Millionaire ranks cut by 19%

Postado por Blog To Teens | 09:11 | 0 comentários »

The global financial crisis took a heavy toll on the world's wealthiest individuals last year, with the number of millionaires falling by a record amount, according to a report released Thursday.

The number of high net worth individuals, those with assets of $1 million or more, plummeted by a record 19.5% in 2008 to 8.6 million worldwide, a survey by Merrill Lynch and Capgemini showed. In 2007, the millionaire ranks totaled 10.1 million worldwide.

Millionaires saw the value of their collective assets cut to $32.8 trillion, down 19.5% from $40.7 trillion in 2007, as world stock markets and property values plunged. According to the survey, last year's losses wiped out all of the gains from the previous two years.

"2008 ushered in an unprecedented global downturn," the report said. "What started as a financial crisis soon expanded into the larger economy, affecting mature and emerging markets alike."

The number of millionaires in the United States fell 18.5% last year to 2.5 million. But the U.S. remains the single largest home to millionaires, accounting for 28.7% of the global millionaire population, the report said.

Ileana van der Linde, principle of Capgemini's wealth management practice, said millionaires with exposure to the financial services industry and commodities, particularly crude oil, were among the biggest losers last year.

However, "there was no asset class that really was safe in 2008," she added.

While the world's population of millionaires is still concentrated in the United States, Japan and Germany, the survey showed that the ranks are beginning to shift to other regions.

For example, China now has more millionaires than United Kingdom, the report said. The firms now expect millionaires in the Asia-Pacific region to outnumber those in North America by 2013, in part because of strong economic growth in China.

Millionaires in Brazil, another developing economy, also moved up on the list despite last year's turmoil. Brazil surpassed Australia and Spain to reach 10th place among millionaire populations globally.

Looking ahead, millionaire's financial wealth is forecast to grow to $48.5 trillion by 2013, advancing at an annualized rate of 8.1%. This compares with annualized growth of 10.4% from 2005 to 2007.

"We're going to have slower growth over the next two years but it will ramp up again," van der Linde said. "China and the U.S. are going to be the engines of growth going forward."

Still, the world's millionaires remain defensive when it comes to their investments. The report showed that millionaires have half of their investment portfolios in cash and fixed-income instruments.

"Investors were looking for safety in a multitude of ways last year," van der Linde said. "A lot of trust and confidence was shaken."

Manufacturing rebound in the works

Postado por Blog To Teens | 09:22 | 0 comentários »

A key measure of manufacturing activity rose for the fourth straight month in April, suggesting the sector may be stabilizing even though the indicator has been at the contraction level for 15 months in a row, a purchasing management group said Friday.

The Tempe, Ariz.-based Institute for Supply Management said its manufacturing index rose to a reading of 40.1 in April from 36.3 in March. A reading below 50 indicates manufacturing activity is shrinking.

Economists had forecast a reading of 38.4, according to consensus estimates gathered by Briefing.com.

"The decline in the manufacturing sector continues to moderate," said Norbert Ore, chair of the ISM's survey committee, in a statement. "This is definitely a good start for the second quarter."

The index, which fell to an all-time low in December, has risen every month in 2009 and is gradually approaching 41, which is the level typically associated with a recession. The index has been below 41 since October.

John Silvia, chief economist at Wachovia Economics Group said the index "suggests we have come off the bottom but are still in recession."

The employment index, which rose 6.3 points to 34.4, remained below breakeven 50, which signals further job losses in manufacturing, according to Silvia.

"Manufacturers will continue to cut jobs as a reflection of the current recession and lower growth expectations for future consumer demand," Silvia wrote in a research report.

While most of the components that make up the index remained in recession territory in April, the report contained signs that manufacturing activity is stabilizing.

The index also showed that new orders and production increased in April compared with March.

Manufacturers reported that customer inventories are "too low" for the first time since July 2008, according to the ISM.

Consumer confidence gets a boost

Postado por Blog To Teens | 08:51 | 0 comentários »

A key index of consumer confidence rose in April to its highest this year with some expectations the economic downturn may be reaching a bottom.

The Conference Board's sentiment index climbed to 39.2 this month from an upwardly revised 26.9 in March. The April reading, which was above economists' median expectation for a reading of 29.8, was the highest since November 2008.

The increase in the index was the highest seen since November 2005, in the aftermath of Hurricane Katrina.

The original March reading was 26, which was near an all-time low for the index, which dates back to 1967.

The survey's expectations index jumped to 49.5 this month from 30.2 in March.

"The sharp increase in the expectations index suggests that consumers believe the economy is nearing a bottom, however this index remains well below levels associated with strong economic growth," said Lynn Franco, director of the industry group's Consumer Research Center.

Consumers assessment of present-day conditions improved moderately, with those claiming business conditions are "bad" easing to 45.7% from 51%, while those claiming business conditions are "good" rose to 7.6% from 6.9%.

Consumers expecting business conditions to worsen over the next six months declined to 25.3% from 37.8%, while those expecting conditions to improve rose to 15.6% from 9.6% in March.

GM to pull the plug on Pontiac

Postado por Blog To Teens | 09:09 | 0 comentários »

General Motors is preparing to announce that the Pontiac car brand, once marketed as GM's "Excitement division," will be killed off, according to a source familiar with the decision.

An official announcement is expected Monday. GM spokesman Jim Hopson declined to comment on Pontiac's fate, saying the automaker has no announcements to make at this time.

In its most recent "viability plan" - which will be updated to reflect this new brand cut - Pontiac was not named as one of GM's four "core brands." Those are Chevrolet, Buick, GMC and Cadillac. But Pontiac was also not to be killed or sold off, as were Saturn, Saab and Hummer.

Instead Pontiac was to continue on as a "niche brand" focusing on just a few models.

That was already a step down for Pontiac which in 2008 was the third-best selling brand behind Chevrolet and GMC. That year the brand sold more than Cadillac and twice as many vehicles as Buick. Cadillac is a high-profile - and high profit - luxury brand while Buick is a hugely popular brand in China and is seen as resurgent in the United States.

In 2005, GM (GM, Fortune 500) vice-chairman Bob Lutz referred to Buick and Pontiac as "damaged brands" during a conference at the New York Auto Show. That set off speculation that one or both of these brands was doomed.

With a focus on affordable luxury, Buick's hopes have been revived by models like the popular Enclave crossover SUV. Improvements in Buick Quality, which earned a top ranking in a recent J.D. Power dependability survey and a public acknowledgement by President Obama, have also helped Buick keep its place in the shrinking pantheon of GM names.
Pontiac performance

"There was a time, a long way back now, when you knew exactly what Pontiac stood for," said Kevin Smith, editorial director for the automotive Web site Edmunds.com.

The GM unit's identity as a performance brand dates back to the late 1950s and early 1960s. Pontiac cars were designed with wider bodies for cosmetic reasons and the wheels were pushed out to match. This "wide-track" design became a selling point and was advertised as giving Pontiac cars a distinct cornering advantage over other cars.

But the idea of Pontiac as a performance brand was solidified in 1964 with the creation of the Pontiac Tempest LeMans GTO. That car quickly evolved into, simply, the GTO and is often credited with creating a new class of American car, the muscle car.

Under Lutz, plans were formed to bring back some actual excitement to the Pontiac brand, which hadn't seen much since the Firebird - a flashier Pontiac version of the Chevrolet Camaro - ended production in 2002.

One strategy floated for Pontiac was to sell only, or mostly, rear-wheel-drive cars. That would set it apart from other GM divisions, and most cars sold in America. Rear-wheel-drive is associated with performance brands like BMW.

Unfortunately, the re-introduction of the Pontiac GTO name on a performance coupe imported from Australia didn't result in big sales. So far, the Pontiac G8, a rear-wheel-drive four-door sedan also imported from GM's Australian Holden division, hasn't been a sales success either, despite good reviews.

