Posts Tagged ‘General Motors’

Fannie Mae Asks Uncle Sam For More Money

Wednesday, March 21st, 2012

In an attempt to dig itself out of a deepening hole, Fannie Mae has requested $4.6 billion in additional federal aid. “We think that we have reserved for and recognized substantially all of the credit losses associated with the legacy book,” Chief Financial Officer Susan McFarland said.  “We’re very focused on returning to profitability so we don’t have to draw (from Treasury) to cover operating losses.”

Although the nation’s banks seem to be recovering nicely, the same cannot be said for mortgage giants Fannie Mae and Freddie Mac.  Writing in Forbes, Steve Schaefer notes that “The mortgage finance giants have taken on a greater share of supporting the U.S. housing market as private players pared back their exposure in recent years, and the result has been billions of losses on the taxpayer dime.  Fannie Mae reported booking a $16.9 billion 2011 loss capped off by the loss of $2.4 billion in the 4th quarter.  Fannie Mae’s losses are still coming largely from its legacy book of business (from before 2009), which led to $5.5 billion in credit-related expenses tied to declining home prices.

“The black holes of Fannie and Freddie – Fannie’s Q4 report shows it has requested to draw $116.2 billion since being placed under conservatorship Sept. 6, 2008 while paying back $19.9 billion in preferred stock dividends – are the biggest black eyes of the 2008 bailouts.  Plenty of critics of the Troubled Asset Relief Program (TARP) have made their voices heard over the years, but at least most of the banks that received TARP injections – the biggest of which went to Bank of America and Citigroup – have paid back the government’s loans and are back to making profits, if modest ones. Even American Intl Group and the automakers  that received bailouts – General Motors and Chrysler – have moved beyond needing additional government dollars.  Fannie and Freddie, on the other hand, show few signs of becoming anything resembling productive companies until the housing market turns around or the pre-2009 assets are completely wiped off the books or new policies are necessary to encourage new refinancing beyond those currently in place that have had limited impact.”

“While economic factors such as falling home prices and high unemployment produced strong headwinds for our business again in 2011, we continued to grow a very strong new book of business as we have since 2009, “said CEO Michael Williams, who handed in his resignation in January but is still on board while the government-sponsored enterprise (GSE) looks for his replacement.

Bank of America last week announced that it had stopped selling some mortgages to Fannie Mae because of a dispute over requests from the government-run company to buy back defective loans.  “If Fannie Mae collects less than the amount it expects from Bank of America, Fannie Mae may be required to seek additional funds from Treasury,” the company said.

Fannie Mae blamed its loss primarily on pre-2009 loans and falling home prices, which pushed up the company’s credit-related expenses.  In the 4th quarter of 2010, Fannie Mae posted a slight profit to end a streak of 13 consecutive quarterly losses, though the company was back in the red in the following quarter and each since.  The net cost to taxpayers for bailing out Fannie and Freddie stands at more than $152 billion.

During the 4th quarter, Fannie Mae acquired 47,256 single family homes through foreclosure compared with 45,194 in the 3rd quarter.  The company disposed of 51,344 REO properties in the quarter, down from 58,297 in the 3rd quarter.  As of the end of 2011, Fannie Mae was holding 118,528 REO properties, a reduction from the 122,616 at the end of September and 162,489 on December 31, 2010.  The value of the single-family REO was $9.7 billion compared with $11.0 billion at the end of the 3rd quarter and $15.0 billion at the end of 2010.  The single family foreclosure rate in the 3rd quarter was 1.13 percent annualized compared with 1.15 for the first three quarters of the year and 1.46 percent for 2010.

Meanwhile, the federal government wants to sell approximately 2,500 distressed properties in eight locations to investors who buy them in bulk and rent them out for a predetermined period.  The properties, located in Atlanta, Phoenix, Las Vegas, Los Angeles/Riverside, and three Florida regions, include single-family homes and co-op apartment buildings.  “This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties, and reduce the supply of REO properties in the marketplace,” said Edward J. DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae.

Are Gas-Sipping Cars Leaving Hybrids in the Dust?

