tag:blogger.com,1999:blog-24677068277310853242024-03-08T01:51:16.527-08:00HatescThe world of business.Unknownnoreply@blogger.comBlogger52125tag:blogger.com,1999:blog-2467706827731085324.post-61659665886278793762010-01-29T07:44:00.001-08:002010-01-29T07:44:53.268-08:00Bernanke gets a second termFederal Reserve Chairman Ben Bernanke was confirmed for a second term Thursday by the U.S. Senate.<br /><br />The final confirmation vote was 70-30. Minutes earlier, more than enough senators, 77, voted to end a filibuster on the nomination in a procedural move that required 60 votes.<br /><br />The vote, which occurred just three days before Bernanke's first term was scheduled to end, came after heavy lobbying by Democratic leaders and the Obama administration. President Obama, himself, made calls last weekend. And Senate Majority Leader Harry Reid, D-Nev., lobbied Republicans to make sure he had enough votes.<br /><br />Despite the strong showing, Bernanke won his confirmation by one of the smallest margins of all time for a Fed chairman. Often the confirmation of a Fed chairman is so overwhelming and uncontroversial, it's done by a voice vote.<br /><br />In 1983, then-chairman Paul Volcker was confirmed for a second term by a vote of 84-16, considered one of the more controversial confirmation votes at the time. Bernanke's second-term vote was far slimmer.<br /><br />The controversy came through in the debate, which grew impassioned on both sides.<br /><br />"This is not some assistant undersecretary of some other agency, this is the central bank chairman of the most important central bank in the world," Sen. Christopher Dodd, D-Conn., said in the last speech of the day on the issue. "It's a critically important component in continuing our path to economic recovery. We will bear the collective responsibility of failing to meet that obligation if we walk away. . . by continuing this filibuster or defeating this nominee."<br /><br />But several Republicans and Democrats countered that Bernanke deserves much of the blame for the current economic situation.<br /><br />"Our present economic problems are no accident," said Sen. Richard Shelby, R-Ala., a key lawmaker who works with Dodd on financial legislation. "Dr. Bernanke's Federal Reserve played a key role in setting the stage for the financial crisis we're in now."<br /><br />Several senators, including Sen. Barbara Boxer, D-Calif., Sen. Sheldon Whitehouse, D-R.I., and Sen. George LeMieux, R-Fla., voted to end the filibuster blocking the confirmation vote but then voted against Bernanke's second term.<br /><br />"He sat there, and said everything was fine. Everything was fine and everything was wonderful. Everything was OK," said Boxer, who is up for re-election this fall. "If Mr. Bernanke is confirmed, and I expect he will be, I hope he will listen to what a lot of us are saying here, and turn his attention to Main Street."<br /><br />The Bernanke vote was a particularly tough one for the Senate.<br /><br />The Senate is sensitive to growing voter frustration that Washington did a better job getting Wall Street back on its feet than Main Street.<br /><br />Bernanke is largely seen as a symbol of Wall Street, even though many credit him for saving the economy from falling into a second Great Depression.<br /><br />At least a half dozen Democrats, including several up for re-election this November, voted no on Bernanke. But the vote garnered some Republican support.<br />0:00 /1:59Politics cloud Bernanke decision<br /><br />"The past decade was the worst decade in modern times," Sen. Bernie Sanders, an independent from Vermont who votes with the Democrats, said on the Senate floor. He is among a handful of senators from both parties who delayed Bernanke's confirmation.<br /><br />"Why do you want to re-appoint somebody who not only failed at his job as chairman of the Fed, in terms of safety and soundness, but was the author the Bush economy?" Sanders asked.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-81814712188726295252010-01-18T06:51:00.000-08:002010-01-18T06:52:56.694-08:00Ohio State is No. 1 - in president's payOhio State University is No. 1 again -- but instead of the gridiron or hardwoods, the school tops the list of U.S. public college presidents' pay for the second year in a row, according to a study published Monday.<br /><br />The Chronicle of Higher Education said E. Gordon Gee, Ohio State's president, took home $1.6 million last year, up from $1.3 million in 2008.<br /><br />Gee's office did not immediately respond to calls requesting comment.<br /><br />Mark Emmert, president of the University of Washington, was the second highest paid executive in the survey, with total compensation of $905,004 last year. Patrick Harker, president of the University of Delaware, came in third with $810,603.<br /><br />The Chronicle, a Washington-based publication focusing on education, said Gee is one of "a growing number" of presidents that have given money back to their institutions, saying he donated $320,850 to help endow a scholarship fund.<br /><br />The Chronicle surveyed total compensation, including salary and benefits, for top executives at 185 public universities.<br /><br />Gee is the only public university president earning more than $1 million. By contrast, The Chronicle reported in November that 23 presidents of the nation's top private universities took home more than $1 million in 2008, the most recent year surveyed.<br /><br />The survey found that compensation for public university execs overall increased at a much smaller rate in 2009 than in recent years. The median total compensation for chief executives last year was $436,111, up 2.3% from 2008. After adjusting for inflation, however, compensation rose 1.1%.<br /><br />The relatively small increase comes after total compensation rose between 7.6% and 18.9% each year since 2005.<br /><br />But as the economy soured and many public universities were forced to hike tuition and eliminate courses, the issue of executive compensation became a sore spot for many schools, said Jeffrey Selingo, editor of The Chronicle.<br /><br />"Steadily rising pay packages of public university chiefs riled parents, students and politicians, especially as tuition increases also had been hefty from year to year," Selingo said in a statement.<br /><br />The survey also showed that base salaries stopped growing last year for more than one-third of the chief executives, while 10% of them experienced a decline in total compensation.<br /><br />The Chronicle also surveyed compensation at 64 community colleges nationwide and identified Eduardo Padrón, president of Miami Dade College, as the highest paid.<br /><br />Padrón's pay package totaled $548,459 last year. He was followed by Michael McCall, president of the Kentucky Community College and Technical College System, at $532,907.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-52139447171262879502010-01-14T06:43:00.001-08:002010-01-14T06:43:35.376-08:00Retail sales take a fall in DecemberRetail sales fell in December, the government reported Thursday, putting a damper on hopes that the holiday shopping season was strong.<br /><br />The Commerce Department said total retail sales fell 0.3% to $353 billion last month, compared with November's upwardly revised 1.8% jump. Economists surveyed by Briefing.com had anticipated that December sales would grow 0.5%.<br /><br />Consumer spending accounts for two-thirds of U.S. economic activity, and related reports such as retail sales are closely watched to determine whether a recovery is underway.<br /><br />Sales excluding autos and auto parts fell by 0.2% from November. Analysts expected sales ex-autos to jump 0.3%.<br /><br />Given that the economy was so weak 12 months ago, the year-to-year increase was strong. December 2009 retail sales jumped 5.4% compared to the same month in 2008.<br /><br />"[It's not] clear how much of this reflects a catch-up from the fantastically depressed post-Lehman period ... and how much represents a sustainable, if very modest, upturn," said Ian Shepherdson, economist at High-Frequency Economics, in a research note. "We suspect more of the latter."<br /><br />The December data are not enough "to reach a definitive verdict" on the holiday sales season, Shepherdson said. The January report will be "hugely important" as well because it reflects holiday gift card spending and post-holiday sales.<br /><br />Total sales for 2009 retreated 6.2%Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-19770841105836025692009-12-10T11:33:00.000-08:002009-12-10T11:34:11.320-08:00Stocks in broad-based rallyStocks rallied Thursday afternoon as reports showing a decline in the pace of foreclosures and a narrowing of the trade gap helped offset a mixed reading on the jobs market and a seesawing dollar.<br /><br />The Dow Jones industrial average (INDU) rose 62 points, or 0.6%, with more than three hours left in the session. The S&P 500 index (SPX) added 6 points, or 0.6%. The Nasdaq composite (COMP) gained 12 points, or 0.6%.<br /><br />Gains were broad based, with 26 of 30 Dow stocks rising, led by commodities and consumer names. Gainers included Alcoa (AA, Fortune 500), Chevron (CVX, Fortune 500), Walt Disney (DIS, Fortune 500), Johnson & Johnson (JNJ, Fortune 500) and Wal-Mart Stores (WMT, Fortune 500).<br /><br />Stocks had risen more sharply in the first minutes of trade, with the Dow adding as much as 107 points on the weak dollar. But the dollar turned positive versus the euro and yen, causing stocks to trim some gains.<br /><br />The weak dollar has helped stocks rally over the past nine months, with the S&P 500 now up 62% from 12-year lows hit on March 9. The weaker dollar has given a boost to dollar-traded commodity shares and the stocks of companies that do a lot of business overseas and therefore benefit from a weaker greenback.<br /><br />But in the last few weeks, the dollar has zigzagged and so have stocks. Stocks have also been volatile due to the lighter trading volume this month, with many investors opting to coast through year end rather than shake up their portfolios at the end of the tumultuous year.<br /><br />"We've come an awfully long way in 12 months, both in terms of equity markets and in terms of bonds," said Mark Travis, president and CEO at Intrepid Capital Funds. "I think at this point people are starting to pause and you're not likely to see much of a change in direction for the last few weeks of the year."<br /><br />Stocks gained Wednesday as the falling dollar boosted commodity stocks and a rise in wholesale inventories and an upgrade of 3M provided some optimism.<br /><br />Jobs market: The number of Americans filing new claims for unemployment rose last week to 474,000 from 457,000 in the previous week, the Labor Department reported. Economists expected claims to fall to 455,000, on average, according to a Briefing.com survey.