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from Rolfe Winkler:

Lunchtime Links 1-19

MUST READ -- Souring mortgages, weak market put FHA on tightrope (Timiraos, WSJ) Good article, though Timiraos doesn't address the absurd circularity perpetuated by FHA Chief David Stevens when Stevens says, on the one hand, that more gov't lending protects the housing market from further declines, while simultaneously arguing that such lending isn't sustainable. That said, Timiraos has worked lots of interesting stuff into this piece, especially towards the end. For instance, in late '07 investors were refinancing at-risk borrowers into FHA loans in order to shift risk to taxpayers. Barney Frank defends permanently raising FHA maximum loans for certain geographies to $729k. Also lots of data about how badly FHA loans are performing.

Citi's Q4 earnings: Not terrible but not great (Wilchins, Reuters) Trading revenues in the investment bank were much weaker compared to last quarter. Citi also benefited from a tax break, without which they wouldn't have met consensus estimates for the quarter. Here's a helpful chart.

(Click here to enlarge in new window)

tyt44h

How the French outplayed AIG and the Fed (Berman, WSJ...subscription req'd) Great column. Goldman gets all the bad press, but it was far from the only bank that got 100¢ on the dollar for derivative contracts with AIG...

Too big to fail is here to stay (Salmon, Reuters) Felix does a great takedown of Andrew Ross Sorkin's latest column.

from Rolfe Winkler:

Afternoon links 1-13

Must Read -- Kyle Bass: Testimony before the FCIC (fcic.gov) Bass is a hedgefunder that made big profits betting against subprime. His testimony has many fascinating facts and figures. [The pie charts on page 9 look familiar.]

Obama to push tax on too-big-to-fail banks (Nasiripour) Not a lot of details: "the planned tax would be imposed in a way that targets firms' riskiest activities, such as proprietary trading. It would be crafted in a way that doesn't affect a financial company's retail banking, so that the cost theoretically would not be passed on to retail customers -- but it wasn't clear exactly how that would work." And will it tax other TBTF firms besides banks? What about insurers? What about GE? Update: WSJ says the tax will target bank liabilities.

Google’s golden one-trick pony

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Google chief executive Eric Schmidt declared “the worst of the recession is over” while unveiling third quarter results. Certainly Google’s recession doesn’t look like anyone else’s.

Revenues of $5.945 billion were up 7 percent from a year ago  and up 8 percent over the previous quarter, after  two flat quarters. Earnings of $5.89 per share were comfortably ahead of the consensus estimate of $5.32. Cost per click, the average amount advertisers pay, was up 5 percent from the second quarter, although still down on the previous year. And Google gushes money — the third quarter had $2.5 billion in free cash flow.

Gut feeling: How Google CEO valued YouTube deal

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Eric Schmidt, Chairman and CEO of Google, sits for an interview at the Newseum in Washington on Oct. 2, 2009Let the second-guessing, the mock horror, the disbelief, the crowing begin.

Google CEO Eric Schmidt has acknowledged he realized upfront that he was overpaying to acquire YouTube, to the tune of $1 billion, judged by any conventional measures.

The many critics of Google’s $1.65 billion deal to acquire the video-sharing site three years ago will claim this confirms everything they have always said about the deal. Not quite.

Cashing in on the data you create

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– Eric Auchard is a Reuters columnist. The opinions expressed are his own. – 

By Eric Auchard

Eric_Auchard_columnist_shot_2009_June_5x7_589x824.jpgSAN FRANCISCO, Sept 17 (Reuters) – You created it. They make money off it.
  
That’s the business strategy of popular Web sites, led by Facebook, which is just beginning to tap the value of its 300 million members, triple its base a year ago.
  
The paradox of so-called “user-generated content” is that big companies such as Facebook and Twitter look to grow rich on information users share with one another.
  
But some users are beginning to grow savvy to — and protective of — the value of the data they share about themselves. This has prompted Web players to make democratic noises about users owning their own information.
  
The companies face a dilemma: they must find ways to sell advertising to support the cost of hosting their customers’ creative content without scaring off the users who make it all possible.
  