Tuesday, February 7th, 2012

When Cadillac is staking its comeback on a compact car that boasts fuel economy approaching 40 mpg, what does it mean for hybrid and electric vehicles?  Cadillac’s ATS sedan is one example of how carmakers at the Detroit Auto Show are re-emphasizing small, powerful models with more fuel-efficient engines such as sport-utility vehicles; even, please note that we are talking gas here, hybrids are taking a back seat. Additionally, General Motors’ luxury brand says that the ATS will have a turbo-charged four-cylinder 270-horsepower engine that offers impressive fuel economy. Meanwhile, Ford is dropping plans for a hybrid version of its popular Escape SUV.

Although recent auto shows have been stocked with gas-electric hybrids and SUVs, slow hybrid sales have brought a dose of reality.  Carmakers realize they can give buyers what they want and avoid the expense of electric motors and batteries by making cars smaller and getting significantly improved fuel economy from traditional gas engines.

“The advantages of hybrids are getting harder to justify,” said Scott Corwin, a vice president with consulting firm Booz & Co.  “It’s the cost differential. Consumers are rational and they understand the cost of ownership.”  Hybrid sales slowed in 2011 to just 2.2 percent of auto sales, down from 2.4 percent in 2010, according to researcher LMC Automotive.

Mike Jackson, CEO of Fort Lauderdale, FL-based auto retail chain AutoNation Inc., said that approximately 75 percent of his customers want to talk about hybrids, although they constitute only 2.5 percent of his sales.  “What happens from the 75 percent consideration to the 2.5 percent commitment?” Jackson said. “They look at the price premium for the technology, which is already subsidized and discounted, and say “the payback period is too long; not for me.  It’s a back-of-the envelope conversation on the part of the American consumer.”

After a decade of hybrids and oil hovering near $100 a barrel, consumers still aren’t ready to pay the premium for hybrid models, said Reid Bigland, president of Chrysler Group LLC’s Dodge brand.  “The delta you get in fuel-economy lift with a hybrid is continuing to shrink because of the efficiencies with the internal combustion engine” through direct engine, turbochargers and advanced transmissions, Bigland said. “The pure economics are a tough case.”

The Chevrolet Volt plug-in hybrid lures people into the showroom, said Chris Perry, Chevrolet’s vice president of U.S. marketing. With fewer than 8,000 sales last year, consumers often went to a Chevy dealer to look at the Volt and settled on something else less pricey.

Despite slower-than-anticipated sales, the Obama administration has defended tax incentives for electric vehicles.  Transportation Secretary Ray LaHood said that the program has worked, “It’s real money and people have utilized it.”

The administration is advocating aggressive fuel efficiency mandates for the U.S. fleet to decrease oil dependence, particularly through more electrical vehicles. President Barack Obama would like to see one million electric vehicles on the roads three years from now, a goal that industry insiders say is too optimistic. The industry is simultaneously investing in battery technology while making more affordable gains through improvements in conventional engine and transmission systems.  Administration officials are fighting Congressional and consumer skepticism about the wisdom of the $7,500 tax credit that mainly has benefited more well-heeled buyers, who experts say would have been able to purchase the technology without it.

Jeremy Anwyl, CEO of online consumer research group Edmunds.com, said plug-ins are most popular on the West and East coasts with “early adopters,” or educated consumers passionate about using less gasoline.  “For these folks, affordability is not the issue,” Anwyl said.

Automakers have little choice but to promote more hybrids as they prepare for fuel-efficiency requirements that will require significant increases by 2020. However, advances such as Ford’s EcoBoost technology have raised mileage for gas-powered engines —the new Fusion midsize sedan can get 37 miles to the gallon — though bigger gains are still needed.

That’s why many are bullish on alternative engines.  “Internal combustion can’t get all the way there, so you need an alternative,” said Russell Hensley, a partner with the consulting firm McKinsey & Company. “The only alternative we have at the moment is electrification.”  McKinsey listed “uncertainty around future adoption of hybrid/electric powertrain technology” as one of several challenges facing automakers in coming years. According to McKinsey, hybrids could account for up 25 percent of sales by 2020, with battery-powered cars making up five percent. It confirmed that internal-combustion engines would dominate the industry through at least 2030.

Over at the Rocky Mountain Institute, Randy Essex and Ben Holland point out that when gas-electric hybrids first rolled out in 2000, the Honda Insight and Toyota Prius had sales of just 9,350. Those figures looked anemic at the time, too. But in the ensuing years, the technology caught on and more than two million hybrids have been sold in the United States. If that’s any prologue, it could bode well for future plug-ins.