Pontiac's most popular products remain the G6, a decent but unexciting midsize car available as a sedan, coupe or convertible, and the Vibe, a small wagon shared with Toyota, which sells it as the Matrix.

Any plans to return Pontiac to the heavy-horsepower days of the '70s ended as gas prices rose and Congress prepared stricter fuel economy rules for the industry.

Those pressures resulted in GM quietly introducing the Pontiac G3, which had been sold in Canada only. Once again, Pontiac was selling a rebadged Chevrolet product, this time the Korean-built Aveo subcompact car.

Pontiac's lack of focus as a brand may finally have brought its demise, said Smith. "That's just death in a marketplace where there's so much competition and so much quality," he said.

Pontiac's current role in GM seems mostly to be to support GMC and Buick by providing a brand under which Pontiac-Buick-GMC dealers could sell non-luxury cars, filling out what then becomes a full-line showroom.

The brand-channel strategy now makes it easier for GM to phase out the brand because it would cause less harm to dealers, independent business protected by strong state franchise laws. When GM phased out Oldsmobile in the early 2000's, it cost GM more than $1 billion to buy out the contracts of Oldsmobile dealers who were left with nothing to sell.

This time, most Pontiac dealers will have other products to sell.

SEC to mull 4 short-selling rules

Postado por Blog To Teens | 08:00 | 0 comentários »

U.S. securities regulators will consider about four proposals to restrict short selling, a type of investing blamed for accelerating the severe downturn in financial services stocks.

Proposals the SEC will consider at its Wednesday meeting include the restoration of the "uptick rule," which allowed short sales -- a bet that a stock's price will fall -- only when the last sale price was higher than the previous price, the chief of the Securities and Exchange Commission said Monday.

"We are going to put forward about four different proposals, and one of them does include the original (uptick rule)," SEC Chairwoman Mary Schapiro told reporters on the sidelines of the Council of Institutional Investors conference.
0:00 /4:49Do-it-yourself investing

"There are different modified versions because the markets have changed a lot, even since 2007." Schapiro said other proposals on the table include a so-called "bid test" and a "circuit breaker."

Schapiro did not provide details on how the bid test or circuit breaker could work and did not elaborate on the fourth proposal. One source familiar with the matter said the SEC bid test proposal would only allow shorting at a price above the highest available bid.

The source wished to remain anonymous because the proposals are still being drafted. The proposal for the updated version of the uptick rule would apply to all stocks, said the source who wished to remain anonymous because the proposals are still being drafted.

The SEC also is crafting two circuit breaker proposals: One would temporarily halt short sales of a stock if the stock has already fallen by a certain percentage, the source said.

The other would trigger the application of an uptick rule or bid test after the price of a stock experienced a decline by a certain percentage, such as 10%, the source said.

This version of the circuit breaker is similar to a suggestion put forth by the operators of the top U.S. exchanges, the New York Stock Exchange, the Nasdaq Stock Market and BATS exchange. SEC staff are still drafting proposals, the source and a second source familiar with the proposal said.

The second source cautioned that the current draft could go through several more adjustments before Wednesday's meeting. In a short sale, an investor borrows stock and sells it in the hope that its price will fall.

If the price does drop, the seller profits by buying the stock back at the lower price and returning the borrowed shares. In 2007 the SEC abolished the uptick rule after studies concluded that advances in trading strategies had rendered it ineffective.

At the time, the SEC's action did not trigger cries from investors and lawmakers. However, as stocks of big investment and commercial banks sank over the past year, some members of Congress started pressuring the SEC to restore the rule.

Some short sellers have questioned the need for the reinstatement of the rule, saying they are being unfairly targeted. Two bills to reinstate the uptick rule have been introduced in the U.S. House of Representatives and a similar bill has been introduced in the U.S. Senate.

"Abusive short selling has gone unaddressed for too long and simply must end if the SEC is to restore investor confidence in the markets," six Senators including Democrats Carl Levin and Edward Kaufman and Republican Arlen Specter, said in a recent letter to Schapiro.

"In the absence of a strong message from the SEC, we believe Congress will need to consider legislation that directs the SEC to do so," the Senators said in a letter dated April 1.

Billionaire investor George Soros said Monday that he favored a reintroduction of some kind of rule to restrict short selling. "You do need to provide some protection against effectively the bear raids," Soros told Reuters Financial Television in an interview.

A final rule will not be adopted at this week's SEC meeting. The agency will still need to solicit public comment on its proposals and hold another meeting to decide on final short sale restrictions as part of its normal rulemaking process.

When asked if she favored restoring the uptick rule, Schapiro said she was anxious to read the comments.

Earlier in a speech to institutional investors, Schapiro said the SEC would convene a roundtable later to discuss the proposals and potentially some broader issues on short selling.

March auto sales plunge

Postado por Blog To Teens | 17:25 | 0 comentários »

U.S. auto sales tumbled sharply in March, although officials with some of the companies said they hope the worst of the downturn is behind them.

Overall industry sales tumbled 37% in March, according to sales tracker Autodata. The decline was broadbased, as sales at U.S. automakers General Motors, Ford Motor (F, Fortune 500) and Chrysler LLC and Japanese rivals Toyota Motor (TM), Honda Motor (HMC) and Nissan (NSANY) all fell at least 36% from year ago levels.

All the major automakers posted gains from January and February, and all but Toyota topped Edmunds.com's sales forecasts. March is typically a month that sees a strong pick-up in sales.

The seasonally-adjusted annual sales rate, or SAAR, came in at 9.86 million vehicles, well ahead of the just over 9 million January and February rate in each month, and much better than forecasts of below 9 million vehicles.

But even with the better than expected sales, it was still the worst March for the industry in the 34 years that the sales have been tracked on that basis.

Still the fact that sales turned out better than expected was encouraging for industry executives who have been battered by one piece of bad news after another. While they weren't ready to declare a definite bottom for auto sales, they said an increase in sales in late March is giving them some hope for the coming months, even as two of the major automakers, GM (GM, Fortune 500) and Chrysler LLC, battle to avoid being forced into bankruptcy.

Mark LaNeve, vice president for GM North America vehicle sales, said sales wound up being better for every major manufacturer than what had been widely expected even two weeks ago. Chrysler Vice Chairman Jim Press also said he saw early signs of a recovery in the battered market.

"The market is starting to show small signs of life," Press said in Chrysler's statement. "It's too early to see a trend, but spring shows signs of hope."

Emily Kolinski Morris, Ford's senior U.S. economist, said that some recent readings that show a slowing of the nation's economic decline have the company hopeful that industrywide sales might reach bottom in the next three or four months.

"We think we're getting close to turning the corner," she told analysts and journalists on the company's sales call.

Industry analysts agreed that March numbers were a bit better than expected but they were more reluctant to predict any quick turnaround.

"It's too soon to call this the bottom," said Jesse Toprak, industry analyst with Edmunds.com.

Efraim Levy, the auto equity analyst for Standard & Poor's, wrote in a report Wednesday afternoon that the year-over-year declines may start to show signs of improvement in the coming months, but that he does not expect "an uptick in industry demand before fourth-quarter 2009 at the earliest."

Ford officials even conceded they aren't banking on any immediate sales rebound, and that they are keeping production of new vehicles in check.
0:00 /0:55Honda offers employee buyouts

"There's no point in trying to get ahead of ourselves," said George Pipas, Ford's director of sales analysis. He said Ford's efforts to keep inventories in line with lower demand are "literally almost a day-by-day process."

There are huge challenges for the industry, first and foremost the bankruptcy clock ticking at GM and Chrysler.

President Obama announced Monday that a government task force overseeing $16.4 billion in loans already given to the two companies had found their turnaround plans not viable.

