DealBook: Buffett’s Annual Letter Plays Up Newspapers’ Value

Over the last half-century, Warren E. Buffett has built a reputation as a contrarian investor, betting against the crowd to amass a fortune estimated at $54 billion.

Mr. Buffett underscored that contrarian instinct in his annual letter to shareholders published on Friday. In a year when Mr. Buffett did not make any large acquisitions, he bought dozens of newspapers, a business others have shunned. His company, Berkshire Hathaway, has bought 28 dailies in the last 15 months.

“There is no substitute for a local newspaper that is doing its job,” he wrote.

Those purchases, which cost Mr. Buffett a total of $344 million, are relatively minor deals for Berkshire, and just a small part of the giant conglomerate. Mr. Buffett bemoaned his inability to do a major deal in 2012. “I pursued a couple of elephants, but came up empty-handed,” he said. “Our luck, however, changed earlier this year.”

Mr. Buffett was making a reference to one of his largest-ever deals. Last month, Berkshire, along with a Brazilian investment group, announced a $23.6 billion takeover,of the ketchup maker H. J. Heinz.

Written in accessible prose largely free of financial jargon, Berkshire’s annual letter holds appeal far beyond Wall Street. This year’s dispatch contained plenty of Mr. Buffett’s folksy observations about investing and business that his devotees relish.

“More than 50 years ago, Charlie told me that it was far better to buy a wonderful business at a fair price than to buy a fair business at a wonderful price,” Mr. Buffett wrote, referring to his longtime partner at Berkshire, Charlie Munger.

Mr. Buffett also struck a patriotic tone, directly appealing to his fellow chief executives “that opportunities abound in America.” He noted that the United States gross domestic product, on an inflation-adjusted basis, had more than quadrupled over the last six decades.

“Throughout that period, every tomorrow has been uncertain,” he wrote. “America’s destiny, however, has always been clear: ever-increasing abundance.”

The letter provides more than entertainment value and patriotic stirrings, delivering to Berkshire shareholders an update on the company’s vast collection of businesses. With a market capitalization of $250 billion, Berkshire ranks among the largest companies in the United States.

Its holdings vary, with big companies like the railroad operator Burlington Northern Santa Fe and the electric utility MidAmerican Energy, and smaller ones like the running-shoe outfit Brooks Sports and the chocolatier See’s Candies. All told, Berkshire employs about 288,000 people.

The letter, once again, did not answer a question that has vexed Berkshire shareholders and Buffett-ologists: Who will succeed Mr. Buffett, who is 82, as chief executive?

Last year, he acknowledged that he had chosen a successor, but he did not name the candidate.

He has said that upon his death, Berkshire will split his job in three, naming a chief executive, a nonexecutive chairman and several investment managers of its publicly traded holdings.

In 2010, he said that his son, Howard Buffett, would succeed him as nonexecutive chairman.

Berkshire’s share price recently traded at a record high, surpassing its prefinancial crisis peak reached in 2007 and rising about 22 percent over the last year.

The company reported net income last year of about $14.8 billion, up about 45 percent from 2011. Yet the company’s book value, or net worth — Mr. Buffett’s preferred performance measure — lagged the broader stock market, increasing 14.4 percent, compared with the market’s 16 percent return.

Mr. Buffett lamented that 2012 was only the ninth time in 48 years that Berkshire’s book value increase was less than the gain of the Standard & Poor’s 500-stock index. But he pointed out that in eight of those nine years, the S.& P. had a gain of 15 percent or more, suggesting that Berkshire proved to be a most valuable investment during bad market periods.

“We do better when the wind is in our face,” he wrote.

For Berkshire’s largest collection of assets, its insurance operations, the wind has been at its back. We “shot the lights out last year” in insurance, Mr. Buffett said.

He lavished praise on the auto insurer Geico, giving a special shout-out to the company’s mascot, the Gecko lizard.

Investors also keep a keen eye on changes in Berkshire’s roughly $87 billion stock portfolio. Its holdings include large positions in iconic companies like International Business Machines, Coca-Cola, American Express and Wells Fargo. He said Berkshire’s investment in each of those was likely to increase in the future.

“Mae West had it right: ‘Too much of a good thing can be wonderful,’ ” Mr. Buffett wrote.

He also complimented two relatively new hires, Todd Combs and Ted Weschler, who now each manage about $5 billion in stock portfolios for Berkshire. Both men ran unheralded, modest-size money management firms before Mr. Buffett plucked them out of obscurity and moved them to Omaha to work for him.

He called the men “a perfect cultural fit” and indicated that the two would manage Berkshire’s entire stock portfolio once he steps aside. “We hit the jackpot with these two,” Mr. Buffett said, noting that last year, each outperformed the S.& P. by double-digit margins.

Then, sheepishly, employing supertiny type, he wrote: “They left me in the dust as well.”

A former paperboy and member of the Newspaper Association of America’s carrier hall of fame, Mr. Buffett devoted nearly three out of 24 pages of his annual report to newspapers.

While Mr. Buffett has been a longtime owner of The Buffalo News and a stakeholder in The Washington Post Company, he told shareholders four years ago that he wouldn’t buy a newspaper at any price.

But his latest note reflects how much his opinion has turned. His buying spree started in November 2011, when he struck a deal to buy The Omaha World-Herald Company, this hometown paper, for a reported $200 million. By May 2012, he bought out the chain of newspapers owned by Media General, except for The Tampa Tribune. In recent months, he continued to express his interest in buying more papers “at appropriate prices — and that means a very low multiple of current earnings.”

“Papers delivering comprehensive and reliable information to tightly bound communities and having a sensible Internet strategy will remain viable for a long time,” wrote Mr. Buffett.

Mr. Buffett said in a telephone interview last month that he would consider buying The Morning Call of Allentown, Pa., a paper that the Tribune Company is considering selling. But Mr. Buffett said he had not contacted Tribune executives.

“It’s solely a question of the specifics of it and the price,” he said about the Allentown paper. “But it’s similar to the kinds of communities that we bought papers in.”

Mr. Buffett has plenty of cash to make more newspaper acquisitions. To cover his portion of the Heinz purchase, Mr. Buffett will deploy about $12 billion of Berkshire’s $42 billion cash hoard. That leaves a lot of money for Mr. Buffett to continue his shopping spree for newspapers — and more major deals like Heinz.

“Charlie and I have again donned our safari outfits,” Mr. Buffett wrote, “and resumed our search for elephants.”

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Euro Watch: Euro Zone Unemployment Rose to New Record in January

PARIS — The unemployment rate in the euro zone edged up in January to a new record, official data showed Friday, as the ailing European economy continued to weigh on the job market.

That, and new data showing a decline in inflation in the euro zone, could prompt the European Central Bank to take steps to stimulate the economy when its Governing Council meets this week, analysts said.

Unemployment in the 17-nation euro zone climbed to 11.9 percent in January from 11.8 percent the previous month, according to Eurostat, the statistical office of the European Union.

For the 27 nations of the Union, the jobless rate in January stood at 10.8 percent, up from 10.7 percent in December. All of the figures were seasonally adjusted.

A separate Eurostat report showed price pressures easing in February. In the euro zone, the annual inflation rate came in at 1.8 percent, down from 2 percent in January and below the European Central Bank’s 2 percent target.

The jobless data “suggest that wage growth is set to weaken from already low rates” and further depress consumer spending, which has already been damped by government austerity measures, Jennifer McKeown, an economist at Capital Economics in London, wrote in a research note.

Ms. McKeown noted that the low inflation numbers and high joblessness “should leave the E.C.B.’s policy options open,” and said it was possible the central bank “might discuss an interest rate cut or other unconventional policies” when its Governing Council meets on Thursday.

There was some bright news Friday. A survey of European purchasing managers by Markit, a data and research firm, showed German manufacturing output growing in February for a second straight month, as new business levels improved.

The composite German purchasing managers’ index improved to 50.3 in February — just above 50, the level that separates growth from contraction — from 49.8 in January. And the Federal Statistical Office in Wiesbaden reported Friday that German retail sales rose 3.1 percent in January from December, when sales fell 2.1 percent.

Another bit of data this week also supports the view that the German economy will bounce back after a fourth-quarter slump. The European Commission’s economic sentiment indicator for the euro zone rose to 91.1 in February from 89.5 in January, with German confidence leading the gain.

“German industry is clearly rebounding and taking advantage from better external traction,” Gilles Moëc, an economist at Deutsche Bank in London, wrote.

Employment is sometimes seen as a lagging indicator of economic growth, because companies try to avoid adding to their costs until they are convinced that a rebound is at hand.