“But is this comparison apt? On the one hand, the new generation of electric vehicles enjoy a few advantages that Priuses didn’t. Gasoline prices sat below $2 per gallon back in 2000, considerably lower than today. What’s more, the latest round of fuel-economy standards, under which carmakers have to get their fleet averages up to 54.5 miles per gallon by 2025, should give the big auto companies incentive to roll out more plug-in vehicles in the coming years.  But then again, today’s electric cars also face special hurdles that the old hybrids didn’t. For one, there’s ‘range anxiety,’ in which would-be buyers of electric cars sometimes fret that their batteries will run out of juice and leave them stranded.”

Warren Buffet Bullish on U.S. Credit Rating

Monday, August 22nd, 2011

Standard & Poor’s may have downgraded the United States credit rating from AAA to AA+ and the bears may have taken over Wall Street, but the Berkshire Hathaway chairman and billionaire Warren Buffett believes that the nation deserves a AAAA rating.

In a recent appearance on CNBC, Buffett said that he still believes that the United States’ debt is AAA and that he’s not changing his mind about Treasuries based on Standard & Poor’s downgrade.  “If anything, it may change my opinion on S&P,” according to the Oracle of Omaha.  “I wouldn’t dream of putting it anywhere else,” Buffett said, noting that at Berkshire, the only reason he’s sold Treasuries in the past is to purchase stocks or make acquisitions.  Berkshire is still buying T-bills, even though yields have declined.  “If I have to buy (Treasuries) at a zero percent yield, I will,” he said.  “I don’t like it, but we’ll do it.”

Buffett has something of a vested interest in criticizing Standard & Poor’s.  Berkshire Hathaway is one of the biggest shareholders in Standard & Poor’s main competitor Moody’s with about 28 million shares. But the billionaire has long urged people to make their own decisions about an investment’s prospects without relying on credit rating agencies.  Buffett said the action doesn’t change his view on the soundness of U.S. Treasury bills.  At least $40 billion of Berkshire Hathaway’s approximately $48 billion cash and equivalents is in U.S. Treasury bills, and Buffett won’t consider investing it elsewhere.

According to Buffett, America’s leaders may have a difficult time agreeing on the country’s financial future and the value of the dollar may slide, but that won’t keep the world’s richest nation from paying its debts.  The United States has a GDP of about $48,000 per person, and the Federal Reserve can always print more money.  “Our currency is not AAA, and in recent months the performance of our government has not been AAA, but our debt is AAA,” Buffett said.

Writing on the InvestorPlace.com website, Jeff Reeves says that “Before you scoff that Buffett is just a bygone relic of an era during which stocks like General Electric truly did have bulletproof dividends and it would have been unfathomable for stocks like General Motors to go bankrupt, consider this: In September 2008, the depths of the financial crisis when nobody knew which bank would fail next, Buffett and Berkshire dumped $5 billion into preferred stock of Goldman Sachs.  Thanks to the 10 percent interest on those shares, Berkshire Hathaway earned a cool $500 million per year in dividends before Goldman bought back the stock several months ago.  What’s more, the investment bank paid a hefty 10 percent premium to buy back those preferred shares.  Maybe it was crazy to jump into banks headfirst when the market was going haywire in 2008.  But it was awfully profitable for Buffett.  You might think it’s crazy to stick to your buy-and-hold strategy now, or to continue to rely on U.S. Treasury Bonds.  But take a deep breath and remember that not everyone is screaming and running for the hills.  Yes, persistent problems with unemployment, the political bickering in Congress and the flatlining of our American economy are serious issues.  But they are hardly new.”

Not everyone agrees with Buffett.  According to the Equity Master website, “We must say that we do not agree with Mr. Buffett.  We are not arguing with the credibility of S&P, whose reputation admittedly became tainted when it gave the highest rating to many mortgaged backed securities in the months leading up to the demise of Lehman.  But that does not mean that the U.S. is without some serious problems.  Indeed, the U.S.’ mounting debt is a huge cause for concern and the government’s latest move to raise the debt ceiling is only likely to postpone an eventual default and not entirely extinguish it.  Moreover, the claim that the U.S. can pay its debt because it can print more money is a dangerous one to make.  Printing money never really solved America’s problems.  The two big quantitative easing programs and their failure to revive the sagging U.S. economy is testimonial to the fact.  One thing that it will certainly do is bring down the value of the dollar and cause inflation to accelerate posing a fresh set of problems for the U.S.  So, while criticisms can be piled on S&P, downgrading of the U.S.’ credit rating is something that the world’s largest economy had a long time coming.”