Facebook photosLast week, Twitter, the Web-based short-messaging phenomenon, revised its terms of service to reassure members that they retain the rights to any messages they post on the site. The key change Twitter made is that now it has laid the groundwork to sell relevant advertising based on users’  messages, known as “tweets.” 
  
Such moves are putting the legal conditions in place to offer targeted advertising based on user behaviors and intentions as they can be deduced from the content they create or watch. Individual activities can be used by advertisers to identify potential audiences, which in aggregate, are served up specific marketing advertising.
  
But it’s hard to see how existing forms of online advertising can be crammed alongside the rapid fire bursts of 140-character messages that Twitter users produce. Advertising experts say the company’s best hope lies in making corporate marketers pay to deliver marketing messages over Twitter. Some recent rule changes seem designed to enable such ads. 
   
Facebook got into hot water with its members earlier this year for adding two sentences to its terms of service that asserted ownership of messages, photos and other user content.

Ex-Google China chief’s dream factory

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Google’s former China head Kai-Fu Lee wants to create China’s next internet giant in a factory. He believes that by combining the smartest entrepreneurs, the shrewdest business people and the brightest business ideas, he will be able to create five highly sellable companies a year. That sounds like an ideal model for venture capital, but is he being realistic?

Lee’s plan, formulated while he spent time in hospital over the summer, follows a battle with Beijing regulators who wanted to censor Google  searches that lead to pornographic sites. It has drawn strong support from investors.
 
Lee has managed to raise $115 million in just one month, winning support from YouTube Inc. co-founder Steve Chen, as well as Foxconn Electronics, Legend Group, New Oriental Education and venture firm WI Harper Group.
   
They believe that as China embraces a start-up culture, Lee’s business, which is a mix of venture capital and development lab, will be well positioned to capitalize. Lee’s plan is to hire 100 to 150 young engineers, help nurture their ideas, then spin off 50 to 75 of them a year with
funding from his venture, whiling hiring new people to make up for the loss.
  
However, it looks as if his company, called Innovation Works, has yet to line up ideas or engineers. This kind of “incubator” model became popular in the U.S. and Europe during the dot-com boom, but most of them just burned through a lot of money and then folded.
 
Lee and his backers believe that China’s market is more favourable, as it is at a crucial point regarding “cloud computing” and mobile technology, and there is a strong need for early-stage funding.
 
The new fund is still starting off, but Lee plans to expand from its base in Beijing to places such as Taiwan, the Asian hardware manufacturing base and his hometown.

from Rolfe Winkler:

Google developing micropayment system for online news

From the San Francisco Business Times (ht J Lit): Google working on painless payments for news

Google’s platform, which should be ready within a year, would simplify the way newspapers and other publishers charge for online content. Some readers have balked at the need to sign in, create an identity and password, and jump other hurdles to access online news at sites that charge money. Google’s idea — based on its existing “Checkout” system — would let people create just one sign in for many different sites and subscriptions.

Online video: Revolution, Evolution or Counter-Revolution?

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Lots of news in online video world, some potentially significant. 

And some we can only wait and see about.

Google Inc, Cisco Systems and News Corp are separately doing things that could mean sweeping changes in the way video is produced and consumed on the web. Eric Schmidt John Chambers Rupert Murdoch

Revolution?

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Video compression technology can be interesting, really.

On2 CEO on Beet TVMost people forget how online video worked before YouTube popularized the embedded Flash video player. Remember the frustration of making sure you had the right video player to play this or that web video? It was YouTube that popularized giving people one-click access to videos.

On Wednesday, Google said it had agreed to acquire On2 Technologies, a maker of video compression technology, in a deal that could have sweeping effects for how video works on the web. The Internet search leader has a bland blog post about how it intends to use On2 to innovate in how video working on the Web, but it isn’t at all clear how far it Google is ready to go.

Apple-Google learn Corporate Governance 1.0

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LONDON, Aug 3 (Reuters) – The resignation of Google CEO Eric Schmidt from Apple’s board should come as no surprise to anyone with an inkling of what corporate governance means.

But then Silicon Valley’s idea of corporate boards has long consisted of cozy, interlocking directorships which would be considered collusion in most other industries.

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