GM has 60 days to try to reach agreements on deeper cost cuts with its creditors and unions, while Chrysler has only 30 days to work out a deal with Italian automaker Fiat or it could be forced out of business.

Obama vowed to provide government help for GM even if it is forced into bankruptcy, and he announced the government would stand behind warranties at the two companies.

GM officials think that, despite the bankruptcy threat, car buyers were more assured than scared by President Obama's remarks on Monday. The company said it had a sales bump in the last two days of the month.

The president also endorsed a proposal now in Congress, a so-called "cash for clunkers" program, to provide incentives to people who trade in older gas guzzlers for more fuel efficient cars. Officials with Ford and GM said that could spark sales of 1 million to 1.5 million vehicles later this year, depending on the details.

Still, the sales numbers from each company were a sign of how far demand for vehicles has fallen from year-ago levels, and how far the industry needs to rebound to get back to what are considered normal sales.
Sharp drops from March '08

GM reported that sales fell 45% from year-ago levels. Its three brands which may be dropped in a restructuring of the company - Saturn, Saab and Hummer - each reported much bigger sales declines than GM's overall drop, the worst being a 76% plunge in Hummer sales.

Ford reported a 41% drop in sales from a year ago and its declines were broad based. Sales fell more than 30% across all the company's brands and vehicle types. The biggest drop was a 73% plunge in sales of SUVs.

Chrysler's sales were down 39% from a year ago, but the company wound up selling more than 100,000 vehicles in a month for the first time since September.

Toyota Motor reported a 39% drop in sales, while U.S. sales at Honda Motor fell 36%. Nissan's sales fell 38%.

Ford also disclosed that first quarter production ended 26,000 vehicles short of its most recent forecast. And production cutbacks are not over at Ford, as it halted production at assembly plants in Kansas City and Chicago for the next three weeks.

The Kansas City plant is one of two that make its F-150 pickup, Ford's best-selling vehicle. The Chicago plant makes the Ford Taurus as well as Mercury and Lincoln vehicles. Ford spokeswoman Angie Kozleski said the shutdowns do not reflect a change in second quarter production targets, however.

High-yield bonds: Appetite for risk

Postado por Blog To Teens | 09:06 | 0 comentários »

Like most investments with higher credit risk, the high-yield bond market took a huge hit in 2008 as investors fled to quality. But with the sector recently seeing its deepest discount ever - and even rallying a bit - some say it's time to test the waters again.

"The values are just extraordinary," says Martin Fridson, CEO of Fridson Investment Advisors and a high-yield bond specialist. "I think it's an opportunity you're not going to see very often in your lifetime."

Fridson says the spread between high-yield bonds and treasuries over the last few months has been far beyond anything seen before. The option adjusted spread, which measures the difference, is about 17.6 points, according to Merrill Lynch data. A year ago, the spread was 8.2 points.

Lower valuations mean more upside, Fridson says, but they're also the reason for investors' hesitations. Default rates will likely run higher than during past recessions, he notes, partly because the quality of the sector has deteriorated since the last low cycle.

Lawrence Jones, associate director of fund analysis at Morningstar, said some experts he's spoken with expect default rates, which have run between 2% and 3% the last few years, to reach between 10% and 15%.

"I see the opportunity," Jones says, "but almost everyone who's being straight with you will say there's a lot of risk."
You may know them as "junk"

High-yield bonds, or "junk" bonds, are defined by the industry as a bond with below a Standard and Poor's BBB- rating. They have a higher risk of default (failure to make a scheduled interest or principal payment), and are subject to greater price swings than more highly rated bonds. But on the upside they also have a higher rate of interest.

Jones suggests making high-yield bonds a small part of your portfolio through bond funds run by experienced managers and research teams investing in better-quality high-yield securities. A fund provides the advantage of a manager's expertise and also the diversification that's needed to limit the risk of default in any single investment. And high-yield bonds can be highly illiquid, i.e., hard to unload if they're thinly traded, but a fund gives you the security of getting in and out when you want.

A small and relatively new entry, which has benefited through conservative investing, is the Intrepid Income Fund. It isn't limited to high-yield - it also holds investment grade and convertible bonds. Morningstar doesn't rate the fund, but it calculates its year-to-date returns at 5.65%, beating out the high-yield sector average of 3.38%. One-year returns fell 7.05% but were well above the category's drop of 21.14%.

Intrepid Income has a greater percentage of its assets in higher-quality debt than is typical for the high-yield bond category, says Jones. About 20% of its assets are in cash, according to Morningstar, which he believes tempered the fund's 2008 loss because the cash held up as the high-yield bond market collapsed. But the fund is not quite two years old, Jones notes. "It's not clear to me whether they're good fund managers or lucky managers," he says.
0:00 /1:19'Should I buy muni bonds?'

Of course fund managers Jason Lazarus and Ben Franklin think there's more than luck involved. They say they can spend more than 60 hours researching one name for their fund, which has $37.5 million in assets under management.

"We like to pride ourselves on not being economists," says Franklin. "We're bottom-up fundamental research analysts."

The fund has only about 30 names in its portfolio and holds concentrated positions in each one. The concentrated positions do, however, reduce diversification. "The reason that we do that is because we can be very confident in the few names that we do own," Lazarus says.

In selecting investments, they consider credit metrics, such as leverage ratio. They look for companies that can cover their interest expenses by a healthy margin to make sure they're going to get repaid in any climate. And while some funds anticipate defaults in their portfolios this year, Lazarus and Franklin expect to avoid these landmines.

The bulk of their work is qualitative, as they try to determine the quality of management, direction of the company, and how cash flows are going to trend over the course of a business cycle. They look for businesses they think will do well in any environment, and they like bonds with short durations (less than five years). Longer-duration bond prices generally fluctuate more with interest rate changes, they say. It also allows them to be more certain in their short-term outlook.

Because Intrepid Income is a small fund, Lazarus and Franklin can invest in issues with about only $150 million in bonds outstanding, while a larger fund wouldn't be able to establish a meaningful position in an issue that small. Fridson says it's hard for large funds to avoid looking like an index. Smaller funds may be able to underweight the less attractive industries, which is harder to do as a fund gets larger.
What catches Intrepid's eye

Here's how their thinking plays out in some of Intrepid Income's representative holdings: (Note that individual investors shouldn't invest in any single junk bond because the risk is too great.)

Silgan Holdings: manufactures metal and plastic containers for companies like Campbell's.

"We like seeing a company that has recurring revenues that we can trust even in a down market," says Franklin. "Many of these companies like Silgan, their operating margins aren't huge, but they're sufficient and we think they'll be able to survive in any situation."

Phillips Van Heusen: one of the world's largest apparel companies.

"We like them because they actually can almost cover their entire amount of debt with cash alone," Lazarus says. "And while we believe they probably won't do that, they may do a strategic acquisition."

Prestige Brand Holdings: makes and sells household names like Comet, Clear Eyes, and Chloraseptic.

"They don't manufacture anything themselves," says Franklin. "They outsource everything. They have almost zero capital requirements to put back into the business. That allows them to use all their free cash flow for acquisitions or paying down debt."

Rent-A-Center: runs a rent-to-own business.

"That bond actually has a one-year to maturity, which is definitely a feature we like," says Lazarus. "It's capitalizing on that sort of customer that wants to go out and buy a TV or needs to buy say a new washing machine or refrigerator but can't get financing from say, Home Depot."

March auto sales faring no better

Postado por Blog To Teens | 09:19 | 0 comentários »

Auto sales in the first two weeks of March were down 40% compared to the same period last year, according to industry analysts at J.D. Power and Associates.