<br /><br />However, continuing claims, the number of Americans receiving benefits for a week or more, declined more than expected. Continuing claims fell to 5.157 million from 5.460 million in the previous week. Economists expected 5.450 million claims.<br /><br />Economy: Foreclosure filings fell 8% in November from October, according to RealtyTrac, an online marketer of foreclosed properties. That means November is the fourth month in a row in which foreclosure filings have dropped.<br /><br />But foreclosures are still up 20% from a year ago.<br /><br />Treasury Secretary Timothy Geithner is speaking before the Congressional Oversight Panel about the government's bailout of the financial system. On Wednesday, Geithner said the Troubled Asset Relief Program (TARP) will be extended through Oct. 2010. It had been set to expire at the end of this month.<br /><br />Also Wednesday, the Congressional Oversight Panel said that while TARP helped stabilize the banking system, it failed to boost spending or stop foreclosures.<br /><br />In other news, the Commerce Department reported that the nation's trade gap narrowed in October to $32.9 billion from a revised $35.7 billion in September, thanks to a jump in exports. Economists thought it would widen to $36.8 billion, on average.<br /><br />The flow of funds report from the Federal Reserve is due around noon. The report is likely to show that household net worth continued to fall in the second quarter, along with home values.<br />0:00 /5:17Make money in 2010<br /><br />Companies: Ciena (CIEN) posted a wider-than-expected fiscal fourth-quarter loss as a result of rising costs. The networking gear maker also forecast better-than-expected revenue in the current quarter. But investors focused on the loss, sending shares lower in active Nasdaq trading.<br /><br />AOL (AOL) began trading Thursday after completing its spinoff from (CNNMoney.com parent) Time Warner (TWX, Fortune 500) Wednesday, ending what is considered to be one of the worst mergers in corporate history. Shares fell 2%.<br /><br />Warehouse club operator Costco (COST, Fortune 500) posted fiscal first-quarter earnings of 60 cents per share versus 65 cents a year ago, in line with analysts' estimates.<br /><br />Market breadth was positive and volume was moderate. On the New York Stock Exchange, winners topped losers two to one on volume of 330 million share. On the Nasdaq, advancers beat decliners by a narrow margin on volume of 690 million shares.<br /><br />World markets: Overseas markets were mixed. In Europe, London's FTSE 100 rose 0.6%, the German DAX rose 0.6% and France's CAC 40 rose 0.5%. Asian markets ended lower.<br /><br />Commodities: Gold prices rallied and oil prices dipped, giving up bigger morning gains after the dollar turned positive. Dollar-traded oil and gold prices tend to move in the opposite direction of the dollar.<br /><br />COMEX gold for February delivery rose $5.70 to $1,126.60 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last week.<br /><br />U.S. light crude oil for January delivery fell 37 cents to $70.30 a barrel on the New York Mercantile Exchange.<br /><br />Bonds: Treasury prices fell, raising the yield on the 10-year note to 3.48% from 3.42% late Wednesday. Treasury prices and yields move in opposite directions.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-66089484526351656482009-06-10T15:47:00.001-07:002009-06-10T15:47:30.740-07:00More bumps ahead for ChryslerChrysler, which has endured more perils than Pauline, announced Wednesday that it has finalized its global alliance with Fiat, its last obstacle to emerging from bankruptcy.<br /><br />Everyone in Auburn Hills who still has a job must feel relieved. In the past 24 hours, Chrysler had endured a challenge from secured creditors that wound up in the Supreme Court, as well as opposition from 789 of the dealers whom it is terminating.<br /><br />Charged with running the new Chrysler Group LLC is a leadership team varied enough to resemble one of those old Hollywood World War II bomber crews.<br /><br />At the top are chairman C. Robert Kidder, an American industrialist, and CEO Sergio Marchionne of Fiat, an Italian industrialist. The nine-member board consists of four directors chosen by the U.S. government and one by the Canadian government, three Fiat directors, and one from the United Auto Workers union. Among the groups left unrepresented: unhappy buyers of Chrysler products; legacy representatives from former owners Daimler and Cerberus; Bob Lutz, Tom Gale, and other members of Chrysler's 1990s "dream team;" and of course those 789 angry dealers.<br /><br />Give Marchionne points for candor. In a news release, he admits that the alliance "does not solve every issue faced by the automotive industry today." But in the same breath, he praises the alliance as possessing "first class technology, a devoted workforce, improved efficiency and an unyielding passion for building great cars."<br /><br />He's been busy, so I guess he didn't have time to read the Obama administration's report on Chrysler published March 30. A number of points:<br /><br /> * Far from possessing great technology, Chrysler spends just over 3% of its revenue on R&D vs. 4%-5% for Toyota and Honda. The government believes that Chrysler "will struggle to comply with increasing fuel efficiency standards."<br /><br /> * Chrysler may have a devoted workforce, but it's certainly a small one. The report found that Chrysler dedicates only half as many engineers to each vehicle platform as GM does. That limits its ability to innovate and develop new product.<br /><br /> * Using fewer engineers may boost efficiency in product development but it doesn't help manufacturing efficiency. The Obama auto team found that increased flexibility in manufacturing is critical but "Chrysler has not invested significantly in common architectures and flexible plant manufacturing capacity."<br /><br /> * Apparently, quality is not one of the ingredients in "a passion for building great cars." Chrysler's current quality scores "significantly lag competitors," according to the Obama team. Since 40% of its quality problems are design related, they typically don't get fixed until a new model is developed. Evidence suggests that Fiat is also a laggard in this category.<br /><br />At this point in its history, Chrysler is the foster child of the auto industry. It was abused by Daimler, which didn't understand how to nurture its creative strengths. And then it was starved by Cerberus, which had dreams of rebuilding an industrial icon that turned into a nightmare when auto sales cratered.<br /><br />To use an even harsher metaphor, Chrysler looks like war-torn Europe, trying to rebuild after World War II. Its plants have been shut down for weeks, supplies of cars and parts have been dwindling, and employees have been fleeing, either voluntarily or otherwise.<br /><br />If Marchionne can produce his own Marshall plan to rebuild this company, he will have pulled off the greatest automotive turnaround since Carlos Ghosn rescued Nissan a decade ago. Or since Lee Iacocca saved Chrysler in 1979 and again in 1991.<br /><br />It will take hard work, inspiration, and a good deal of luck. A good place to start would be a sober assessment of Chrysler's strengths and weaknesses that can be translated into a compelling sales proposition for potential customers. Chrysler needs to leave its old illusions behind as it goes forward in tandem with Fiat.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-79235063070872425642009-05-18T20:22:00.000-07:002009-05-18T20:26:01.434-07:00Stocks get high on Lowe'sStocks rallied Monday, with the Dow adding 350 points after positive news about the U.S. housing market, including an upbeat profit forecast from Lowes, as well as an upgrade of Bank of America, encouraged investors to step back into the market after last week's selloff.<br /><br />The Dow Jones industrial average (INDU) gained 235 points, or nearly 2.8%. The S&P 500 (SPX) index rose 3% to close above 900, bringing the average back into positive territory for the year. The Nasdaq composite (COMP) advanced 3.1%.<br /><br />Stocks slumped last week after worse-than-expected reports on retail sales, housing and weekly jobless claims put investors on the defensive.<br /><br />But a big rally in Indian markets helped set Monday's bullish tone early on. The buying gained momentum in afternoon trading with retail and banking shares gaining ground.<br /><br />"I think we're seeing a bounce after the weakness last week," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research. "For investors who think the market is going to continue higher, now might be a good time to get back in at prices that are a bit lower."<br /><br />Tuesday brings readings on new home construction and building permits in April. Companies reporting quarterly results include Dow components Home Depot (HD, Fortune 500) and Hewlett-Packard (HPQ, Fortune 500).<br /><br />Housing: Lowe's (LOW, Fortune 500), the No. 2 home-improvement retailer, projected a higher fiscal second-quarter profit after posting a 22% decline in the first quarter that still managed to top analysts' forecasts. Shares rose 8%.<br /><br />"The housing issue is front and center in the economic recovery," said Quincy Krosby, chief investment strategist at The Hartford. "Lowe's is a major player in that space and their comments are important."<br /><br />Two private reports helped bolster confidence in the housing market. The National Association of Home Builders said its index of homebuilder confidence rose for the second month in a row. Separately, the NAHB said home prices are at their most affordable in nearly two decades.<br /><br />Banking: Shares of financial services companies got a boost after Bank of America (BAC, Fortune 500) was upgraded to "buy" by Goldman Sachs (GS, Fortune 500). Analysts said the bank will be able to raise needed capital thanks to gains in mortgage and capital markets activity. BofA gained 10%.<br /><br />Financial holding company State Street (STT, Fortune 500) announced a $1.45 billion stock offering and said it would also offer non-guaranteed senior notes. The company said it plans to repay its government bailout funds.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-74940481204188496452009-04-03T09:35:00.000-07:002009-04-03T09:36:29.333-07:00Signs of life in California real estateNo state has been harder hit by the housing bust than California.<br /><br />It has piled up more foreclosures and has endured among the worst home-price declines. The median price of a single-family home sold in February was $247,590, down 41% from 12 months earlier, according to the California Association of Realtors (CAR).<br /><br />And home construction in the Golden State has nearly vanished: December housing permits shrank to about a quarter of what they were during the boom years, according to the National Association of Homebuilders.<br />0:00 /3:17Housing on the rebound?