The board of Japanese camera and endoscope maker Olympus
Corp voted unanimously on October 14, 2011 to fire
president and CEO Michael Woodford, one of the few foreigners
ever to run a major Japanese company.

There was no discussion and Woodford was not allowed to
comment. His secretary had been told to leave the building so he
could not say goodbye to her. He was ordered to leave his
apartment within a few days, and told he must take the airport
bus when leaving the country, rather than a company car. The
summary justice was almost unprecedented in Japan’s corporate
culture.

In his memoir “Exposure – Inside the Olympus Scandal: My
Journey from CEO to Whistleblower,” (Portfolio, $27.95),
Woodford explains how his dogged attempts to find out about a
series of suspicious deals had put him in direct confrontation
with the board and management teams that had run the company for
many years.

Woodford looked like a safe choice when he was promoted to
be president of the company six-and-a-half months earlier. He
had started with Olympus in 1991 as a medical equipment salesman
in Britain, and had steadily climbed up the corporate ladder. He
regarded Tsuyoshi Kikukawa, the chairman and the previous holder
of the president’s job, as his mentor.

But any idea that Woodford would not rock the boat dissolved
after a Japanese magazine Facta published several articles
reporting on “Mickey Mouse” deals Olympus had done that had
nothing to do with its main businesses. These included its
purchase of a maker of microwavable dishes, a cosmetics mail
order firm, and a hospital waste company. There were special
purpose companies based in the Cayman Islands, and payments of
massive fees to advisors.

Woodford called in accountants PricewaterhouseCoopers, who
produced a damning report. But his attempts to get those
involved in the deals to be accountable led to his ousting.

He wasn’t going to go quietly. He mounted a campaign to get
shareholders to replace the board. He was prepared to return to
run a reformed company, but it became clear that Japan Inc. was
not going to let this foreigner radically transform the way
things were done. Olympus’ board, its Japanese shareholders and
bankers closed ranks.

GREW UP IN POVERTY

As Woodford launches this book — which is likely to be
followed by a movie — and goes on the
international lecture circuit to talk about the need for
corporate reform in Japan, he acknowledges his mission is very
difficult. The resistance to change goes very deep. Despite all
the media coverage in the past year, there is still much that
hasn’t been explained about the Olympus scandal.

While much of the appeal of this book is in its
thriller-like elements — justifiably or not, Woodford and his
wife feared for their lives — it is also fascinating because of
the personal elements that he introduces.

We learn how Michael Woodford grew up in a harsh environment
after his mother left his father at an early age and took him to
live in poverty in Liverpool. His home didn’t have a bath and he
had to wash in a public bathhouse. He faced racial taunts as a
child attending a jewish school and possessing vaguely asian
features, which he explained without providing detail came from
his father’s side of family.

Most relevant, Woodford writes of developing from an early
age a distinct sense of justice and civic responsibility. After
stealing chewing gum from a store, his conscience drove him to
return it.

Witnessing as a teenager a fatal crash that killed a
motorcyclist led to a life-long commitment to road safety. He
has been involved in more than 1,000 road-safety projects. If he
sees a road danger that could be reduced he will stop to take a
picture and send a report to the relevant traffic authority.

We also learn how Woodford’s insecurity at home helped to
produce the drive to build a sales career after leaving school
at the age of 16 without any major qualifications.

It is a combination of that sense of right and wrong, the
insecure man’s determination, his sense of civic duty, and his
determined nature that led him to expose wrongdoing at Olympus.

NIGHTMARES

Woodford also shows how his battle with Olympus impacted his
Spanish wife, Nuncy, who had not wanted him to take the job in
Tokyo in the first place. At the height of the stress on the
Woodfords from the scandal, she began to have nightmares in
which she screamed “They’re going to get us.” And at one stage
things get so tense between the couple that a panel gets smashed
in the front door of their home.

There are also, though, surreal moments. Such as the
Woodfords’ decision not to call the police on their neighbor’s
kids when they had a rowdy party for fear that armed officers -
who were on call to protect the couple – would storm the place.
And at times Woodford gets carried away with his new “rock star”
status as he is mobbed by the Japanese media at the airport.

