Credit Crisis and Fox As Well As Art Investment


Theo LEGGET: Welcome to Business Brief. I’m Theo Legget. A one hundred billion dollar plan to counter the credit crunch, well that’s what some of the world’s biggest banks expected to discuss on Monday. We’ll be hearing one news corp. set to go head to head with CNBC. And why some investors are indulging in a sense of the artistic. First, though some of the worlds biggest banks are believed to be working on ambitious plan to ease the growing credit crunch, in the wake of the sub-prime mortgage crisis in the United States, banks have become weary about who they lend to and have pushed up the cost of borrowing. That’s making life difficult for businesses which need to borrow large sums of money. And under the new plans, the banks will pull together billions of dollars and created a fund that would buy out many risky investments including securities backed by sub-prime mortgages. Kate Noble reports.


Kate Noble: These talks reflect the serious concern which remains within the financial industry about the impact of the credit crisis. The ideas to find a workable solution before the situation gets out of control, with that in mind the US treasury department brought together a group of big banks for discussions and it’s widely believed they could announce the creation of a special 100 billion dollar superfund as early as Monday. The money would then be invested in securities that no one is buying at the moment, mostly because they are seen as too risky and often with too much exposure to sub-prime mortgages. Citigroup is reportedly pushing for the creation of the fund which would serve as a safety net for certain bank investments which have been hit hard by the credit crunch. The fear is if things get any worse, they could be a sharp panic sell off of those assets, that would mean millions, or possibly billions of dollars in loses for the banks. JP Morgan and Bank of America are also said to be involved in the discussions and Britain’s stock market regulator has reportedly recommended UK banks participate in the fund. HSBC and Barclays are said to have been approached. But some firms are thought to be resisting the idea, arguing that Citigroup is looking for help in bailing out some of its SIV assets and they say that an industry wide effort is unnecessary. Still US treasury secretary Henry Paulson is reportedly in favor of creating the superfund. If the fund is announced, it will be a rare example of big companies putting together a plan to avert an international financial crisis.


Theo LEGGET: Kate Noble reporting. Now here at the BBC we think business news is exciting and can be entertaining. But we’ve never talked to up quite this way.


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Theo LEGGET: Well that in case you were wondering is a trailer for Fox Business Network, a new venture from Rupert Murdock’s news corp. which starts broadcasting on Monday. It’s being pitched as a direct rival for CNBC, the cable channel that currently dominates that market for TV business news in the United States. The launch comes hot on the heels of news corp. successful bid for control of Dow Jones and its flag shipped title the Wall Street Journal. So what is Rupert Murdock trying to achieve? A question I put to ponder a bit of Mediatech Capital Partners.


Porter Bibb: Rupert Murdock has had an eye on business, news, and advertising for a long time and has watched CNBC over the last seven years to become the most profitable unit of NBC Universal. Most analyst believe that CNBC makes between 5 and 600 million dollars pre-taxed income every year and is growing at a about 10 or 12% rate every year.


Theo LEGGET: And that’s quite remarkable because CNBC is very much a niche market, isn’t it? It has a small audience of high net worth individuals.


Porter Bibb: It is strictly a niche market. It surprises people when they pick up the audience ratings and realize that fewer than a quarter of a million people are watching CNBC at any given time.


Theo LEGGET: So doesn’t that mean that if Mr. Murdock is starting up his own business channel it could be bad news for CNBC?


Porter Bibb: Well they’re really apples and oranges. Murdock is putting out a presentation that suggests they are going head to head with CNBC and that gives him the ability to scale up the cost per thousand advertising rates close to the onerously expensive rates that CNBC gets because of its very elite audience. He is going, however, much broader and is seeking a mass market. I would call Fox Business News a personal finance network rather than a business network. He simplifies it and says CNBC goes after Wall Street; we are going after Main Street.