<br /><br />But there are signs that California's housing market may be coming out of this tailspin: Sales volume is increasing, investors are returning and inventory is shrinking.<br />Bringing back buyers<br /><br />Low prices have brought out droves of buyers. In February, they purchased more than 600,000 homes, some 80% more than they bought in February 2007, according to CAR. And most of this activity is where prices are off 40% to 60% from their peaks.<br /><br />In the Sun City area of Riverside County, for example, prices have fallen more than 35% over the past 12 months. Two-thirds of February's sales in the area were of foreclosed properties owned by banks, according to Chuck Whitehead, broker with Coldwell Banker Associated Brokers.<br /><br />"The sales rebound is largely centered around areas that have experienced the biggest impact from the subprime crisis," said CAR chief economist Leslie Appleton-Young.<br />How low can home prices go in your city?<br /><br />In more stable communities, where fewer homes were saddled with toxic mortgages, prices have not crashed as badly and sales are rebounding more slowly. But foreclosures still account for a significant portion of sales, according to Phil Jones, a broker with Coldwell Banker Coastal Alliance in Long Beach.<br /><br />Most analysts foresee continued price declines in California, according to Nicholas Retsinas, director of Harvard's Joint Center for Housing Studies. "But [there'll be] a slowing of that decline, which portends the end of price drops."<br /><br />That may already be happening in Long Beach, according to Jones. The measure he uses to judge market trends there, price per square foot, turned up in February, growing 5% to $360.<br /><br />"Every one of my agents is very busy," Jones said.<br />Investing 2.0<br /><br />Another positive sign that markets don't have much further to fall is that investors are returning to some markets.<br /><br />"I spoke with one investor who is putting together a group of buyers and they're ready to get back into the market," said Jones. "They're planning to buy single-family homes in bulk."<br /><br />John Dugan is one such investor. The San Francisco-based medical supplies salesman is using a portion of his Entrust Group-managed IRA to buy townhouses in the Sacramento area.<br /><br />So far he's purchased three 840-square-foot, two-bedroom, one-bath duplexes. He paid just $35,000 to $80,000 a piece - down from their $180,000 to $200,000 selling prices a few years ago.<br /><br />He paid cash for the first property and rents it out for $750 a month, a profit of $550 after dues and common charges. That's a 19% return on investment, without figuring on appreciation.<br /><br />"This kind of pricing is something you only think of as Midwestern, not Californian," he said.<br />Supply dropping<br /><br />The booming sales have whittled away existing home inventory to just six and a half months - down from 15 months a year ago.<br /><br />"Typically, I would describe a normal market as having a six to seven month supply of homes," said Appleton-Young. "We have that now."<br /><br />California's inventory now compares favorably with the rest of the nation, where there's a 9.7 month supply of homes on the market, according to the National Association of Realtors.<br /><br />One wildcard, however, is that banks have kept many repossessed homes off the market. "Banks are spoon feeding them out very slowly so they don't overload the market," said Whitehead. But, he added, if they release a lot of properties during the heavy spring buying season, they "will be eaten right up by buyers."<br />Could the end be near?<br /><br />All of those factors add up to a more optimistic forecast for California, which is seen as a harbinger of things to come for the rest of the country.<br /><br />Appleton-Young said that while home prices should continue to decline for the rest of 2009, she predicts that the pace of decline will slow. In total, she's predicting a total loss of 19% for the year. But, "I think we could see home price stabilization by early next year," she said.<br /><br />If that happens in California, it could spread to the rest of the hard-hit Sun Belt markets - and beyond.<br /><br />"California was the pace setter for lots of the mortgage products that went toxic," said Retsinas. "The sense is if the problems can be addressed there, the rest of the country will follow."Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-2467706827731085324.post-66983193678639641722009-03-27T08:41:00.001-07:002009-03-27T08:41:57.400-07:00Obama tax panel on treasure huntPresident Obama has now added tax reform to his to-do list.<br /><br />The administration said this week it will form a task force to propose ways to simplify the tax code, reduce evasion, close loopholes and make changes in corporate breaks.<br /><br />One overarching end-goal: Raise revenue.<br /><br />Obama isn't setting a revenue target but is placing two constraints on the task force's efforts: Members may not propose tax increases for 2009 and 2010; and beyond 2010, they may not propose tax increases on families making less than $250,000.<br /><br />A major focus for the task force will be to reduce the estimated $300 billion-a-year tax gap -- the difference between what individual and corporate taxpayers owe and what they actually pay.<br /><br />"Three hundred billion a year or more is a lot of money, and we are interested in being as aggressive as possible in trying to reduce that number," White House budget director Peter Orszag said.<br />Closing the gap<br /><br />Reducing the tax gap is far easier said than done.<br /><br />"Managing to make headway to reduce that gap often means difficult reforms," said James Poterba, president of the National Bureau of Economic Research and a member of President Bush's tax reform panel created in 2005.<br /><br />The biggest reason for the gap is underreporting of income. There's a high rate of compliance when it comes to income reported by third parties, such as employers reporting workers' incomes on W-2s.<br /><br />But the compliance is much lower in cases when there's no third-party reporting, such as with small business owners who do mostly cash transactions. The cash economy may account for over $100 billion of the annual tax gap, according to testimony from Nina Olson, the National Taxpayer Advocate.<br /><br />The IRS is already working to improve compliance. For instance, starting in 2011, brokerages will be required to report taxpayers' cost basis when they sell a publicly traded security. That will make it easier for the IRS to verify capital gains income.<br /><br />Boosting third-party reporting in areas where it is lacking means more work and expense for someone and almost certainly "will bump into [resistance] from those required to do the reporting," Poterba said.<br /><br />Of course, the gap isn't all due to intentional tax avoidance. Some of it comes from honest mistakes by filers confused by a tax code that is almost universally acknowledged to be maddeningly complex.<br /><br />Simplifying the code may actually help narrow the tax gap since currently "people don't perceive the tax code to be fair and that encourages non-compliance," said Len Burman, co-director of the Tax Policy Center.<br /><br />The perception is that the code now allows too many people to escape paying their fair share. And where there are popular tax breaks to be had, they often come with Twister-like eligibility requirements that can qualify or disqualify tax filers seemingly arbitrarily. And where different credits or deductions target similar groups -- such as retirement savers or low-income workers with kids -- the rules for each are different.<br /><br />The task force will be charged with suggesting ways to streamline those types of credits.<br /><br />But what the task force may find is that behind every Byzantine requirement is a rationale and a group that lobbied for it.<br /><br />"What looks like simplification to one person looks like a tax increase to another," Poterba said.<br /><br />So, how much of the $300 billion-a-year tax gap can be recouped realistically?<br /><br />Poterba says he's not sure. "There's not one magic bullet," he said, noting that it takes serious time and effort to change individual provisions in ways that make sense in the broader scheme of things.<br />Targeted changes more likely than overhaul<br /><br />The members of the task force will come from the Presidential Economic Recovery Board, which is headed by former Federal Reserve Chairman Paul Volcker. It will present its proposals to Obama on Dec. 4.<br /><br />Given the president's mandates and the many urgent priorities facing lawmakers, the task force's recommendations are likely to be less far-reaching than those of President Bush's tax reform panel. The Bush panel proposed ways to change and simplify not only individual tax measures but also considered alternative structures for the tax system.<br /><br />"To get fundamental tax reform you really need the political stars to line up in just the right way. ... It also requires concentrated attention from the political process. It requires a fair amount of heavy lifting," Poterba said.<br /><br />Those stars were not aligned when Poterba's panel put forth their proposals in November 2005. Nothing came of their report and Bush made little or no mention of it after the day it was presented. But tax experts praised the group's efforts, and Burman thinks there are a lot of ideas in their work that could serve as good starting-off points for Obama's task force.<br /><br />Even if the Obama task force recommends only targeted changes to the tax code, the administration will still need to get the House and Senate on board in many cases.<br /><br />It hasn't gotten off to the most auspicious start. The announcement of the task force appears to have come as a surprise to leading lawmakers, according to Congress Daily.<br /><br />The top Senate Democratic tax writer indicated that the panel could be constructive, but he would prefer they offer a broad set of principles rather than specific tax changes.<br /><br />"We'll certainly look at it, but we're the Congress, we'll do what we think makes sense," Senate Finance Chairman Max Baucus, D-Mont., told reporters.<br /><br />"Springing a tax reform panel without talking to [leading tax writers on the Hill] is not politically astute," said Anne Matthias, director of research at Concept Capital. "But it doesn't mean [the panel's work] won't end up being important."Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-85296589286838922632009-03-26T09:17:00.001-07:002009-03-26T09:17:49.983-07:00The Great RecessionIs this the worst economy since the Great Depression? And what are the chances of the economy falling into another depression?<br /><br />The answer to the first question is fairly clear. In most ways that matter to economists and average Americans, this is the worst economic crisis since the Depression.