Perhaps the most poignant moment comes at the end of the
book when Woodford has a clandestine rendezvous with the
original whistleblower, an Olympus employee who had provided
Facta with much of its information. The whistleblower apologizes
for not going straight to Woodford with the scandal – “I didn’t
know you weren’t one of them.”

It may say a lot about the current state of corporate
governance in Japan that this whistleblower remains anonymous.
In the United States, a whistleblower in such a high-profile
case might by now be featured in the media, be writing a book,
and be claiming a big reward. In Japan, they live quietly, in
fear.

In interviews during last week’s World Economic Forum in
Davos, top executives from three of the Big Four accounting
firms said discussions over a roadmap to move U.S. companies to
international standards were reaching a crucial point.

The U.S. Securities and Exchange Commission has been
reviewing public comments on a roadmap that would allow U.S.
companies to use International Financial Reporting Standards
(IFRS) by 2014. However, it is unclear whether SEC Chairman
Mary Schapiro favors the timeline as it was drawn up under her
predecessor Christopher Cox.

SEC officials said late last year that they are likely to
consider further action early this year. The SEC wasn’t
immediately available for comment on Wednesday.

“I don’t think you are going to rush to a global set of
standards that everybody has bought into anytime soon,” said
Bob Moritz, the U.S. Chairman at PricewaterhouseCoopers.

He said that the original date of 2014 for one set of rules
could easily extend to 2020. “I think it possibly could be then
– I hope not, because I am a firm believer,” he said.

Moritz said that the CEOs of U.S. companies still had some
major questions about moving to one set of rules, especially
given many were still trying to dig their companies out of the
financial crisis.

There was also concern about the way some countries in
Central Europe were interpreting the rules, leading to doubts
about whether a common set of standards was being created, he
said.

“The next six months are going to be defining,” said
Deloitte Touche Tohmatsu CEO James Quigley, who describes his
position as more hopeful than confident that a single set of
standards will be agreed soon. “The key is what the SEC’s
position is going to be,” he said.

Quigley said that the biggest threat to reaching an
agreement was if the politicians got too involved. “The single
biggest risk is undue and inappropriate political influence
into the standards-setting process.”

U.S. accounting rules makers came under huge pressure from
lawmakers and bankers during the financial crisis to be more
flexible in the way the rules on mark-to-market, or fair-value
accounting were applied.

As credit markets froze, banks and other financial
institutions blamed the rules — which forced companies to put
a market value on financial instruments — for setting off a
downward spiral of asset writedowns. Some said the rules were a
major contributor to the crisis.

“We need an independent standards setting process that
should be void of politics,” said Timothy Flynn, the chairman
of KPMG International and its U.S. arm KPMG LLP. “But
independence doesn’t mean isolation — we have to consider the
environment that we are in.”

Unlike Moritz, Flynn said he believes that major progress
can be made in months, not years.

Still, talk to financier Stephen Schwarzman, the CEO of
powerful private equity firm Blackstone Group <BX.N>, and there
is little indication that harmony over accounting rules is just
around the corner.

He said that if the U.S. rules maker, the U.S. Financial
Accounting Standards Board, doesn’t change mark-to-market
rules, it could be very damaging. “Fair value accounting as
applied to private equity investments tends over time to get
very odd outcomes,” Schwarzman said.

Moritz said that such views from CEOs are part of the
reason he isn’t optimistic about an early move to one set of
global rules.

“You come back to the practical realities that every CEO in
the United States is saying, why am I going to pay for changing
to new rules and regulations when I don’t buy into the
motherhood and apple pie statement about the need for one
consistent set of standards,” he said.
(Reporting by Martin Howell; Editing by Gary Hill)

In an interview at the World Economic Forum in Davos, Schwarzman said a standoff between the Australian Taxation office and U.S. buyout group TPG <TPG.UL> over the tax treatment of the A$1.58 billion ($1.42 billion) profit it made selling out of department store group Myer <MYR.AX> has had an impact on the investment climate.

