mr. medication. But after Valeant
Pearson is set to discuss unau- cut ties with Philidor, which han-
dited fourth-quarter results and dled much of the onerous paper-
earnings guidance on an investor work associated with drug reim-
conference call Tuesday. bursement, he said he stopped
Mr. Ingram said Mr. Pearson because the process became too
has the board’s full support. Mr. time-consuming. Now that
Pearson wasn’t made available Valeant has tied up with Wal-
by the company for an interview. greens, Dr. Beer said, he will try
Valeant has indicated it will prescribing Valeant drugs again.
temper its gusto for takeovers “If we get pushback,” he said,
designed to capitalize on drug- “we will stop.”
pricing opportunities. But that —Joann S. Lublin
raises the question whether it contributed to this article.
panded to treat the roughly 1% Oilfield Services Ltd. said Fri-
of patients with advanced, or
metastatic, non-small cell lung
day that it would cut 230 jobs
in Norway because of Statoil
cancer whose tumors have an ASA’s termination of a drilling-
ROS-1 gene alteration, thought rig contract.
to lead to abnormal cells. Xalkori, COSL Drilling Europe said
or crizotinib, is the first and only earlier last week that it was
FDA-approved treatment for pa- disappointed and disagreed
tients with the ROS-1 gene al- with Statoil’s contract termina-
teration. tion, which was announced on
Crizotinib was designed and Sunday. “It’s incredibly sad that
approved in 2011 to treat the so many competent and loyal
roughly 5% of non-small cell
lung-cancer patients who test
positive for alterations in a gene
workers lose their jobs,” said
Jørgen Arnesen, chief executive
of COSL Drilling Europe.
known as ALK. A spokesman for Statoil said
—Anne Steele the contract had been ended
because the COSL Innovator
EDF didn’t satisfy conditions stipu-
lated in the contract. The
CGN Partnership spokesman declined to specify
Is Cleared by EU which conditions, saying it was
The European Commission confidential.
approved the partnership be- —Kjetil Malkenes Hovland
tween state-controlled power
utility Électricité de France and AIR INDIA
state-owned China General Nu-
clear Power Group to build and
Airline Heads Toward
operate nuclear reactors in the An Operating Profit
U.K. Air India Ltd. might post an
The companies are expected operating profit this financial
to make a final investment deci- year aided by low fuel prices,
sion on a project that would rep- the first for the carrier since the
resent an investment estimated merger of the country’s domes-
at £18 billion, or nearly $26 bil- tic and international flag carriers
lion. in 2011.
The European Commission “All indications are we might
didn’t find any antitrust issue in post an operating profit [for the
the partnership given the small financial year ending March 31],”
market shares held by both the airline’s commercial director,
companies in the U.K. and the Pankaj Srivastava, said in an in-
presence of other competitors. terview. The airline would cer-
The project to build nuclear tainly meet the target of operat-
reactors in Hinkley Point is the ing back in the black next year,
centerpiece of a series of busi- he added.
ness deals between the U.K. and The recent slump in oil prices
China announced last year. has been a $150 million benefit
—Inti Landauro to the airline, Mr. Srivastava
said. The airline has now begun
CHINA OILFIELD SERVICES to lock in costs for about 25% of
planned consumption to help as-
Firm to Shed Jobs sure it continues to benefit from
As Statoil Drops Pact low spot rates, he said.
The European arm of China —Robert Wall
KRISZTIAN BOCSI/BLOOMBERG NEWS
VW’s Europe sales rose sharply. Above, a MAN factory in Germany.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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MARKETS DIGEST B6 | FINANCE WATCH B8

Silicon Valley Is on Qualcomm Worry: Intel

EUROPEAN PRESSPHOTO AGENCY

ROBERT GALBRAITH/REUTERS

BofA’s Shopping List Taps Into iPhone Market

BANKING TECHNOLOGY | B8 HEARD ON THE STREET | B8
© 2016 Dow Jones & Company. All Rights Reserved. THE WALL STREET JOURNAL. Monday, March 14, 2016 | B5
As of 4 p.m. ET Friday EUR/GBP 0.7755 g 0.95% YEN/DLR ¥113.67 À 0.41% GOLD 1258.70 g 1.05% OIL 38.50 À 1.74% 3-MONTH LIBOR 0.63385% 10-YR TREAS g 14/32 yield 1.977%

ECB Loans Expose Banks’ Divide Accelerator

No-cost borrowing is The loans allow eurozone
banks to borrow at no cost for
welcomed in Southern up to four years. Many banks in
Europe but criticized Italy, Spain and elsewhere in
the region have struggled to
in Germany clean up bad loans and main-
tain investor confidence.
BY TODD BUELL But in Germany, where
banks sit on more cash than
FRANKFURT—The European they can productively deploy,
Central Bank’s decision to offer the industry lashed out at the
eurozone financial institutions loan program and other aspects
cheap four-year loans offers of the ECB’s monetary-policy
fresh hope to struggling banks decision. German financiers
in Southern Europe—and has said the moves were unneces-
drawn immediate ire from their sary and could undermine Ger-
Northern European rivals. man investments, insurance
and retirement plans.
ECB President Mario Draghi
addressed such concerns by
saying Thursday that it was un-
likely interest rates would fall
further.
Investors, foreseeing imme-
diate help for all eurozone
banks, bid up lenders’ shares
Friday. Spain’s Banco Popular
Español SA surged almost 13%,
Italy’s UniCredit SpA leapt
9.5% and Germany’s Deutsche
Bank AG, which faces internal
restructuring problems,
jumped 7.4%.
For bankers, though, the dis-
pute highlights afresh the lin-
gering gap between lenders in
the continent’s generally
healthy north and a south that
struggles with debt and high
unemployment. This represents
one of many difficulties in cre-
ating a one-size-fits-all mone-
tary policy for the 19-country
eurozone.
The ECB on Thursday rolled
out a six-pronged plan to boost
weak inflation to its target of
just below 2% and increase
bank lending in the eurozone.
The ECB also said it would cut
all of its key interest rates,
Loans have helped fuel auto sales
$600 billion
pushing its core deposit rate
500
New auto loans
further into negative territory. Subprime
The move means commercial auto loans
banks with excess funds— 400
which are mainly those in the
north—must pay even more to 300
park cash at the central bank.
The ECB also announced a 200
fresh program of targeted, lon-
ger-term loans to banks, which 100
can now even be paid to lend to
Please see BANKS page B7
0
 Heard on the Street: ECB 2008 ’09 ’10 ’11 ’12 ’13 ’14 ’15
recognizes banks’ pain......... B8 Note: Annually; 2015 data are through November
 Heard: Corporate-credit costs Source: Equifax
are the area to watch.......... B8 THE WALL STREET JOURNAL.

Auto Debt
Oil Price Rise Could Be Its Own Undoing Hints That
BY NICOLE FRIEDMAN
AND IRA IOSEBASHVILI

The relentless slide in oil

Industry
prices has paused after crude
Faces Pain
CITIZENS OF THE PLANET/EDUCATION IMAGES/UIG/GETTY IMAGES