<br /><br />The answer to the second question is not as clear. While the National Bureau of Economic Research officially declares the beginning and end of recessions, nobody does that for depressions.<br /><br />Still, the general consensus of economists is that another depression is not likely. But the risks are greater than they were only a few months ago.<br />Why this recession is so bad<br /><br />First things first: Even though it may seem obvious to most that this is the worst downturn since the Great Depression, the economy has experienced other serious recessions in the past, particularly in the mid-1970s and early 1980s.<br /><br />But this recession dwarfs those two for several reasons.<br /><br />In terms of length, the longest post-Depression economic decline was 16 months, which occurred in both the 1973-75 and 1981-82 recessions. This recession began in December 2007, which means that it will enter its 17th month next Wednesday.<br /><br />The current recession is also more widespread than any other since the Depression. The Federal Reserve's readings show that 86% of industries have cut back production since November, the most widespread reduction in the 42 years the Fed has tracked this figure.<br /><br />What's more, every state reported an increase in unemployment this past December, the first time that has happened in the 32 years that records for unemployment in each state have been kept.<br />0:00 /3:54Jobless - it feels so bad<br /><br />"This is important because there's nowhere you can move to find a job," said Gus Faucher, director of macroeconomics for Moody's Economy.com.<br /><br />Finally, during the past nine months, the drop in household wealth has been larger since anything on record in the post-World War II period.<br />Why this won't be another depression<br /><br />So far during this recession, the nation's gross domestic product, the broadest measure of economic activity, has dropped about 1.7%. Forecasts of experts surveyed by the National Association for Business Economics work out to about a 3.4% decline in GDP over the life of this recession.<br /><br />To be sure, there already have been some quarters where the drop was much more severe. The government will report its final revision of GDP for the fourth quarter of 2008 and economists are expecting that report to show an annual rate of decline of 6.6%. And some economists think the drop in the first quarter could be even greater.<br /><br />But measuring the drop in economic activity from top to bottom is how economists judge a recession's depth. And a 3.4% drop would be the worst since World War II, and far worse than the average recession in that period.<br /><br />Still, that's a long way from the 26.5% drop in GDP that took place between 1929 and 1933.<br /><br />One of the main reasons why economists think another depression could be avoided is that it will take more than just a sharp decline in consumer spending and household wealth to spark a depression.<br /><br />Even though household net worth has fallen a record $11 trillion, or 18%, during the course of this recession, the broader economy can weather such a shock.<br /><br />Historically, stock market crashes and bursting housing bubbles haven't necessarily led to depressions. It takes a variety of economic factors and policy decisions to turn a recession into something even more serious.<br /><br />"I don't know if you can make a causal link between a loss of wealth and a depression," said Lakshman Achuthan, managing director of Economic Cycle Research Institute.<br />Learning lessons of the 1930s<br /><br />Significant policy changes since the 1930s will also cushion the blow.<br /><br />Unemployment insurance, Social Security payments and larger government at the federal, state and local levels keep money flowing into the economy even as consumers and businesses pull back on their own spending.<br /><br />"There's a lot more safeguards in place," said Keith Hembre, chief economist at First American Funds.<br /><br />Hembre said the $787 billion stimulus bill passed by Congress in February will also spur more economic activity down the road.<br /><br />In addition, the Federal Reserve, led by Great Depression expert Ben Bernanke, has pumped trillions of dollars into the economy with new lending programs the central bank has never tried before. That has swelled the supply of money. By way of contrast, the money supply tightened during the Great Depression.<br /><br />There were many other policy mistakes made in the 1930s that economists say are not being repeated today, including stiff tariffs that killed international trade and government imposed limits on prices and production levels.<br /><br />Even if Congress imposed "Buy American" provisions in the public works paid for by the stimulus bill, there is no call to move back to the strict protectionism of the 1930s or production and price controls.<br /><br />"I'd like to think we've learned something, so in terms of policy we're doing better," said Achuthan.<br /><br />Still, even if the United States does not enter another depression, that doesn't make the current economic crisis any less painful for many Americans. Also, few economists are predicting an end to the recession anytime soon.<br /><br />Hembre said he is worried that the country could be in a period of prolonged economic stagnation similar so the so-called lost-decade that Japan suffered starting in the 1990s. He said continued weakness in housing and high debt levels by households and governments could hold the economy back for some time.<br /><br />And some economists aren't completely ruling out another depression.<br /><br />In a paper for the National Bureau of Economic Research last month, Harvard University professors Robert Barro and Jose Ursua put the chance of a minor depression (which they defined as a GDP decline of at least 10%) at about 20% and a 3% chance of a major depression (defined as a GDP drop of at least 25%). Moody's Economy.com is forecasting a 10% chance of a depression.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-37462670490028578992009-03-24T07:24:00.000-07:002009-03-24T07:25:02.202-07:00Stocks retreat after rallyStocks tumbled Tuesday morning as investors showed caution following the best day on Wall Street in four months.<br /><br />The Dow Jones industrial average (INDU) lost 70 points, or 0.9%, in the early going. The S&P 500 (SPX) index lost 10 points, or 1.2%. The Nasdaq composite (COMP) lost 19 points, or 1.2%.<br /><br />Investors are looking to Washington, where Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner are testifying at a Congressional hearing about the government's intervention at American International Group.<br /><br />Stocks around the world soared Monday, boosted by the U.S. Treasury's plan to remove toxic assets from the balance sheets of banks. The Dow surged 6.8% while the S&P 500 rallied 7.1%. But investors may be ready for a rest after the dramatic advance. Full story<br /><br />"It wouldn't be a big surprise if there was a negative hangover in the following session," said Ken Wattret, economist with BNP Paribas in London. "Given the scale of the preceding day, you would expect to see a decline.<br /><br />But given Wall Street's gains over the last two weeks, Wattret detected a bit of optimism in the air, going forward.<br /><br />"There's a feeling that we're getting to the end of the worse of the news," he said. But he noted that there's plenty to be pessimistic about, including skepticism over whether the toxic assets at the center of the government's plan - and the inspiration for Monday's rally - will ever rise in value.<br /><br />Financial shares - leaders of the rally Monday - led the decline Tuesday, with Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) among the losers.<br />0:00 /01:34AIG back on lawmakers' minds<br /><br />AIG hearing: Investors will be watching Bernanke and Geithner. Both will testify at a House Financial Services Committee hearing on AIG (AIG, Fortune 500), due to start at 10 a.m. ET. Full story<br /><br />AIG has been given access to $182 billion in taxpayer funds in the past six months. Recently it paid out $165 million in retention bonuses to employees in the company's financial products division. Those bonuses were written into employee contracts written in early 2008.<br /><br />But Dan Cook, senior market analyst at IG Markets in Chicago, believes the government has already wasted too much time on the topic of AIG bonuses - and Tuesday's hearing won't help the stock markets.<br /><br />"We still have an opportunity to wreck the run we've been on with this AIG hearing," he said. "It's such an emotional issue, this AIG thing, but if you look at the [total] cost, it's a drop in the bucket."<br /><br />World markets: Asian shares extended gains, rising to their highest level in two months. Japan's Nikkei added 3%. Major European markets were mixed in morning trading, with a decline in London's FTSE, but increases in the XETRA-DAX in Hamburg and the CAC in Paris.<br /><br />Oil and money: Oil prices fell 55 cents a barrel to $53.25. The dollar rose versus the euro and the yen, but fell against the British pound.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-5367061408929797932009-03-20T18:32:00.000-07:002009-03-20T18:33:59.261-07:00U.S. seizes 2 big credit unionsThe federal government, in its latest effort to prop up the financial system, took over two big wholesale credit unions Friday with combined assets of $57 billion.<br /><br />U.S. Central Federal Credit Union in Lenexa, Kan., and Western Corporate Federal Credit Union in San Dimas, Calif., were placed under conservatorship "to stabilize the corporate credit union system and resolve balance sheet issues," according to the National Credit Union Administration.<br /><br />The administration is a federal agency that regulates, charters and supervises federal credit unions.<br /><br />Neither of the failed institutions serve consumers directly. As corporate credit unions, they service the credit union system. Credit unions count 90 million members nationwide.<br /><br />Members of the two credit unions will not experience any disruption in service and are free to make deposits and access funds, according to the regulator.<br /><br />U.S. Central Federal Credit Union has about $34 billion in assets, with 26 retail corporate credit union members. WesCorp has $23 billion in assets and approximately 1,100 retail credit union members.<br />0:00 /3:41Bypassing the banks<br /><br />The board of the NCUA analyzed the health of the mortgage and asset backed securities held by all corporate credit unions starting on Jan. 28. The board determined that the two credit unions taken over had "an unacceptably high concentration of risk," according to the statement.