Hank Greenberg Sued The Government For Bailing Out AIG, And He Actually Might Win

Of all the crazy things people have said about former AIG chief Maurice "Hank" Greenberg's lawsuit against the government, the craziest was that he just might win.

It's sounding less crazy all the time.

The possibility of a Greenberg victory at trial, which began six weeks ago is no longer unthinkable. According to a Bloomberg report, Greenberg has a real shot of winning his argument that the U.S. government bailed out the insurance firm he founded on "unfair" terms. Greenberg and his star lawyer, David Boies, may walk away with a $25 billion judgment in the case.

As Buzzfeed’s Matthew Zeitlin pointed out, $25 billion is twice the value of all housing aid given through TARP, the highly-criticized relief program that was supposed to help out troubled mortgage holders. It’s also equal to the total value of TARP money set aside for housing that remains unspent. The talking points write themselves.

If Greenberg wins, “the howling will start,” says Susan Webber told Bloomberg, who blogs under the pseudonym Yves Smith at Naked Capitalism.

A legal ruling that AIG shareholders were victims of the government bailout that saved those same shareholders' stake in the company from being worth zero would be galling. If Greenberg walks away with billions, the public outrage will hit 11. No one argues that his firm could have survived without government intervention.

Worse still, if Greenberg wins, it seems that he will do so, in part, for a completely pointless reason.

Bloomberg reports that the judge in the case, Thomas Wheeler, “appears intent on writing an opinion that will guide what regulators are permitted to do in the next financial crisis.” Elliott Stein, a legal analyst at Bloomberg, says Wheeler “sees a real absence of established precedent about what the government can do.”

This is a weird thing for a federal judge to think, because the law is now established on this topic. It wasn't at the time of the AIG bailout, which is why Greenberg raises the issue of fairness and Wheeler seems sympathetic to it.

The government's response is, essentially, it was 2008 and we did what we had to.

Whatever you think of these arguments, precedent, in the form of a judicial opinion, is no longer needed.

As The Huffington Post wrote when the trial started, the Dodd-Frank financial reform act is very clear about the structure of future bailouts. It alters the Federal Reserve’s emergency lending powers to prohibit an individual firm from being bailed out. Instead, any extraordinary lending must to made to a broad class of firms. The rate of that lending must be the Fed's discount rate (the rate at which the Fed routinely lends to banks). Under these rules, AIG could not be bailed out in the way it was. Mike Konczal of the Roosevelt Institute wrote in 2012, “Dodd-Frank goes out of its way to pre-commit against further bailouts” aimed at individual companies. If in the next crisis, Dodd-Frank doesn't provide enough authority, Congress can simply pass a bill that provides it.

If Wheeler sides with Greenberg, he will unnecessarily clarify what Congress has already codified, and could supersede if necessary, while recklessly cause public outrage.

Red Lobster Attempts To Save Itself With More Lobster

NEW YORK (AP) — It turns out people go to Red Lobster for the seafood.

The struggling chain on Monday announced another revamped menu that removes dishes including Spicy Tortilla Soup and a Wood-Grilled Pork Chop, while tacking on more dishes featuring lobster. The non-seafood dishes had been added by the chain's previous owner, Darden Restaurants Inc., in hopes of attracting people who don't like seafood as sales declined.

But the new management thinks that was a mistake.

"At the end of the day, we believe that seafood is really why people come to Red Lobster," said Salli Setta, Red Lobster's president, in a phone interview.

The revamped menu is 85 percent seafood, up from 75 percent. Red Lobster says the menu will be easier to navigate and features more photos of the food. Four of the five new dishes include lobster, and it's increasing the amount of shrimp in the popular "Ultimate Feast" platter by 50 percent. The price of the dish, which also includes lobster and crab, will go up by a dollar to $26.99.

The reversal comes after Red Lobster was sold off to investment firm Golden Gate Capital by Darden this summer. Darden, which is based in Orlando, Florida, and owns Olive Garden, had failed to turn around the chain's declining sales and blamed a variety of factors such as the growing availability of shrimp at other restaurants and price-sensitive customers.