fell more than 70% from its

2014 peak. Now the question
is whether the recent rise it- BY SERENA NG
self could spark another down-
ward spiral. To understand how far the
U.S. oil prices are up more U.S. auto business has been
than 45% from a 13-year low in reaching for new customers,
February, boosted by talks consider the early performance
among Saudi Arabia, Russia of a bond issue called Skopos
and other major Auto Receivables Trust 2015-2.
ABREAST producers about The bonds were built out of
OF THE capping their subprime auto loans and sold
MARKET output. in November. Through Febru-
A temporary ary, about 12% of the underly-
reduction in ing loans were at least 30 days
global crude supply following past due, a third of which were
outages in Nigeria and Iraq Shale-fracking oil wells can be drilled within a matter of months, much faster than other types of wells. more than 60 days delinquent.
also helped buoy the market. In another 2.6% of loans, bor-
On Friday, the International rowers had filed for bankruptcy
Energy Agency said that oil Commodities Nymex crude oil Brent crude oil Copper or the vehicles had been repos-
prices may have bottomed out, $45 a barrel $45 a barrel $2.40 a pound sessed.
and it forecast U.S. output to
Come Back $40.39 $2.24 Those borrowers are at the
Friday $38.50
decline by nearly 530,000 bar- Commodities have enjoyed a 40 40 2.20 outer fringe of the auto market.
rels a day this year. The report broad-based rally in recent Still, the high level of missed
seemed to support the mar- weeks, but some worry that 35 35 2.00 payments for loans made so re-
ket’s increasingly bullish these higher prices will bring cently is a warning sign for an
mood, pushing U.S. oil prices more supply and slow down 30 30 1.80 industry that needs every cus-
up 1.7% to $38.50 a barrel. future gains. tomer it can get to keep sales
25 25 1.60
But this rally could lead to increasing at a record pace.
its own demise, many analysts Jan. Feb. March Jan. Feb. March Jan. Feb. March The early delinquency rates
warn. Higher prices will likely seen in the debt issue from
encourage shale producers to Gold Iron ore Cocoa Lean hogs Skopos Financial LLC, a Dallas-
ramp up output again, muddy- $1,300 a troy ounce $1,258.70 $70 a metric ton $3,400 a metric ton 75 cents a pound based lender that specializes in
72 cents
ing any forecasts for shrinking $55.32 loans to people with weak or
$3,031
U.S. supply. Shale wells can be 1,200 60 3,200 70 no credit histories, are in line
drilled and fracked within a with those for several similar
matter of months, much more 1,100 50 3,000 65 bond deals from other lenders
quickly than other types of oil around the same time. About
1,000 40 2,800 60
wells that can take years to 12% of the loans backing bonds
complete. 900 30 2,600 55
sold in November by Exeter Fi-
“My concern is if the mar- nance Corp., another Dallas-
ket surges right back to $50 a Jan. Feb. March Jan. Feb. March Jan. Feb. March Jan. Feb. March based subprime lender, were
barrel…we just end up with Note: Continuous front-month contract Source: Thomson Reuters THE WALL STREET JOURNAL. more than 30 days delinquent
another problem six months through February, according to
from now,” said Jeffrey Currie, fall from current elevated lev- But as with oil, many inves- Zivic, portfolio manager of the surge in prices lead producers the company. A spokeswoman
head of commodities research els before any sustained rally tors say they are still looking $250 million Oppenheimer to crank up output and over- said delinquency rates came
at Goldman Sachs Group Inc. can take place, Goldman said for more evidence of a funda- Commodity Strategy Total Re- supply the market? Last down from the previous month.
“You’d be taking a lot of risk in a note on Friday. mental rise in demand for turn Fund, who said he closed spring’s rebound in crude Loan payments have been
entering this market early,” he Oil’s sharp rise has been commodities or a significant out positions in copper, alumi- prices shows how this can slipping as well for the broader
said, because a rally could be part of a broader commodities drop in production to justify num and zinc last week. happen. group of subprime borrowers
self-defeating. rally that has lifted everything further price increases. Commodity rallies, from Crude prices rose 40% be- who make up a big slice of the
Stored supplies of crude oil from gold and copper to cocoa “We have moved too much copper to cotton, often face tween mid-March and early auto market. The 60-plus-day
and refined products need to and lean hogs. on too little data,” said George this dilemma: Will a sudden Please see OIL page B7 Please see AUTOS page B7

Valeant: Does It Make Sense? Blackstone Nears Quick Deal

BY MICHAEL RAPOPORT nue. Yet Valeant now sug- BY KANE WU setting them up to top the re- ury properties such as the Es-
What's The gests possibly half that $111 cord $108 billion of Chinese sex House overlooking
Valeant Pharmaceuticals Prognosis? million shouldn’t have been HONG KONG—Blackstone outbound acquisitions reached Manhattan’s Central Park and
International Inc.’s fi- booked in 2014. Group LP is selling a portfolio last year. the Hotel del Coronado near
nances are like an old jigsaw Valeant's annual revenue Move it and Philidor’s of U.S. luxury hotels to the China National Chemical San Diego. It owns a number of
puzzle: Some pieces don’t Through Sept. 30 2014 revenue would fall to Chinese owner of New York’s Corp.—known as ChemChina— Four Seasons properties, in-
$8 billion
seem to fit together, and $53 million; first-half 2015 Waldorf Astoria, just months announced China’s biggest cluding hotels in Washington
some are missing. revenue would soar to $323 after buying it for $4 billion. overseas purchase earlier this and Austin, Texas, and a resort
6
Investors hope to find a million. That would be a China’s Anbang Insurance year with a $43 billion deal to in Jackson Hole, Wyo.
few Tuesday when the com- spectacular increase. It Group Co. is near a deal to buy buy Swiss pesticide and seed Once a provincial car in-
pany plans to, finally, an- 4 needs explanation. Strategic Hotels & Resorts Inc. company Syngenta AG. Other surer, Beijing-headquartered
nounce fourth- That isn’t all: About $15 from a Blackstone-managed Anbang Insurance has leapt
AHEAD OF quarter results
THE TAPE and update
2 million of the $58 million in
misplaced revenue was from
real-estate fund, according to
people familiar with the situa-
The firm is selling a onto the global stage with sev-
eral high-profile deals, includ-
earnings guid- 0 sales of acne drug Solodyn, a tion. The price Anbang is pay- portfolio of U.S. ing its purchase of the Waldorf
ance. If it
doesn’t provide enough an-
2011 2012 2013 2014 2015
spokeswoman says. But
Valeant’s disclosed quar-
ing couldn’t be determined,
but Blackstone is expected to
hotels months after Astoria New York hotel for
$1.95 billion in February 2015
swers, its shares could again Source: the company terly Solodyn sales have turn a profit after taking the taking it private. from Hilton Worldwide Hold-
get hammered. been in a tight range. company private in December. ings Inc., which counts Black-
Valeant must address un- revenue from products it The misplaced sales were Blackstone has built itself stone as its largest share-
resolved questions about sold through mail-order concentrated in 2014’s fourth into the world’s largest real- big deals include Haier Group’s holder. The property will
its accounting and business pharmacy Philidor Rx Ser- quarter, say people familiar estate private-equity fund $5.4 billion agreement to buy continue to be managed by
practices. But it also must vices LLC. with the matter. manager by assets, and typi- General Electric’s appliance Hilton under a 100-year man-
address concerns That doesn’t seem huge. Move $15 million cally holds such assets for unit and a $3.3 billion bid by agement agreement.
about its growth prospects But move that revenue and from that quarter to the years. Chinese equipment maker The Waldorf Astoria New
now that it has foregone some strange things happen. next, and sales of one of Anbang is among China’s Zoomlion Heavy Industry Sci- York sale carried the steepest
its model of buying other According to Valeant, Valeant’s biggest drugs sud- most ambitious overseas ac- ence & Technology Co. for price tag ever for a U.S. hotel
companies and boosting the Philidor had $111 million in denly plunge and then spike. quirers, snatching up insur- U.S. crane maker Terex Corp. at the time, brokers said, al-
prices of their drugs. revenue for most of 2014, To make sense of the ance companies and property Anbang’s agreement to ac- though it wasn’t the highest
But mysteries abound. before Valeant’s December stock, investors need to be assets across the U.S. and Eu- quire Chicago-based Strategic on a per-room basis.
Consider what is implied 2014 purchase of an option able to make sense of moves rope. Chinese companies have Hotels will give it a substantial Chinese investors have
by Valeant’s statements last to buy it. In 2015’s first half, like that. done more than $84 billion in presence in luxury hotels sought to buy U.S. properties
month that it was too quick Philidor appears to have had deals since the start of the across the U.S. Strategic Ho- that cary prestige, like the
to recognize $58 million of about $265 million in reve- Email: tape@wsj.com year, according to Dealogic, tels’ prime assets include lux- Please see HOTELS page B8
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B6 | Monday, March 14, 2016 THE WALL STREET JOURNAL.

MARKETS DIGEST Data as of Friday, March 11, 2016

Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
16938.87 s 86.52, or 0.51% Year-to-date t 11.01% 342.23 s 8.73, or 2.62% Year-to-date t 6.45% 2022.19 s 32.62, or 1.64% Trailing P/E ratio * 23.02 20.19
High, low, open and close for each 52-wk high/low20868.03 14952.61 High, low, open and close for each 52-wk high/low 414.06 303.58 High, low, open and close for each P/E estimate * 16.72 17.55
trading day of the past three months. All-time high 38915.87 12/29/89 trading day of the past three months. All-time high 414.06 4/15/15 trading day of the past three months. Dividend yield 2.27 1.98
All-time high: 2130.82, 05/21/15

20000 400 2100

65-day moving average

19000 380 65-day moving average 2050

65-day moving average

18000 360 2000

Session high 17000 340 1950

DOWN UP
t

Session open Close

16000 320 1900
Close Open
t

Session low 15000 300 1850

Bars measure the point change from session's open

14000 280 1800
Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar.