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-10234449335042420682009-03-18T09:05:00.001-07:002009-03-18T09:05:20.319-07:00Madoff accountant turns himself inDavid Friehling, accountant for Bernard Madoff, turned himself in on Wednesday to answer charges that he "rubber stamped" the Ponzi schemer's falsified numbers and lied about it, said federal prosecutors.<br /><br />Friehling was charged with securities fraud, aiding and abetting investment adviser fraud and four counts of filing false audit reports to the Securities and Exchange Commission, according to the U.S. Attorney for the Southern District and the Federal Bureau of Investigation.<br /><br />If convicted, Friehling could face a sentence of up to 105 years.<br />0:00 /1:43Liquidating Madoff's assets<br /><br />"Mr. Friehling is charged with crimes that represent a serious breach of the investing public's trust," said Acting U.S. Attorney Lev Dassin, in a prepared statement.<br /><br />"Although Mr. Friehling is not charged with knowledge of the Madoff Ponzi scheme, he is charged with deceiving investors by falsely certifying that he audited the financial statements of Mr. Madoff's business," said Dassin. "Mr. Friehling's deception helped foster the illusion that Mr. Madoff legitimately invested his clients' money."<br /><br />For his services, Madoff's firm paid Friehling about $12,000 to $14,500 per month between 2004 and 2007, the prosecutors said.<br /><br />Friehling could not immediately be contacted by CNNMoney.com. A spokesman for the U.S. Attorney's office said he was unable to identify Friehling's lawyer.<br /><br />Friehling is the first person after Madoff charged with having some connection to the world's biggest Ponzi scheme.<br /><br />He was also an investor with Madoff's firm, according to prosecutors. They say Friehling and his wife had an account of more than $500,000.<br />Madoff appeals for bail<br /><br />Bernard Madoff is trying to get out of jail again. He has been locked up since March 12, when he pleaded guilty in U.S. District Court to all 11 criminal counts related to his long-running, multi-billion dollar scheme. He has spent the entire time at the Metropolitan Correctional Center in lower Manhattan.<br /><br />But Madoff believes he should get out of jail until June 16, when he faces sentencing of up to 150 years. On Thursday morning, he is scheduled to appear in the U.S. Court of Appeals for the 2nd Circuit to appeal the revoking of his $10 million bail.<br /><br />The bail was taken out against his $7 million Manhattan apartment, as well as his wife's properties in Montauk, N.Y. and Palm Beach, Fla. Madoff had lived in luxury with his wife Ruth in the Manhattan apartment since his December arrest, avoiding jail even after investigators caught him mailing more than $1 million worth of diamond-studded jewelry to relatives.<br /><br />Now, investigators are tallying up Madoff's assets, valued at well over $800 million, so they can be liquidated and allocated to the thousands of victims who entrusted his firm with their money. Investigators are still trying to determine how many people were victimized and how much money was stolen.<br /><br />In court, Madoff confessed to running a Ponzi-style scheme, where he used fresh investments to pay off his more mature investors, while creating the appearance of legitimate returns. These investors received statements claiming that their accounts had grown in value. But in reality, Madoff said he never bought securities, and therefore never invested his clients' money.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-23201244584894151422009-03-15T09:40:00.000-07:002009-03-15T09:41:54.951-07:00AIG pledges to revamp bonusesUnder pressure from the Treasury, insurance giant AIG - a recipient of at least $170 billion in federal bailout money - is scaling back bonuses and compensation for some of its top-earning employees.<br /><br />CNN on Saturday obtained a letter from AIG Chairman and CEO Edward Liddy to Treasury Secretary Timothy Geithner, in which Liddy pledges to reduce 2009 bonus payments - which AIG refers to as "retention payments" - by at least 30 percent.<br /><br />He also addresses steps to limit compensation in AIG Financial Products, the London-based unit responsible for issuing the risky credit default swaps - basically insurance against losses from bad loans - which on several occasions has brought the company to the brink of collapse.<br /><br />In the letter, Liddy says the unit's 25 highest-paid contract employees will reduce their salaries to $1 this year and all other officers in the unit will reduce their salaries by 10 percent. Other "non-cash compensation" will be reduced or eliminated.<br /><br />Liddy, who took the helm of the company in September after it had nearly failed, also refers to a conversation he had with Geithner last week, which the AIG chief describes as "a difficult one for me."<br /><br />Liddy says in the letter that he personally does not receive a bonus, but that some bonus payments are unavoidable, because they are binding legal obligations of the company, and "there are serious legal, as well as business consequences for not paying."<br /><br />Some of the bonus payments are due on Sunday, according to the letter.<br /><br />During the conversation Wednesday, Geithner told Liddy that millions of dollars in bonuses to senior employees were unacceptable and needed to be renegotiated, according to a senior administration official.<br /><br />While the bonuses were never a secret, the official told CNN, Geithner felt giving them "was still inappropriate, given the state of the economy and the recent restructuring of the AIG agreement."<br /><br />Liddy, however, makes clear that he made the changes with trepidation, saying in the letter: "I would not be doing my job if I did not directly advise you of my grave concern about the long-term consequences of the actions we are taking today," specifying that the company will have trouble attracting and retaining "the best and the brightest ... if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."<br /><br />The company, which lost a record $62 billion dollars in the fourth quarter of 2008, has more than 74 million insurance policies issued in 130 countries around the world.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-1189000922146923762009-03-12T08:32:00.000-07:002009-03-12T08:33:41.352-07:00GE loses top rating in downgradeConglomerate General Electric Co. lost its perfect credit rating Thursday when rating agency Standard & Poor's downgraded the company.<br /><br />S&P said it lowered the company's rating to "AA+" from "AAA," because it expects the worsening economy to cause GE's holdings to deteriorate in value. GE's finance arm GE Capital Corp. (GECC) also received a one-notch downgrade to AA+.<br /><br />"We believe that GECC is under increasing earnings pressure, due to the recent sharp deterioration in general economic conditions around the globe," said Standard & Poor's credit analyst Robert Schulz. "This will result, in our opinion, in rising credit losses across key segments of finance portfolio."<br /><br />The rating agency said that it still believes that GE is on solid footing, predicting that the multinational company will be able to generate about $2 billion in cash flow due to its huge reduction of its dividend to 10 cents from 31 cents late last month.<br /><br />"We expect GE's commitment to maintaining very high credit quality, the still-solid prospects for many of its business segments (despite economic weakness), and the company's ample financial flexibility should continue to support the ratings at the current level and the stable outlook," added Schulz.<br /><br />GE was one of only six American companies to hold AAA status. The five remaining are Berkshire Hathaway Inc. (BRK.A), Automatic Data Processing (ADP, Fortune 500), Exxon Mobil Corp. (XOM, Fortune 500), Johnson & Johnson (JNJ, Fortune 500) and Microsoft Corp (MSFT, Fortune 500).<br /><br />An AAA credit rating allows a company to borrow at cheaper rates, but it also requires a significant amount of cash on hand, which GE was unable to maintain with its escalating debt.<br /><br />GE said it will not change its business practices despite the downgrade, noting that it has taken steps to ensure that its balance sheet and liquidity position were bolstered.<br /><br />"As we have previously said, we are prepared to fund the company as a double-A, but we will continue to run GE with the disciplines of a triple-A company, which means low leverage, high liquidity and strong risk disciplines," said Jeff Immelt, GE chief executive. "While no one likes a downgrade, this review and rating reaffirm the relative strength of the company."<br /><br />John Bergenson, portfolio manager of Albion Management Group, said GE's downgrade was expected.<br /><br />"It's not that much of surprise, because of their debt situation and the amount of fear that's out there," said Bergenson, who runs a mutual fund with GE as its top holding. "In the current environment, with that amount of debt, it's probably been due for a while."<br /><br />Shares of GE (GE, Fortune 500) soared more than 11% in early trading. Bergenson said investors felt relief after worrying GE would be downgraded by several notches instead of just one.<br />Trouble with AAA rating<br /><br />To maintain the rare AAA rating, experts say GE had to exert extra caution, costing the company billions of dollars in security measures.<br /><br />"AAA has a sort-of saintly symbolism, -- usually only governments have AAA ratings," said Sylvain Raynes, principal of R&R Consulting, a company that helps clients value its securities. "A company that wants to be AAA is giving up on things that are important to most companies, like leverage and experimenting with new systems that could be fly-by-night."<br /><br />Ann Rutledge, also of R&R Consulting, called the downgrade "a defining moment for GE," expecting more downgrades from other agencies to come, followed by GE's credit rating slipping even further in the future.<br /><br />"No one is going to panic here," said Rutledge. "GE will have to pay a little more for capital, and the transcendental feeling of comfort and security is gone, but the impact is more qualitative and quantitative."<br /><br />Still, when insurer American International Group (AIG, Fortune 500) lost its AAA rating in 2005, the company started on a downward spiral that forced it to raise more and more capital. Bond insurer Ambac Financial Group (ABK) lost its AAA rating in January of 2008, and its stock is currently trading at less than $1 a share.<br /><br />"No one believed in AIG or Ambac, because they were houses of cards," said Rutledge. "But GE is so far away from not paying its bills, it's ridiculous. GE already began taking measures since it was put on credit-watch negative."<br /><br />Bergenson thinks that GE needs to focus on finding a way to spin off its ailing GE Capital wing before it attempts to reclaim its AAA rating.