But despite the glimmers of hope in German industry, there are few reasons to regard a recovery as imminent. Markit’s overall euro zone purchasing managers’ index was unchanged in February at 47.9, signaling continued contraction.

Olli Rehn, the European commissioner for economic and monetary affairs, forecast on Feb. 22 that the euro zone would shrink 0.3 percent this year, about the same as last year. The bloc’s debt problems, and the tax increases and government spending cuts that have been prescribed as the remedy, have sapped demand and spending power, reducing business demand for labor.

In absolute terms, Eurostat estimated Friday that 19 million people in the euro zone and more than 26 million people in the overall Union were unemployed.

Spain’s unemployment rate in January was 26.2 percent, and Portugal’s was 17.6 percent. Austria, at just 4.9 percent, had the lowest rate, followed by Germany and Luxembourg, both of which had 5.3 percent unemployed.

Greece’s unemployment rate in November, the latest month for which Eurostat has figures for the country, was 27 percent.

France, with the second-largest euro zone economy, after Germany’s, had a 10.6 percent jobless rate in January. In Britain, not a euro member, the jobless rate stood at 7.7 percent.

That compares with a January unemployment rate of 7.9 percent in the United States. In Japan, 4.2 percent of the work force was counted as unemployed in December.

This article has been revised to reflect the following correction:

Correction: March 1, 2013

An earlier version of this article carried a headline that misstated the month of the data. The report was for January, not February. An earlier version of the article also misstated the name of a federal agency in Wiesbaden, Germany. It is the Federal Statistical Office, not the Federal Statistics Office.

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High & Low Finance: Report Lays Out Plan to Reduce Government Role in Home Financing

Can the American mortgage market ever function again without Uncle Sam guaranteeing that lenders will be repaid?

It is amazing just how few people think it can.

“For the foreseeable future, there is simply not enough capacity on the balance sheets of U.S. banks to allow a reliance on depository institutions as the sole source of liquidity for the mortgage market,” stated a report on the American housing market this week, issued by a group that was filled with members of the housing establishment.

The panel, which included Frank Keating, the president of the American Bankers Association and a former governor of Oklahoma, does not see that as an indictment of the American banking system, which would much rather trade leveraged derivatives than keep a lot of mortgage loans on its books.

“Given the size of the market and capital constraints on lenders, the secondary market for mortgage-backed securities must continue to play a critical role in providing mortgage liquidity,” added the report, issued by a housing commission formed by the Bipartisan Policy Center, a group that was begun by former Senate majority leaders from both parties. The group thinks investors will not be willing to finance enough mortgages — particularly 30-year fixed-rate loans — without a government guarantee.

The report does an excellent job of analyzing the history of the American housing finance system, as well as looking at the government’s efforts over the years to promote and subsidize rental housing. It calls for changes in those policies as well, aimed at assuring that those with very low incomes “are assured access to housing assistance if they need it.”

But those rental proposals are unlikely to lead to legislation any time soon, said Mel Martinez, one of four co-chairmen of the housing panel. Mr. Martinez, a former Republican senator from Florida and housing secretary under President George W. Bush, said in an interview that any proposal calling for spending government money, as this one does, would face tough sledding in Congress.

But he said it was possible that changes in the housing finance system, which is widely criticized on both sides of the aisle, had a better chance of getting approval.

Certainly, one principle enunciated by the panel will get wide support: “The private sector must play a far greater role in bearing housing risk.” But the details show that the panel still thinks sufficient money can be found for housing only if Uncle Sam remains the ultimate guarantor for most home mortgages.

Currently, the government backs about 90 percent of newly issued mortgages, more than ever before. The proportion fell in the years leading up to 2007 as subprime loans proliferated and then soared after that market collapsed. Since then, the Federal Housing Administration has expanded its role in backing home loans on the low end of the scale. But most mortgages are purchased by either Fannie Mae or Freddie Mac, the government-sponsored enterprises that the government took over after the housing bubble burst.

So-called jumbo mortgages, that is mortgages too large to qualify for purchase by Fannie or Freddie, account for most of the rest. Some mortgages are put into securitizations that have no government guarantee, but many jumbo mortgages end up being owned by the banks for the long term.

The F.H.A. appears to be more cautious than it used to be. The report notes that last year the average FICO score for an F.H.A. or Department of Veterans Affairs loan was close to 720 on a range of 300 to 850. That is about what the average Fannie Mae and Freddie Mac borrower had in 2001.

The commission, whose other co-chairmen were George J. Mitchell, the former Senate Democratic leader; Christopher S. Bond, a former Republican senator; and Henry Cisneros, who served as housing secretary under President Bill Clinton, wants to preserve the F.H.A., but orient it more to those who need the most help. It would phase out Fannie and Freddie — something that is politically necessary — but replace them with something that sounds sort of similar.

The new organization would be called a “public guarantor.” It would guarantee that investors in mortgage-backed securitizations would not lose money, much as Fannie and Freddie now do. But its responsibility would come after that of a “private credit enhancer,” which sounds like a monoline insurer that would make payments to securitization holders if the underlying mortgages were performing badly. That organization would be regulated by the public guarantor, and only after it goes broke — something that should happen only if housing prices fall more than they did in the recent crisis — would the public guarantor be responsible for making investors whole.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

This article has been revised to reflect the following correction:

Correction: February 28, 2013

An earlier version of this column misstated the potential proportion of new mortgages that Mr. Martinez said he believed would eventually be financed by private capital. It is 40 to 55 percent, not 40 to 50 percent.

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DealBook: J.C. Penney’s Poor Showing Is Another Retail Miss for Ackman

With J.C. Penney‘s awful fourth-quarter results, William A. Ackman has found success in retail investments elusive once more.

It’s hard to call J.C. Penney’s latest quarterly report anything but breathtaking. The retailer lost $552 million for the quarter, which at $1.95 a share far exceeded the 17-cent loss that analysts had been expecting. Same-store sales tumbled nearly 32 percent from the same time a year ago.

Shares in the company were down nearly 9 percent in after-hours trading.

So far, J.C. Penney’s chief executive, Ron Johnson — whom Mr. Ackman recruited from Apple — has asked for patience, citing all the changes that he has rolled out at the formerly dowdy department store chain. (Indeed, he spent the first several minutes of an investor Webcast on Wednesday enumerating the many innovations at the store.)

One wonders whether Mr. Ackman, whose Pershing Square Capital Management owns a 17.8 percent stake in J.C. Penney, can wait that long.

It isn’t the first time that he has taken a bath betting on a retailer. Mr. Ackman’s most recent failure in the industry was a bet on the Borders Group, taking a 17 percent stake in the troubled bookseller by late 2007.

Despite efforts by the hedge fund manager to help prop up the company, including offering to finance a merger with the much larger Barnes & Noble, Borders filed for bankruptcy in late 2010. Mr. Ackman has acknowledged losing at least $125 million on the investment.

Perhaps his most notable troubled investment was in Target, a wager in which Mr. Ackman actually created a special fund dedicated to the discount retailer. He also embarked on a lengthy and expensive campaign to gain seats on the company’s board, to forcefully advocate for a complicated restructuring he said would generate better returns for shareholders.

That didn’t quite work out either. Mr. Ackman lost the proxy fight. He sold Pershing’s stake by early 2011, having lost about 90 percent of his firm’s $2 billion investment.

Last month, it appeared that Mr. Ackman was willing to give Mr. Johnson room to prove naysayers wrong. “We put Ron in charge, and we’re letting him run the company,” the hedge fund manager told CNBC in an interview.

But he added that he’ll run out of patience — in three year’s time.

“If three years from now, Ron Johnson is still struggling to turn around J.C. Penney,” Mr. Ackman said to CNBC, “he’s probably the wrong guy.”

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Economic Scene: Medicare Needs Fixing, but Not Right Now

What’s the rush? For all the white-knuckled wrangling over spending cuts set to start on Friday, the fundamental partisan argument over how to fix the government’s finances is not about the immediate future. It is about the much longer term: how will the nation pay for the care of older Americans as the vast baby boom generation retires? Will the government keep Medicare spending in check by asking older Americans to shoulder more costs? Should we raise taxes instead?

It might not be a good idea to try to resolve these questions quite so urgently. Partisan bickering under the threat of automatic budget cuts is unlikely to produce a calm, thoughtful deal.

“We don’t have to solve this tomorrow; not even next year,” said Jonathan Gruber, an economist at the Massachusetts Institute of Technology who worked on the design of President Obama’s health care reform.