International Stock Indexes Data as of 4 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 3 p.m. ET
World The Global Dow 2287.66 42.43 1.89 2047.44 • 2639.52 –2.1 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1644.94 32.79 2.03 1491.52 • 1950.85 –4.2 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 800.91 10.17 1.29 688.52 • 1066.71 0.8 5.500 Australia 2 2.034 107.4 104.1 110.8 119.1 1.975 1.765 1.875
4.250 10 2.688 71.1 66.7 72.3 49.0 2.601 2.384 2.600
Americas DJ Americas 484.55 8.15 1.71 433.35 • 524.44 –0.5
3.500 Belgium 2 -133.1 -123.0 -110.8 -84.8 -0.295 -0.450 -0.164
-0.371
Brazil Sao Paulo Bovespa 49638.68 67.57 0.14 37497.48 • 58051.61 14.5
0.800 10 0.529 -144.8 -136.4 -107.7 -178.0 0.570 0.584 0.331
Canada S&P/TSX Comp 13522.00 142.86 1.07 11843.11 • 15450.87 3.9
4.250 France 2 -0.397 -135.6 -131.6 -110.3 -84.6 -0.381 -0.445 -0.161
Mexico IPC All-Share 44735.50 398.46 0.90 40265.37 • 45773.31 4.1
1.000 10 0.541 -143.6 -134.5 -107.2 -163.9 0.590 0.589 0.471
Chile Santiago IPSA 3058.09 4.45 0.15 2759.77 • 3359.04 3.9
0.500 Germany 2 -0.461 -142.0 -138.3 -118.6 -91.8 -0.448 -0.528 -0.234
U.S. DJIA 17213.31 218.18 1.28 15660.18 • 18312.39 –1.2
0.500 10 0.270 -170.7 -162.1 -147.0 -193.7 0.314 0.190 0.173
Nasdaq Composite 4748.47 86.31 1.85 4266.84 • 5218.86 –5.2
4.500 Italy 2 -0.037 -99.7 -97.6 -53.9 -52.9 -0.042 0.119 0.155
S&P 500 2022.19 32.62 1.64 1829.08 • 2130.82 –1.1
2.000 10 1.333 -64.4 -49.1 5.7 -98.2 1.443 1.717 1.128
CBOE Volatility 16.50 –1.55 –8.59 11.95 • 40.74 –9.4
0.100 Japan 2 -0.162 -112.1 -110.3 -86.9 -64.6 -0.169 -0.211 0.038
EMEA Stoxx Europe 600 342.23 8.73 2.62 303.58 • 414.06 –6.4 0.100 10 -0.011 -198.8 -195.2 -164.7 -168.8 -0.018 0.014 0.422
Stoxx Europe 50 2864.88 71.72 2.57 2566.26 • 3591.47 –7.6 0.500 Netherlands 2 -0.449 -140.9 -134.9 -116.5 -86.9 -0.415 -0.507 -0.184
Austria ATX 2284.02 55.09 2.47 1957.05 • 2681.44 –4.7 0.250 10 0.379 -159.8 -154.0 -132.0 -185.6 0.394 0.341 0.255
Belgium Bel-20 3425.80 70.76 2.11 3130.76 • 3905.71 –7.4 4.350 Portugal 2 0.261 -69.9 -66.3 12.0 -61.7 0.271 0.778 0.067
France CAC 40 4492.79 142.44 3.27 3896.71 • 5268.91 –3.1 2.875 10 2.754 77.7 97.7 224.1 -49.9 2.911 3.902 1.612
Germany DAX 9831.13 332.98 3.51 8752.87 • 12374.73 –8.5 4.500 Spain 2 -0.019 -97.9 -87.7 -58.2 -55.6 0.058 0.076 0.128
Greece ATG 566.20 2.08 0.37 440.88 • 851.81 –10.3 2.150 10 1.482 -49.5 -32.4 11.1 -93.8 1.610 1.771 1.172
Hungary BUX 25608.69 354.04 1.40 18522.42 • 25608.69 7.1 3.750 Sweden 2 -0.599 -155.8 -154.0 -128.5 -84.8 -0.605 -0.627 -0.164
Israel Tel Aviv 1478.61 … Closed 1383.34 • 1723.56 –3.3 2.500 10 0.615 -136.2 -138.1 -125.9 -138.5 0.553 0.402 0.725
Italy FTSE MIB 18987.75 869.52 4.80 15773.00 • 24031.19 –11.3 1.250 U.K. 2 0.564 -39.6 -39.8 -35.2 -31.0 0.537 0.306 0.374
Netherlands AEX 441.75 11.57 2.69 382.61 • 509.24 –0.02 2.000 10 1.577 -40.0 -39.4 -35.6 -26.5 1.541 1.305 1.846
Poland WIG 47182.13 495.39 1.06 42152.70 • 57379.45 1.5 0.750 U.S. 2 0.960 ... ... ... ... 0.935 0.658 0.684
Russia RTS Index 845.59 11.35 1.36 628.41 • 1082.21 11.7 1.625 10 1.977 ... ... ... ... 1.934 1.661 2.110
Spain IBEX 35 9090.60 323.70 3.69 7746.30 • 11866.40 –4.8
Sweden SX All Share 490.21 9.98 2.08 435.21 • 564.90 –3.0 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 7998.43 104.77 1.33 7496.62 • 9526.79 –9.3 EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
South Africa Johannesburg All Share 51739.83 206.05 0.40 46282.02 • 55188.34 2.1 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 3/10/2016
Turkey BIST 100 79380.18 355.49 0.45 68567.89 • 88651.88 10.7
One-Day Change Year Year
U.K. FTSE 100 6139.79 103.09 1.71 5536.97 • 7103.98 –1.6 Commodity Exchange Last price Net Percentage high low
364.25 1.50 0.41% 378.25 354.25
Asia-Pacific DJ Asia-Pacific TSM 1333.27 12.17 0.92 1190.45 • 1619.39 –4.1 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 894.25 5.00 0.56 896.75 856.00
Australia S&P/ASX 200 5166.40 16.30 0.32 4765.30 • 5982.70 –2.4
Wheat (cents/bu.)
CBOT
CBOT 476.25 -0.75 -0.16% 493.50 442.25
China Shanghai Composite 2810.31 5.58 0.20 2655.66 • 5166.35 –20.6
Live cattle (cents/lb.) CME 128.550 0.925 0.72 129.775 118.775
Hong Kong Hang Seng 20199.60 215.18 1.08 18319.58 • 28442.75 –7.8
Cocoa ($/ton) ICE-US 3,051 -11 -0.36 3,215 2,738