“What it will do of course will be to dramatically chill any future investment until this matter is resolved one way or the other,” said Schwarzman.

He said there appeared to be disagreement in the government in Australia as to how their laws apply.

Carlyle Group <CYL.UL> co-founder David Rubenstein, who also attended the forum that ended on Sunday, declined to comment on the subject.

Other private equity company executives at Davos said it was unclear if the tax question would become a longer-term issue.

Australia’s government trade agency has been gathering opinion from major global buyout firms to see if they are deterred from investing in Australia after the country’s tax office hit TPG with a large tax bill on the Myer deal.

Austrade reached out to a small number of global private equity firms in late December to find out it affected their investment intentions in the country, according to a memo, recently obtained by Reuters and a source familiar with the matter.

It asked buyout firms for confidential comments, which would be communicated back both to the Treasury, cabinet members and Australian Prime Minister Kevin Rudd.

That highlighted Australia’s concern about foreign investment into the country being derailed.

Australia’s tax office proposed tough rules in December for taxing gains on private equity investments.

In draft rulings, the tax office touched on the two issues behind the continuing dispute with TPG.

In one draft ruling, the tax office said if an investor’s regular business is restructuring and floating companies, then the profit from selling shares in the Australian public company will be treated as ordinary income, which is taxed at a higher rate than a capital gain.

As well as TPG, a number of buyout firms have investments, or a presence, in Australia. Carlyle opened an office in Sydney in 2005; and Kohlberg Kravis Roberts & Co <KKR.AS>, which has an office in Sydney, has been building an Australian franchise since 2006.

Bain Capital does not have a presence in Australia and Blackstone has not done any deals in the country.

(Reporting by Martin Howell; Editing by Tim Dobbyn)

Savage cost cutting, capital raising and debt refinancing mean that a lot of the more profitable companies now have strong enough balance sheets to be opportunistic if a deal is presented. The debt markets are also open again to help finance deals, and market gains mean their shares can be used as currency in transactions.

Buying growth through purchases may also be more attractive than trying to expand current businesses organically, given concerns about how fast the economies of Europe and the United States will recover this year.

But the CEOs are generally looking for bolt-on acquisitions, not massive deals that transform their businesses.

Take Mike Fries, for example. As chief executive of pay-TV company Liberty Global <LBTYA.O> he is eager to expand beyond the 15 million subscribers Liberty has across 10 countries in Europe.

“We are opportunistic on the M&A front,” Fries said. “If something came up that fits us perfectly we would have to look at it.”

He said that the strength of high-yield debt markets was fueling such activity. It took less than two days for the company to raise enough money for the $3 billion acquisition of Germany’s Unitymedia at the end of last year.

Also in the media sector, Thomson Reuters Corp <TRI.TO><TRI.N> CEO Thomas Glocer said the company was in a strong position to make acquisitions, thanks in part to its opportunistic refinancing of debt over last summer. Glocer said there was “a ton” of good businesses coming onto the market.

TD Ameritrade Holding Corp <AMTD.O>, the second-biggest U.S. discount broker, has been a major consolidator of the industry with 10 deals in about as many years, and its chairman, Joe Moglia, made it clear that was going to continue.

“Literally every day we are trying to look at different opportunities in the market place,” he said, and that included eyeing any of its rivals if they come up for sale. “There is probably still some room left in the industry for consolidation,” Moglia added.

PLACING BETS

Kraft Foods Inc’s <KFT.N> $18.7 billion deal for Cadbury <CBRY.L> was likely to make companies more confident as they consider big deals, said Mark Foster, group chief executive for management consulting at Accenture.

“Cost cutting and responding to the economic realities remains top of mind for companies, but there are some leading companies that are lifting their heads and starting to place bets,” he said.

The heads of three of the biggest private equity companies in the world, Stephen Schwarzman, Henry Kravis and David Rubenstein, made it clear in interviews at Davos that they expect to do more acquisitions. They will also be seeking to sell more of their current holdings through initial public offerings or straight sales to companies.