More significantly perhaps, some economists point out that the problem may already be on the way toward largely fixing itself. The budget-busting rise in health care costs, it seems, is finally losing speed. While it would be foolhardy to assume that this alone will stabilize government’s finances, the slowdown offers hope that the challenge may not be as daunting as the frenzied declarations from Washington make it seem.

The growth of the nation’s spending slowed sharply over the last four years. This year, it is expected to increase only 3.8 percent, according to the Centers for Medicare and Medicaid Services, the slowest pace in four decades and slower than the rate of nominal economic growth.

Medicare spending is growing faster — stretched by baby boomers stepping out of the work force and into retirement. But its pace has slowed markedly, too. Earlier this month, the Congressional Budget Office said that by 2020 Medicare spending would be $126 billion less than it predicted three years ago. Spending over the coming decade, it added, would be $143 billion less than it forecast just last August.

While economists acknowledge that the recession accounts for part of the decline, depressing incomes and consumption, something else also seems to be going on: insurers, doctors, hospitals and other providers are experimenting with new, cheaper and more efficient ways to deliver care.

Prodded by President Obama’s Affordable Care Act, which offers providers a share of savings reaped by Medicare from any efficiency gains, many doctors are dropping the costly practice of charging a fee for each service regardless of its contribution to patients’ health. Doctors are joining hundreds of so-called Accountable Care Organizations, which are paid to maintain patients in good health and are thus encouraged to seek the most effective treatments at the lowest possible cost.

This has kindled hope among some scholars that Medicare could achieve the needed savings just by cleaning out the health care system’s waste.

Elliott Fisher, who directs Dartmouth’s Atlas of Health Care, which tracks disparities in medical practices and outcomes across the country, pointed out that Medicare spending per person varies widely regardless of quality — from $7,734 a year in Minneapolis to $11,646 in Chicago — even after correcting for the different age, sex and race profiles of their populations.

He noted that if hospital stays by Medicare enrollees across the country fell to the length prevailing in Oregon and Washington, hospital use — one of the biggest drivers of costs — would fall by almost a third.

“Twenty to 30 percent of Medicare spending is pure waste,” Dr. Fisher argues. “The challenge of getting those savings is nontrivial. But those kinds of savings are not out of the question.”

We could be disappointed, of course. Similar breakthroughs before have quickly fizzled. Just think back to that brief spell in the mid-1990s when health maintenance organizations seemed to have beat health care inflation — until patients rebelled against being denied services and doctors dropped out of their networks rather than accept lower fees.

The Centers for Medicare and Medicaid Services already expects spending to rebound in coming years. Without tougher cost control devices, be it vouchers to limit government spending or direct government rationing, counting on savings of the scale needed to overcome the expected increase in Medicare rolls may be hoping for pie in the sky.

“It makes no sense,” said Eugene Steuerle, an economist at the Urban Institute, to expect the government will reap vast Medicare savings without having an impact on the quality of care.

The Affordable Care Act already contemplates fairly big cuts to Medicare. In its latest long-term projections published last year, the Congressional Budget Office estimated that under current law, growth in spending per beneficiary over the coming decade would be about half a percentage point slower than the rate of economic growth per person.

To understand how ambitious this is, consider that Medicare spending per beneficiary since 1985 has exceeded the growth of gross domestic product per person by about 1.5 percentage points per year. Slowing down that spending would require deep cuts in doctor reimbursements that, though written into law, Congress has never allowed to happen — repeatedly voting to cancel or postpone them.

Under a more realistic situation, the Budget Office projected that the growth of Medicare spending per capita over the next 10 years would be in fact 0.6 percentage points higher than under current law and accelerate further after that.

Yet despite the ambition of these targets, they would not be enough to stabilize future Medicare spending as a share of the economy. A report by three health care policy experts, Michael Chernew and Richard Frank of Harvard Medical School, together with Stephen Parente of the University of Minnesota, concluded that to do that would require limiting the growth of spending per beneficiary at 1.25 percentage points less than the growth of our gross domestic product per person.

“The Affordable Care Act places Medicare spending on a trajectory that is historically low,” Mr. Chernew said, noting his opinion was not an official statement as vice chairman of Medicare’s Payment Advisory Commission, which advises Congress on Medicare. “Could we do better? Of course. Will we? That requires a little more skepticism.”

Yet even if it is unrealistic to expect that newfound efficiencies will stabilize Medicare’s finances, the slowdown in health care spending suggests that politicians in Washington calm down. It offers, at the very least, more breathing room to carefully consider reforms to the system to raise revenue or trim benefits in the least damaging way.

There are many ideas out there — from changing Medicare’s premiums, deductibles and coinsurance to introducing a tax on carbon emissions to raise revenue. Some of them are not as good as others. Until recently, President Obama favored increasing the eligibility age for Medicare. Then research by the Kaiser Family Foundation concluded that raising the age would increase insurance premiums and cost businesses, beneficiaries and states more than the federal government would save. The nation would lose money in the deal.

“As we do this, there are smarter and dumber ways to do it,” Mr. Gruber said. “It would be a problem if we were to do things in a panic mode that set us backward.”

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Time Inc. and Meredith Prepare to Join Magazine Businesses

Mary Chind/The Des Moines Register

Meredith, a magazine company, is headquartered in Des Moines.

When Jack Griffin, the former president of the magazine company Meredith, took the reins at Time Inc., he threw a holiday party for his staff on the 34th floor of the Time & Life Building. For many employees at the famously hierarchal company, their first visit to the rambling executive suites that inspired the sets of “Mad Men” became known as “The Miracle on 34th.”

Mr. Griffin lasted just six months at Time before he was asked to leave by Jeffrey L. Bewkes, the chief executive of its parent company, Time Warner, who publicly rebuked Mr. Griffin, saying that his “leadership style and approach did not mesh with Time Inc. and Time Warner.”

As bankers and media executives hammer out the details of creating a new publicly traded company to house the magazine titles of the Meredith Corporation and the lifestyle titles of Time Inc., employees at both companies have been wondering how executives will take on the harder task of merging two very different corporate cultures.

Meredith’s headquarters in Des Moines have an open floor plan; the executives have their offices on the first floor and favor early-morning meetings. A recent lunch at one of Meredith’s magazines featured kale salad and rosemary-infused cucumber lemonade. Time executives tend toward lunches at Michael’s, where the dry-aged steak is a highlight, and after-work cocktails at the Lamb’s Club.

And then there are the postrecessionary approaches to travel: Meredith’s chief executive turned its corporate jets into shuttles with open seating, while Time still allows staff members to expense hotel rooms at the Four Seasons.

“It’s like the Yankees’ farm team taking over the Yankees,” according to a current Time Inc. executive who, like many who talked about the merger, declined to be identified while criticizing bosses or potential bosses.

The merger news appears to be more troubling to employees at the long revered Time Inc., whose lucrative titles like People and InStyle have been essentially sold off by Time Warner and are likely to be overseen by Meredith’s chief executive, Stephen M. Lacy. Time Inc. employees have made cracks about Des Moines and shared more sobering fears about the merger.

And unanswered questions swirl around the offices: Will Time Inc.’s Cooking Light and its fierce rival at Meredith, Eating Well, be expected to share intelligence? Can celebrity titles like People and InStyle flourish sharing a publisher with Wood magazine? And, most important of all, how many former Time Inc. executives might be moved to Iowa?

Press officers for both Time and Meredith declined to comment about any specific negotiations. But an earlier effort to blend Meredith’s folksy culture with the titans of Time failed quickly.

In August 2010, Mr. Griffin became the first chief executive to join Time Inc. from outside the company. His efforts to restructure some of the company’s entrenched hierarchy and infuse his management experiences from Meredith were largely rebuffed. While he garnered praise for the holiday party, staff members bristled when Mr. Griffin, a marathon runner, introduced 7:30 a.m. breakfast meetings — similar to the daily meetings he attended at Meredith, but a shock to the culture at Time Inc., where late nights on deadline are typical.

But this time, Time and Meredith are blending the titles that magazine industry executives say are more compatible. Time is holding onto the older titles that gave the company its gravitas, like Time, Fortune and Sports Illustrated. The new company will include titles it created or purchased in recent decades, like the cash cows People and InStyle and smaller titles like Southern Living and This Old House.

Both companies also have major workforces beyond their home cities. Only 3,000 of Time Inc.’s nearly 8,000 employees are based in New York City, with offices in London and Birmingham, Ala. Meredith has its 1,000 magazine employees split evenly between its midtown offices on Third Avenue and its headquarters in Des Moines.

“If you take Time, Fortune and Sports Illustrated from the mix, you have much greater similarity to the titles that are left than differences,” said Peter Kreisky, who worked as a senior adviser to Mr. Griffin at Time Inc. and who also has advised Meredith in the past.