<br /><br />"The unfortunate situation GE is in is they bet too big on the AAA rating," he said. "I'm hoping that they just deal with what they need to within the company and forget about the AAA for the short-term. But it wouldn't surprise me if they break their back to get the AAA back."Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-61345526101073827382009-03-08T07:52:00.001-07:002009-03-08T07:52:43.562-07:00Key global bankers' meeting reportedChief executives of leading Japanese, European and U.S. banks will meet in London to discuss the future of the financial system, the Nikkei newspaper reported Sunday, as the global financial crisis prompts a barrage of new regulatory proposals for the sector.<br /><br />The Japanese business daily said the British government would host the meeting on March 24, after a Group of 20 (G20) finance ministers meeting in London next weekend and ahead of a summit of G20 leaders there on April 2.<br /><br />The G20 summit of big developed and developing countries in London aims to put the world economy on a path to recovery, with banks facing strong calls for new regulations ranging from increased supervision of the financial sector to limits on executive bonuses.<br /><br />Invitations to the meeting of bankers had been sent to leading institutions including JPMorgan Chase (JPM, Fortune 500) and HSBC (HBC), the newspaper said, without naming any sources.<br /><br />Mitsubishi UFJ Financial Group president Nobuo Kuroyanagi would attend the meeting, which the paper said would discuss regulations to prevent further crises similar to the meltdown of the subprime mortgage market.<br /><br />The London summit will follow last November's G20 crisis meeting in Washington, and aims to agree on coordinated actions to revive the global economy, regulate the financial sector and principles for reforming international financial institutions.<br /><br />In the lead up to the summit, European leaders have called for tighter global banking supervision while President Obama has urged a sweeping overhaul of Wall Street regulations.<br /><br />The European Commission's proposals range from tougher bank capital rules to streamlining supervision, more transparency in derivatives markets and proposals to penalize banks whose remuneration policies encourage excessive risk-taking.<br /><br />China said Saturday it wanted a major say in talks about reworking the global financial order and there should be more power for developing countries in the International Monetary Fund and World Bank.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-91390068584347075802009-02-06T05:10:00.000-08:002009-02-06T05:19:41.694-08:00Obama to name experts for economic panelPresident Obama plans Friday to name business executives, academics and labor leaders to an advisory panel that will help guide his effort to rescue the economy and rebuild the shattered U.S. financial system.<br /><br />Former Federal Reserve Chairman Paul Volcker was tapped by Obama in November to lead the Economic Recovery Advisory Board, which is modeled on a board created in the Eisenhower administration to advise the White House on intelligence matters.<br /><br />Volcker is to join Obama for an 11:15 a.m. ET event to introduce the other 15 members of the economic panel.<br /><br />According to the White House, the members will include Robert Wolf, chairman and chief executive of UBS (UBS) Group Americas, and Jim Owens, chairman and chief executive of Caterpillar Inc. (CAT, Fortune 500), and labor leaders such as Anna Burger, secretary-treasurer of the Service Employees International Union.<br /><br />Penny Pritzker, chairman and founder of Pritzker Realty Group who was also the finance chair of Obama's presidential campaign, will sit on the board as will Laura D'Andrea Tyson, a former Clinton administration economist now at University of California, Berkeley.<br /><br />The panel includes some officials who served Republican administrations, such as William Donaldson, who was SEC chairman under President George W. Bush and Harvard economist Martin Feldstein, who served in the Reagan administration.<br /><br />The naming of the advisory board comes amid a slew of data showing soaring job losses and a deepening recession.<br /><br />Economists are bracing for grim news when the Labor Department issues its January employment report at 8:30 a.m.<br /><br />Analysts polled by Reuters predicted the data will show U.S. employers slashed another 525,000 workers from their payrolls after cutting 524,000 jobs in December.<br /><br />Obama is prodding Congress to pass a more than $800 billion package of public works spending projects and tax cuts aimed lifting the economy out of recession.<br /><br />Meanwhile, Treasury Secretary Timothy Geithner plans Monday to unveil a plan to quell turmoil in the banking system and revive frozen credit markets.<br /><br />Obama has also said one of his key priorities is overhauling a Wall Street regulatory structure whose laxity he believes helped to set the stage for the financial meltdown.<br /><br />When he announced the idea of the Economic Recovery Advisory Board in November, Obama said its intent was to help him avoid "insular" government decision-making.<br /><br />"The walls of the echo chamber can sometimes keep out fresh voices and new ways of thinking -- and those who serve in Washington don't always have a ground-level sense of which programs and policies are working for people, and which aren't," Obama said.<br /><br />Volcker is among several high-profile players advising Obama on economic policy. The team also includes Lawrence Summers, the former Treasury secretary who is now head of the National Economic Council, and current Treasury Secretary Geithner, who previously headed the New York Federal Reserve bank.<br /><br />Another important aide is Christina Romer, chairwoman of the White House Council of Economic Advisers and an expert on the Great Depression.<br /><br />Obama relied heavily on Volcker for advice during the campaign. The 81-year-old former Fed chief gave the Democrat's presidential bid a boost last year with an early endorsement.<br /><br />As Federal Reserve chairman from 1979 to 1987 under former Presidents Jimmy Carter and Ronald Reagan, Volcker was credited with breaking the back of double-digit inflation through interest-rate rises.<br /><br />Austan Goolsbee, a longtime Obama adviser, is serving as staff director and chief economist for the economic advisory panel. Goolsbee is also a member of the Council of Economic Advisers.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-43381648047410565402009-01-26T07:21:00.000-08:002009-01-26T07:22:03.067-08:00FDIC closes 1st Centennial BankCalifornia banking officials closed the 1st Centennial Bank Friday, the Federal Deposit Insurance Corporation said in announcing the third bank failure this year.<br /><br />The bank, which has just six branches, will be purchased by First California Bank of Westlake Village, California, the FDIC said.<br /><br />As of Jan. 9, 2009, 1st Centennial had total assets of $803.3 million and total deposits of $676.9 million. Approximately $12.8 million of that exceeded the insurance limits, the FDIC said.<br /><br />Three U.S. banks failed in 2007 while 25 were seized by officials in 2008 as a struggling economy and falling home prices took their toll on financial institutions. Only three banks failed in 2007 and none did in 2006 and 2005.<br /><br />Executives at 1st Centennial were not immediately available for comment.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-71807795484865049162009-01-22T10:42:00.001-08:002009-01-22T10:42:55.538-08:00Microsoft slashes up to 5,000 jobsSoftware maker Microsoft Corp. announced Thursday it will cut up to 5,000 jobs in the next year and a half, or 5.5% of its global workforce, citing further deterioration of global economic conditions.<br /><br />The company also posted lower fiscal second-quarter earnings that missed analysts' forecasts.<br /><br />Microsoft will slash 1,400 positions immediately, with the rest of the cuts coming by June 2010. The company also said it will freeze employees' pay in 2009.<br /><br />Microsoft said it will save about $1.5 billion in operating expenses and $700 million in 2009 capital expenditure from the job cuts and pay freeze.<br /><br />"Economic activity slowed beyond our expectations in the quarter, and we acted quickly to reduce our cost structure and mitigate its impact," said Chris Liddell, Microsoft's chief financial officer, on a conference call. "We are planning for economic uncertainty to continue through the remainder of the fiscal year, almost certainly leading to lower revenue and earnings for the second half relative to the previous year."<br /><br />Thursday's was the first mass job cut announcement in Microsoft's 34-year history. Prior to the cuts, Microsoft had been hiring rapidly, growing its global workforce by 14% since September 2007. But even as it cuts staff, the company said it will continue to hire a few thousand employees in the current quarter, mainly in its online advertising division.<br /><br />Many analysts on the conference call questioned whether Microsoft was cutting enough, given the strong headwinds it is facing in a tough economic environment. Some believe that more cuts could be on the way, as the company takes a slow approach to evaluate its capital situation.<br /><br />"Obviously, no one has any real visibility as to how things are going to go," said Brent Williams, analyst at The Benchmark Co. "But if they cut too much, too fast, it's going to hurt them."<br /><br />Shares of the company fell more than 9% in midday on the news.<br />Earnings disappoint<br /><br />Microsoft (MSFT, Fortune 500) also announced second-quarter net income of $4.17 billion, down 11% from a year earlier. The company reported earnings per share of 47 cents, missing analysts' estimates of 49 cents, according to a consensus compiled by Briefing.com<br /><br />The Redmond, Wash.-based company reported revenue of $16.63 billion for the quarter, up 2% from $16.37 billion a year earlier.<br /><br />The software maker said software sales, including its Vista operating system, slumped 8% on weak PC sales as well as a continued shift toward lower-priced laptop computers.<br /><br />Microsoft's Online Services division, which includes the online portal MSN and its online advertising sales, continued to lose money - $471 million in the quarter - even as that sector's sales were up 7% from the same quarter a year earlier. Microsoft continued to struggle to compete with rivals Google and Yahoo (YHOO, Fortune 500) in the online advertising business.<br /><br />But sales grew in other areas. Revenue from its entertainment and devices division, which includes the Xbox 360, rose 3% over the same period a year earlier. Microsoft said holiday Xbox sales were strong, selling a record 6 million game consoles in the quarter.<br /><br />The company also performed well in its server unit, with revenue growing 15% in that sector.