India S&P BSE Sensex 24717.99 94.65 0.38 22951.83 • 29044.44 –5.4
Coffee (cents/lb.) ICE-US 126.10 3.95 3.23 128.25 113.35
Japan Nikkei Stock Avg 16938.87 86.52 0.51 14952.61 • 20868.03 –11.0
Sugar (cents/lb.) ICE-US 15.21 0.39 2.63 15.34 12.61
Singapore Straits Times 2828.86 19.74 0.70 2532.70 • 3539.95 –1.9
Cotton (cents/lb.) ICE-US 57.14 0.31 0.55 64.30 54.53
South Korea Kospi 1971.41 2.08 0.11 1829.81 • 2173.41 0.5 Robusta coffee ($/ton) ICE-EU 1428.00 26.00 1.85 1,568.00 1,342.00
Taiwan Weighted 8706.14 45.44 0.52 7410.34 • 9973.12 4.4
Copper ($/lb.) COMEX 2.2415 0.0215 0.97 2.3040 1.9440
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1253.00 -19.80 -1.56 1,287.80 1,061.90
Silver ($/troy oz.) COMEX 15.530 -0.019 -0.12 16.005 13.760
Currencies London close on March 11 Aluminum ($/mt)* LME 1,574.00 10.00 0.64 1,588.50 1,451.50
Tin ($/mt)* LME 16,800.00 170.00 1.02 17,225.00 13,225.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Fri YTDchg Copper ($/mt)* LME 4,911.00 -10.00 -0.20 4,989.50 4,320.50
10% Country/currency in US$ per US$ (%) Lead ($/mt)* LME 1,842.00 -9.00 -0.49 1,888.00 1,598.00
8 s Europe Zinc ($/mt)* LME 1,797.00 -4.00 -0.22 1,843.00 1,467.00
6 Euro
Bulgaria lev 0.5715 1.7498 –2.8 Nickel ($/mt)* LME 8,780.00 -45.00 -0.51 9,400.00 7,750.00
4
Yen
s Croatia kuna 0.1476 6.774 –3.4 Rubber (Y.01/ton) TCE 171.40 2.50 1.48 180.00 154.10
2
Euro zone euro 1.1173 0.8951 –2.8
0 Palm oil (MYR/mt) MDEX 2607.00 61.00 2.40 2,653.00 2,425.00
Czech Rep. koruna-b 0.0413 24.216 –2.7
–2 Denmark krone 0.1498 6.6769 –2.8 Crude oil ($/bbl.) NYMEX 40.09 0.69 1.75 41.35 29.85
–4 s WSJ Dollar index
Hungary forint 0.003592 278.40 –4.1 NY Harbor ULSD ($/gal.) NYMEX 1.2287 0.0035 0.29 1.2563 0.8950
–6 Iceland krona 0.007896 126.65 –2.7
–8 RBOB gasoline ($/gal.) NYMEX 1.4786 0.0086 0.59 1.5782 1.1488
Norway krone 0.1188 8.4173 –4.8
0.2602 3.8426 –2.1
Natural gas ($/mmBtu) NYMEX 1.917 0.034 1.81 2.5490 1.7310
2015 2016 Poland zloty
Russia ruble-d 0.01432 69.844 –2.9 Brent crude ($/bbl.) ICE-EU 40.42 0.37 0.92 41.48 28.58
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1199 8.3398 –1.3 Gas oil ($/ton) ICE-EU 365.00 3.50 0.97 374.00 260.25
Fri Fri
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0190 0.9814 –2.1
Turkey lira 0.3484 2.8702 –1.6 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1289 7.7583 0.1
Ukraine hryvnia 0.0399 25.0585 4.4
Argentina peso-a 0.0667 14.9960 15.9
India rupee
Indonesia rupiah
0.0149
0.0000769
66.9517
13001
1.1
–6.0
U.K. pound 1.4410 0.6940 2.3 Cross rates London close on Mar 11
Brazil real 0.2762 3.6210 –8.6 Middle East/Africa
Japan yen 0.008798 113.67 –5.5
Canada dollar 0.7566 1.3218 –4.5 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002907 343.96 1.5 Bahrain dinar 2.6525 0.3770 –0.03
Chile peso 0.001465 682.70 –3.7 Australia 1.3224 1.9059 1.3475 0.0116 0.1705 1.4776 1.0008 ...
Macau pataca 0.1252 7.9881 –0.2 Egypt pound-a 0.1277 7.8335 0.05
Colombia peso 0.0003163 3161.15 –0.4 Canada 1.3218 1.9045 1.3470 0.0116 0.1704 1.4766 ... 0.9992
Malaysia ringgit-c 0.2458 4.0686 –5.4 Israel shekel 0.2579 3.8780 –0.37
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.6749 1.4817 1.2 Kuwait dinar 3.3242 0.3008 –0.9 Euro 0.8951 1.2898 0.9120 0.0079 0.1154 ... 0.6771 0.6768
Mexico peso-a 0.0564 17.7242 3.0
Pakistan rupee 0.0096 104.590 –0.3 Oman sul rial 2.5976 0.3850 0.003 Hong Kong 7.7583 11.1812 7.9053 0.0683 ... 8.6690 5.8697 5.8668
Peru sol 0.2905 3.4429 0.8
Philippines peso 0.0215 46.445 –0.9 Qatar rial 0.2746 3.641 –0.04 Japan 113.6660 163.8000 115.8100 ... 14.6520 127.0000 86.0020 85.9400
Uruguay peso-e 0.0313 32.000 7.0
Singapore dollar 0.7288 1.3721 –3.3 Saudi Arabia riyal 0.2666 3.7504 –0.1 0.9814 1.4143 ... 0.0086 0.1265 1.0966 0.7424 0.7421
Venezuela bolivar 0.158595 6.31 0.005 Switzerland
South Korea won 0.0008435 1185.50 0.8 South Africa rand 0.0656 15.2440 –1.5
U.K. 0.6940 ... 0.7071 0.0061 0.0894 0.7755 0.5251 0.5247
Asia-Pacific Sri Lanka rupee 0.0068937 145.06 0.6 Close Net Chg % Chg YTD % Chg
0.7562 1.3224 –3.6 Taiwan dollar 0.03064 32.641 U.S. ... 1.4410 1.0190 0.0088 0.1289 1.1173 0.7566 0.7562
Australia dollar –0.8 WSJ Dollar Index 87.88 –0.32 –0.36 –2.54
China yuan 0.1539 6.4978 0.1 Thailand baht 0.02851 35.070 –2.7 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