Over the entire month, car dealers are expected to sell 633,000 cars and trucks to retail customers. That's compared to 1.07 million retail sales in March 2008. Including fleet sales, J.D. Power expects a total 798,000 new vehicle sales in March. That would translate to annual sales for the year of about 9.2 million new cars and trucks. In 2008 automakers sold a total of 13.2 million vehicles despite a sharp falloff in sales during in the last few months of the year.
0:00 /3:41R.I.P. family car dealership

J.D. Power analysts don't expect the market to stay quite this bad, however.

"We're still seeing economic headwinds and reduced consumer demand for new vehicles, making it a tough marketplace,"said Gary Dilts, senior vice president of global automotive operations at J.D. Power and Associates. "However, we anticipate that improvements on Wall Street and a boost in consumer confidence will help to bring the market back.

In February, sales were down 41% compared to the previous year, with the worst declines seen among U.S.-based automakers Ford (F, Fortune 500), General Motors (GM, Fortune 500) and Chrysler.

AIG rage: Washington is just as guilty

Postado por Blog To Teens | 18:39 | 0 comentários »

Arrogance. Incompetence. Greed.

That's what Rep. Paul Hodes, D-N.H., said AIG stands for during Wednesday's congressional circus, uh, hearing about the now notorious $165 million in bonuses.

Well, many Buzz readers have a message for Hodes, the rest of Congress, the Federal Reserve and the Treasury Department. A lot of them think that the government is just as arrogant, incompetent and greedy as all those credit-default swap peddling geniuses in AIG's London and Connecticut financial products offices.

Earlier this week, I wrote about what I thought was the real AIG outrage: the fact that the $165 MILLION in bonuses was overshadowing the need to sell AIG assets so taxpayers could get back the $170 BILLION in bailout money. At the time, I asked readers what they thought the government should do about AIG.
0:00 /02:45The rage over AIG

Many readers seemed just as angry at Washington (if not more so) than they were at AIG. Here's a sampling of some of the comments from readers on our Talkback page.

"Here we go again, politicians putting on the show for the public. AIG bonuses, 165 million to losers that helped cause the recession. OK big shot politicians, where the hell is the other 99.9 percent of the 170 billion you gave AIG. One tenth of one percent isn't cutting it. That just gets you on the news." That was Jim from Fox Island, Wash.
Talkback: Who deserves more blame for the AIG mess: the company or the government?

Amen, Jim. If politicians want to be outraged about something, they should be angered that AIG has so far been unable to sell off the pieces of itself that still have value. (Or perhaps unwilling to accept bargain basement prices.) The problem isn't the bonuses. The problem is that there seems to be no plan to get even a fraction of the money lent to AIG since September returned to taxpayers.

That's exactly what Doug in Mentor, Ohio wants to see done.

"Don't give them anymore money. And then figure out a way to dismantle AIG and sell the parts to other insurance companies, which there a lot of. Money made on sales can go toward repayment of the monies lent. If AIG fails, tough," he wrote.

I agree with Doug to a point. I don't think that letting AIG fail is a smart idea since the government has already put in so much effort to keep it afloat. It's too late to be having the argument about whether AIG should be allowed to fail.

Plus, for all the anger about AIG, which unfortunately has even led to death threats (that's going WAY too far), it's worth pointing out that there a tens of thousands of hardworking AIG employees who've done nothing wrong. Don't punish the entire company for the mistakes of a few.

People who sell AIG auto insurance policies and annuities, for example, had nothing to do with the exotic financial instruments that have brought the company to its knees.

Another reader is ticked off that it took so long for Congress to notice the bonuses and thinks that the current outcry is just a way for lawmakers to shift the blame for the botched bailout.

"So Congress has the temerity to pretend to be outraged over the PUBLISHED contractual obligations of a company that it acquired with taxpayer money after passing a boondoggle bill with nearly 9000 earmarks in it even after the head of their party said that those days were OVER???? Give me a break. We have a government made up of mendacious hypocrites!!" wrote Bob in Macon, Ga.

Bob has a great point. Somebody in Congress should have made an issue of this much earlier. And I also think that as much as the new administration is talking about change in the nation's capital, it's hard not to think that it's still just business as usual in Washington, especially at Capitol Hill.

Finally, Bob deserves high praise for his use of the word mendacious. It's a great word.
Readers angry at Geithner too

Congress isn't target of criticism from Buzz readers. Many are also quite annoyed with Treasury Secretary Tim Geithner.

Geithner is in a particularly tough spot since not only is he facing questions about when he did or didn't know about the AIG bonuses in his role as Treasury Secretary, Geithner was also the one who spearheaded the first bailout of AIG last September when he was the president of the Federal Reserve Bank of New York.

"Fire Geithner. He ran the Fed Bank of NY during the six years when all of this financial mess was created. He couldn't see what was happening then and still can't now as evidenced by this latest fiasco," wrote AJ in El Dorado Hills, Calif.

Scott in Indianapolis adds that "considering that Geithner authored the AIG bailout plan, and Congress gives themselves raises as the government loses money (hand over fist) every year, why isn't the public outrage directed at these two entities as well? I find it very ironic when the same people that create a negative situation suddenly act appalled by it."

Well, it does seem like there is a growing backlash against Geithner (who a couple of readers also derisively referred to as TurboTax Tim in light of the tax issues that came up during his confirmation hearing.)

President Obama has so far pledged support for Geithner, and I don't think he will be fired. But so far, the Treasury Department under Geithner is showing as much (or little) skill handling the bailout as it did under former Treasury Secretary Henry Paulson. It's obviously a huge undertaking. And some of the criticism of Geithner, and Paulson for that matter, is a tad unfair.

But there have been too many missteps. And it's understandable people are angry about it. The bottom line is that it appears that the government, in its rush to save AIG following the collapse of Lehman Brothers, may not have thoroughly thought through the unintended consequences.

"The REAL outrage should be expressed by the TAXPAYER whose government heaps money on companies without knowing where the bailout money is going or how the bailout is going to be spent. The SIMPLEST of due diligence by the government was obviously NOT DONE! Our government officials should take a part of the blame - They gave taxpayer money away without question," wrote Tom in Pittsburgh.

Spike in Pensacola, Fla. sums it up best.

"I think it's pretty amazing that our elected officials that approved the bailout money are surprised at how it's being used. When I borrow money, I usually have to fill out a lengthy application stating what I intend to do with the money if I get it. I guess our elected officials just handed over $170 billion and said "surprise us". See how well it worked," he wrote.

Bonus rage closes in on AIG

Postado por Blog To Teens | 06:02 | 0 comentários »

Anger over $165 million in bonuses doled out to American International Group senior employees reached a fevered pitch on Monday, prompting the Obama administration to vow to recoup the money and a New York prosecutor to subpoena the firm for recipients' names.

President Obama said Monday that he has asked Treasury Secretary Tim Geithner to use the government's role as a majority owner of the troubled insurance company and "every legal avenue" to stop the bonuses.

"It's hard to understand how derivative traders at AIG warranted any bonuses," Obama said.

But the bonuses -- set out in contracts made before the government became so deeply involved in the company -- would be hard to reverse.

In fact, a Treasury official confirmed to CNNMoney.com that the government can't stop the bonuses from going to employees. But it could try to recoup the money.

Treasury plans to make $30 billion in bailout funds pledged on March 2 contingent on a promise by AIG to reimburse the government an extra $165 million for the bonuses, according to the Treasury official.

The government has stepped in four times to help AIG through $170 billion in bailout packages, in large part because it had issued risky credit default swaps -- a kind of insurance for bad loans made by banks and investment companies.

It remains to be seen how much of those billions the government will be able to get back.

"If the market stabilizes, there could be valuable assets at the end of the day, but there's a lot of ifs," said Rob Haines, an analyst with research firm CreditSights.