<br /><br />Still, some analysts question Microsoft's strategy of participating in seemingly every aspect of the tech market.<br /><br />"In the short term, it's all about PC unit demand, but once they surmount that problem, they go back to their longer-term strategic issues: they can't match the speed, economics, or the quality and reliability of their competitors," said Williams. "They may ultimately suffer a fate worse than death - big, but irrelevant."<br />Weak sales likely to continue<br /><br />Microsoft did not offer specific earnings and revenue guidance for the coming quarter "due to the volatility of market conditions going forward," but it said consumer, business and advertising sales will likely continue to decline for at least the next six months.<br /><br />The company said Xbox sales will probably decline at least through June as well, as consumer confidence and spending wanes.<br /><br />Microsoft also suggested that investors should not rely on previous fiscal 2009 estimates.<br /><br />"The economy is resetting to a lower level of consumer spending due to reduced leverage in the economy," said Microsoft CEO Steve Ballmer on the conference call. "Consumers have less money to buy discretionary second and third PCs."<br /><br />Microsoft's announcement comes a day after rival Apple Inc. (AAPL, Fortune 500) reported net income rose 2% in the most recent quarter, trouncing analysts' expectations. Ballmer noted that Apple's Macintosh computer sales were strong in the quarter, but he predicted that trend may drop off soon.<br /><br />"The price premiums that people pay for Macs versus PCs will be looked at much more critically in the next two quarters," said Ballmer. "Neither the consumer nor business side is immune to the economic conditions."<br /><br />Though Ballmer called the current economic dislocation "unprecedented," he called the recent downturn in the tech sector "just a pause."<br /><br />"Nothing will stop the forward march of our industry or Microsoft," Ballmer said. "There will soon be renewed growth in the tech industry and certainly in Microsoft."<br /><br />Google (GOOG, Fortune 500) is set to release its quarterly financial report after the market's close Thursday.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-47429473585337177842008-12-12T06:56:00.000-08:002008-12-12T06:59:36.826-08:00The case for bondsBoring is beautiful - or so it feels in this time of wild and crazy stock market swings. In this case we're talking about investment-grade corporate bonds, which are dirt-cheap right now for the same reason that stocks are: The market turmoil has pounded down their prices. The result is historic opportunities in bonds issued by blue-chip companies.<br /><br />Right now investment-grade bonds maturing in ten years or longer are yielding an average 8.4%, according to Barclays, a remarkable 5.7 percentage points more than ten-year Treasuries. "Today's spreads are the highest we've seen since 1931," says economist Michael Darda of MKM Partners, a trading and research firm. Or as bond guru and PIMCO chief Bill Gross keeps saying, stocks are pricing in a recession, and bonds are priced for a depression. A depression isn't likely, so it's time to pounce.<br /><br />In general, buying individual bonds isn't ideal. You'll need to go through a broker, and the commissions can be high. If you choose that route, you should buy at least four or five issues to diversify and stick with pummeled but steady performers like Verizon Wireless, Comcast, Xerox, and Altria, all of which offer yields of more than 8% on their ten-year bonds.<br /><br />The best way to buy corporate bonds is through mutual funds. Since they own big baskets of bonds, you won't see your gains evaporate if a few holdings get downgraded or default, a major danger when you own individual issues.<br /><br />Your choices fall into two broad categories. The first is for the cautious. It consists mostly of what amount to index funds; the securities are highly rated, and the expenses minimal, but the yields are relatively low. Here are two excellent choices: Vanguard Intermediate-Term Investment-Grade (VFICX). More than two-thirds of the holdings - including the likes of McDonald's and Medtronic - are rated A and above by S&P. Expenses are a tiny 0.2% and the 30-day yield stands at 7.5% (as of Dec 4). iShares iBoxx $ Investment Grade Corporate (LQD) tracks a fixed-income index for 100 household names. The portfolio is even more blue-chip than Vanguard's, and the yield is 7.3%.<br /><br />The second category is for the more adventurous. The managers of these funds select lower-rated bonds that yield far more and even offer an extra kicker in capital gains. T. Rowe Price's Corporate Income Fund (PRPIX) concentrates on the lowest end of investment grade and favors high-yielding bank bonds - including J.P. Morgan's and Bank of America's - reckoning that government aid substantially reduces their risk. Its yield is 8.2%. For investors seeking bigger yields, there is Loomis Sayles Bond Fund (LSBRX). It focuses on beaten-down bonds in solid, noncyclical companies such as Kraft and Verizon. The current yield is a rich 11.2%.<br /><br />For all the opportunities in corporate bonds, it's worth noting that both Treasury Inflation Protected Securities (TIPS) and municipal bonds are unusually good deals right now. In the case of TIPS, the principal is adjusted in line with the consumer price index, guaranteeing that you won't lose ground to inflation. The yield on ten-year TIPS issued in July is now 1.9%, or just 0.6 point lower than that of a ten-year Treasury, which doesn't offer inflation protection. You can buy TIPS through brokers like Schwab or at www.treasurydirect.gov. Fund investors have lots of attractive, low-expense choices, including Vanguard Inflation Protected Securities Fund (VIPSX) and T. Rowe Price Inflation Protected Bond (PRIPX).<br /><br />Tax-free municipal bonds also offer extra wallop right now. Munis usually deliver lower yields than Treasuries, but the recent exodus to T-bills and bonds - and growing concerns about state credit ratings (hello, California) - has driven prices south and yields north. A triple-A-rated ten-year muni now yields 4.2%, compared with 2.5% for a Treasury. Add the tax savings, and the effective yield for someone in the highest federal bracket (35%) would be 6.5%. While defaults remain unlikely, we recommend eschewing individual bonds and single-state funds and going with funds that hold munis from across the country, such as Fidelity Tax-Free Bond (FTABX), which has an average annual return of 2.4% over the past five years, or Vanguard Long-Term Tax-Exempt (VWLTX) , which has an average five-year return of 1.8%. Like the TIPS and corporates, the munis are a tad drab; they're not the sort of glitzy investment you brag about at parties. But with their strong yields, that won't matter.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-13635595837976517612008-12-10T08:14:00.000-08:002008-12-10T08:15:52.637-08:00AIG owes Wall Street $10B - reportStruggling insurance giant America International Group owes Wall Street firms $10 billion from trades that went sour, according to sources cited by The Wall Street Journal.<br /><br />AIG (AIG, Fortune 500), which is now operating under government assistance, had not previously detailed these losses, which stemmed from speculative investments in mortgage and corporate debt assets, the Journal wrote on Wednesday. And now that those investments have gone south, the company must pay off its investment partners.<br /><br />However, the Journal reported that an AIG spokesman told the paper that AIG defines the trades not as speculative but as "credit protection instruments." The spokesman also said the company believed it had already disclosed the exposure.<br /><br />The government's $150 billion rescue package doesn't cover these losses, which raises questions about how AIG will pay off the debts, according to the JournalUnknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-24215855454318356062008-12-05T08:17:00.000-08:002008-12-05T08:18:23.042-08:00Foreclosures soar 76% to record 1.35 millionA record 1.35 million homes were in foreclosure in the third quarter, driving the foreclosure rate up to 2.97%, the Mortgage Bankers Association said Friday.<br /><br />That's a 76% increase from a year ago, according to the group's National Delinquency Survey.<br /><br />At the same time, the number of homeowners falling behind on their mortgages rose to 6.99%, up from 5.59% a year ago, the association said. The weakened economy and mounting job losses are expected to push that number even higher.<br /><br />"We have not gone into past recessions with the housing market as weak as it is now, so it is likely that a much higher percentage of delinquencies caused by job losses will go to foreclosure than we have seen in the past," said Jay Brinkmann, MBA's chief economist.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-38807880551379177172008-11-18T09:53:00.001-08:002008-11-18T09:53:54.015-08:00Stocks stage rallyStocks rallied Tuesday afternoon as investors welcomed Hewlett-Packard's strong forecast and comments from government officials that the $700 billion bank bailout is working.<br /><br />The Dow Jones industrial average (INDU) gained 1.7% around 3 hours into the session. The Standard & Poor's 500 (SPX) index added 1.1% and the Nasdaq composite (COMP) advanced 0.4%.<br /><br />Stocks managed some gains after Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke told a House committee that the bailout has been working to help stabilize the financial system, despite recent criticism. FDIC Chairman Sheila Bair is also speaking at the hearing.<br /><br />Lawmakers are especially concerned by last week's decision to stop buying up bank's troubled assets and instead take ownership stakes in the firms. (Full story)<br /><br />After all the recent dour news on the economy, investors were probably relieved that the officials were saying something positive, said Kenny Landgraf, principal and founder at Kenjol Capital Management.<br /><br />"Their assessment seems to be that the bailout has helped," said Landgraf. "The news lately has been so negative that people are just glad they're saying something positive."<br /><br />He said that Hewlett-Packard's forecast was also helping push stocks higher, with investors scooping up a variety of shares hit in the recent selloff.<br /><br />Hewlett-Packard (HPQ, Fortune 500) forecast fiscal fourth-quarter profit that is above analysts' forecasts, despite the sagging economy. HP also lifted its fiscal-year 2009 forecast. It was welcome news for tech investors after both Intel (INTC, Fortune 500) and Cisco (CSCO, Fortune 500) warned about weaker sales in the current quarter.<br /><br />Home Depot (HD, Fortune 500) reported weaker quarterly sales and earnings that nonetheless topped forecasts. The retailer also warned that 2008 earnings per share will plunge 24% from a year ago, due to the anemic consumer spending environment. Yet, investors focused on the positive and the stock rallied 6%.