Federal Reserve Chairman Ben Bernanke was confirmed for a second term Thursday by the U.S. Senate.
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.
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.
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.
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.
The controversy came through in the debate, which grew impassioned on both sides.
"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."
But several Republicans and Democrats countered that Bernanke deserves much of the blame for the current economic situation.
"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."
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.
"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."
The Bernanke vote was a particularly tough one for the Senate.
The Senate is sensitive to growing voter frustration that Washington did a better job getting Wall Street back on its feet than Main Street.
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.
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.
0:00 /1:59Politics cloud Bernanke decision
"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.
"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.
Ohio 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.
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.
Gee's office did not immediately respond to calls requesting comment.
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.
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.
The Chronicle surveyed total compensation, including salary and benefits, for top executives at 185 public universities.
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.
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%.
The relatively small increase comes after total compensation rose between 7.6% and 18.9% each year since 2005.
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.
"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.
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.
The Chronicle also surveyed compensation at 64 community colleges nationwide and identified Eduardo Padrón, president of Miami Dade College, as the highest paid.
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.
Retail sales fell in December, the government reported Thursday, putting a damper on hopes that the holiday shopping season was strong.
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%.
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.
Sales excluding autos and auto parts fell by 0.2% from November. Analysts expected sales ex-autos to jump 0.3%.
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.
"[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."
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.
Total sales for 2009 retreated 6.2%
Stocks 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.
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%.
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).
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.
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.
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.
"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."
Stocks gained Wednesday as the falling dollar boosted commodity stocks and a rise in wholesale inventories and an upgrade of 3M provided some optimism.
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.
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.
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.
But foreclosures are still up 20% from a year ago.
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.
Also Wednesday, the Congressional Oversight Panel said that while TARP helped stabilize the banking system, it failed to boost spending or stop foreclosures.
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.
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.
0:00 /5:17Make money in 2010
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.
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%.
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.
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.
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.
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.
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.
U.S. light crude oil for January delivery fell 37 cents to $70.30 a barrel on the New York Mercantile Exchange.
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.
Chrysler, 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.
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.
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.
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.
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."
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:
* 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."
* 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.
* 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."
* 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.
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.
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.
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.
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.
Stocks 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.
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%.
Stocks slumped last week after worse-than-expected reports on retail sales, housing and weekly jobless claims put investors on the defensive.
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.
"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."
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).
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%.
"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."
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.
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%.
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.
No state has been harder hit by the housing bust than California.
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).
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.
0:00 /3:17Housing on the rebound?
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.
Bringing back buyers
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.
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.
"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.
How low can home prices go in your city?
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.
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."
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.
"Every one of my agents is very busy," Jones said.
Investing 2.0
Another positive sign that markets don't have much further to fall is that investors are returning to some markets.
"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."
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.
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.
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.
"This kind of pricing is something you only think of as Midwestern, not Californian," he said.
Supply dropping
The booming sales have whittled away existing home inventory to just six and a half months - down from 15 months a year ago.
"Typically, I would describe a normal market as having a six to seven month supply of homes," said Appleton-Young. "We have that now."
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.
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."
Could the end be near?
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.
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.
If that happens in California, it could spread to the rest of the hard-hit Sun Belt markets - and beyond.
"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."