This article has been revised to reflect the following correction:

Correction: February 25, 2013

An earlier version of this article misstated the year Nancy Williamson left Time Inc. She retired in 1998, not 1989.

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Major Banks Aid in Payday Loans Banned by States

Major banks have quickly become behind-the-scenes allies of Internet-based payday lenders that offer short-term loans with interest rates sometimes exceeding 500 percent.

With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or far-flung locales like Belize, Malta and the West Indies to more easily evade statewide caps on interest rates.

While the banks, which include giants like JPMorgan Chase, Bank of America and Wells Fargo, do not make the loans, they are a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers’ bank accounts, even in states where the loans are banned entirely. In some cases, the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals.

“Without the assistance of the banks in processing and sending electronic funds, these lenders simply couldn’t operate,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, which works with community groups in New York.

The banking industry says it is simply serving customers who have authorized the lenders to withdraw money from their accounts. “The industry is not in a position to monitor customer accounts to see where their payments are going,” said Virginia O’Neill, senior counsel with the American Bankers Association.

But state and federal officials are taking aim at the banks’ role at a time when authorities are increasing their efforts to clamp down on payday lending and its practice of providing quick money to borrowers who need cash.

The Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are examining banks’ roles in the online loans, according to several people with direct knowledge of the matter. Benjamin M. Lawsky, who heads New York State’s Department of Financial Services, is investigating how banks enable the online lenders to skirt New York law and make loans to residents of the state, where interest rates are capped at 25 percent.

For the banks, it can be a lucrative partnership. At first blush, processing automatic withdrawals hardly seems like a source of profit. But many customers are already on shaky financial footing. The withdrawals often set off a cascade of fees from problems like overdrafts. Roughly 27 percent of payday loan borrowers say that the loans caused them to overdraw their accounts, according to a report released this month by the Pew Charitable Trusts. That fee income is coveted, given that financial regulations limiting fees on debit and credit cards have cost banks billions of dollars.

Some state and federal authorities say the banks’ role in enabling the lenders has frustrated government efforts to shield people from predatory loans — an issue that gained urgency after reckless mortgage lending helped precipitate the 2008 financial crisis.

Lawmakers, led by Senator Jeff Merkley, Democrat of Oregon, introduced a bill in July aimed at reining in the lenders, in part, by forcing them to abide by the laws of the state where the borrower lives, rather than where the lender is. The legislation, pending in Congress, would also allow borrowers to cancel automatic withdrawals more easily. “Technology has taken a lot of these scams online, and it’s time to crack down,” Mr. Merkley said in a statement when the bill was introduced.

While the loans are simple to obtain — some online lenders promise approval in minutes with no credit check — they are tough to get rid of. Customers who want to repay their loan in full typically must contact the online lender at least three days before the next withdrawal. Otherwise, the lender automatically renews the loans at least monthly and withdraws only the interest owed. Under federal law, customers are allowed to stop authorized withdrawals from their account. Still, some borrowers say their banks do not heed requests to stop the loans.

Ivy Brodsky, 37, thought she had figured out a way to stop six payday lenders from taking money from her account when she visited her Chase branch in Brighton Beach in Brooklyn in March to close it. But Chase kept the account open and between April and May, the six Internet lenders tried to withdraw money from Ms. Brodsky’s account 55 times, according to bank records reviewed by The New York Times. Chase charged her $1,523 in fees — a combination of 44 insufficient fund fees, extended overdraft fees and service fees.

For Subrina Baptiste, 33, an educational assistant in Brooklyn, the overdraft fees levied by Chase cannibalized her child support income. She said she applied for a $400 loan from Loanshoponline.com and a $700 loan from Advancemetoday.com in 2011. The loans, with annual interest rates of 730 percent and 584 percent respectively, skirt New York law.

Ms. Baptiste said she asked Chase to revoke the automatic withdrawals in October 2011, but was told that she had to ask the lenders instead. In one month, her bank records show, the lenders tried to take money from her account at least six times. Chase charged her $812 in fees and deducted over $600 from her child-support payments to cover them.

“I don’t understand why my own bank just wouldn’t listen to me,” Ms. Baptiste said, adding that Chase ultimately closed her account last January, three months after she asked.

A spokeswoman for Bank of America said the bank always honored requests to stop automatic withdrawals. Wells Fargo declined to comment. Kristin Lemkau, a spokeswoman for Chase, said: “We are working with the customers to resolve these cases.” Online lenders say they work to abide by state laws.

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Major Banks Aid in Payday Loans Banned by States

Major banks have quickly become behind-the-scenes allies of Internet-based payday lenders that offer short-term loans with interest rates sometimes exceeding 500 percent.

With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or far-flung locales like Belize, Malta and the West Indies to more easily evade statewide caps on interest rates.

While the banks, which include giants like JPMorgan Chase, Bank of America and Wells Fargo, do not make the loans, they are a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers’ bank accounts, even in states where the loans are banned entirely. In some cases, the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals.

“Without the assistance of the banks in processing and sending electronic funds, these lenders simply couldn’t operate,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, which works with community groups in New York.

The banking industry says it is simply serving customers who have authorized the lenders to withdraw money from their accounts. “The industry is not in a position to monitor customer accounts to see where their payments are going,” said Virginia O’Neill, senior counsel with the American Bankers Association.

But state and federal officials are taking aim at the banks’ role at a time when authorities are increasing their efforts to clamp down on payday lending and its practice of providing quick money to borrowers who need cash.

The Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are examining banks’ roles in the online loans, according to several people with direct knowledge of the matter. Benjamin M. Lawsky, who heads New York State’s Department of Financial Services, is investigating how banks enable the online lenders to skirt New York law and make loans to residents of the state, where interest rates are capped at 25 percent.

For the banks, it can be a lucrative partnership. At first blush, processing automatic withdrawals hardly seems like a source of profit. But many customers are already on shaky financial footing. The withdrawals often set off a cascade of fees from problems like overdrafts. Roughly 27 percent of payday loan borrowers say that the loans caused them to overdraw their accounts, according to a report released this month by the Pew Charitable Trusts. That fee income is coveted, given that financial regulations limiting fees on debit and credit cards have cost banks billions of dollars.

Some state and federal authorities say the banks’ role in enabling the lenders has frustrated government efforts to shield people from predatory loans — an issue that gained urgency after reckless mortgage lending helped precipitate the 2008 financial crisis.

Lawmakers, led by Senator Jeff Merkley, Democrat of Oregon, introduced a bill in July aimed at reining in the lenders, in part, by forcing them to abide by the laws of the state where the borrower lives, rather than where the lender is. The legislation, pending in Congress, would also allow borrowers to cancel automatic withdrawals more easily. “Technology has taken a lot of these scams online, and it’s time to crack down,” Mr. Merkley said in a statement when the bill was introduced.

While the loans are simple to obtain — some online lenders promise approval in minutes with no credit check — they are tough to get rid of. Customers who want to repay their loan in full typically must contact the online lender at least three days before the next withdrawal. Otherwise, the lender automatically renews the loans at least monthly and withdraws only the interest owed. Under federal law, customers are allowed to stop authorized withdrawals from their account. Still, some borrowers say their banks do not heed requests to stop the loans.

Ivy Brodsky, 37, thought she had figured out a way to stop six payday lenders from taking money from her account when she visited her Chase branch in Brighton Beach in Brooklyn in March to close it. But Chase kept the account open and between April and May, the six Internet lenders tried to withdraw money from Ms. Brodsky’s account 55 times, according to bank records reviewed by The New York Times. Chase charged her $1,523 in fees — a combination of 44 insufficient fund fees, extended overdraft fees and service fees.

For Subrina Baptiste, 33, an educational assistant in Brooklyn, the overdraft fees levied by Chase cannibalized her child support income. Ms. Baptiste said she applied for a $400 loan from Loanshoponline.com and a $700 loan from Advancemetoday.com in 2011. The loans, with annual interest rates of 730 percent and 584 percent respectively, skirt New York law.

Ms. Baptiste said she asked Chase to revoke the automatic withdrawals in October 2011, but was told that she had to ask the lenders instead. In one month, her bank records show, the lenders tried to take money from her account at least six times. Chase charged her $812 in fees and deducted more than $600 from her child-support payments to cover them.

“I don’t understand why my own bank just wouldn’t listen to me,” Ms. Baptiste said, adding that Chase ultimately closed her account last January, three months after she asked.