For its part, AIG said it had no plans to try to rescind the bonuses, part of $450 million paid out in 2008-09 to employees in AIG's key financial products division. An AIG spokesman on Monday referred to a letter Chief Executive Edward Liddy wrote to Geithner last week saying that he found the bonuses "distasteful" but the company "must proceed with them."
'Taxpayers have a right to know'

Meanwhile, New York Attorney General Andrew Cuomo said on Monday that he planned to subpoena AIG for details of the employee bonuses.

"We believe the taxpayers have a right to know what's happening to their money," said Cuomo, who said he had sent AIG a letter Monday seeking a list of employees who received bonuses.

AIG told the attorney general's office that the checks were issued on Friday, and "their point is there's nothing you can do," Cuomo said.

After weeks of criticism and a weekend of smackdowns, AIG on Sunday finally revealed which firms received billions in federal bailout money, which included several European institutions and two big Wall Street firms, Goldman Sachs (GS, Fortune 500) and Merrill Lynch.

AIG, which has avoided bankruptcy because of taxpayer funding, said it released the list of trading partners or counterparties, along with the sums they received, because the company "recognizes the importance of upholding a high degree of transparency with respect to the use of public funds." AIG said it made the announcement after consulting with the Federal Reserve, which has led the bailout of the company.

The pressure on AIG is likely to only get worse in coming days.

Liddy, who was brought in as CEO in September after the government's first bailout, is expected to testify before a House Financial Services subcommittee on Wednesday.

"Because the federal government has about an 80% stake in the company, AIG must be open and transparent about how it spends taxpayers' money," subcommittee Chairman Rep. Paul Kanjorski, D-Pa., said in a statement. "These counterparties and the recent bonuses, among other topics, will certainly be important issues that my colleagues and I intend to investigate further at the hearing."

AIG spokesman Nicholas Ashooh said Liddy plans to use his appearance on Capitol Hill to explain, among other things, AIG's progress untangling its credit default swaps and its plans to sell companies and securities to pay back the government.

The panel will also hear from Scott Polakoff, acting director of the Office of Thrift Supervision; Joel Ario, the Pennsylvania insurance commissioner; and Rodney Clark, a director in charge of Standard & Poor's insurance ratings.

Signs of life at the store

Postado por Blog To Teens | 08:59 | 0 comentários »

U.S. store sales showed a smaller-than-expected decline in February after an unexpected surge in January that was bigger than originally reported, according to a government report Thursday.

The Commerce Department said total retail sales fell 0.1% last month, compared with January's revised increase of 1.8%. January's increase was originally reported at 1%.

Economists surveyed by Briefing.com had been expecting a decrease of 0.5% for February.

This second month of better-than-expected sales results prompted one retail expert to say he was "hopeful" that the six-month stretch of monthly sales declines was "moderating" and could reverse before the end of the year.

"We have changed our thinking based on these numbers," said Scott Hoyt, senior director of consumer economics with Moody's Economy.com.

Hoyt said the surprisingly strong sales numbers both in January and in February's core sales, which exclude auto purchases, was due to lower-income consumers having more money in their pockets as a result of government actions.

"There was a significant increase in payments to Social Security, and welfare and food stamp payments in January," said Hoyt, adding that this factor combined with a reduction in tax payments was boosting household budgets.

"There will be another bump to household cash from the government over the course of spring and into summer. That could spur spending again," he said.

But another analyst was less optimistic.

"It [retail sales increase] is highly unlikely to last given the latest downdraft in consumers' confidence and the continued pressure on incomes as payrolls collapse," Ian Shepherson, chief U.S. Economist with High Frequency Economics, wrote in a report Thursday.

"It looks to us like little more than a temporary, though welcome, rebound," he said.

The overall monthly sales number was dragged down by a 4.9% drop in auto sales and a 4.3% decline in sales of auto parts.

Sales excluding autos and auto parts increased 0.7%, compared to a revised 1.6% rise in January. The measure had originally shown a 0.9% increase for January.

Economists had forecast a decrease of 0.1% for February sales, excluding auto purchases, according to Briefing.com.

The government report showed sales rose across retail categories, including a 2.8% gain clothing purchases, a 0.7% increases in furniture sales and a 1.1% increase in purchases at department stores.

Gasoline station sales jumped 3.4%, boosted by rising gas prices at the pump.

Stanford slashes 85% of U.S. employees

Postado por Blog To Teens | 08:00 | 0 comentários »

The court-appointed lawyer overseeing the assets and operations of Texas billionaire Allen Stanford's companies Friday told 1,000 U.S. employees their jobs have been terminated and said most of the firm's operations will be discontinued.

The cuts represent about 85% of Stanford's U.S. employees, U.S. receiver Ralph Janvey said in a statement.

U.S. regulators have have charged Stanford, his two top aides and three of his companies with a long-running $8 billion Ponzi scheme involving high-yield certificates of deposit.

A small number of U.S. employees, most from the company's Houston headquarters, will be retained to assist with the process of winding down the company's operations, Janvey said.

All terminations are effective March 6, so regular salary and benefits will be discontinued immediately and employees will not receive any severance or bonus, Janvey said.

Exxon Mobil sticks to spending plans

Postado por Blog To Teens | 08:20 | 0 comentários »

Exxon Mobil Corp. said Thursday that it would stick to its planned capital spending range for the next five years despite the steep decline in oil prices that has prompted many producers to cut back.

The oil giant said it would spend between $25 billion to $30 billion per year as part of its effort to meet long-term growth in world demand.

"Exxon Mobil's business is strong, and so is our commitment to investing through the business cycle," Chief Executive Officer Rex Tillerson told an analysts meeting.

Exxon's capital spending was about $26 billion in 2008, up about 28% from 2007. The company also spent $32 billion in share buybacks last year.

Exxon set a company and U.S. record for annual profits in 2008, racking up $45.2 billion in earnings in the year that saw oil prices skyrocket to $147 per barrel.

But oil prices have crashed nearly 70% to $45 a barrel since then as the economic downturn has eroded demand in many key regions, including the United States.

Exxon (XOM, Fortune 500) shares were down 2.5% at $64.01 in morning New York Stock Exchange trade.

At Wednesday's close, the stock had slumped nearly 18% so far this year, but was the second-best performer behind McDonald's Corp (MCD, Fortune 500). in the Dow Jones Industrials index over the past six months, with a 17.5% decline in that period.

The stock was also the second-best performer in the Standard & Poor's Energy Index over the last six months and easily outperformed the index, which was down 42% in that period.

Managing a stimulus windfall

Postado por Blog To Teens | 07:43 | 0 comentários »

It's like winning the lottery, then being told you have just a week to spend it. And, oh yeah, don't waste any of it.

Under the nearly $800 billion stimulus package signed last week, some federal programs are set for an unparalleled increase in funding.

The example people usually cite first is the Energy Department's Home Weatherization Program, which is expecting a tenfold increase to its budget - with the stimulus package dumping $5 billion on a program that's currently running on $500 million a year.

But the weatherization program is hardly the only example. From the National Park Service to the Health Department to the Army Corps of Engineers, several agencies are getting a huge infusion of cash and a mandate to spend it quickly.

And that's got a lot of people nervous.

"'The federal, state and local bureaucracy just doesn't have the capacity to handle that decision making," said Rudy Penner, a senior fellow with the Urban Institute and a former director of the Congressional Budget Office. "There's going to be a lot of waste."

The Obama administration - which is responsible for managing the stimulus money - seems to understand the potential for waste.

They are promising an unprecedented level of transparency in doling out the money, and have created a board to oversee the process and a novel Web site - www.recovery.gov - that's supposed to allow citizens to track every dollar.

But experts say many of the federal agencies simply don't have the manpower or procurement procedures in place to oversee a such huge amount of money.

It's a shortcoming the Obama team itself acknowledges.