And deals are not just about bankers’ fees and executives’ egos. They also create business activity, boosting airlines, hotels and restaurants — as investment bankers, investors, consultants and auditors take to the road.

“The IPO activity and the canceled projects from last year that are being restarted, the negotiations for things coming up have created a pretty spontaneous increase in demand,” said Frits van Paasschen, the CEO of luxury hotel chain Starwood Hotels & Resorts Worldwide Inc <HOT.N>.

Brazilian and Chinese companies, bolstered by the relative strength of their economies, are also set to make a significant contribution to the dealmaking.

Brasil Foods <BRFS3.SA>, Brazil’s biggest pork and poultry producer, is looking for ways to expand around the world, said its co-chairman, Luiz Fernando Furlan. The company was only formed last year after Perdigao took over Sadia — a transaction still awaiting regulatory approval in Brazil.

“We have plans to invest outside, maybe the U.S. and the Middle East and some other places,” he said while declining to be specific on particular targets.

PROTECTING STAFF

Former Deputy U.S. Treasury Secretary Robert Kimmitt said the political climate in the United States was positive toward inbound investment by the Chinese and others.

“We haven’t seen the barriers to investment — investment protectionism — as much as we have seen trade barriers rise,” said Kimmitt, who is now chairman of Deloitte’s Center for Cross Border Investment.

Still, there are some companies that will not be making M&A fees for the bankers.

Jim Goodnight, the founder and controlling shareholder of business software company SAS, said he would not sell because he fears that a buyer would just gut the company’s workforce and culture — a culture that made it No. 1 in the latest Fortune magazine list of top 100 American companies to work for.

“I am not interested in selling the company because I really like to try and protect the people that work here and one of the first things an acquiring company does is lay off people, terminate people,” he said.

(Editing by Steve Orlofsky)

It was a private, five-minute, expletive-filled tirade
against the U.S. president for this reporter’s benefit. Welcome
to one aspect of the World Economic Forum’s annual
schmoozefest.

This unique event — a gathering of several thousand of the
members of the world’s business and political elites for
debate, dealmaking and a fair amount of partying in a ski
resort in the Alps — is in many ways an annual celebration for
capitalists.

But this is a very dysfunctional family.

For the second successive year, the recriminations arising
from the financial crisis were a dominant theme.

Sure, the global economy looks better – people are no
longer talking about financial Armageddon, while some CEOs are
talking about investing more, buying companies and even
hiring.

But many times when executives talked about a recovery,
they also used words like “fragile” and then mumbled about
whether the battle between bankers and politicians could upset
it all.

The tone for this year’s WEF was partially set by Obama’s
proposal on Jan. 21 to ban financial institutions with
commercial banking operations from engaging in proprietary
trading operations for their own profit. Coming against the
backdrop of sky-high Wall Street compensation, only just over a
year after huge government bailouts, it meant bankers’
behaviour was going to be a major focus.

The release of the annual Edelaman Trust Barometer at Davos
didn’t help. It showed that college-educated, so-called
“opinion leaders” around the world have lost a huge amount of
trust in banks. In the United States, for example, the trust
level has plummeted to just 29 percent of those surveyed from
68 percent in 2007.

PUBLIC ENEMY NUMBER ONE?

No wonder that Junichi Ujiie, the chairman of Japan’s
largest brokerage Nomura Holdings Inc <8604.T>, said he
perceived bankers were seen in the West as “public enemy
No.1.”

“When I come to Davos I find a very big difference. Bankers
and investment bankers in Tokyo are still respected,” he said.

This year more top bankers turned up than last year, when
it was too dangerous to risk being seen near a ski slope
supping gluhwein and fondue just after being rescued with
taxpayer cash.

Some of those who did come this time around kept a low
profile — Citigroup Inc <C.N> CEO Vikram Pandit and Morgan
Stanley <MS.N> Chairman John Mack were rarely seen around the
Davos Congress Centre, though new Bank of America <BAC.N> CEO
Brian Moynihan was much more prominent.

A meeting between the CEOs of top financial institutions
failed to find common ground over regulatory reform, according
to several who attended.