A spokeswoman for Bank of America said the bank always honored requests to stop automatic withdrawals. Wells Fargo declined to comment. Kristin Lemkau, a spokeswoman for Chase, said: “We are working with the customers to resolve these cases.” Online lenders say they work to abide by state laws.

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Combes Named to Lead Alcatel-Lucent Through Troubled Time

BERLIN — Alcatel-Lucent, the struggling French telecom equipment maker, on Friday hired a former Vodafone and France Télécom executive, Michel Combes, to lead the company through what might be a major downsizing.

Mr. Combes, 51, will take over for Ben Verwaayen, who had failed in four years to bring the equipment maker, created by the 2006 merger of Alcatel of France and Lucent Technologies of New Jersey, to sustained profit.

Mr. Combes left Vodafone last summer after agreeing to take over as chief executive of SFR, a French mobile operator owned by Vivendi. But the sudden departure of Jean-Bernard Lévy as Vivendi chief executive caused Mr. Combes to withdraw from the job.

In brief remarks to Alcatel-Lucent senior executives this morning in Paris, Mr. Combes outlined his plans to conduct a “listening tour” of employees, shareholders and other stakeholders before formulating a strategy for Alcatel-Lucent, which lost €1.4 billion, or $1.9 billion, in 2012 as sales fell 6 percent.

The company is in the midst of cutting 7 percent of its global workforce, some 5,500 of 76,000 jobs, by the end of this year.

In a statement, Mr. Combes said he would work to return Alcatel-Lucent to lasting profitability, something that has eluded the company since the trans-Atlantic merger.

“This is a company I know well and I look forward to succeeding Ben, working with the key international customers, and driving the business into sustained profitability for its customers, employees and shareholders,” Mr. Combes said in a statement.

But Alcatel-Lucent’s shares fell 1 percent in Paris trading following the announcement to €1.13. Alexander Peterc, an analyst in London at Exane BNP Paribas, said investors had been hoping for an executive with more of a proven track record as a cost-cutter. Mr. Peterc said that Mr. Combes should quickly identify which businesses are for sale.

The company has indicated that its optical submarine cable business and its enterprise business of selling equipment to large companies and organizations, are both on the block, Mr. Peterc said.

“Alcatel-Lucent is in a crisis situation and even just identifying which businesses it intends to sell would be a step forward that could save thousands of jobs,” Mr. Peterc said. “They have tried for six years since the merger and have spent €4 billion on restructuring to turn this company around and it hasn’t worked yet.”

Mr. Verwaayen, the former chief of the British operator BT, had integrated the Alcatel and Lucent product lines and organizations under a unified brand. When he announced on Feb. 7 that he would step down, he said in a conference call with analysts that the company was reviewing its entire business portfolio with an eye to possible asset sales.

In December, the company secured €1.62 billion in emergency financing from to buy more time. As a condition of the loans, the company pledged a percentage of revenues derived from future asset sales.

Martin Nilsson, an analyst at Handelsbanken in Stockholm, said that Mr. Combes would likely be forced to take major steps to expedite the resizing of the French company, including selling some businesses. The company employs only 12 percent of its work force, roughly 9,000 people, in France. The rest are spread around the world, mostly in the United States, China, India, the Netherlands, Japan and South Korea.

“I think irrespective of the C.E.O. they had chosen, this is the main challenge for Alcatel-Lucent at this time,” Mr. Nilsson said. “It has been seemingly very difficult for this company to reach sustained profitability. That is a very hard for any company to maintain.”

In another potential signal that Alcatel-Lucent may be entering a phase of greater reorganization, the company announced it had appointed Jean C. Monty, the former president and chief executive of Nortel Networks and of Bell Canada, as vice chairman of the board, a new position.

Philippe Camus, the Alcatel-Lucent chairman, said in a statement that Mr. Monty would be working closely with Mr. Combes to sort out the company’s future.

“We are fortunate to have such an experienced colleague to support Michel Combes in his new role,” Mr. Camus said. “I’m looking forward to working more closely with Jean and I’m convinced Alcatel-Lucent will benefit from his incredible knowledge of our business.”

Mr. Nilsson said that Alcatel-Lucent’s turnaround will not be easy. Selling money-losing businesses and cutting research and development spending to increase profit will also decrease Alcatel-Lucent’s base of sales and could limit its future growth potential by slowing the development of new products.

“It is very easy for tech companies to get into a downward spiral,” Mr. Nilsson said.

The company has declined to say which businesses it might sell. In 2012, sales of Alcatel-Lucent’s optical networking and wireless networking businesses fell by 20.3 percent and 17.2 percent, respectively, from 2011. The company blamed the declines on the rapid transition by U.S. operators to faster network gear based on Long Term Evolution technology, which reduced demand for Alcatel-Lucent’s second- and third-generation products.

This article has been revised to reflect the following correction:

Correction: February 22, 2013

An earlier version of this article misspelled, in one reference, the last name of the departing Alcatel-Lucent chief executive. He is Ben Verwaayen, not Verwaaven. It also misspelled the given name of an Exane BNP Paribas analyst. He is Alexander Peterc, not Aleksander. Additionally, an earlier summary for the article misstated the size of Alcatel-Lucent’s loss in 2012. It was €1.4 billion, not €1.4.

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Citi Changes Terms of Executive Bonuses

Citigroup responded to anger about the size of its executive pay packages on Thursday by changing the way it calculates the bonuses given to top executives.

Starting with last year’s compensation, a portion of the bonuses paid out to Citi’s executives will now be linked to the company’s performance relative to that of other big banks.

Citi has been a prominent symbol in the debate over the scale of executive compensation on Wall Street. The changes announced Thursday come less than a year after Citigroup shareholders voted against a $15 million pay package for Vikram S. Pandit, then the bank’s chief executive.

After that vote, Citi’s chairman, Michael O’Neill, took the reins of a five-member group last April assigned to review executive pay. “When our shareholders spoke last year about Citi’s compensation structure, we listened,” Mr. O’Neill said in a regulatory filing.

The change in the compensation structure was prompted by a desire to “more strongly connects compensation with performance,” Mr. O’Neill said in the filing.

Nell Minow, a shareholder advocate at GMI Ratings, said that “it’s a huge step forward from terrible, which is what it was.”

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DealBook: Anheuser- Busch InBev and Justice Dept. Ask for Halt in Antitrust Case

Anheuser-Busch InBev and the Justice Department said Wednesday that they were in talks to resolve antitrust concerns over the beer maker’s planned deal with Grupo Modelo, the maker of Corona beer and other brands.

The parties said they had jointly requested a temporary stay of an antitrust suit filed by the Justice Department while they work through the options.

Last year, Anheuser-Busch InBev had offered $20.1 billion to buy the rest of with Grupo Modelo that it did not already own, but the Justice Department filed suit on Jan. 31 seeking to block the deal on antitrust grounds. United States authorities had said the original Grupo Modelo merger proposal would increase Anheuser-Busch InBev’s control of the American beer market, enabling it to raise prices while reducing choice for local consumers.

Grupo Modelo is the third-largest beer company in the United States. Anheuser-Busch InBev is the largest, ahead of MillerCoors.

In response, Anheuser-Busch InBev last week offered broad concessions, saying it would sell the rights to Corona and other Grupo Modelo brands in the United States to Constellation Brands, one of the world’s largest wine companies, for $2.9 billion. The new agreement would also include the sale of a brewery close to the United States-Mexico border that is owned by Grupo Modelo, as well as the perpetual licensing rights to Grupo Modelo’s brands in the United States.

The Grupo Modelo deal is a vital merger for Anheuser-Busch InBev, which has been seeking greater access to emerging markets.

Despite robust competition from microbrewers and other brands, analysts say that the craft beer market makes up just 6 percent of beer sales.

The biggest in the market, Anheuser — brewer of Budweiser and Stella Artois — has raised its prices with regularity every year, with MillerCoors following suit, the Justice Department said.

In a statement on Wednesday, the companies involved in the talks and the Justice Department jointly requested a delay until March 19. Anheuser-Busch InBev and Modelo reiterated that the “revised transaction resolves the concerns raised” by the Justice Department’s antitrust suit.

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Nanotubes Seen as an Alternative to Silicon Circuits

SAN FRANCISCO — In the next decade or so, the circuits etched on silicon-based computer chips are expected to shrink as small as they can physically become, prompting a search for alternative materials to take their place.

Some researchers are putting high hopes on carbon nanotubes, and on Monday a group of researchers at Stanford successfully demonstrated a simple microelectronic circuit composed of 44 transistors fabricated entirely from the threadlike fibers.

The development, which was presented both as a paper and a working demonstration at a technical conference here, is the most striking evidence yet that carbon nanotubes may prove to be the material of the future when today’s silicon-based chips reach their fundamental physical limits.