Firstpost agrees that Buffett is wrong.  “Among other things, he said that the U.S. deserved a AAA credit rating when the S&P decided to bring it down to AA+. He also believes the U.S. will avert a double-dip recession.  Well, Mr. Buffett, you are already half-wrong. A slow-growing nation with a 100 percent debt-to-GDP ratio cannot be AAA by any stretch of economic logic.  It makes India’s 70-72 percent debt-GDP ratio look like the epitome of prudence.  As for the other half of your prediction – that the U.S. will avoid a double-dip recession – the jury is out on that one, but the recession wasn’t the reason for the S&P downgrade anyway.  There are two reasons, or maybe three, why the U.S. is in a mess.  One is that it is overleveraged – in deep debt – both at the level of government and the common people.  Two, the law that the U.S. can indefinitely live beyond its means has a flaw.  It was built on the assumption that dollar debts can be paid off by printing more of the green stuff forever.”

TARP’s Ultimate Tally Could Be Just $25 Billion

Thursday, December 16th, 2010

TARP’s Ultimate Tally Could Be Just $25 BillionThe estimated cost of the Troubled Asset Relief Program (TARP) keeps falling, according to the nonpartisan Congressional Budget Office (CBO).   The latest estimate is that TARP will cost the taxpayers just $25 billion – significantly less than the $700 billion allocated for the financial bailout in the fall of 2008.  The CBO’s last estimate – made in August – was that TARP would add up to a $66 billion loss, so the newest numbers represent a significant improvement.

This optimistic prediction is thanks to funds returned to the Treasury Department as banks repaid their loans and bought back stock warrants.  Another factor in the revised numbers is that less money than anticipated went to bailing out AIG and General Motors, the latter of which recently had an extremely successful initial public offering.  “Clearly, it was not apparent when the TARP was created two years ago that the cost would turn out to be this low,” according to the CBO.  “At the time, the U.S. financial system was in a precarious position, and the transactions envisioned and ultimately undertaken through the TARP engendered substantial financial risk for the federal government.”

TARP was originally created so the government could buy toxic mortgage-backed securities from big banks.  Former Treasury Secretary Henry M. Paulson ultimately altered the program to infuse cash into banks and other companies that were likely to fail.  The majority of banks have repaid their loans; in fact, the federal government has made approximately $12 billion from those transactions.  Because the financial system was stabilized more quickly than originally anticipated, only $433 billion of the TARP fund was spent, which reduced the potential for losses, according to the CBO.  President Barack Obama and Treasury Secretary Timothy Geithner have hailed the revised projection as a sign that the extremely unpopular program was effective and not the corporate giveaway as some opponents have accused.

RIP: The Iconic Pontiac

Tuesday, December 14th, 2010

RIP The Iconic Pontiac

The Pontiac – renowned for its muscle cars in the 1960s and 1970s – recently ended its 84-year run when General Motors (GM) pulled the plug on the once-iconic brand.  Pontiacs – which peaked at nearly one million sales a year in 1968 – came to an end due to a combination of bad corporate strategy and drivers’ changing tastes.  At the peak of Pontiac’s popularity, it was a favorite of young drivers because of its high horsepower models like the GTO, Trans Am and Catalina 2+2.

In the late 1980s, GM shifted its strategy on Pontiac, bringing the brand into line with its other cars.  As a result, Pontiac lost its edge.  Bill Hoglund, a retired GM executive who headed Pontiac during the days of the “We Build Excitement” ad campaign, blames the brand’s passing on a corporate reorganization led by then-CEO Roger Smith in the late 1980s.  “There was no passion for the product,” according to Hoglund.  “The product had to fit what was going on in the corporate system.”

Introduced in 1926, Pontiacs were originally aimed at working-class families who wanted reliable transportation.  A sales slump in the 1950s nearly finished the brand, but GM revitalized the cars by giving them powerful V8 engines that strongly appealed to young drivers.  Sales spiked to 17 percent of all GM cars and trucks sold in the United States in 1968.  The GTO, in particular, was a subject in popular culture and was the subject of a 1960s hit song by Ronny and the Daytonas.  The song’s chorus honored the car “C’mon and turn it on, wind it up, blow it out GTO.”

