Coffee-making break that's worth copying

It wasn't a joke. Starbucks closed 7,000 or so of its US stores on Tuesday from 5:30 to 9pm local time - so that employees could learn how to make coffee.

Howard Schultz, the company's founder who reassumed the CEO's role this year, says Starbucks has to get back to its roots if it is to stop a decline in customer visits to its stores. At a time when the outlook for the US economy is at best bleak, managements of other companies might do well to copy Schultz, shutting themselves up in their boardrooms and considering how to get back to basics.

Bank of America executives, for instance. When it completes its $4 billion acquisition of Countrywide Financial, the bank will originate about 25 per cent of all US home mortgages and control 17 per cent of the mortgage-servicing business. This market is in disarray because lenders forgot how to make the coffee. Giving mortgages to people with little or no credit violated the basics of the business, and led to the subprime mortgage disaster that helped drag the economy to its low state.

To restore trust - and stem the avalanche of defaults - Bank of America and its new partner should adjust the terms of as many of their mortgages as reasonable, helping customers to keep up with their monthly payments.

Goldman Sachs Group should take a break to consider whom it's in business for, its customers or its shareholders. While the answer is both, there should be a balance. Goldman Sachs has helped its stockholders by selling mortgage securities short as that market collapsed.

The firm's profit in its third fiscal quarter jumped 79 per cent and then two per cent in the fourth quarter, about the time rival banks and securities firms were reporting big losses from their mortgages.

Goldman Sachs customers, however, weren't well served. The firm had sold them the same securities it was betting against with its short sales.

Fannie Mae and Freddie Mac couldn't help alleviate the current mortgage crisis because in the past they too got overly concerned with pleasing stockholders. The companies, formed by Congress to keep the mortgage market liquid, manipulated their earnings to make their shares look attractive. Their government regulator then curbed the companies' ability to buy more mortgages, depriving the market of its two biggest buyers. The restrictions now are being lifted.

Off the beat

Drug manufacturers might take some time to think about the billions of dollars they spend on advertising that encourages the use of the most-recent, most-expensive products that may be no more effective than a cheaper alternative. Pfizer last week stopped TV commercials in which Robert Jarvik, who invented an artificial heart, plugged the Lipitor cholesterol pill. Jarvik has a medical degree but never practiced medicine.

Diverting advertising dollars to research might produce a breakthrough drug or two. That's what the companies were supposed to do - at a profit, of course.

Self-evaluation never hurts. Lock the door at 5:30pm and start talking. Plod on after 9pm if three and a half hours aren't enough time. Whatever it takes, learn to brew again.