I.B.M., which is one of the biggest proponents of nanotubes for microelectronic applications, has made clear its hope that carbon nanotube technology will be ready a decade from now, when semiconductors are expected to shrink to minimum dimensions of just 5 nanometers. But until now, researchers at universities and chip makers have succeeded in making only individual devices, like transistors, from carbon nanotubes.

The Stanford development is the first time a complete working circuit has been created and publicly demonstrated, suggesting that the material may indeed live up to its promise.

Silicon, a plentiful natural element which functions both as a conductor and an insulator, has already lasted decades longer than computer engineers originally expected, as generations of increasingly smaller transistors have been perfected. It is used by the computer chip industry to etch circuits much finer than the wave length of light, and engineers and scientists say they believe that the material will continue to scale down, at least until the end of the decade.

But sooner or later the shrinking of circuits made from the material will stop, ending the microelectronic era that has been defined by Moore’s Law, the 1965 observation by the Intel co-founder, Gordon Moore, that the number of transistors that could be placed on a silicon chip doubled at regular intervals.

The Stanford advance seems to hold promise for the belief that whenever the silicon era stalls, the scaling-down process will continue, and permit designers to increase power and capacity of computers far into the future.

The Stanford demonstration came during a session at the International Solid State Circuits Conference, held here annually. A graduate student, Max Shulaker, chose a wooden, human-size hand, connected to a simple motor and gear arrangement on a makeshift stand. Onstage, he threw a switch and the hand shook vigorously.

It was a simple demonstration, but the research group said its goal was to build an entire microprocessor from carbon nanotubes to confirm the potential of the material.

Besides their small size, carbon nanotubes use much less power and switch faster than today’s silicon transistors.

“The bottom line is you can expect an order of magnitude in power saving at the system level,” said Subhasish Mitra, an associate professor of electrical engineering at Stanford and director of the Robust Systems Group. That offers tremendous promise for effectively increasing the battery life in mobile consumer devices in the future, he said.

Other new materials and variations of silicon-based transistors are also being studied to see if they will shrink to smaller sizes. Intel, for example, last year began using a three-dimensional transistor called a FinFET. By turning the device on its side, the chip maker was able to pack transistors more densely on the surface of a chip.

“I’m not saying there is nothing else around,” said H.-S. Philip Wong, a Stanford electrical engineering professor. “It’s just a matter of who wins when you scale down to really, really small dimensions.”

The challenge of carbon nanotubes in their type state is that they form a giant “hairball” of interwoven molecules. However, by chemically growing them on a quartz surface, the researchers are able to align them closely and in regularly spaced rows. They then transfer them to a silicon wafer, where they used conventional photolithographic techniques to make working circuits.

The technological hurdle has been to make reliable circuits even when a small percentage of the wires are misaligned. The Stanford group stated it had perfected a circuit technique that made use of redundancy to work around the imperfectly formed wires.

Dr. Mitra said that “99.5 percent looks very nice on a PowerPoint slide. But when you’re talking about 10 billion things, .5 percent of 10 billion is a really large number, and that completely messes things up.”

Beyond microelectronics, carbon nanotubes are showing promise in commercial applications like rechargeable batteries, bicycle frames, ship hulls, solar cells and water filters, according to an article in the Feb. 1 issue of the journal Science.

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DealBook: Reader's Digest Files for Bankruptcy, Again

Executives at Reader’s Digest must be hoping that the magazine’s second trip to bankruptcy court in under four years will be its last.

The magazine’s parent, RDA Holding, filed for Chapter 11 protection late on Sunday in another effort to cut down the debt that has plagued the pocket-size publication for years. The company is hoping to convert about $465 million of its debt into equity held by its creditors.

In a court filing, Reader’s Digest said it held about $1.1 billion in assets and just under $1.2 billion in debt. It has provisionally lined up about $105 million in financing to keep it afloat during the Chapter 11 case.

This week’s filing is the latest effort by the 91-year-old publisher, whose magazine once resided on many American coffee tables, to fix itself in a difficult economic environment.

“After considering a wide range of alternatives, we believe this course of action will most effectively enable us to maintain our momentum in transforming the business and allow us to capitalize on the growing strength and presence of our outstanding brands and products,” Robert E. Guth, the company’s chief executive, said in a statement.

Reader’s Digest last filed for bankruptcy in 2009, emerging a year later under the control of lenders like JPMorgan Chase.

That reorganization substantially cut the publisher’s debt, and afterward the company worked to further shrink its footprint. It jettisoned nonessential publications in a series of deals, including the $180 million sale of Allrecipes.com and the $4.3 million sale of Every Day With Rachael Ray, both to the Meredith Corporation.

Most of the money from those transactions went to pay down a still significant debt burden. But the company remained pressured by what it described in a court filing as steep declines that still bedevil the media industry. Last year, the publisher began negotiating with its lenders, including Wells Fargo, about amending some of its debt obligations. That process eventually led to a “pre-negotiated agreement” with creditors, which will be put into effect by the bankruptcy filing.

This time, Reader’s Digest is hoping to spend even less time in court. Mr. Guth said in a court filing that the publisher aims to emerge from bankruptcy protection in about four months.

The company’s biggest unsecured creditors include firms represented by Luxor Capital. The Federal Trade Commission also contends that it is owed $8.8 million in a settlement claim.

Reader’s Digest is being advised by Evercore Partners and the law firm Weil, Gotshal & Manges.

Reader's Digest bankruptcy petition (2013) by

Declaration by Reader's Digest Chief Executive by

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S.E.C. Inquiry Into China Film Trade Unnerves Hollywood

LOS ANGELES — Hunkered down. Lawyered up. Looking over your shoulder for the prosecutors.

That is a not a comfortable way to do business. But it may become business as usual for those who have been struggling to make China both a customer for Hollywood films and a partner in the production of them.

Last March, word reached several studios of a confidential inquiry by the Securities and Exchange Commission and the Justice Department into possible violations of the Foreign Corrupt Practices Act by people or companies involved in the China film trade. Since then, executives and their advisers have been waiting for some public sign of the scope or focus of the government’s interest.

So far, there has been none.

But official silence has not kept the investigation from casting a chill over dealings between Hollywood and China. At a discussion in August sponsored by the Beverly Hills Bar Association, some panel members said deal-making had been complicated by the investigation. This concern was repeated in recent interviews by people involved in the Chinese-American film trade, though only on the condition of anonymity to avoid attracting the attention of regulators.

The legal concern is arising precisely as Chinese consumers — once presumed to be an easy audience for American-made films like “Skyfall” or “The Dark Knight Rises” — have been showing a preference for homegrown, Chinese-language blockbusters.

Those include the comedy “Lost in Thailand,” which surpassed American films to collect more than $200 million in China’s theaters after it opened last year, and the action-fantasy “Journey to the West: Conquering the Demons,” which had sales of $50 million in its first four days this month, according to the China Film Biz blog.

Asked last week about the corrupt practices inquiry, spokesmen for the Justice Department and the Securities and Exchange Commission declined to comment. All the major studios, in addition to DreamWorks Animation and Marvel Entertainment, which have extensive dealings in China, either did not respond or declined to comment.

Last April, people briefed on the inquiry said virtually every Hollywood company with significant dealings in China had been notified in prior weeks of the inquiry into possible violations of the Foreign Corrupt Practices Act, which forbids American companies from making illegal payments to government officials or others to ease the way for operations abroad.

Last week, a government official close to the inquiry, who spoke on the condition of anonymity in order not to prejudice the investigation, said the inquiry was continuing.

Bethany L. Hengsbach, a lawyer in Los Angeles versed in China dealings, said last week that she could not discuss the action because she had been retained by an involved party.

At the Beverly Hills Bar Association panel in August, Ms. Hengsbach spoke publicly of indications that federal officials were involved in “an industry sweep of the studios,” while warning that it was rare for such investigations “to turn up nothing.”

In the meantime, business has moved forward on projects like “Kung Fu Panda 3,” a Chinese coproduction from DreamWorks Animation, and “Iron Man 3,” which Marvel, a Walt Disney Company unit, has shot partly in China.

Thomas E. McLain, the chairman of the Asia Society Southern California, said he had not seen evidence that deals were being put on the back burner until the inquiry was resolved. But he acknowledged that the investigation was a topic of conversation at the society’s annual U.S.-China Film Summit. The event was held here last October, and drew some important figures from the Chinese film industry, including Han Sanping, the chairman of the China Film Group.