A push by Wall Street banks and some major European peers
to battle back against politicians’ attempts to bring in
tougher regulations didn’t get the support of some European
commercial banks who prefer a more conciliatory tone.

By the Saturday, the bankers and regulators were reduced to
using post-it notes and white boards in a joint brainstorming
session that was inconclusive.

WORRY FOR BUSINESS

To executives in other sectors, this is concerning. If the
banks and political leaders continue to fight then markets and
bank lending might take a further hit, crimping the recovery.

Daniel Vasella, the chairman of Swiss drugmaker Novartis AG
<NOVN.VX>, said lack of trust in the system remained his big
worry and made the risk of a double-dip slump “substantial.”

Even some bankers are fast losing patience.

“I think the industry had better wake up before they get
the wrath of God on them,” said Joseph Perella, a veteran
dealmaker and chairman of U.S. investment bank Perella Weinberg
Partners.

Of course, there is always a possibility all this huffing
and puffing may be a lot less relevant than the evidence of
more than just green shoots in parts of the economy.

Luxury hotel chain Starwood Hotels & Resorts Worldwide Inc
<HOT.N> said during the week it expects to open 80-100 hotels
this year and its CEO Frits van Paasschen said at Davos it was
benefiting from pent-up demand as companies who cancelled their
offsite sales meetings last year now reinstate them.

Even the paranoia among executives that they would get
accused of organizing junkets at a time of job losses and
government rescues has diminished, he said. “People are more
discreet but they are not scared,” he said.

The heads of top private equity firms, such as Blackstone
Group LP <BX.N>, Carlyle Group [CYL.UL] and Kohlberg Kravis
Roberts & Co <KKR.AS>, also said they were optimistic.

Vivek Ranadive, the CEO of business software firm Tibco
Software Inc <TIBX.O>, said it was time to “quit whining.”

But then again perhaps we should just consult the
astrologers, like Geneva-based banker and industrialist Prakash
Hinduja. When asked at the WEF about the investment climate he
had no hesitation in declaring 2012 will be a very bad year in
the U.S. and the years heading into it not much better: “The
astrology guides us on this,” he said.

Hinduja might want to do a little star-gazing for the
bankers and regulators too.

(additional reporting by Ben Hirschler)

However, in interviews with Reuters while attending the
World Economic Forum in Davos in the past few days, they had
varying views over whether the size of deals could start to
head back up to the $10 billion mark, or even above, from the
post-financial crisis limits in the $3 billion to $5 billion
range.

David Rubenstein, the co-founder of Carlyle Group [CYL.UL],
said he sees all the four key metrics for the business taking a
“fairly dramatic move in the right direction.

“More deal volume and value, much more on distributions,
much more in terms of fund raising,” he said, adding that the
valuations for private equity holdings had now risen for four
successive quarters.

During the financial crisis, private equity firms were
largely locked out of the credit markets making it tough for
them to finance leveraged buyouts, while the equities markets
were so weak that initial public offerings of existing
investments became very difficult.

However, in the past six months the credit markets have
opened up more, at least for small or medium-sized deals, and
the recovery in stock markets has made IPOs achievable once
again.

Stephen Schwarzman, chief executive of private equity giant
Blackstone Group <BX.N>, said that typically the first year of
economic recovery after a recession has been a good one for
making private equity investments. “Historically, the returns
have been double or triple what they were at the top of the
economic cycle,” he said.

This time may be a bit different because the economic
recovery is likely to be more muted than after previous
downturns, which means the firms may have to hold the
investments longer to make the same returns, he said.

Henry Kravis is also very optimistic about this year’s
outlook.

The legendary co-founder of Kohlberg Kravis Roberts & Co
<KKR.AS>, said that the environment was certainly better than
last year.

“Clearly markets have opened up, the debt markets are open
right now, the bank loan markets are just opening, spreads have
come down tremendously, so your cost of capital comes down. And
the equity markets are open so it now makes it possible for
companies acquired in the last years to go public,” he said.