Treasury: TARP Repayments Now Surpass Debt

Tuesday, June 29th, 2010

TARP repayments total $194 billion; $190 billion is still outstanding.  The $700 billion Troubled Asset Relief Program (TARP) is turning out to be a better bet than many thought at first. According to the Treasury Department, the amount of money repaid by banks and other recipients now exceeds TARP’s outstanding balance.  In a monthly report to Congress on the program, TARP repayments total $194 billion; $190 billion is still outstanding.  A large chunk of that came when Treasury sold 1.5 billion Citigroup shares it had acquired when bailing out the bank, netting $6.18 billion.

“TARP repayments have continued to exceed expectations, substantially reducing the projected cost of this program to taxpayers,” said Herbert M. Allison, the Department of the Treasury’s assistant secretary for financial stability.  “This milestone is further evidence that TARP is achieving its intended objectives:  stabilizing our financial system and laying the groundwork for economic recovery.”

Created during the darkest months of the financial meltdown in the fall of 2008, TARP originally was intended to purchase toxic subprime mortgage securities from banks.  Henry M. Paulson, who was Treasury Secretary at the time, later altered TARP to channel money into banks to stabilize them and provide capital to encourage them to make loans at a time when the capital markets were frozen.  TARP funds bailed out 707 American banks – including Citicorp and Bank of America — to the tune of $205 billion.  Another $331 billion was used to bail out companies such as General Motors and Chrysler.

Banks are making a concerted effort to repay the money to avoid strict executive compensation limits.  By May 31, 71 banks had repaid 100 percent – or $137 billion — of their TARP money.  President Barack Obama hopes to recoup some TARP losses with his proposal to tax the 50 largest financial institutions.  This would net approximately $9 billion annually over 10 years.  Congress is considering the legislation, which faces stiff opposition from the big banks.

Kenneth Feinberg Widens Review of Rescued Bank Compensation

Thursday, April 1st, 2010

The nation’s pay czar is widening his review of how much money hundreds of banks paid their top executives during Pay czar is asking for details on compensation at U.S. banks that took TARP money.  the 2008 financial crisis. Kenneth R. Feinberg, officially the Special Master for Executive Compensation, is asking for details on compensation at 419 banks that were bailed out by the Treasury Department’s Troubled Asset Relief Program (TARP).  Because Feinberg’s authority over compensation only started on February 17, 2009 – when President Barack Obama signed the $787 billion stimulus bill into law and gave Treasury the ability to shape compensation at bailed-out companies – he can do nothing about bonuses paid at the end of 2008.

The standards for deciding that compensation is excessive must be “contrary to the public interest.”  Feinberg’s “look back letter” gives the firms 30 days to provide the information requested.  The compensation review applies only to managers who earned upwards of $500,000 during the four-month period that is under assessment.  Scott Talbott, senior vice president of the Financial Services Roundtable, said the big banks “will work with Mr. Feinberg to demonstrate that the industry has eliminated pay practices that encouraged excessive risk-taking.”

Last fall, Feinberg cut executive paychecks by approximately 50 percent for the seven biggest bailout recipients.  Of those, Citigroup and Bank of America have since repaid the government.  Feinberg was able to pressure AIG employees to return a percentage of their compensation.  James Angel, a finance professor at Georgetown University’s McDonough School of Business, said, “On one hand, some of these banks were effectively forced to take TARP money.  But you could also argue that the executives of surviving banks should not be compensated highly because it wasn’t really their particular skill, it was their luck that they were in an institution that survived when the government bailed out the financial system.”

TARP’s Price Tag: $109 Billion

Monday, March 29th, 2010

CBO predicts that TARP’s ultimate price tag will not be as high as expected.  The Congressional Budget Office has determined that the Troubled Asset Relief Program (TARP) will cost the government $109 billion – just 16 percent of the $700 billion set aside to rescue the nation from the great recession.  Insurance giant AIG and the auto industry are TARP’s largest beneficiaries.