Key Rates Top Stock Listings 4 p.m. New York time

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Close Chg Chg Cur Stock Sym Close Chg Chg Cur Stock Sym Close Chg Chg Asia Titans 50
One month 0.43620% 0.17650% ¥ TakedaPharm 4502 5444.00 -0.29 -10.24 £ RioTinto RIO 2000.00 2.20 1.04 Last: 128.30 s 1.43, or 1.13% YTD t 5.8%
Three month 0.63385 0.27065 Asia Titans HK$ TencentHoldings 0700 148.10 2.14 -3.01 CHF RocheHldgctf ROG 246.00 0.57 -11.00
150
Six month 0.90550 0.40290 43.00 2.26 -7.73 1669.00
HK$ AIAGroup 1299 ¥ TokioMarineHldg 8766 3959.00 0.05 -15.98 £ RoyDtchShell A RDSA 1.86 9.37
One year 1.22450 0.71335 ¥ AstellasPharma 4503 1529.50 -0.87 -11.67 ¥ ToyotaMtr 7203 6140.00 -0.23 -18.00 € SAP SAP 69.97 1.97 -4.65 50–day 140
moving average
Euro Libor AU$ AustNZBk ANZ 25.42 -0.27 -8.99 AU$ Wesfarmers WES 41.79 1.19 0.43 € Sanofi SAN 73.96 1.93 -5.90
130
One month -0.30100% -0.01071% 17.61 -0.51 -1.40 55.42 2.71 5.44
t
AU$ BHP BHP AU$ WestpacBanking WBC 32.74 0.68 -2.44 € SchneiderElectric SU
Three month -0.23571 0.01857 HK$ BankofChina 3988 3.11 0.97 -10.12 AU$ Woolworths WOW 23.34 0.86 -4.73 € Siemens SIE 89.13 2.61 -0.83 High 120
Six month -0.12371 0.07429 HK$ CKHutchison 0001 99.15 0.86 -5.03 € Telefonica TEF 10.18 4.73 -0.59 Close 110
One year -0.00543 0.20357 HK$ CNOOC 0883 9.18 0.77 13.75 Stoxx 50 € Total FP 42.35 3.79 2.63 Low
100
Euribor ¥ Canon 7751 3363.00 1.91 -8.49 CHF ABB ABBN 18.34 2.17 2.12 CHF UBSGroup UBSG 16.58 3.30 -15.06
One month -0.30100% -0.01000% ¥ CentralJapanRwy 9022 19465 0.62 -9.88 € AXA CS 21.63 6.19 -14.27 € Unilever UNA 39.63 1.39 -1.20 18 25 31 8 15 22 29 5 12 19 26 4 11
Three month -0.22500 0.02500 HK$ ChinaConstructnBk 0939 4.80 0.21 -9.60 € Allianz ALV 144.65 4.37 -11.56 £ Unilever ULVR 3096.00 0.47 5.79 Jan. Feb. Mar.
Six month -0.13100 0.09600 HK$ ChinaLifeInsurance 2628 17.90 1.94 -28.69 € Anheuser Busch ABI 105.40 1.49 -7.87 £ VodafoneGroup VOD 217.35 2.21 -1.65
One year -0.00900 0.21400 HK$ ChinaMobile 0941 85.50 0.53 -2.29 £ AstraZeneca AZN 4043.50 0.62 -12.41 CHF ZurichInsurance ZURN 228.10 3.12 -11.73
Yen Libor AU$ CmwlthBkAust CBA 76.37 0.30 -10.71 € BASF BAS 64.41 3.62 -8.92
DJIA Stoxx 50
One month 0.23304% 0.23714% ¥ EastJapanRailway 9020 9861.00 0.51 -13.88 € BNP Paribas BNP 48.70 5.53 -6.76
Last: 2864.88 s 71.72, or 2.57% YTD t 7.6%
Three month 0.56786 0.38500 ¥ Fanuc 6954 18095 -1.28 -14.16 £ BT Group BT.A 459.05 1.65 -2.68 $ AmericanExpress AXP 59.46 1.21 -14.51
Six month 0.89214 0.53929 ¥ Hitachi 6501 519.50 0.52 -24.87 € BancoBilVizAr BBVA 6.51 6.19 -3.32 $ Apple AAPL 102.26 1.08 -2.85 3400
One year 1.26946 0.84071 TW$ Hon Hai Precisn 2317 83.20 0.24 2.97 € BancoSantander SAN 4.45 7.15 -2.33 $ Boeing BA 124.63 1.37 -13.80
72.80 2.02 7.12 3200
Offer ¥ HondaMotor 7267 3150.00 -0.32 -19.44 £ Barclays BARC 166.00 3.81 -24.17 $ Caterpillar CAT
KRW HyundaiMtr 005380 149000 0.68 ... € Bayer BAYN 97.96 2.52 -15.41 $ Chevron CVX 94.58 0.68 5.14 3000
Eurodollars
HK$ Ind&Comml 1398 4.15 0.73 -11.32 £ BP BP. 348.40 1.52 -1.58 $ CiscoSystems CSCO 27.86 1.75 2.60
One month 0.4500% 0.3500%
$ CocaCola KO 45.20 0.71 5.21
2800
Three month 0.6500 0.5500 ¥ JapanTobacco 2914 4646.00 -1.88 3.91 £ BritishAmTob BATS 4076.50 2.31 8.10
¥ KDDI 9433 3017.00 2.50 -4.34 CHF FinRichemont CFR 66.45 0.15 -7.84
$ Disney DIS 97.94 0.93 -6.79 2600
Six month 0.9000 0.8000
¥ Mitsubishi 8058 2074.00 1.57 2.27 CHF CreditSuisse CSGN 15.50 5.44 -28.54
$ DuPont DD 63.83 2.69 -4.16 2400
One year 1.2500 1.1500
554.30
$ ExxonMobil XOM 82.19 0.01 5.44
Latest 52 wks ago ¥ MitsuUFJFin 8306 3.49 -26.79 € Daimler DAI 65.09 4.04 -16.10 18 24 31 8 15 22 29 5 12 19 26 4 11
$ GenElec GE 30.34 1.34 -2.60
¥ Mitsui 8031 1437.00 0.21 -0.59 € Deutsche Bank DBK 18.34 7.44 -18.58 Jan. Feb. Mar.
Prime rates $ GoldmanSachs GS 153.94 1.93 -14.59
¥ Mizuho Fin 8411 182.70 2.47 -24.97 € DeutscheTelekom DTE 15.83 3.50 -5.15
U.S. 3.50% 3.25% $ HomeDepot HD 128.46 2.04 -2.87
¥ NTTDoCoMo 9437 2579.50 0.76 3.84 £ Diageo DGE 1873.00 1.22 0.89
Canada 2.70 2.85 $ Intel INTC 31.76 1.63 -7.81
AU$ NatAustBnk NAB 27.92 0.90 -7.55 13.32 2.94 -3.48
Japan
Hong Kong
1.475
5.00
1.475
5.00 ¥ NipponStl&SmtmoMtl 5401 2248.50 2.91 -6.93
€
£
ENI
GlaxoSmithKline
ENI
GSK 1398.00 0.87
$
1.82 $
IBM
JPMorganChase
IBM
JPM
142.36
59.34
1.55
1.25
3.44
-10.13
Dow Jones Industrial Average P/E: 18
¥ NipponTeleg 9432 4851.00 -0.25 0.31 £ HSBC Hldgs HSBA 451.35 1.31 -15.82 $ JohnsJohns JNJ 107.71 0.53 4.86 Last: 17213.31 s 218.18, or 1.28% YTD t 1.2%
Policy rates
ECB 0.05% 0.05%
¥ NissanMotor 7201 1096.50 -0.32 -14.30 € INGGroep INGA 11.81 5.73 -5.14 $ McDonalds MCD 121.55 1.31 2.89
Britain 0.50 0.50
¥ NomuraHldgs 8604 528.00 1.54 -22.25 £ ImperialBrands IMB 3752.50 1.34 4.63 $ Merck MRK 53.20 1.18 0.72 18000
Switzerland 0.50 0.50
¥ Panasonic 6752 982.40 0.16 -20.81 € IntesaSanpaolo ISP 2.73 7.47 -11.46 $ Microsoft MSFT 53.07 1.96 -4.34 17400
Australia 2.00 2.25
HK$ PetroChina 0857 5.42 2.46 6.48 € L'AirLiquide AI 99.32 2.12 -4.18 $ NikeClB NKE 60.08 2.04 -3.87
HK$ PingAnInsofChina 2318 34.75 0.14 -19.00 € LVMHMoetHennessy MC 157.45 2.01 8.66 $ 16800
U.S. discount 1.00 0.75 Pfizer PFE 30.50 3.08 -5.51
Fed-funds target 0.25 0.00
$ RelianceIndsGDR RIGD 30.10 -0.50 -1.63 £ LloydsBankingGroup LLOY 70.15 1.74 -4.00 $ Procter&Gamble PG 81.75 -0.64 2.95 16200
Call money 2.25 2.00
AU$ RioTinto RIO 44.57 -0.36 -0.31 € LOreal OR 156.25 1.79 0.61 $ 3M MMM 161.88 1.24 7.46 15600
KRW SamsungElectronics 005930 1249000 1.96 -0.87 £ NationalGrid NG. 965.50 0.68 2.99 $ TravelersCos TRV 113.64 1.89 0.69
Overnight repurchase rates 15000
U.S. 0.46% 0.16%
¥ Seven&I Hldgs 3382 4680.00 0.80 -15.68 CHF Nestle NESN 71.55 0.77 -4.02 $ UnitedTech UTX 96.75 0.59 0.71
Euro zone n.a. n.a.
¥ SoftBankGroup 9984 5795.00 1.10 -5.60 CHF Novartis NOVN 72.90 1.04 -16.01 $ UnitedHealthGroup UNH 125.10 2.47 6.34 18 24 31 8 15 22 29 5 12 19 26 4 11
¥ Sumitomo Mitsui 8316 3635.00 3.56 -21.08 DKK NovoNordiskB NOVO-B 379.00 1.09 -5.23 $ VISAClA V 71.63 2.01 -7.63 Jan. Feb. Mar.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 93.45 1.08 -0.32 £ Prudential PRU 1358.50 2.96 -11.27 $ Verizon VZ 52.53 0.40 13.65 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 155.00 0.32 8.39 £ ReckittBenckiser RB. 6529.00 1.04 3.95 $ WalMart WMT 67.17 -0.36 9.58 Sources: WSJ Market Data Group; Birinyi Associates
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THE WALL STREET JOURNAL.
Beijing Tries New Bad-Loan Remedies
Efforts include letting
banks exchange dud
debt for equity in too-
big-to-fail companies
BY LINGLING WEI
BEIJING—Chinese regula-
tors are speeding up efforts to
help banks shed bad loans, but
some of the measures risk
keeping “zombie” companies
afloat while making lenders
more strapped for capital.
The deepening economic
slowdown has heightened the
need for banks to have more
funds to lend out. A main fea-
ture in a plan outlined by cen-
tral-bank and regulatory offi-
cials over the weekend would
be to let banks sell dud loans
to investors either by repack-
aging them as securities or
transferring them to special
asset-management companies
that handle distressed debt.
Senior executives at China’s
Big Four state-owned banks
say regulators are also explor-
ing ways for banks to ex-
change bad loans for equity in
certain too-big-to-fail compa-
nies—a potentially controver-
sial step that they say could
saddle banks with near-worth-
less stock and squeeze their li-
quidity.
Bank of China Ltd., one of
the top four lenders, recently
agreed to become the largest
shareholder in a publicly
traded shipbuilder under the
yet-to-be-disclosed plan, peo-
ple close to the bank say. Offi-
cials at the central bank and
banking regulatory agency de-
clined to comment.
The steps come as Chinese
banks are seeing a surge in
BANKS
Continued from page B5
the eurozone’s private sector.
The ECB added corporate
bonds to the mix of assets it
can buy as part of its large-
scale asset-purchase program,
a policy known as quantitative
easing. The ECB also increased
its monthly bond purchases by
€20 billion ($22.30 billion), to