To keep Washington focused less on fears of corruption than on the possible benefits of film trade with China — where the growing box office reached $2.7 billion last year — the U.S.-Asia Institute, a policy-oriented nonprofit, has begun including movie operations among the stops made by lawmakers and their staff on institute-sponsored trips to China.

Kent A. Lucken, the institute’s president, said in an interview last week, “They need to see that there are American companies operating in China, fully regulated and under the law, conducting business, and thriving.”

Some who are involved in Hollywood’s entry into China are privately expressing hope that the Justice Department inquiry will be resolved before they run out of time on what one of them last week called a “ticking clock,” as Chinese consumers outgrow their receptivity to Hollywood fare.

The squeeze started last year when they began to spend more money on some homegrown films than on the American blockbusters.

But Michael W. Emmick, who was formerly a prosecutor with the Justice Department, and now focuses on the corrupt practices cases, among other things, in his private law practice, said a resolution could be a long time coming.

“This is still early in the game,” he said.

While Mr. Emmick is not representing clients in the investigation, and said he had no direct knowledge of it, he said that regulators sometimes use such industrywide inquiries as a “cost effective” way of putting an entire business sector — like the pharmaceuticals industry or the portion of the financial industry dealing in sovereign debt — on notice.

“Sometimes, they’re trying to send a message, to make companies keep their records, beyond the usual document retention policy,” Mr. Emmick said. He cautioned against characterizing the Hollywood action as a “sweep,” which he said might indicate imminent civil suits or arrests.

In a summary published this month, lawyers for the WilmerHale law firm said that new foreign corrupt practices enforcement cases by the S.E.C. and the Justice Department declined to just 27 last year, after spiking to a recent high of 90 in 2010, though violations of the act remain a stated priority for both agencies.

Looking ahead at the rest of the year, the lawyers predicted the “continuation and outcome” of industrywide government examinations of “financial institutions’ dealings with sovereign wealth funds, movie studios’ operations in China, and oil and gas companies’ business in Libya.”

Asked to elaborate on his expectations for the film industry investigation, Roger M. Witten, one of the authors of the report, in an e-mail last week echoed what those hunkered-down studio representatives have been saying for the last year.

“Unfortunately, I’m not in a position to talk about this on or off the record,” he said.

Brooks Barnes contributed reporting from Los Angeles, and Edward Wyatt from Washington.

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The Education Revolution: In China, Families Bet It All on a Child in College

Chang W. Lee/The New York Times

Wu Caoying studied English under her father’s watchful eye in 2006. She is now a sophomore in college. More Photos »

HANJING, China — Wu Yiebing has been going down coal shafts practically every workday of his life, wrestling an electric drill for $500 a month in the choking dust of claustrophobic tunnels, with one goal in mind: paying for his daughter’s education.

His wife, Cao Weiping, toils from dawn to sunset in orchards every day during apple season in May and June. She earns $12 a day tying little plastic bags one at a time around 3,000 young apples on trees, to protect them from insects. The rest of the year she works as a substitute store clerk, earning several dollars a day, all going toward their daughter’s education.

Many families in the West sacrifice to put their children through school, saving for college educations that they hope will lead to a better life. Few efforts can compare with the heavy financial burden that millions of lower-income Chinese parents now endure as they push their children to obtain as much education as possible.

Yet a college degree no longer ensures a well-paying job, because the number of graduates in China has quadrupled in the last decade.

Mr. Wu and Mrs. Cao, who grew up in tiny villages in western China and became migrants in search of better-paying work, have scrimped their entire lives. For nearly two decades, they have lived in a cramped and drafty 200-square-foot house with a thatch roof. They have never owned a car. They do not take vacations — they have never seen the ocean. They have skipped traditional New Year trips to their ancestral village for up to five straight years to save on bus fares and gifts, and for Mr. Wu to earn extra holiday pay in the mines. Despite their frugality, they have essentially no retirement savings.

Thanks to these sacrifices, their daughter, Wu Caoying, is now a 19-year-old college sophomore. She is among the growing millions of Chinese college students who have gone much farther than their parents could have dreamed when they were growing up. For all the hard work of Ms. Wu’s father and mother, however, they aren’t certain it will pay off. Their daughter is ambivalent about staying in school, where the tuition, room and board cost more than half her parents’ combined annual income. A slightly above-average student, she thinks of dropping out, finding a job and earning money.

“Every time my daughter calls home, she says, ‘I don’t want to continue this,’ ” Mrs. Cao said. “And I say, ‘You’ve got to keep studying to take care of us when we get old’, and she says, ‘That’s too much pressure, I don’t want to think about all that responsibility.’ ”

Ms. Wu dreams of working at a big company, but knows that many graduates end up jobless. “I think I may start my own small company,” she says, while acknowledging she doesn’t have the money or experience to run one.

For a rural parent in China, each year of higher education costs six to 15 months’ labor, and it is hard for children from poor families to get scholarships or other government financial support. A year at the average private university in the United States similarly equals almost a year’s income for the average wage earner, while an in-state public university costs about six months’ pay, but financial aid is generally easier to obtain than in China. Moreover, an American family that spends half its income helping a child through college has more spending power with the other half of its income than a rural Chinese family earning less than $5,000 a year.

It isn’t just the cost of college that burdens Chinese parents. They face many fees associated with sending their children to elementary, middle and high schools. Many parents also hire tutors, so their children can score high enough on entrance exams to get into college. American families that invest heavily in their children’s educations can fall back on Medicare, Social Security and other social programs in their old age. Chinese citizens who bet all of their savings on their children’s educations have far fewer options if their offspring are unable to find a job on graduation.

The experiences of Wu Caoying, whose family The New York Times has tracked for seven years, are a window into the expanding educational opportunities and the financial obstacles faced by families all over China.

Her parents’ sacrifices to educate their daughter explain how the country has managed to leap far ahead of the United States in producing college graduates over the last decade, with eight million Chinese now getting degrees annually from universities and community colleges.

But high education costs coincide with slower growth of the Chinese economy and surging unemployment among recent college graduates. Whether young people like Ms. Wu find jobs on graduation that allow them to earn a living, much less support their parents, could test China’s ability to maintain rapid economic growth and preserve political and social stability in the years ahead.

Leaving the Village

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U.S. Signals Support for Japan’s Yen Policy

MOSCOW — Ben S. Bernanke, the Federal Reserve chairman, strongly indicated on Friday that the United States did not intend to censure Japan for weakening its currency over the last several months, something that has aided Japanese exporters and angered its competitors.

Mr. Bernanke spoke in brief introductory remarks at a conference in Moscow of the Group of 20, a club of the world’s largest industrial and emerging economies.

At issue are stimulus programs backed by Prime Minister Shinzo Abe, who is also maintaining pressure on the Bank of Japan to keep interest rates near zero and flood the economy with money to support Japanese manufacturers. As a result, the yen has lost about 15 percent of its value against the dollar over the last three months, meaning products produced in Japan, like some Sony electronics or models of Toyota cars, are relatively cheaper.

Japan’s maneuver touched off fears that other countries and the European Union might follow suit in a so-called currency war, which has been the main topic of the Group of 20 meeting here, which runs through Saturday.

Initially, it seemed the world’s largest economies might agree on a firm statement at the end of the meeting to condemn a currency war, or competitive devaluations. This tactic is now widely seen as a beggar-thy-neighbor approach to creating growth that would ultimately harm a global recovery and is understood to be a cause of the lingering nature of the depression in the 1930s.

Mr. Bernanke, an advocate of the loose monetary policy in the United States known as quantitative easing, but also a student of the Great Depression, suggested a distinction should be drawn based on the intention of the monetary easing.

“The United States is using domestic policies to advance domestic agendas,” Mr. Bernanke said, speaking in a gilded and colonnaded chamber in the Kremlin to a round table of the world’s leading central bankers and finance ministers, in addition to President Vladimir V. Putin of Russia.

“We believe that by strengthening the U.S. economy, we are helping to strengthen the global economy as well,” Mr. Bernanke said. “We welcome similar approaches by other countries.” He said he endorsed an earlier statement at the meeting from Christine Lagarde, the director of the International Monetary Fund, who had said the risk of a currency war was “overblown.”

The global recovery has become unbalanced, Mr. Lagarde said in her statement to the group. Developed countries are swooning, while the emerging markets bounced back quickly, and yet such countries, including Russia, have been critical of the stimulus efforts of the developed nations. Japan’s devaluation of the yen is “sound policy,” she said.

“The international monetary system can function effectively if each country follows the right policies for their domestic economies,” she said, ultimately lifting the tide of the global marketplace, she said.