The federal government bought $40 billion in AIG preferred stock and created a $30 billion line of credit for the firm.  Earlier CBO estimates that AIG would cost the government $9 billion; since AIG hasn’t paid the Treasury Department the quarterly dividend it owes, the CBO increased its projected loss to $36 billion or more than half of the bailout cost.  The CBO estimates that TARP will lose $34 billion from its bailout of Chrysler and General Motors.

TARP’s mortgage modification program is estimated to use less than $20 billion, less than half of the $50 billion set aside to help people stay in their homes.  The CBO says that fewer people will participate in the program than anticipated.  When President Barack Obama announced the program in February of 2009, he said that as many as four million homeowners could reduce their monthly payments to no more than 31 percent of their pre-tax incomes.  At the end of February, only 170,000 distressed homeowners had taken advantage of the mortgage modification program.

RIP Hummer: 1992 – 2010

Monday, March 15th, 2010

 GM pulls the plug on the Hummer after deal with Chinese firm sours.  General Motors took its Hummer brand off life supports and will let the iconic SUV die a peaceful death.  GM’s brief statement said that its planned sale of Hummer to the Sichuan Tengzhong Heavy Industrial Machines Company “cannot be completed,” without giving a reason. The $150 million deal had been stalled as the companies awaited approval from the Chinese government.  GM had been trying to sell Hummer for a year, and had made a preliminary deal with Tengzhong last June.

The off-road leviathans (17 mpg/highway and 10 mpg/city) started life as the Hum-Vee, a military vehicle whose special options included troop carriers, gun turrets and radar.  The original manufacturer was AMC Jeep’s General Products division, which started selling a civilian version of the M998 High Mobility Multipurpose Wheeled Vehicle (HMMWV or Hum-Vee) to the public with the brand name “Hummer”, also known as the H1.  In 1998, AMC General sold the brand name to General Motors, but continued to manufacture the vehicles at its Mishawaka, IN, plant.  GM assumed responsibility for marketing and distributing the niche vehicles.

In time, GM introduced two homegrown models – the H2 and H3 – which it built at the same Shreveport, LA, plant where the Chevrolet Canyon and GMC Canyon pickups are produced.

Controversy dogged the Hummer throughout its life.  Criticisms focused on its size; ecological perceptions; poor fuel economy; safety data and concerns; and stability control.  Still, many Hummer devotees (including this author) put their vehicles’ heavy-duty capabilities to good use by partnering with The Hummer Club, Inc., and the American Red Cross to receive CPR and first aid training so they could assist victims during disaster situations.

The science of global warming is still in dispute, with credible people on both sides.  A recent poll showed that just 36 percent of Americans believe the evidence of human-induced climate change, a slide from the 47 percent reported in early 2008. According to author Jeffrey D. Sachs, “The rise of unemployment has perhaps made people more reluctant to accept adverse news on living standards.  There is also considerable public confusion about climate science and possible remedies.”

Rest in peace, Hummer.

Czar Kenneth Feinberg Wants Across-the-Board Executive Pay Cuts

Thursday, January 14th, 2010

Pay czar Ken Feinberg thinks Wall Street executives make too much money.  Compensation czar Kenneth Feinberg – officially, the Obama administration’s special master for executive compensation – believes that the pay reductions he mandated at seven taxpayer-rescued firms should become the model  for Wall Street and corporate America.

“There is entirely too much reliance on cash and there’s got to be a better way to tie corporate performance to long-term growth,” Feinberg said.  “I’m hoping that the methodology we developed to determine compensation for these individuals might be voluntarily adopted elsewhere.”  The Obama administration is holding unregulated risk-taking fueled by excessive pay partially responsible for the financial crisis, which has caused $1.6 trillion in losses and write-downs globally, as well as 7,200,000 jobs in the United States.  Between Feinberg’s ruling and Federal Reserve guidelines for banker compensation, the government has inserted itself directly into decisions normally made by corporate boards.

Feinberg has restructured cash “guarantees” into stock that the recipients must hold over the “long term”, according to a statement from the Treasury Department.  “Guaranteed minimum amounts give employees little downside risk in the event of poor performance – but upside when times are good.”

Meanwhile, the Federal Reserve has proposed new guidelines on pay practices at that nation’s banks and plans to review the 28 biggest firms to assure that compensation packages don’t create incentives that lead to the risky investments that caused the worst financial crisis in 70 years.