For its last fiscal year, Darden had said Red Lobster's sales declined 6 percent at established locations, following a 2.2 percent decline the previous year. Red Lobster, which is still operating out of Darden's offices until it moves into its new home, no longer has to disclose its sales figures because it is privately held.

Whether its new menu will win back customers remains to be seen, with people increasingly heading to chains like Chipotle where they feel they can get high-quality food without paying as much.

Other changes had already been in the works.

CEO Kim Lopdrup, who is back at Red Lobster after serving as its president from 2004 to 2011, has said steep discounting like "30 shrimp for $11.99" was a mistake. The chain this summer also started changing the way it plates its dishes, with fish piled over rice instead of having foods spread out on a dish. Red Lobster says that presentation is more visually appealing, while also helping retain the food's heat.

Follow Candice Choi at www.twitter.com/candicechoi

Richard Branson: Virgin Galactic Will 'Not Push On Blindly' After Crash

Virgin Galactic founder Richard Branson on Saturday cast doubt on the future of his commercial space tourism company.

A day after the pilot of a Virgin Galactic rocket plane died in a crash and another was injured during a test flight, the billionaire vowed to investigate the accident and said he "would like to see the dream living on."

"We would love to finish what we started some years ago," Branson said at a press conference in California. "I think pretty well all our astronauts would love to finish it, and would love to go to space."

The National Transportation Safety Board opened an investigation on Saturday into what caused the SpaceShipTwo shuttle to crash, seriously injuring one pilot and killing 39-year-old Michael Alsbury. Founded in 2004, Virgin Galactic is working to provide suborbital spaceflight to tourists and scientists.

The accident on Friday underscores the dangers facing the nascent space travel industry, led in recent years by Branson and billionaire SpaceX founder Elon Musk.

On Tuesday, an unmanned Antares rocket exploded six seconds after liftoff from NASA's Wallops Island launch pad in Virginia. The rocket was ferrying supplies to the International Space Station.

A GIF of the Antares rocket exploding after takeoff.

No one was hurt in Tuesday's explosion, but shares in the company that developed the rocket, Orbital Sciences Corporation, plummeted afterward. The company said it would investigate what went wrong.

"It's a real setback to the idea that lots of people are going to be taking joyrides into the fringes of outer space any time soon," John Logsdon, a retired space policy director at George Washington University, told the Associated Press. "There were a lot of people who believed that the technology to carry people is safely at hand."

On Saturday, Branson appeared somber as he told reporters Virgin Galactic, the space-travel arm of his business empire, would "not push on blindly."

"We owe it to our test pilots to figure out what went wrong," the British mogul said. "If we can overcome it, we'll make absolutely certain that the dream lives on."

Red Lobster Attempts To Save Itself With More Lobster

NEW YORK (AP) — It turns out people go to Red Lobster for the seafood.

The struggling chain on Monday plans to announce another revamped menu that removes dishes including Spicy Tortilla Soup and a Wood-Grilled Pork Chop, while tacking on more dishes featuring lobster. The non-seafood dishes had been added by the chain's previous owner, Darden Restaurants Inc., in hopes of attracting people who don't like seafood as sales declined.

But the new management thinks that was a mistake.

The revamped menu is 85 percent seafood, up from 75 percent. Four of the five new dishes include lobster, and it's increasing the shrimp in the popular "Ultimate Feast" platter by 50 percent and raising the price by a dollar to $26.99.

Last year, Red Lobster's sales fell 6 percent at established locations.

Starbucks Plans Delivery After Sales Fall Short

NEW YORK (AP) — After reporting disappointing quarterly sales Thursday, Starbucks said it will offer a delivery option on its mobile app in select areas of the U.S starting next year.

The Seattle-based company declined to provide more details, but has been pushing to get people to use its app as a way to build customer loyalty. It also previously said it plans to let customers across the country place orders ahead of time on their smartphone by next year, an option intended to get people in and out of stores quicker.