Ms. Lagarde did caution that too bald a ploy to prop up exports would not count as a justified weakening of a currency.

Because loose monetary policy encourages economic growth while also helping exports, critics of such tactics say these are distinctions without a difference.

Germany’s finance minister offered a contrarian view, saying that countries should not use easy money to avoid reducing their deficits over the long term, with measures like reducing government waste.

The Russian finance minister, Anton Siluanov, the host of the meeting, has also been pushing for a strong statement against competitive devaluations in the final communiqué from the forum, expected Saturday. Mr. Siluanov said in his opening remarks that a statement endorsing market mechanisms to set exchange rates would “find a place in the communiqué.”

That reiterated the position of a statement issued by the Group of 7 earlier this week. But it now seems a watered-down version is more likely.

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Media Decoder Blog: CBS Reports Record Operating Income for 4th Quarter

The CBS Corporation set records in the fourth quarter for operating income and adjusted operating income, the company said Thursday, but the results were short of some analysts’ expectations, causing its share price to fall slightly in after-hours trading.

The adjusted net earnings of $414 million produced earnings per share of 64 cents, also a new quarterly record for CBS, though some analysts had forecast a price as high as 69 cents.

CBS, which reported full-year results for 2012 as well as for the quarter ending Dec. 31, also announced an additional stock buyback of $1 billion. That brings the total amount of stock CBS has committed to repurchasing for the current year to $2.2 billion.

Over all, CBS demonstrated improved results in most financial categories and divisions. Revenues for the quarter rose to $3.7 billion, up 2 percent from $3.61 billion for the comparable quarter in 2011.

The company reported net income of $393 million, or 60 cents a share, up 6.2 percent from $370 million, or 55 cents a share, in the fourth quarter of 2011.

CBS cited increases in advertising revenue in the quarter, partly driven by political commercials in an election year. The CBS broadcast network continues to be the most watched in television and will likely beat all its competitors in the significant ratings categories for the current season.

The company also saw increases from subscription fees, driven by improvement in its cable networks. Showtime, the pay-cable channel owned by CBS, has experienced growth in subscriptions, thanks in part to its award-winning drama “Homeland.” CBS has pressed for years for increased compensation from cable systems for the rights to carry CBS broadcast stations, and Thursday the company reported that retransmission fees were also up for the quarter, part of 9 percent growth overall in affiliate and subscription fees.

Adjusted operating income before depreciation and amortization increased 6 percent, to $866 million from $814 million the year before. Operating income increased 12 percent to $726 million, up from $647 million.

For the full year CBS also produced some encouraging results. The company reported revenues of $14.09 billion, up 3 percent from $13.64 billion in 2011. Adjusted income increased to $3.49 billion from $3.16 billion. Operating income of $2.98 billion was up from $2.62 billion in 2011. All represented new highs for CBS.

One more troubling area was publishing. CBS’s Simon & Schuster unit experienced a decrease in revenues, to $215 million from $229 million in 2011. CBS attributed the drop to decreasing print book sales that could not be offset by increasing e-book sales.

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Stock Indexes End Mixed

The stock market lacked direction on Wednesday, as a slump in McDonald’s stock helped pull the Dow Jones industrial average below 14,000. Other major market indexes were marginally higher.

McDonald’s was among the biggest decliners in the Dow, losing $1.10, to $94, as investors worried that Americans were spending less on eating out after a rise in Social Security taxes at the beginning of the year. The government reported early Wednesday that spending by Americans barely grew last month.

Other fast-food companies also fell. Buffalo Wild Wings stock plunged $4.52, to $76.55, after its earnings fell short of analysts’ expectations. Burger King and Wendy’s also fell.

“Consumer spending is coming under pressure,” said Bryan Elliott, an analyst at Raymond James. “It’s the easiest way to save money; stay at home and cook.”

The Dow Jones industrial average fell 35.79 points, or 0.26 percent, to 13,982.91. The Dow is still up 6.71 percent so far this year and is just 182 points below the record close of 14,164 set on Oct. 9, 2007.

The Standard & Poor’s 500-stock index edged up 0.90 point, or 0.06 percent, to 1,520.33. The index climbed as high as 1,524.69 during the day, the highest since November 2007. It is up 6.6 percent so far this year.

The Nasdaq composite index rose 10.38 points, or 0.33 percent, to 3,196.88.

Investors sent General Electric and Comcast higher after G.E. agreed Tuesday to sell its stake in NBCUniversal to Comcast for $16.7 billion. G.E. said it would use up to $10 billion of the money to buy back its own stock. Shares of G.E. rose 81 cents, to $23.39. Comcast advanced $1.16, to $40.13.

Trading has been relatively quiet in recent days following a strong opening to the year.

“We’re cautiously optimistic on stocks,” said Colleen Supran, principal at Bingham, Osborn & Scarborough. “There is some indication that we could be continuing on this slow growth trajectory.”

Ms. Supran said investors should still be prepared for volatility in the stock market and not assume that the gains from January and so far in February will set the pattern for the rest of the year.

Strengthening the economy and creating jobs were major topics in President Obama’s State of the Union address Tuesday. Although the economy is healthier than it was four years ago, growth remains slow and unemployment high.

The government reported that spending at retail businesses and restaurants slowed last month after higher taxes cut paychecks. Retail sales growth slowed to 0.1 percent in January, from a 0.5 percent increase in December.

Among the stocks on the move, Groupon rose 28 cents, to $5.57, after the brokerage firm Sterne, Agee & Leach, raised its rating on the company to buy from neutral, citing the long-term potential for Groupon’s changing business model. The online deals company has lost almost three-quarters of its value since going public in November 2011 at $20 as revenue growth slowed.

Dean Foods, a milk producer, fell $1.69, or 9.19 percent, to $16.70, after its profit forecast fell short of Wall Street expectations.

As stocks have advanced this year, bond prices have slumped and interest rates have risen. On Wednesday, the price of the 10-year Treasury note fell 13/32, to 96 15/32, while its yield rose to 2.03 percent, from 1.98 percent late Tuesday.

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Media Decoder Blog: Netflix Teams With DreamWorks Animation to Create Cartoon Series

LOS ANGELES — Continuing a campaign to deepen its appeal to children, Netflix on Tuesday announced a partnership with DreamWorks Animation to create an original cartoon series.

The show, expected to make its debut on the streaming service in December, will be based on DreamWorks Animation’s coming movie “Turbo,” about a snail who gains the power of superspeed. The Netflix spinoff will be called “Turbo: F.A.S.T.,” which stands for Fast Action Stunt Team.

Netflix is gambling that “Turbo” will be a hit when it arrives in theaters on July 19. Although DreamWorks Animation has high hopes for that movie, it’s still anyone’s guess how audiences will respond; the company’s last film, “Rise of the Guardians,” was a box-office disappointment.

Ted Sarandos, Netflix’s chief content officer, said in a statement that DreamWorks Animation had “a long track record of creating incredibly successful characters.” DreamWorks Animation’s chief executive, Jeffrey Katzenberg, never shy about making a hard sell, called the partnership “part of the television revolution.”

A rival streaming service, Amazon’s Prime Instant Video, is racing to prepare its own original series, and has five children’s shows in development.

Netflix, which recently introduced the original series “House of Cards” to strong reviews from critics, has been working over the last several years to enhance its offerings for children. In 2011, it acquired the streaming rights to DreamWorks Animation’s movies and television specials. New films from Disney, Pixar and Marvel will move from Starz to Netflix in late 2016, following a deal the streaming company made with the Walt Disney Company in December.

Netflix said its members streamed more than two billion hours of children’s content in 2012, taking care to note that it is “always commercial free.” Netflix is also trying to enhance its appeal with multiple audience niches. A new horror series called “Hemlock Grove” is on the way, for instance. “Orange Is the New Black,” an original comedic drama from the “Weeds” creator Jenji Kohan, is aimed at women.

Children’s programming is particularly important to the company’s growth plans. Children are avid streaming consumers, particularly overseas, and Netflix can pitch itself to parents as a commercial-free alternative to television. Cartoons are also less likely to appear on the pirated-content sites that compete with Netflix for viewers.

For DreamWorks Animation, the agreement is part of an effort to diversify into television both as a way to grow and to avoid the sharp ups and downs of the movie business. The company’s shares rose 2.91 percent on Tuesday, to $16.63.

The company has two shows on Nickelodeon that are spinoffs of its “Madagascar” and “Kung Fu Panda” films; a third series built around “Monsters vs. Aliens” is in the works. DreamWorks Animation also has a series built around the film “How to Train Your Dragon” on the Cartoon Network, as well as a growing number of holiday-themed television specials.

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