Opening Bell: What Recession?

Super-rich keep raking it in; Are banks lying about Libor?; Bush flip-flops on global warming; etc.

Not everybody’s losing money these days. The New York Times has on A1 a story based on a hedge-fund industry trade mag’s list of top earners last year. John Paulson took in $3.7 billion with huge anti-housing bets, while two others, James H. Simons and George Soros, pulled in about $3 billion each.

Fire up the income-inequality lasers:

Their unprecedented and growing affluence underscores the gaping inequality between the millions of Americans facing stagnating wages and rising home foreclosures and an agile financial elite that seems to thrive in good times and bad. Such profits may also prompt more calls for regulation of the industry.

Even on Wall Street, where money is the ultimate measure of success, the size of the winnings makes some uneasy. “There is nothing wrong with it—it’s not illegal,” said William H. Gross, the chief investment officer of the bond fund Pimco. “But it’s ugly”…

“Like at the end of the Gilded Age and the Roaring Twenties, we are going the other way,” Mr. Gross said. “We are clearly in a period of excess, and we have to swing back to the middle or the center cannot hold.”

That’s our Quote of the Day.

The NYT quotes a think-tank type saying last year had the most unequal distribution of wealth since 1928, but doesn’t give us any numbers to back that up. Bloomberg reports that average pay for the top twenty-five was $892 million.

The paper also notes the pile of money made by Philip Falcone, the Harbinger Partners founder who just wrangled two seats on the NYT board. He earned $1.7 billion in 2007, about two-thirds of the entire Times Company’s value.

Of course, it ain’t too hard to make money when you’re guaranteed a 2 percent annual fee of every dollar you manage and get to keep 20 percent of any profits you happen to make.

Are banks lying about Libor?

The Journal on page one reports that questions are being raised about Libor, the key interest rate that measures how much banks are charging to lend to one another. The concern: that banks are outright lying about how much they’re paying for short-term loans in order to hide the extent of their woes from consumers and investors. Uh-oh.

No specific evidence has emerged that banks have provided false information about borrowing rates, and it’s possible that declines in lending volumes are making some Libor averages less reliable. But bankers and other market participants have quietly expressed concerns to the British Bankers’ Association, which oversees Libor, about whether banks are reporting rates that reflect their true borrowing costs, according to a person familiar with the matter and to government documents. The BBA is now investigating to identify potential problems, the person says.

Libor is critical because trillions of dollars of loan interest rates are pegged to it. Keeping it artificially low would actually help borrowers by keeping their interest rates down. The Wall Street Journal reports that Libor may be 0.3 percentage points lower than it should be.

This is a story to watch.

Worse living through chemistry

The papers report on a National Institutes of Health study that found a common chemical in plastic hurt animals at the levels that are found typically in humans.

The Journal puts the news on A2, and Big Chem immediately disputed the findings. The NYT in its C3 story wisely drops that bit of news to the very bottom paragraph.

The NYT leads its story with news that Canada will declare the chemical, called bisphenol A (BPA), toxic as early as today.

B.P.A. is widely used to make polycarbonate plastics, which are rigid and transparent like glass but very unlikely to shatter. Polycarbonates have many uses that pose no risk, like the cases of some iPod models. Because animal tests have shown that even small amounts of the chemical may cause changes in the body, however, researchers have focused on food- and drink-related applications of B.P.A., like the popular Nalgene brand beverage bottles.

“If the government issues a finding of toxic, no parent in their right mind will be using products made with this chemical,” said Rick Smith, the executive director of Environmental Defence, a Canadian group that has been campaigning against B.P.A. “We will be arguing strongly for a ban on the use of this chemical in food and beverage containers.”

The Los Angeles Times, which broke a story last year that the government was using a conflict-ridden company as the basis for its approval of the chemical, says the NIH study reversed course and found “some concern” that kids and unborn babies could be hurt.

Good money after bad

The NYT on A1 digs deeper into the Senate’s housing bill, looking at the array of tax breaks it hands out to corporations. The carmakers get tens of millions, as do the airlines. Retailers may be included for some reason, and as has been reported, the homebuilders make out like bandits.

That makes no sense, of course, because subsidizing the homebuilders just means more homes, which is not exactly what the country needs right now—or anytime in the next couple of years at minimum—especially in a bill called the Foreclosure Prevention Act.

The House looks unlikely to go along with the tax breaks, at least in their current form. But its version has its own problems, including a $7,500 tax credit for all first-time homebuyers, something the Times says gets big ups from the National Association of Realtors, which is like getting an endorsement from Mr. Bean.

So the government’s going to incentivize taxpayers to play catch the falling knife in this market? If home prices have only fallen half as much as they’re going to, as many predict, that $7,500 will be wiped out quickly.

All’s well for Intel

Tech-industry bellwether Intel had a good-news earnings report yesterday, saying “it had yet to feel the effect of the credit squeeze that has led to big writedowns by banks and heightened fears of a US recession,” the Financial Times reports.

The chipmaker saw profits dip 12 percent on the quarter on an accounting charge, but said demand was good (Bloomberg and the NYT say sales were up 9 percent) and issued forecasts that topped analyst estimates. Part of the upside is due to the woes of rival Advanced Micro Devices, the NYT says on C2.

The WSJ on B5 says Intel unloaded an unprofitable flash-memory business, which caused a $275 million write-down that hurt otherwise solid earnings.

Merck ghost-writes drug studies?

The WSJ and NYT say a Journal of the American Medical Association report (the WSJ calls it “reports”) that drugmaker Merck wrote research studies and had big-name doctors slap their names on them, including ones on Vioxx, the stroke-inducing drug that will cost it nearly $5 billion in a class-action settlement.

The NYT on C1 quotes the study’s author as saying it “almost calls into question all legitimate research that’s been conducted by the pharmaceutical industry with the academic physician.”

The Washington Post has the best-written story and puts it on A1:

Two teams of researchers with access to thousands of documents gathered for lawsuits over the painkiller Vioxx allege that Merck waged a campaign of deception to promote its drug, moving slowly to warn of possible hazards while at the same time dressing up in-house studies as the work of independent academic researchers.

The reports in today’s Journal of the American Medical Association in effect accuse one of the world’s biggest pharmaceutical makers of various forms of scientific fraud.

Bush gets global warming, joins human race

The papers say Bush will switch stances on global warming, and the WSJ says on A1 he will propose today to stop emissions increases by 2025. That’s a lot longer away than some other plans’ aims.

The stance, set to be unveiled Wednesday at a White House speech, indicates Mr. Bush’s willingness to grapple with the growing legislative debate over global warming. It marks an acknowledgment by the Bush administration that the U.S. likely will adopt some sort of broad new legal system to curb greenhouse-gas emissions in coming years. Mr. Bush has opposed comprehensive legislation to curb emissions.

But like an increasing number of utilities and manufacturers, he is aiming to join the discussions in hopes of shaping the debate and creating a system that won’t be too costly to industry or consumers.

Let them eat goods and materials

In economic news, the producer-price index shot up a higher-than-expected 1.1 percent in March on food and energy costs, Bloomberg reports. The index is important because it shows how much businesses are paying for goods and materials—higher costs mean they have to eat them and see profit margins fall, or try pass them onto consumers in the form of higher prices.

Year over year, producer prices were up 6.9 percent (2.7 percent, excluding food and energy).

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.