Pre-Sept. 11, 2001, the government awarded about $200 million worth of contracts a year, Earl Devaney, head of the Recovery Act Transparency and Accountability Board, said at a press conference earlier this week.

Now the government doles out more than $500 billion a year, but the number of procurement staff has stayed the same, said Devaney.

"That will be a major challenge for all of the (cabinet) secretaries to address," he said, "to make sure that the staff is available to make this happen quickly and to monitor it once it goes out."
Who may have trouble

Government programs that aren't used to handing out grants and don't have the staff or experience in place are most at risk of fumbling the money, said Paul Verchinski, a former official at the Federal Transit Administration.

This is by no means an exhaustive list, but these agencies came up in conversation with various experts.

The Transportation Department: The agency is slated to get some $45 billion, but shouldn't have too much of a problem with the cash, said Verchinski. That agency is used to giving grants, has a backlog of projects that have already been vetted that need funding, and has many local partners in the form of the state transportation departments that can provide more localized oversight.

The Department of Energy: Other experts worry about this agency's ability to distribute funds efficiently and effectively.

In addition to the tenfold increase in the weatherization program, the department is also tasked with handing out billions to support renewable energy and an additional $25 billion to help automakers transition to more fuel-efficient vehicles.

The money for the automakers, approved in 2007, is still in coffers at DOE, although to the agency's credit it didn't actually get the money until this past fall, the New York Times reported Friday.

A spokeswoman at DOE said the agency is prepared to handle the influx of money, although she couldn't detail any plans as they are still being finalized.

The Army Corps of Engineers: Tasked with dredging the nation's harbors and building dams and levies, among other things, the Corps is set to get an additional $4.6 billion as part of the stimulus package. That amount would nearly double its annual budget, causing it to come up as a potential trouble spot.

Corps spokesman Gene Pawlik said the agency has an experienced contracting staff, although they realize they'll have to bring in more people to manage the influx of money.

Particularly challenging, said Pawlik, is figuring out how to ramp up staff for just two or three years, as the stimulus money won't last forever.

Bringing in temporary workers or enticing former workers out of retirement are two ideas the Corps has been floating around so far, he said.

The National Institutes of Health: The Institutes, which funds medical-related research, is getting an $8 billion boost to its normal budget of about $29 billion.

The size of the budget increase worries some policy experts, but with some 60,000 grants currently under management, NIH spokesman John Burklow said the agency is in a good position to handle the extra money.

Burklow said the stimulus cash will be split between funding previous requests that were good but turned down for lack of funds, increasing the funding for some existing grants, and funding new requests.

The National Park Service: Even parks are getting more money. Some $50 million has been slated for a division that cleans up old mines in the West, according to an industry newsletter.

"It's a huge infusion [of money], like we've never seen before," John Burghardt, coordinator of the program, told the Land Letter weekly report.

There's no doubt many other agencies will see a huge infusion of cash.

While hardly anyone is naive enough to think there will be zero waste, experts are holding out hope that the programs can be managed effectively.

"There's always the chance of waste," said Mike McNamara, head of the public law and policy group at the law firm Sonnenschein Nath & Rosenthal. "What you have here is a heightened attempt to diminish the waste and get the money flowing quickly."

The Obama administration unveiled plans Wednesday aimed at assessing the health of the nation's 19 largest banks in order to determine the size and scope of future bailouts.

Under the so-called "stress test" program, which was first hinted at earlier this month when the White House rolled out its financial recovery plan, banking regulators would examine major financial institutions like Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500), estimating firmwide losses for the next two years if economic conditions worsened and the bank's ability to absorb such losses.

Industry regulators, including the Office of Thrift Supervision and the FDIC, are expected to look at the performance of different assets owned by banks, including loans and such exotic securities as collateralized debt obligations, under two different scenarios.

One would rely on current consensus economic expectations, while the other would focus on a "more adverse" scenario in which unemployment climbs above 10% and home prices decline another 20% over the next two years.

Senior government officials said that those tests would help regulators identify which banks may require additional government support and how much.

If regulators deem that a bank needs additional funds, the company will be given six months to secure aid from private investors.

If those efforts fail, the government would step in and buy convertible preferred shares. Over time, it is expected that the bank would convert those holdings into common stock, helping to boost a key measure of capital adequacy.

Officials said they would not make public the names of those banks that require additional assistance, although institutions may be forced to show their hand at some point, especially if they are trying to raise funds in public markets.

Nevertheless, officials stressed that money would be there for the banks that need it, even as Treasury's budget for spending on financial institutions may appear stretched thin.

"One clear certainty is that capital will be there," said one official.

In some sense, regulators may be hoping that the new tests will also help the government more carefully target the remaining funds from the second half of the $700 billion bailout program.

"It was ready, aim, fire on the first one," said Donald Musso, president and founder at the New Jersey-based financial services consulting firm FinPro. "Now there is a little more precision in the decision making."

One key provision of the stress test program, however, is that banks accepting further funds would be required to increase lending. Many banks that received taxpayer funds under the original Troubled Asset Relief Program, or TARP, which was unveiled late last year, were criticized for hoarding cash.

After the Treasury Department started making its first round of capital injections last October, those banks that accepted government funds faced heavy criticism from lawmakers and taxpayers for failing to use the funds to make new loans.

Fanning that anger was an unwillingness by many institutions to make any changes to their seemingly lavish spending habits.

Regulators said they hope to complete their examinations as quickly as possible, but all determinations would be made no later than the end of April.

Shares of most financial firms including Bank of America, rallied on the news, climbing 9%. Other large banks were also higher after treading in negative territory for most of the session, including JPMorgan Chase and Wells Fargo (WFC, Fortune 500), which gained 3% each. Bucking the trend was Citigroup, which ended the session 3% lower.

Many big bank stocks have managed to eke out gains this week as top administration officials downplayed fears that the government may have to step in and take control of the country's largest financial institutions.

Cheap gas is history, again

Postado por Blog To Teens | 17:23 | 0 comentários »

The days of cheap gas are retreating into the rearview mirror, as prices continue to flirt with the $2-per-gallon mark.

The national average price for a gallon of unleaded gasoline edged down 0.1 cent to $1.965 Monday, according to the motorist group AAA. This is bad news for the growing ranks of jobless Americans, who are pinching pennies and looking for ways to cut costs.

The current price would have been welcomed by summertime drivers, because it's less than half the all-time high of $4.114 per gallon, achieved last July 17.

But since gas prices slumped to a low of $1.616 per gallon on Dec. 30, they've jumped more than 20%. At their current rate, prices could easily eclipse $2 per gallon.

This is occurring as crude oil prices are trading well below $40 a barrel.

"I think what you're seeing now is a backlash of a period, from the end of the summer until the end of the year, when refiners were selling gas into the consumer market at a discount to crude oil," said Ben Brockwell, director of data pricing for OPUS.

Brockwell said refineries lost money last year, despite the surge in gas prices. The refineries in the latter half of 2008 were paying top dollar for oil, and then producing gasoline in a low-demand economy, he said. Now, refineries are producing less, driving up prices in even this low-demand economy, while stockpiling discount oil, he said.

It's hard to tell how this impacts Americans, who have been cutting back on driving since last year, and who have avoided the gas-guzzling larger vehicles, said Moody's chief economist John Lonski.

"You'd rather see energy prices lower, but it doesn't serve right now as one of the primary worries that affects consumer spending," said Lonski. "I would think that of the list of things to worry about, it does not yet rank as high as it did this spring or early summer, when gas prices were at stratospheric levels."

Robert Sinclair, spokesman for AAA in New York, one of 16 states where the price of unleaded averages more than $2 a gallon, said, "Driving levels are already pretty low, with the downturn on the economy and people holding onto their pennies and worrying about the future."