€80 billion.
A German trade group rep-
resenting commercial banks in-
cluding Deutsche Bank and
Commerzbank AG criticized
the ECB’s moves to pump more
money into the economy. The
association, BdB, accused the
central bank of overstating “de-
flationary risks.”
The longer-term
loans ‘will not have
an effect on the real
economy.’
Germany’s association of
savings banks also opened fire,
saying the measures hurt not
only savers and banks but en-
dowments, pensions, social-se-
curity programs and insurers.
“These measures are above
all aimed at financial institu-
tions in crisis in Southern Eu-
rope, which could use favorable
AUTOS
Continued from page B5
delinquency rate among sub-
prime car loans that have been
packaged into bonds over the
past five years climbed to 5.16%
in February, according to Fitch
Ratings, the highest level in
nearly two decades. The rate of
missed payments is higher for
loans made in more recent
years, a reflection of more lib-
eral credit standards and the
larger number of deals from
lenders serving less creditwor-
thy customers, according to
Standard & Poor’s Ratings Ser-
vices.
Investors are becoming con-
cerned. Flagship Credit Accep-
tance LLC, another small
lender, recently had to offer
higher yields than expected to
sell bonds backed by subprime
auto loans. Flagship declined to
comment.
“What’s driving record auto
sales is not the economy, but
record auto lending,” said Ben
Weinger, who runs hedge fund
3-Sigma Value LP in New York
and who has bearish bets on
some auto lenders. He said de-
mand for auto debt has led
lenders to systematically loosen
underwriting standards, which
he predicts will result in higher
Collateral Damage
Chinese banks have expanded rapidly, but their profitability is declining and risks such as bad loans, which had improved steadily for the past
decade, are again on the rise.
Total assets held
250 trillion yuan
200
150
100
50
0 0
2004 ’05 ’10
*A measure of how well banks are protected against future loan losses
Source: China Banking Regulatory Commission via Macquarie Securities
nonperforming loans and a
sharp decline in profitability,
as they absorb the effects of a
yearslong lending binge. To
make their books look health-
ier, many banks have extended
new credit to corporate bor-
rowers to repay existing debt.
Shang Fulin, chairman of
the China Banking Regulatory
Commission, indicated at a
news conference on Saturday
that policy makers see such
rollover practices as a problem
because the funds aren’t used
to invest in new projects and
create fresh demand.
“Through securitization and
transfers of nonperforming as-
sets, the hope is to increase
the turnover rate of bank
lending, thereby improving
[banks’] ability to support the
real economy,” Mr. Shang said.
Total soured loans in
China’s banking system
reached 1.27 trillion yuan
($195.5 billion) as of Decem-
refinancing,” said Michael Wol-
gast, the chief economist at the
savings bank association, DSGV.
The longer-term loans “aren’t
necessary for monetary policy
and they will not have an effect
on the real economy,” he said.
Bankers aren’t the only Ger-
mans upset. The front page of
business daily Handelsblatt’s
edition on Friday depicted Mr.
Draghi lighting a cigar with a
burning €100 bill. “Mario
Draghi’s dangerous game with
the money of German savers,”
read the caption. “Whatever it
takes” was beneath, a sarcastic
allusion to Mr. Draghi’s state-
ment in London nearly four
years ago promising to do
whatever was necessary to save
the euro.
Elsewhere, the ECB’s mea-
sures were seen as a victory for
banks in the eurozone’s embat-
tled south, which can get cheap
funding for loans. “Italian
banks are much more old-fash-
ioned commercial banks that
make money from loans,” said
Luca Paolini, chief strategist at
Pictet Asset Management. “The
ECB decision…is a positive be-
cause [the targeted loans] are
on very generous terms and
will go a long way to offset any
negative impact of falling de-
posit rates.”
Southern European banks
depend more on central-bank
funding and are less rich in de-
posits than are their German
peers. Data compiled by Dutch
loan delinquencies.
Most analysts have shrugged
off talk of a subprime auto-loan
bubble. They said the economy
isn’t in recession, unemploy-
ment rates are fairly stable and
that low gasoline prices are
putting more money in people’s
pockets.
The U.S. auto industry has
been on a tear. Sales of new
cars and light trucks came in at
a record 17.5 million in 2015,
and the strong pace has carried
into the new year. Sales of used
cars, which a majority of sub-
prime borrowers purchase, also
are increasing, according to the
National Automobile Dealers
Association.
The total volume of U.S. auto
loans is now at an all-time high
of close to $1 trillion, with a
fifth made to subprime borrow-
ers, according to Equifax.
Many of those loans are re-
packaged into bonds to free up
capital so that new loans can
be made.
Issuance of bonds backed by
U.S. subprime auto loans
topped $27 billion last year, the
highest in a decade and up 25%
from 2014, according to Asset-
Backed Alert, an industry news-
letter that has flagged concerns
around Skopos and other “deep
subprime” lenders.
Skopos sold its first bond
deal backed by pools of sub-
MONEY & INVESTING
Return on equity
25%
20
15
10
5 3
’15 2011 ’12 ’13 ’14 ’15
ber, the highest level since
mid-2006. Even as the official
bad-loan ratio remains rela-
tively low, at 1.67% as of the
end of 2015, it has been
steadily climbing in the past
three years. That is largely
because Chinese steelmakers,
coal miners and other manu-
facturers find it increasingly
difficult to pay off debts be-
cause of weak demand and ex-
cessive industrial capacity.
Nonperforming loans could
peak at around 7% of all loans
in China in the current credit
cycle, according to a recent
analysis by J.P. Morgan Chase
& Co., meaning the entire
banking sector would need
about $600 billion to replenish
its capital. In a crisis scenario,
China’s bad-loan ratio would
hit 20% and the banking sys-
tem would require five trillion
yuan ($770 billion) of capital,
according to the report.
“The key question is, what
Lending a Hand
The average cost of borrowing has declined across the
eurozone since the European Central Bank pushed interest
rates into negative territory almost two years ago.
Cost of borrowing for companies
January 2016
Slovenia
Italy
Estonia
Ireland
Spain
Netherlands
Luxembourg
Cyprus
Eurozone
Finland
0% 1 2
*Percentages are rounded
Source: ECB
lender Rabobank Group show
that, as of January, the top bor-
rowers drawing on regular
ECB lending were banks from
Italy and Spain. German banks
had the highest level of central-
bank deposits.
The ECB itself doesn’t dis-
close this information. Ample
deposits mean that German
banks are well-insulated from
any capital flight.
Data provided by the ECB
show that the cost of borrow-
ing for German firms stood at
1.98% in January, down 22%
from their level in June 2014,
when the ECB first pushed bor-
rowing rates into negative ter-
ritory. Comparable rates in It-
prime loans in April. The com-
pany’s second deal was the No-
vember transaction, which
raised $154 million. The bonds
are backed by more than 10,000
loans, with terms averaging 5.6
years and interest rates of
about 20%.
Some 87% of the loans were
to borrowers with credit scores
below 600, on a scale of 300 to
850. A third of those had scores
below 500 or no credit scores
at all.
Before making loans, Skopos
said, it verifies information, in-
cluding borrowers’ employment
and whether they actually
Cars await shipment from Lansing, Mich., to dealers in the U.S., where auto sales have been on a tear.
Non-performing loan ratios
15%
12
9 180
6 120
0 0
2004 ’05 ’10 ’15
is the roadmap out of a credit
cycle or crisis?” asked the J.P.
Morgan analysts.
Officials at the country’s
central bank, in particular, are
wary of risks associated with
securitization of loans, point-
ing to how risky securities tied
to home mortgages helped
trigger the 2008 global finan-
cial crisis. For now, the central