<br /><br />Stocks slipped Monday in volatile trading on Citigroup's massive job cuts and a weak manufacturing report. The declines sent all three major gauges down by at least 2% and sent the Nasdaq to a fresh 5-1/2 year low.<br /><br />Automakers: Also Tuesday, Congress begins debating whether to bail out the hard-hit industry with an additional $25 billion on top of the $25 billion General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler have already received.<br /><br />Senate Democrats and President-elect Barack Obama are in favor of some kind of bailout, while many Republicans would prefer to see the companies file for bankruptcy, restructure and reemerge. (Full story)<br /><br />Economy: The morning's economic news was far less buoyant than the stock market. Home prices plummeted in the third quarter by a record 9% versus a year ago, amid a flood of foreclosures. On the upside, bargain hunters have been scooping up properties in some of the hardest-hit areas.<br /><br />A separate report showed that inflationary pressures remain moderate. Wholesale prices posted the sharpest monthly decline on record in October due to the collapse in oil prices over the last four months. But prices excluding food and energy, the so-called "core" reading, rose more than expected.<br /><br />Other markets: In global trading, Asian markets tumbled and European markets rose in the afternoon.<br /><br />The dollar gained versus the euro and the yen.<br /><br />COMEX gold for December delivery rose 30 cents to $742.30 an ounce.<br /><br />U.S. light crude oil for December delivery rose 53 cents to $55.48 a barrel on the New York Mercantile Exchange, the lowest close since January 2007.<br /><br />Gasoline prices dipped another 1.9 cents to a national average of $2.068 a gallon, according to a survey of credit-card activity released Tuesday by motorist group AAA. The decline marks the 62nd consecutive day that prices have decreased. During that time, prices dropped by $1.78 a gallon, or 46.3%.<br /><br />Bonds: Treasury prices gained, lowering the yield on the benchmark 10-year note to 3.61% from 3.65% late Friday. Treasury prices and yields move in opposite directions. (Full story)<br /><br />The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, rose to 0.13% from 0.08% Monday, with investors preferring to take a piddling return on their money than risk the stock market. In September, the 3-month yield reached a 68-year low around 0% as investor panic peaked.<br /><br />Borrowing rates were little changed from the previous day, with the credit market continuing to stall after a month long improvement. The 3-month Libor rate fell to 2.22% from 2.4% Monday, while overnight Libor was unchanged at 0.4%, according to Bloomberg.com. Libor is a key bank lending rate.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-89879054370002615122008-11-03T04:59:00.000-08:002008-11-03T05:00:05.340-08:00Global markets advanceStocks around the world mostly rose Monday, a day before the U.S. presidential election.<br /><br />U.S. futures, which give an indication of how markets may open when trading begins in New York, were narrowly higher.<br /><br />European markets edged higher. In midday trading, Germany's DAX and the FTSE 100 in Britain were a shade higher. The CAC-40 in France was little changed.<br /><br />Major markets in Asia advanced, with South Korea's KOSPI index closing up 1.4% after the government announced a plan to jolt the economy.<br /><br />The Hang Seng index in Hong Kong finished the session up 2.7%. Markets in Tokyo were closed.<br /><br />The gains overseas followed a strong finish on Wall Street on Friday. The Dow Jones industrial average, Standard & Poor's 500 and Nasdaq Composite all rose more than 1%.<br /><br />The rally capped off a strong week at the end of one of the worst months in Wall Street history.<br /><br />In October, the Dow lost nearly 1,526 points, its worst month ever, according to Stock Trader's Almanac data going back to 1901. On a percentage basis, the decline of 14.1% doesn't rank in the top 10.<br /><br />The S&P 500 lost nearly 198 points, or 16.9% in the month, to post its worst month ever on a point basis and eighth worst ever on a percentage basis, going back to 1930.<br /><br />The Nasdaq dropped 361 points, or 17.4% in October, tracking its seventh-worst month ever on a point basis and its fifth-worst month on a percentage basis, going back to its inception in 1971.<br /><br />Investors are keeping their eye on upcoming rate decisions from the European Central Bank and the Bank of England. Both are expected to lower rates when they meet Thursday.<br /><br />Central banks worldwide have been slashing rates to combat their weakening economies. The European Commission forecast Monday that the economy in the 15 countries that use the euro will barely grow next year<br /><br />In the U.S., all attention is focused on the outcome of the presidential election, where the economy is the top issue on voter's minds.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-50982079092438274862008-10-28T07:32:00.000-07:002008-10-28T07:33:23.356-07:00Home prices see another record plungeHome prices fell in August for the 25th consecutive month and prices in 10 major markets plunged a record 17.7% year over year, according to a key index of real estate values released Tuesday.<br /><br />The S&P Case-Shiller Home Price 10-city index dropped 1.1% for the month. The 20-city index recorded a record year-over-year decline of 16.6% with a 1% fall in August.<br /><br />The indexes compare the sale prices of the same homes each year to determine price trends and are considered one of the most accurate home price gauges.<br /><br />The hardest hit of all 20 cities on a year-over-year basis was Phoenix, where prices plummeted 30.7% during the past 12 months. Las Vegas prices plunged 30.6% and Miami sank 28.1%.<br /><br />The cities that held up the best were Dallas, which saw a decline of just -2.7%, Charlotte NC (down -2.8%) and Boston (off -4.7%). No city showed a price gain during the last 12 months.<br /><br />In August, San Francisco saw the biggest price declines, down 3.5%. Phoenix (-2.9) and Las Vegas (-2.4) also reported sizable losses for the month. Two cities showed gains in August; Cleveland prices rose 1.1% and Boston prices inched up 0.1%.<br />Price declines picking up<br /><br />Of course, the August indexes don't reflect the financial market meltdown that hit in September and severely restricted access to credit, according to Richard DeKaser, chief economist for National City Corp (NCC, Fortune 500). He believes the pace of price declines has picked up since then.<br /><br />"There are two explanations for these steeper declines," he said, "neither of which are encouraging. One is that the difficulty in obtaining credit has further constricted demand. The second is that home sellers are finally capitulating on prices. They've been holding out for months, refusing to sell except at their prices. Now they're throwing in the towel."<br /><br />Indeed, the California Association of Realtors reported last week that home sales volume jumped a whopping 97% in September compared with the same period a year ago. But the median price of an existing home has fallen 41%.<br /><br />If that trend spreads to other states, price weakness could last for many more months, even as sales volume picks up. What happens after that largely depends on the confidence bolstering effect of the government economic stimulus packages, according to DeKaser.<br /><br />"I'm optimistic," he said. "More credit will be available and inventories will be reduced. The deterioration will give way to a more balanced market."Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2467706827731085324.post-84040795022298224862008-10-27T11:17:00.000-07:002008-10-27T11:18:18.258-07:00Regional banks get over $18 billionA diverse group of roughly a dozen regional banks announced Monday that they will get more than $18 billion in federal funds under the bailout program aimed at resuscitating the ailing sector.<br /><br />Varied by size, region and specialty, most of the banks made their participation in the program known Monday morning although some disclosed it early as Sunday evening.<br /><br />Among the first were two major Ohio-based players KeyCorp (KEY, Fortune 500) and Huntington Bancshares (HBAN), both of which said they had been approved to get money as part of the the Treasury's Capital Purchase Program. They will receive a total of $3.9 billion.<br /><br />Others include Capital One Financial Corp. (COF, Fortune 500), Valley National Bancorp (VLY) and three Southern franchises - First Horizon National (FHN), Regions Financial (RF, Fortune 500) and SunTrust (STI, Fortune 500). Combined, the five will receive $11.7 billion.<br /><br />Both the Seattle-lender Washington Federal (WFSL) as well as First Niagara Financial Group (FNFG), a small community bank headquartered just outside of Buffalo that operates some 114 branches said they would each get roughly $200 million.<br /><br />Baltimore-based Provident Bancshares (PBKS) also was among those getting federal funds, as was City National (CYN), a Los Angeles bank, which got nearly $400 million from the government.<br /><br />Collecting $1.9 billion was Northern Trust (NTRS, Fortune 500), a Chicago firm, which caters to affluent individuals and institutions.<br /><br />Others outlined plans to apply for the program. Fifth Third Bancorp (FITB, Fortune 500), based in Cincinnati, said late Sunday that it applied for $3.4 billion and that it expects "our application will be approved shortly by Treasury."<br /><br />In an effort to spur banks to lend to one another and loosen credit for consumers and businesses, regulators unveiled plans earlier this month to inject $250 billion into banks.<br /><br />Nine of the country's largest financial institutions - including Citigroup, Bank of America, Goldman Sachs and Wells Fargo - were initially chosen to receive $125 billion. They are expected to take hold of the money sometime this week.<br /><br />The remaining $125 billion was put up for grabs among thousands of other banks and thrifts nationwide.<br /><br />PNC grabbed some of that money Friday when it announced it would get $7.7 billion from the government by selling preferred stock and related warrants, when it announced plans to buy embattled lender National City.<br /><br />Regulators have stressed that there is plenty of money to go around for those banks that need capital, but it remains unclear just which banks and thrifts would be eligible.<br /><br />In exchange for capital, banks must give up a stake to the U.S. government, but they also have to agree to pay a dividend on those shares and keep pay packages of their top executives in check. To top of pageUnknownnoreply@blogger.com0