He also said that larger leveraged buyouts of the $10
billion range could return. “I wouldn’t discount anything right
now. I think there is that possibility — they would require
more equity so you have to find out where the equity is coming
from. I am not going to guess whether they are 8 billion or 10
billion or 5 billion, the capital markets being open enables
larger deals.”

The “sweet spot” for most firms would be in the $1 billion
to $3 billion range though, he said.

HIGHER EQUITY

The need for more equity in deals is one of the lasting
legacies of the crisis. There is also an even greater increased
focus on running businesses well rather than relying on
financial engineering.

“The valuations have come down and the leverage has come
down but that is a small piece of what has to happen — you
have to have the operational improvement in a company and that
is how you make money today,” said Kravis. “You have to act and
think like an industrialist, if you are just going to do
financial engineering you are not going to be around long.”

Rubenstein says he doesn’t see the size of deals climbing.
“I think you will probably see deals in the $2 billion-$5
billion range — I don’t think you will see pure buyouts in the
$10 billion, $15 billion, $20 billion or $30 billion
category.”

That doesn’t worry him though. The rules are different
after every recession, he said.

“This time you are seeing smaller deals, smaller funds,
higher equity components in the deals, more minority stake
transactions, much higher co-investments by investors, fewer
consortia deals by private equity firms and much more money
being put in emerging markets and more government oversight and
interest in what private equity is doing,” he said.

All three say they expect to probably do more IPOs this
year than last, though they also declined to give specific
forecasts. Rubenstein said that Carlyle itself has no immediate
plans to join Blackstone as a publicly traded company.

“We are not today planning to go public this year, we have
a lot of things we are going to do and we think we can do these
things as a private company. We will take a look at the
situation down the road,” he said.

(Editing by Bernard Orr)

A closed-door meeting of dozens of financial sector heavyweights on the sidelines of the World Economic Forum made some progress on bank capital and liquidity requirements, and legal structures, participants said.

But the bankers and regulators skirted the issue of a global insurance levy to make sure that banks — not taxpayers — pay for future mistakes, and no firm agreements were reached.

Larry Summers, top economic adviser to President Barack Obama, who is under fire from Wall Street over his plans to curb big banks, said the “vigorous, constructive discussion” had raised the level of understanding.

Financial Stability Board chief Mario Draghi said global regulators were working on proposals for a central agency to manage bank failures, and mulling ideas for capital surcharges or contingent capital for institutions deemed too big to fail.

“We want to have an authority or an agency which has the power, the funds, the budget and the competence to manage failure in an orderly way,” he told Reuters Insider television.

But other participants were skeptical of any cross-border body that would impinge on national sovereignty.

Congressman Barney Frank, piloting tough legislation to regulate Wall Street, said after the talks: “No one got up and said don’t regulate us. They would be wasting their time if they did. They all understand regulation is coming.”

In a panel discussion on the world economy, Summers and International Monetary Fund chief Dominique Strauss-Kahn said growth was returning faster than expected but a better balance was needed between exporting and importing nations.

Summers also highlighted the high toll in unemployment, saying: “What we are seeing in the U.S. is a statistical recovery and a human recession.”

China’s deputy central bank head, Zhu Min, told delegates the emerging economic powerhouse was working to achieve more balanced growth and boost private consumption this year, but the switch from exports to domestic demand would take time.

Trade ministers from major economies, meeting on the sidelines of the annual Davos conference, voiced gloom about prospects of a global trade liberalization deal this year and many blamed the United States for foot-dragging. Washington sent only a deputy ambassador to the informal talks.

NO-DEAL ON LEVY

British finance minister Alistair Darling told Reuters after the talks with bankers: “Firstly we are agreed that whatever we do, it needs to be universal.

“What has changed is there is an acceptance on the part of banks that they need to make changes and they need to make changes quickly because that is what people expect.”

Darling said a wind-down levy to cover the cost of bank failures was “one of a number of ideas” discussed, but there was no agreement.

Draghi said the idea of a global insurance levy was not discussed but others said it was among ideas kicked around.