bank has picked six large Chi-
nese banks for a trial run of
securitizing tens of billions of
dollars of loans, according to
people familiar with the mat-
ter. The banks include the Big
Four—Industrial & Commer-
cial Bank of China Ltd., China
Construction Bank Corp., Agri-
cultural Bank of China Ltd.
and Bank of China—along with
Bank of Communications Co.
and China Merchants Bank.
Zhou Xiaochuan, China’s
central-bank governor,
said Saturday that such secu-
rities could attract investors
Percentage
June 2014 change*
–41%
–32
–29
–29
–29
–28
–28
–26
–26
–23
3 4 5 6
THE WALL STREET JOURNAL.
aly in January stood at 2.47%,
down 32% from June 2014
The ECB’s decision Thursday
is “going to hurt banks that
have a lot of excess liquidity”
said ING economist Carsten
Brzeski, citing German savings
banks. “These are the ones be-
ing hurt by the negative de-
posit rate.” He said these banks
need to park excess funds
somewhere, “so they park it at
the ECB.”
These lenders also aren’t
helped by the ECB’s targeted
four-year loans, he said. “Why
would you now pick up more
excess liquidity if you already
are having trouble getting rid
of your excess liquidity?”
made cash down payments. For
those with no credit score, it
looks at alternative metrics,
like how they pay phone bills.
“We interview every customer
before we fund the loan,” Sko-
pos CEO Daniel Porter said,
adding that individuals with no
credit histories are often young
working adults who are more
motivated to keep making pay-
ments.
The lender and the credit-
rating firms involved in the No-
vember transaction said the
deal’s performance so far is
within expectations. They said
some borrowers likely over-
Monday, March 14, 2016 | B7
in exchange for more than six
billion yuan of loans owed by
the struggling shipbuilder.
Current banking rules gen-
erally forbid commercial banks
Provision-coverage ratios* from taking stakes in nonfi-
nancial entities. But regula-
300%
tors, led by the powerful gov-
ernment commission
240 overseeing state assets—
known as the State-owned As-
sets Supervision and Adminis-
tration Commission, or SASAC
—are pushing for changes in
the rules to help heavily in-
debted state companies cut
60 debts. Corporate debt now
amounts to 160% of China’s
gross domestic product, ac-
cording to Standard & Poor’s
2004 ’05 ’10 ’15 Ratings Services. That is up
from 98% in 2008 and com-
THE WALL STREET JOURNAL. pares with a current U.S. level
of 70%.
who specialize in buying trou- Blessed by the leadership’s
bled assets, but he stressed goal of helping companies de-
the need to draw lessons from leverage, SASAC is compiling
the global financial crisis in a list of big companies that
developing the market. could be slated for debt-for-
Regulators are also refining equity swaps, according to of-
a practice pioneered by former ficials close to the agency.
Premier Zhu Rongji, who in But many bankers think
the late 1990s set up four such swaps should only be al-
state-owned asset-manage- lowed on a limited scale. By
ment companies to take over exchanging loans for equity
large amounts of bad loans that would be worth little if
from Chinese banks and resell the companies already are
them to other investors. Under struggling to pay off debts,
the new plan, the list of buy- banks would be required to
ers would be expanded from sharply bump up the amount
the four to include other insti- of capital they set aside
tutional investors. against such equity holdings,
Meanwhile, as illustrated by which are considered more
the Bank of China example, risky than loans. That would
regulators are starting to open strain their liquidity.
the door to more debt-for-eq- “It doesn’t sound like a
uity restructurings. Under the great idea to save zombie
deal, the bank will hold about companies with zombie
14% of equity in China Hua- banks,” said Larry Hu, China
rong Energy Co., listed in economist at Macquarie Secu-
Hong Kong and based in east- rities, a Sydney-based invest-
ern China’s Jiangsu province, ment bank.
OIL told analysts last week.
Chevron has 16 rigs in the
region drilling wells that will
come online in six to 12
Continued from page B5 months. “We think that those
May last year to as high as wells that are being drilled
$60.75 a barrel after falling to will be economic at the kinds
as low as $43.46. Investors of low prices that we’re seeing
piled in on expectations that today,” he said.
the plunge in prices would The oil surplus may be eas-
spur a quick decline in U.S. oil ing compared with a year ago.
output. Retail investors tried U.S. production fell on a yearly
to benefit from oil’s antici- basis in December for the first
pated rebound through ex- time since 2011, according to
change-traded funds designed the Energy Information Ad-
to track oil futures, as analysts ministration. Global produc-
called for prices to return to tion dropped 0.7% in the first
$70 a barrel by 2016. two months of this year, the
But higher prices also al- International Energy Agency
lowed producers to lock in said on Friday.
prices for future years and in- But Iranian production is
vest in new output. The num- expected to rise this year by
ber of rigs drilling for oil several hundred thousand bar-
started rising again over the rels a day, analysts say, as in-
summer as companies rushed ternational sanctions are
to turn on the tap and gener-
ate new cash flow.
lifted.
U.S. crude inventories are
Some producers told inves- at their highest level in more
tors that because of cost sav-
ings, they could afford to bring
than 80 years. Cushing, Okla.,
a key storage hub in the Mid-
new wells online with prices west and the delivery point for
above $60 a barrel. By August, Nymex crude futures, is hold-
oil had fallen to new lows. ing 66.9 million barrels of oil,
Cost reductions now allow 92% of its estimated working
companies to increase produc- capacity as of September, ac-
tion at even lower prices. cording to EIA data.
Chevron Corp. could drill Traders “want to see the in-
4,000 wells in the Permian ba- ventory worked down,” said
sin in Texas that would make Joseph Quinlan, head of mar-
money at prices below $50 a ket and thematic research at
barrel, and some of those Bank of America Global Wealth
would make money below $30, and Investment Management,
Chief Executive John Watson which manages $380 billion.
spent during the year-end holi-
day season and should become
current on the loans after re-
ceiving tax refunds. Delin-
losses. The high interest rates
on the loans are expected to
cover any losses from people
defaulting.
quency rates fell from January “We don’t see anything at
to February as that trend is this point that causes us con-
starting to play out, according cern,” said Eric Neglia, a senior
to the company. director.
Representatives of Kroll The auto market might. Af-
Bond Rating Agency Inc., ter last year wrapped up with
which gave most of the bonds record sales, some analysts be-
in the November deal invest- gan worrying that a top could
ment-grade ratings, said the se- be near.
curities are structured so that Shares in Ford Motor Co.
half the loans in the pool could and General Motors Co. have
default and all the bonds still fallen this year. Sales surged in
would be repaid, while the February, but analysts still
lending company absorbs the worry the industry is starting
to rely more on incentives.
Loans have been crucial, too.
Nearly nine out of every 10 new
cars and more than half of all
used cars are financed, accord-
ing to credit-reporting com-
pany Experian.
Most auto lenders, unlike
subprime mortgage lenders of
years past, hold some risk from
the loans they make, so they
have little incentive to make
bad loans.
Delinquencies could snow-
ball, however, if lenders get
REBECCA COOK/REUTERS
stretched for cash and in turn
struggle to keep up after bor-
rowers get them to pay. “That
could quickly change perfor-
mance across the spectrum,”
said Kevin Duignan, a managing
director at Fitch.
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B8 | Monday, March 14, 2016 THE WALL STREET JOURNAL.