But gas prices will probably keep going up, as they often do in late winter and early spring, when refineries traditionally conduct annual maintenance on their facilities, said Peter Beutel of energy risk firm Cameron Hanover.

The silver lining for consumers is that, because of lower demand, prices are unlikely to return to their sky-high levels from last year, according to Beutel.

"I think this market is going to have a very tough time getting over $2.35 [per gallon of unleaded by Memorial Day] just because there are so many people out of work and the economy is having such as difficult time going forward," he said.

Stimulus: How it may affect your wallet

Postado por Blog To Teens | 05:55 | 0 comentários »

The final topline price of the economic recovery package: $787 billion. That's below both the $820 billion House-passed version and the $838 billion Senate-passed version.

The compromises that the House, Senate and White House struck to finalize legislation changed the scope of a number of provisions, including those affecting individuals directly. In some cases, they either reduced or expanded a benefit relative to what appeared in the Senate or House versions of the bill.

Here's a look at some of the provisions that will have a direct effect on individuals in their paychecks, on their tax returns, and with regard to their unemployment benefits and health insurance if they've lost a job.

Making Work Pay Credit: The bill provides a $400 credit per worker and a $800 credit per dual-earner couple. The full credit would be paid to people making $75,000 or less ($150,000 per dual-earner couple). A partial credit would be paid to those making above those amounts but no more than $100,000 ($200,000 for couples).

The credit would also be refundable, which means that even very low-income families who don't make enough to owe income tax would be able to claim it.

For most working individuals, the credit will be paid over time at roughly $15 per period, assuming 26 pay periods in a year. Estimated cost: $116 billion.

One-time payments to those who don't work: For retirees, disabled individuals and others who don't work, the bill provides a one-time $250 payment. Estimated cost: $14.2 billion.

Break for higher income families: The bill includes a one-year provision to protect middle- and upper-middle-income families from having to pay the Alternative Minimum Tax. The AMT was intended primarily for high-income taxpayers but has in recent years threatened to engulf those lower down the income scale. Estimated cost: $70 billion.

Temporary deduction for car buyers: The bill would let those who buy a new car, light vehicle, recreational vehicle or motorcycle in 2009 deduct state and local sales taxes as well as any excise tax charged in the purchase. The deduction would be available to those earning less than $125,000 ($250,000 for joint filers). It will be an above-the-line deduction, meaning even taxpayers who don't itemize may take it in addition to the standard deduction. Estimated cost: $1.7 billion.

Temporary credit for home buyers: The bill increases the size of an existing temporary and refundable first-time home buyer credit to $8,000, up from $7,500. It also removes the requirement under current law that the credit be paid back if the buyer stays in the home for at least three years. And it would extend the credit's expiration date to Dec. 1, 2009, from July 1. Those eligible for this credit must have purchased a home after Jan. 1, 2009, and before Dec. 1, 2009.

The full credit is available to those making $75,000 or less ($150,000 for joint filers). Estimated cost: $6.6 billion.

New temporary college credit: The bill introduces the American Opportunity Tax Credit, which would be in effect for 2009 and 2010. It expands the existing Hope Scholarship tax credit and would be worth as much as $2,500 for higher education expenses, up from $1,800 currently.

The full credit would be available to those making less than $80,000 ($160,000 for joint filers). Those making between those amounts and $90,000 ($180,000 for joint filers) would get a partial credit. And the break would also be partially refundable, meaning lower income families with little or no tax liability could now claim some of the credit. Estimated cost: $13.9 billion.

Temporary Pell Grant increase: The bill increases the maximum Pell Grant by $500 to $5,350 in 2009 and $5,550 in 2010. Estimated cost: $15.6 billion.

Temporary expansion of child tax credit: The bill increases eligibility for the child tax credit by lowering the income threshold that must be met for the credit to be refundable. The threshold would be lowered to $3,000 for this year and next. That will allow lower income families to claim more of the credit than under current law. Estimated cost: $14.8 billion.

Temporary increase in earned income tax credit: The credit will be temporarily increased to 45% from 40% of qualifying earnings for low-income families with three or more children. It also includes a marriage penalty relief provision for couples who qualify for at least a portion of the credit. Estimated cost: $4.6 billion.
Direct lifeline benefits

Health insurance help for the jobless: The bill includes provisions to help eligible jobless workers pay for health insurance under Cobra. Cobra coverage allows newly unemployed workers to keep health insurance provided by their former employers for a period of time.

For workers who have been laid off between Sept. 1, 2008, and Dec. 31, 2009, the government will subsidize 65% of their premiums under Cobra for up to 9 months.

Those people laid off between Sept. 1, 2008, and the day the stimulus law goes into effect, and who did not sign up for Cobra, will get an additional 60 days to do so and receive the subsidy.

The subsidy will be limited to those whose income for the year is $125,000 or less ($250,000 for couples filing jointly). Estimated cost: $24.7 billion.

Another provision provides states funding to help pay for expanded Medicaid rolls for workers who've lost their jobs and can't afford health care on their own or can't get Cobra coverage because their former employer doesn't offer a health care plan. Estimated cost: $87 billion.

Unemployment benefits: The bill provides jobless workers with an additional 20 weeks in unemployment benefits, and 13 weeks on top of that if they live in what's deemed a high unemployment state, of which there are now about 30. Estimated cost: $27 billion.

In addition, the weekly unemployment benefit will temporarily increase by $25 on top of the roughly $300 jobless workers currently receive. Estimated cost: $8.8 billion.

Plus, the first $2,400 of benefits in 2009 would be exempt from federal income taxes. Estimated cost: $4.7 billion.

Food stamp payments: The bill includes a provision would increase food stamp payments by 13.6%, so a family of four would see an additional $80 on top of the $588 per month they receive currently. Estimated cost: $19.9 billion.

The bill also provides assistance to help local groups providing food and shelter, elderly nutrition services such as Meals on Wheels, and a program to help food banks re-stock their shelves. Estimated cost: $350 million.

Other help for needy families: The bill provides funding to states to create a contingency fund through 2010 for the welfare program called Temporary Assistance for Needy Families, which provides cash assistance to the needy. Estimated cost: $2.4 billion.

Madoff whistleblower gives SEC new tips

Postado por Blog To Teens | 05:23 | 0 comentários »

Harry Markopolos, the fraud investigator who was repeatedly rebuffed by the Securities and Exchange Commission in his efforts to blow the whistle on Bernard Madoff, Thursday presented SEC Inspector General David Kotz with evidence of two new potential cases of investment fraud.

"Pursuant to an agreement with him I've handed those tips to the office of the [SEC] Chairman Mary Shapiro," Kotz told CNN. Kotz said he could not elaborate on the tips from Markopolos.

Kotz and members of his staff met with Markopolos and two of his attorneys for seven hours Thursday, as part of the inspector general's investigation into the SEC's failure to uncover Madoff's alleged scam.

"He's a key witness in our investigation," said Kotz. "It was a very productive meeting. We received a tremendous amount of good information."

Kotz said he is still months away from issuing a report on the SEC's performance in the Madoff matter. Testifying before the House Subcommittee on Capital Markets Wednesday, Markopolos slammed the SEC's failure to heed his warnings that Madoff was a fraud.

"I gift-wrapped and delivered the largest Ponzi scheme in history to them and somehow they couldn't be bothered to conduct a thorough and proper investigation," said Markopolos.

Madoff remains under 24-hour house arrest at his luxury apartment on Manhattan's Upper East Side. A former Chairman of the Nasdaq Stock Market, Madoff told FBI agents he had operated a scheme that may have cost investors $50 billion, according to a criminal complaint. He faces one count of securities fraud.