Brian Moynihan, chief executive of Bank of America, described the talks as “robust.” Reporters glimpsed white boards with action points headed “Capital Requirements,” “International Regulatory Cooperation” and “Risk Assessment” in the room.

The IMF’s Strauss-Kahn called for a speeding up of new rules on capital requirements for banks.

“The question of coordinating this financial sector reform is top priority. We’re not going exactly in the right direction,” Strauss-Kahn said in an oblique reference to Obama’s proposals to bar commercial banks from proprietary trading and ties with hedge funds and private equity funds.

European Central Bank President Jean-Claude Trichet also warned of the danger of divergent responses, saying: “If we do not have a global set of coordinated rules and regulations, it’s a recipe for catastrophe.”

Summers and Zhu skirmished politely about global economic imbalances.

“Not everyone can have export-led growth,” the White House adviser said. “Countries (that) traditionally have export-led growth desire to continue that growth; countries that have been substantial borrowers want to reduce that borrowing. There’s a mismatch, It’s serious… it’s an adding up problem.”

Zhu said China’s purely export-led growth model was not sustainable but could not be changed overnight.

“We want to increase consumption but it will take some time,” he said. “We need global coordination on structural change…for us to increase consumption and for others to increase consumption or to increase savings.”

(Additional reporting by Lisa Jucca, Dominic Evans, Ben Hirschler, Gleb Bryanski and Gerard Wynn, writing by Paul Taylor, Editing by Hans Peters)

So was the censorship row censored in order not to offend the Chinese?

That’s not the way the Klaus Schwab, the founder of the World Economic Forum, sees it.

“We raise issues where we know we can make a positive contribution to them,” he told Reuters. “This is an issue that is still cooking and we don’t think we could have made a positive contribution on it.”

Of course, that didn’t stop Google’s future in China being a top topic for corridor chat — after banker-bashing.

And the few words on China that passed the lips of Google CEO Eric Schmidt during a session on technology were scrutinised for hidden meaning. In truth, it was hardly ground-breaking stuff.

“We love what they (China) are doing in terms of growth,” Schmidt said. “We just don’t like the censorship.”

Don’t hold the front page.

Talking during the World Economic Forum in Davos, Finance Minister Guido Mantega also said that he was pleased that the real currency had fallen about 7 percent against the U.S. dollar this year, though he indicated he expected a further decline.

“The Brazilian economy is undergoing growth which is sustainable growth and is not going to generate inflation. I don’t see any signs of inflation,” he told a news conference.

That meant the government didn’t need to cut fuel taxes or take other such anti-inflationary moves, he told Reuters in an interview.

Mantega confirmed Brazilian media reports that the government had no plans to renew tax breaks that have helped automakers and home appliances manufacturers boost sales as there is no need for the additional stimulus.

“We are reducing the stimulus now because the economy is recovering fast and I think that they don’t need more governmental help,” he told Reuters.

Mantega said that Brazil’s internal demand was growing at a 7 percent annual rate and that the overall economy was forecast to grow at 5 to 5.5 percent this year.

A reduction in industrial taxes on household durable goods such as washing machines will end this weekend, and tax breaks on cars at the end of March, he said.

He said that he was “happy” to see the real floating lower but that it still wasn’t yet in currency equilibrium.

While declining to say if he wanted it to fall further, Mantega told the news conference that the size of the current account deficit would put pressure on the real.

“This deficit will help the exchange rate because there might be a (market) devaluation of the real,” which would make Brazilian exports more competitive, he said.

Data last week showed Brazil ran a current account deficit of $24.334 billion in 2009 compared with a $28.192 billion deficit in 2008, after surpluses over the previous five years.

Mantega said he expected it to hit about $40 billion in 2010 but said this was a temporary rise and the deficit would reduce as global recovery took hold.

“It’s not a reason for concern and we should not take any steps do deal with it.”

Earlier in the day, in a speech from President Luiz Inacio Lula da Silva delivered by Foreign Minister Celso Amorim, the Brazilian leader said the country had “a long way to go” but had made great strides in economic growth.

“We have strengthened our economy, improved people’s living standards, reinforced democracy, raised our self-esteem and made our voice heard louder across the world.”