Email: heard@wsj.com
HEARD ON THE STREET FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard

Qualcomm’s
New iPhone
ECB Wakes Up to Bank-Profit Nightmare
Mario Draghi is worried negative rates to retail de- Mr. Draghi closed his

Chip Angst about eurozone bank profits

after all.
The European Central
Intel’s mobile efforts have Bank president said in Janu-
been long stymied by the ary that it wasn’t his job to
fact that it has remained protect banks and on Thurs-
shut out of the most profit- day insisted that loose policy
able smartphone on the mar- had so far helped not hin-
positors either because they
fear the money will leave, or
in some countries because
Due Dates
Eurozone banks' senior unsecured
bonds due for repayment
news conference Thurs-
day with a very deliberate
reference to a private Euro-
they aren’t allowed to by Germany France Italy pean Commission paper on
law. Spain Others ways to ease costs on an im-
Bank stocks and portant element of bank cap-
300 billion euros
bonds have been heavily sold ital. The commission isn’t re-
by investors this year be- leasing the paper, but one of

MATTHIAS BALK/DPA/ZUMA PRESS

ket: the iPhone. dered their profits. But cause of worries about the its aims is to suggest more
200
That may be changing. the ECB’s big policy sector’s profitability and the leeway for banks to avoid
Rumors have circulated that moves contained special effects on dividends and cou- skipping coupon payments
Intel may grab market share tricks designed to protect pon payments for some ju- 100
on junior debt known as ad-
from Qualcomm for the mo- banks against the debilitat- nior bonds. ditional tier-one capital.
dem chip, or baseband pro- ing effects of negative inter- Mr. Draghi acknowl- Fears about missed cou-
cessor, handling the iPhone’s est rates. edged Thursday that the 0 pons were behind the selloff
connections to wireless net- Investors were initially pain caused to banks over in these junior bonds this
2016 2017 2018 2019 2020
works. Morgan Stanley, Co- confused: Bank shares rallied the longer term would put a year, which infected share
wen and Credit Suisse last then fell back on Thursday. limit on how far negative he Source: Standard & Poor's Euro notes prices and senior bonds, too.
week all noted signs that But bank stocks then rose could push interest rates. To These moves are having
production of a new Intel sharply Friday, especially protect banks and stop them At most this will cost option to replace banks’ ma- the desired effect in the
chip is gearing up ahead of those of Southern European from cutting back lending, banks nothing. But if they turing bonds with more than markets. Two indexes that
the expected iPhone 7 launch banks, as the implications the ECB launched more tar- have grown lending by 2.5% €500 billion due for repay- measure the riskiness of se-
in the fall. became clear. geted lending operations, by the end of January 2018, ment in the next two years, nior and subordinated Euro-
Less clear is whether the Negative rates are a night- known as TLTRO II. These the interest rate they pay according to Standard & pean bank bonds dropped
smaller iPhone that Ap- mare for banks. They have to offer banks more than €700 could drop to the ECB’s de- Poor’s, as well to refinance sharply. The ECB won’t solve
ple reportedly plans to un- pay to leave money on de- billion ($780 billion) of fresh posit rate at the time the existing ECB money. The the bank profitability prob-
veil at a March 21 event also posit at the central bank and four-year funding, according funding was taken. That was lower costs would add a net lem like this, but at least it
would make use of these can end up paying to own to Barclays, to back their cut to minus 0.4% on Thurs- €3 billion, or up to 2.5%, to is trying to stop making it
chips. And it is worth noting government bonds. At the loans to companies and con- day. annual earnings, according worse.
that rumors of an Intel chip same time, banks can’t pass sumers, but not mortgages. This funding is a cheap to Deutsche Bank. —Paul J. Davies
in the iPhone have circulated
in regard to prior genera-
tions of the smartphone.
Qualcomm controls about
60% of the baseband market,
according to Strategy Ana-
The New Test of Success for the European Central Bank
lytics. So it makes sense for Time to switch focus. Un- reached £1.6 billion ($2.3 bil- strategists peg it at roughly ciété Générale notes. Some
a major buyer like Apple to til now, the euro’s exchange Room to Rally lion) and the focus swiftly €500 billion. of the ECB’s efforts may just
seek out a second source on rate has been closely tracked Yield spread between European shifted to buying gilts in But there is already some contribute to more debt
a key component. But ana- as an indicator of the effec- corporate and government bonds huge quantities. The ECB is evidence of the power of building up on U.S. invest-
lysts say Qualcomm is highly tiveness of the European also buying at a different ECB buying. Some Italian ment-grade balance sheets.
unlikely to lose the entire Central Bank’s stimulus pro- 1.6 percentage points stage in the cycle: The BOE utilities, such as Enel and The spread on BAML’s Eu-
iPhone business, because its grams. Now eurozone corpo- 1.4 moved when financial mar- Terna, got onto the ECB’s ropean corporate-bond index
baseband chips still are su- rate bonds are the crucial 1.2 kets were truly in disarray shopping list last year, and has already narrowed to 1.43
perior to the competition. barometer investors need to 1.0 and corporate-bond yields their bonds have sharply percentage points from a
Stacy Rasgon of Bernstein watch. were very high. Now the outperformed the wider February peak of 1.63 points.
0.8
estimates that losing 30% of Thursday’s decision to add credit cycle is already fairly market since then, Bank of The cost of insuring Euro-
Apple’s business would cut corporate bonds to the ECB’s 2014 ’15 ’16 advanced, although less so in America Merrill Lynch notes. pean company debt against
about 7% off of consensus purchase programs marks a Source: Bank of America Merrill Lynch Europe than in the U.S. There are pitfalls too. The default has fallen very
profit projections for Qual- shift in President Mario THE WALL STREET JOURNAL. Many questions remain success of the program will sharply since the ECB deci-
comm this fiscal year. But Draghi’s strategy. Previously, about how the ECB will go ultimately depend on compa- sion was announced; cash
Wall Street already projects much of the focus was on rate-bond spreads—the gap about its corporate-bond nies’ appetite for invest- bonds are slower to move,
a 14% decline in Qual- lowering the government- between yields on company purchases. It is unclear how ment. And the ECB’s largess but there is substantial room
comm’s chipset revenue for bond yield curve, which had debt and underlying govern- much of the extra €20 billion in lowering the overall cost for a rally from here.
the current fiscal year. the side effect of delivering ment bonds—are of vital im- ($22.3 billion) a month of of borrowing in Europe has How far it goes, and how
With the stock already a weaker euro both to help portance. central-bank cash an- led to a rush of euro-denom- much it stirs the animal spir-
down 28% over the past 12 growth via exports but also This is new territory for nounced Thursday will go inated bond issuance by U.S. its of company executives,
months, Qualcomm inves- boost inflation via higher the ECB. The Bank of England into credit markets. The po- companies. Last year, they will determine how effective
tors may be pricing in even import prices. Now credit briefly engaged in corporate- tential universe of eligible accounted for nearly one- the ECB’s latest gambit
bleaker prospects. markets have joined the bond purchases in early company debt remains to be quarter of issuance and so proves to be.
—Dan Gallagher party, which means corpo- 2009, but total holdings only determined too, although far this year for a third, So- —Richard Barley

MONEY & INVESTING

Bank of America Hunts

has said the bank’s disappointing fi-
Finance nancial performance and high litiga-
tion costs should be reflected in
Watch overall employee pay.
was placed on leave in January
after the firm discovered the let-
ter during an internal investiga-
tion into the banker’s role in

For Silicon Valley Deals

Despite the bonus-pool cuts, handling deals for a controversial
Deutsche Bank’s total compensa- Malaysian government invest-
tion rose 5% last year. The bank ment fund at the center of a
cited an increase of roughly 3,000 corruption scandal, The Wall
BY PETER RUDEGEAIR full-time employees. Street Journal has reported.
DEUTSCHE BANK —Jenny Strasburg Mr. Leissner’s file on a Finan-
Bank of America Corp. is cial Industry Regulatory Author-
abandoning its no-deals policy
Bonus Pool Is Cut GOLDMAN SACHS ity database was updated re-
and going shopping in Silicon By 17% for 2015 Finra Filing Confirms cently to reflect the discovery.
Valley. Deutsche Bank AG cut its over- The file noted that the June
In a push to upgrade its all bonus pool by 17% last year, as Suspension for Letter 2015 reference letter was “pro-
technology offerings, the calculated on a constant-currency A former Goldman Sachs vided to a non-U.S. financial [in-
Charlotte, N.C.,-based lender is basis, the company said Friday in Group Inc. banker’s file with the stitution] he wrote on behalf of
dispatching a top executive its annual report. U.S. securities industry’s self-reg- a foreign affiliate of the firm,
CHRIS KEANE/BLOOMBERG

out West to look at possibly Bonuses paid for 2015 will total ulating group confirmed Friday without the affiliate’s or the
scooping up promising startup €2.4 billion ($2.7 billion), the German that the Wall Street firm sus- firm’s knowledge or approval.”
companies. lender said, citing Deutsche Bank’s pended him for making “inaccu- Goldman placed Mr. Leissner
Thong Nguyen, Bank of “negative result” last year, when it rate and unauthorized state- on leave after executives inter-
America’s president of retail reported a net loss of €6.8 billion, its ments” in a reference letter he viewed him on Jan. 19. A day
banking, said the bank wants first full-year loss since 2008. wrote without its consent. later, he told the firm he planned
to be a bigger player in the Co-Chief Executive John Cryan, Tim Leissner, Goldman’s for- to retire, according to the Finra
business of handling consumer Bank of America CEO Brian Moynihan in December. who succeeded Anshu Jain in July, mer Southeast Asia chairman, filing. —Justin Baer
payments, even though that
field is increasingly crowded. Francisco is designed to make ers’ embrace of online spend-
“All options are on the ta-
ble. That includes partnerships
or an acquisition,” he said in
an interview.
it easier for the bank to meet
more frequently with potential
technology partners and Bay
Area recruits that can help the
ing. Also, regulations and low
interest rates have pummeled
other core banking businesses
like trading and lending.
HOTELS
The pursuit of potential bank develop its mobile apps Overall, global payments- Continued from page B5
deals marks a major shift for and cut costs associated with related income accounted for Waldorf Astoria, and will ben-
Bank of America, which was so paper checks and cash pay- 40% of total bank revenue in efit from a growing number of
scarred by ill-fated purchases ments. The bank declined to 2014, or $1.7 trillion, up from Chinese travelers abroad.
during the financial crisis that discuss specific potential part- 38% in 2013, according to Many Chinese companies are
Chief Executive Brian Moyni- ners. McKinsey & Co. The consulting also seeking to acquire U.S.
han declared “No Acquisi- Mr. Nguyen’s move shows firm estimates that bank pay- businesses that can help China
tions” in one of his first inves- increasing focus on the fast- ments revenues will exceed $2 upgrade its domestic indus-
tor slideshows. growing digital payments trillion by 2020. tries with better technology.
CHARLIE NEUMAN/U-T SAN DIEGO/ZUMA PRESS

That policy hasn’t changed business, which promises Still, only about 13% of U.S. Anbang has also cut a num-
with respect to buying banks faster service and more secure adult smartphone owners have ber of deals in the insurance
or other large operating com- transactions than traditional downloaded a digital wallet world. It agreed to buy U.S. in-
panies. But with digital pay- credit and debit cards. app, where customers pay for surer Fidelity & Guaranty Life
ments and financial technol- items and services without a for $1.57 billion last year. It
ogy, or “fintech,” being one of plastic credit card. Of those, paid around $1 billion for a
the few clear-cut growth op-
An acquisition of a only one in four use it regu- majority stake in a South Ko-
portunities in the industry, Mr. company would be larly, according to a survey in rean insurer and has pur-
Moynihan and Mr. Nguyen July by research firm Gallup. chased insurance companies in
agreed that Bank of America
the big lender’s first Consumers who do use dig- Belgium and the Netherlands.
has to look at outsiders that since 2009. ital wallets have gravitated to Bloomberg News first re-
have succeeded in making nonbank offerings. Only 2% of ported that Anbang had agreed
transactions simpler and more consumers list their bank as to purchase Strategic Hotels Anbang is buying Strategic Hotels, whose prime assets include
user-friendly. Banks, credit-card networks the digital wallet they use from Blackstone Group. luxury properties such as the Hotel del Coronado near San Diego.
“Payments is going to be and other financial intermedi- most often, compared with
the thing we’re going to focus aries overall command $590 35% for Alphabet Inc.’s Google
on,” Mr. Nguyen says. “We
have a lot to learn from the
billion in fees globally by en-
abling business-to-consumer
Wallet, according to Gallup.
Rather than develop its own
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