"We are playing offense," CEO Howard Schultz said in explaining the various steps the company is taking to adapt to changing customer habits, including their move toward online shopping and away from brick-and-mortar stores.

The delivery plans for the second half of 2015 were announced by Schultz during a conference call Thursday discussing the company's fiscal fourth quarter results. For the period ended Sept. 28, Starbucks reported sales that rose but fell short of Wall Street expectations. Global sales at established locations rose 5 percent, including in the Americas and Asia.

Starbucks Corp. is pushing aggressively into different areas as it faces more competition from fast-food chains serving specialty coffees. To boost sales of food in the afternoon, for instance, it has been revamping its sandwiches and adding new offerings like a grilled cheese sandwich that's warmed up in an oven.

This summer, Starbucks also launched its Fizzio soda drinks in the Sunbelt. But Wells Fargo analysts said in a note this week that their checks at a dozen stores in six states suggested the drinks aren't performing up to expectations so far.

In a phone interview, Chief Operating Officer Troy Alstead said the soda drinks are doing "exactly what we expected it to do," but that a national launch isn't planned for 2015. In a previous interview, Alstead had said he expected the drinks to be in much of the U.S. by the upcoming summer.

Alstead said Starbucks is instead focusing on growing its tea business. He said tea accounted for a "high single digit" percentage of sales last year, and that the company expects it to reach "well into the teens" over time.

For the quarter, Starbuckst earned $587.9 million, or 77 cents per share. Not including one-time item, it earned 74 cents per share, which was in line with Wall Street expectations, according to FactSet.

Revenue came in at $4.18 billion, short of the $4.24 billion analysts expected.

For the current quarter ending in December, Starbucks expects its per-share earnings to range from 79 cents to 81 cents. Analysts expected 83 cents per share. The company expects full-year earnings in the range of $3.08 to $3.13 per share.

Shares of Starbucks were down 4 percent at $74.04.

___

Follow Candice Choi at www.twitter.com/candicechoi

Tim Cook Comes Out As Gay In Powerful Businessweek Essay

Apple CEO Tim Cook came out as gay in a powerful essay for Bloomberg Businessweek.

In the essay, published Thursday, Cook said that he has never denied being gay, but has not publicly discussed his sexuality until now: "So let me be clear: I’m proud to be gay, and I consider being gay among the greatest gifts God has given me."

He described how his sexuality has given him an acute social perspective.

Being gay has given me a deeper understanding of what it means to be in the minority and provided a window into the challenges that people in other minority groups deal with every day. It’s made me more empathetic, which has led to a richer life. It’s been tough and uncomfortable at times, but it has given me the confidence to be myself, to follow my own path, and to rise above adversity and bigotry. It’s also given me the skin of a rhinoceros, which comes in handy when you’re the CEO of Apple.

The revelation comes just days after Cook advocated on behalf of lesbian, gay, bisexual and transgender rights in his home state of Alabama.

"[Alabama is] still too slow on equality for the LGBT community," he said, per the Associated Press, while calling for laws protecting people based on sexual orientation and gender identity. "Under the law, citizens of Alabama can still be fired based on their sexual orientation. We can't change the past, but we can learn from it and we can create a different future."

Cook's sexuality has been a point of speculation for quite some time. Gawker reported that Cook was gay back in 2011 before he succeeded Steve Jobs.

Since then, Cook himself has seemingly dropped hints about his sexuality. Last year, during a speech about human rights at Auburn University Cook discussed the discrimination he faced as a young person, according to ValleyWag.

"Since these early days, I have seen and have experienced many types of discrimination and all of them were rooted in the fear of people that were different than the majority," he said.

However, since the 53-year-old had not publicly come out, the question still remained. In May, the New York Times ran a story titled "Where Are The Gay Chief Executives?" and had to subsequently clarify their definition of "openly gay." CNBC's Simon Hobbs made headlines for mistakenly saying Cook was "fairly open" about being gay during a live segment back in June.

Head over to Businessweek to read Cook's full essay.