(Reporting by Krista Hughes and Martin Howell; Editing by Hans Peters)

Top executives from leading U.S. and European banks held behind-the-scenes talks on their response, people attending the talks said. But a deal has proved elusive.

Regulators and policymakers, meanwhile, appeared to have struck some common ground at the World Economic Forum, agreeing on the need to ensure changes to the rulebook — from banker pay to lenders’ activities — are global, and not unilateral.

The annual forum in the Swiss mountain resort of Davos has reverberated with U.S. President Barack Obama’s plans to curb the activities of major banks, particularly betting in financial markets with their own money, sparking a fierce debate on the necessary overhaul and the risks of excessive correction.

“We had a global problem … we have to find a global solution,” European Central Bank President Jean-Claude Trichet said on Friday. “We are bound to succeed. But it has to be done very, very carefully, seriously at the global level.”

Ministers and officials from G20 nations, the International Monetary Fund and the Financial Stability Board held informal talks at Davos on Friday, which Canadian Finance Minister Jim Flaherty said centered on mutual assessment of financial systems.

“There was unanimity that we ought to go ahead … and use the work of the FSB and the G20 and try to get the implementation done this year, 2010,” he told Reuters.

“When we’re dealing with (bank) capitalization rules, liquidity rules, leveraging, I’m hopeful … that we all get those rules right and agree on those. On executive remuneration there may be some divergence of opinion,” Flaherty said.

There were also differences on Obama’s proposal to stop commercial banks engaging in proprietary trading, he said.

The head of the Swiss National Bank, whose country does not belong to the G20, had earlier urged the group to fold the U.S. plans to tax and curb banks into the G20 agenda.

TONE DEAF?

During the financiers’ talks, annual conversations that have taken particular prominence this year, Wall Street’s largest banks and some European investment banks argued for a common front against politicians who are calling for much tougher measures to regulate the industry in the wake of the financial crisis.

But they did not win over the heads of some commercial banks and even some European peers, who believe the industry needs to be more conciliatory, sources familiar with the talks said.

“The tough line of the large investment banks is very different than the approach of the major commercial banks,” said one of the sources on Friday. “It looks like it is very difficult to reach a common position.”

The banks held the discussions ahead of an expected meeting with regulators and lawmakers on Saturday.

“What we are trying to achieve is to engage in a good dialogue with all the relevant parties, the regulators and the political side,” said Brian Moynihan, the CEO of Bank of America Corp., who confirmed the bankers’ meeting took place.

U.S. economic adviser Larry Summers, however, showed little sign of conciliation, telling the forum that U.S. policies were not a curb on banks’ businesses and would only limit profits made on the back of government support.

“The policy is a constraint on purely proprietary trading. It is not a constraint on doing business with customers, so it does not by definition interfere with their ability to serve their customers,” he said.

Bankers attending the annual Davos jamboree, in boom years an opportunity for lavish parties and networking, have used the forum to vent exasperation at their demonization at the hands of the public and politicians.

One top banker who attended the financiers’ meeting said much frustration was expressed by executives who thought they had changed a lot in the past year but that politicians just were not listening.

“There is a common language (with) regulators, central bankers … and increasingly a very constructive dialogue,” Peter Sands, CEO of Standard Chartered, said.

“The more challenging strand of how banks and bankers craft a new relationship with society is on the political side,” he said, adding the industry had been “tone deaf” and insensitive.

Top industry figures including Barclays President Bob Diamond and Deutsche Bank Chief Executive Josef Ackermann have taken the stage in Davos to warn policymakers against unilateral action on regulation that would threaten fragile political consensus on new rules within the G20.

“The solutions have to be consistent enough that we can operate,” Moynihan told Reuters at the Swiss resort.

Some economists, however, have said it may suit banks to spin out the negotiations on an agreed set of rules in hopes of delaying and watering down changes as the economy improves.

(Reporting by Lisa Jucca and Martin Howell; Additional reporting by Paul Taylor and Krista Hughes; Editing by Mike Peacock)