Geithner vote looms on Capitol Hill

Postado por Blog To Teens | 07:20 | 0 comentários »

The Senate is set to meet Monday evening to vote on Tim Geithner's nomination as the next Treasury Secretary. Senate Majority Leader Harry Reid of Nevada has said he expects to hold a vote at 6 p.m. ET.

Geithner is expected to easily win confirmation from the Democratic-controlled Senate. Democrats on Capitol Hill have spoken of the need to quickly confirm Geithner, who will spearhead President Obama's response to the financial crisis that threatens to unravel economic growth around the globe.

Reid warned Friday that Republicans "would not be very wise politically" to try to hold up the nomination, which last week won the support of all the Democrats and half the Republicans on the Senate Finance Committee. He added that Democrats could block any attempt to filibuster.

On Thursday, the committee recommended in an 18-5 vote that the full Senate confirm the appointment of Geithner, who is currently president of the Federal Reserve Bank of New York, to succeed Henry Paulson. Supporters spoke highly of Geithner's substantial experience in managing financial emergencies.

Five Republicans, including Sen. Orrin Hatch, R-Utah, supported his nomination, citing among other things the enormous stress the economy and the financial system are under right now.

If confirmed, Geithner will take over for Stuart A. Levey, the Under Secretary for terrorism and financial intelligence, who has been serving as acting Treasury Secretary since the Obama administration took office last week.
Bank bailout, part 2

The finance panel's recommendation came after two hearings last week that were dominated by questions about how President Obama and his top advisers plan to address the troubles in the financial sector.

Shares of big U.S. banks have plunged anew this month as investors struggle to come to grips with the risk that financial institutions will be overwhelmed by rising loan losses as the economy slows -- and the possibility that shareholders may be wiped out by a new round of government aid.

Congress has given Obama access to $350 billion of federal bailout funds. But congressional leaders, angered by the Bush administration's handling of the first slug of money under the Troubled Asset Relief Program, or TARP, have demanded that tough new terms be applied to bailout recipients -- and that the government give taxpayers a more complete account of how money is spent.

For his part, Geithner said in testimony last week that the administration is working on what he called a comprehensive response to the crisis. He said Obama would address the nation in coming weeks. Geithner also stressed the need for the government to act urgently and with great force.

"The tragic history of financial crises is a history of failures by governments to act with the speed and force commensurate with the severity of the crisis," Geithner said. "In a crisis of this magnitude, the most prudent course is the most forceful course."

Geithner also said he didn't yet see the need for more federal bailout funds, but stressed that the Treasury may have to "act flexibly" if conditions deteriorate further. The comments suggest the president may ask Congress for additional money beyond the $350 billion currently available under TARP.

Lawrence Summers, head of the National Economic Council, on Sunday wouldn't rule out the possibility that more money would be needed. "We can make important progress and get started with the support that has been provided," Summers said on NBC's "Meet the Press" when asked whether taxpayers should expect another request for funding to shore up the financial system. "What ultimately will be necessary is something that will play out over time."

Similarly, House Speaker Nancy Pelosi on Sunday said that "some increased investment" may be needed.

The five Republican committee members who opposed Geithner's nomination did so in part because of questions about Geithner's tax problems and whether he had candidly answered their inquiries about them.

Sen. Jon Kyl, R-Ariz., questioned Geithner extensively about the errors on his 2003 and 2004 tax returns and why Geithner didn't immediately pay back taxes due on his 2001 and 2002 returns.

Geithner acknowledged having made mistakes but insisted the errors were unintentional. To top of page
First Published: January 25, 2009: 4:21 PM ET

Here comes 'terrible': In the coming week, investors gear up for a deluge of weak earnings and the biggest plunge in GDP in 26 years.

Stomach-wrenching volatility is back

Postado por Blog To Teens | 10:49 | 0 comentários »

Stocks tumbled Thursday afternoon as Microsoft's earnings miss and job cuts and John Thain's departure from Bank of America - exacerbated fears about the depth and duration of the recession.

The Dow Jones industrial average (INDU) fell 220 points or 2.7%, with roughly 3-1/4 hours left in the session. The Standard & Poor's 500 (SPX) index tumbled 22 points or 2.7% and the Nasdaq composite (COMP) lost 52 points or 3.5%.

Stocks slumped Tuesday on banking woes, rallied Wednesday on IBM's earnings and bouncing bank stocks and then sold off again Thursday.

"We're back to the volatility levels we saw in November, where it's up 250 one day, down 250 the next, only it's going to feel more dramatic this time because the Dow is at 8,000," said Brian Battle, vice president at Performance Trust Capital Partners.

Battle said that Microsoft's earnings loss and job cuts were a big negative for sentiment because it confirms that the recession is hitting a broad range of industries.

John Thain's departure from Bank of America is adding to nervousness about the leadership at the big banks, Battle said.

Microsoft: The tech leader said it will cut up to 5,000 jobs over the next 18 months due to the impact of the recession. Microsoft (MSFT, Fortune 500) also reported lower fiscal second-quarter earnings that missed estimates on slightly higher revenue that also missed estimates. Shares fell 10%.

Financials: Former Merrill Lynch chief executive John Thain will leave Bank of America, amid criticism of his management of Merrill - purchased by BofA a month ago. The news sent shares of Bank of America (BAC, Fortune 500) down 13%.

Citigroup (C, Fortune 500) said late Wednesday that former Time Warner chairman Richard Parsons has been named its new chairman. Last week, the company announced it was splitting its business in two.

Separately, it was reported that the chief executives of Bank of America and Citigroup bought some company stock last week, according to SEC filings. Yet this failed to reassure investors. Citigroup shares fell 14%.

Aflac (AFL, Fortune 500) shares fell after Morgan Stanley raised worries about its exposure to certain securities issued by hard-hit European financial firms, according to reports. Shares of the insurer lost 30%.

Apple: The company reported higher fiscal first-quarter sales and earnings late Wednesday that topped estimates. Apple (AAPL, Fortune 500) also issued a fiscal second -quarter sales and earnings forecast that was short of analysts' estimates. But investors focused on the earnings and sent shares 7% higher Thursday morning.

Other company news: After the market close Wednesday, eBay (EBAY, Fortune 500) reported a lower fourth-quarter profit that nonetheless topped estimates. The online auctioneer also issued a current-quarter profit forecast that is short of expectations. Shares fell 12.7% Thursday.

Also late Wednesday, Intel (INTC, Fortune 500) said it was shutting sites in Asia and scaling back U.S. operations in a restructuring move that will affect up to 6,000 people. Shares fell 5%.

Market breadth was negative. On the New York Stock Exchange, losers beat winners five to one on volume of 620 million shares. On the Nasdaq, decliners topped advancers four to one on volume of 1.08 billion shares.

Economy: Housing starts and building permits both tumbled to record lows in December, the government reported. Permits fell 10.7% from November to an annual rate of 549,000 in December. Starts fell 15.5% from November to an annual rate of 550,000. The declines were worse than expected, according to a Briefing.com survey of economists.

A separate report showed that weekly claims for unemployment rose to a 26-year high last week, rising 62,000 from the previous week to 589,000. That was a bigger rise than what economists were expecting.

Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 2.60% from 2.52% Wednesday. Treasury prices and yields move in opposite directions. Yields on the 2-year, 10-year and 30-year Treasurys all hit record lows last month.

Lending rates tightened. The 3-month Libor rate increased to 1.16% from 1.12% Wednesday, according to Bloomberg.com. Overnight Libor rose to 0.21% from 0.19% Wednesday. Libor is a bank-to-bank lending rate.

Other markets: The dollar gained against the euro and fell against the yen.

U.S. light crude oil for March delivery fell $2.18 to $41.37 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery rose $4.80 to $856.50 an ounce.

Gasoline prices rose two-tenths of a cent to a national average of $1.85 a gallon, according to a survey of credit-card swipes released Wednesday by motorist group AAA.